Cooper Tire & Rubber Company 11-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2005
Commission File No. 1-4329
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
(formerly the Thrift and Profit Sharing Plan)
COOPER TIRE & RUBBER COMPANY
(Exact name of registrant as specified in its charter)
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DELAWARE
(State or other jurisdiction of
incorporation or organization)
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34-4297750
(I.R.S. employer
identification no.) |
Lima and Western Avenues, Findlay, Ohio 45840
(Address of principal executive offices)
(Zip code)
(419) 423-1321
(Registrant’s telephone number, including area code)
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
(formerly the Thrift and Profit Sharing Plan)
ITEM 1. Not applicable.
ITEM 2. Not applicable.
ITEM 3. Not applicable.
ITEM 4. FINANCIAL STATEMENTS OF THE PLAN
The Financial Statements of the Cooper Tire & Rubber Spectrum Investment Savings Plan
(formerly the Thrift and Profit Sharing Plan) for the fiscal year ended December 31, 2005, together
with the report of Ernst & Young LLP, independent auditors, are attached to this Annual Report on
Form 11-K. The Financial Statements and the notes thereto are presented in lieu of the financial
statements required by items 1, 2 and 3 of Form 11-K and were prepared in accordance with the
financial reporting requirements of the Employee Retirement Income Security Act of 1974.
EXHIBITS:
(23) Consent of Independent Registered Public Accounting Firm
(99) Certification Pursuant To 18 U.S.C. § 1350
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrator
has duly caused this Annual Report to be signed by the undersigned, thereunto duly authorized.
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COOPER TIRE & RUBBER COMPANY |
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/s/ Philip G. Weaver |
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PHILIP G. WEAVER |
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Vice President and Chief Financial Officer |
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Plan Administrator |
Date: June 21, 2006
Financial Statements and Supplemental Schedule
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
December 31, 2005 and 2004, and Year Ended December 31, 2005
With Report of Independent Registered Public Accounting Firm
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
Financial Statements and Supplemental Schedule
December 31, 2005 and 2004, and
Year Ended December 31, 2005
Table of Contents
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1 |
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Financial Statements |
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2 |
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3 |
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4 |
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Supplemental Schedule |
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Report of Independent Registered Public Accounting
The Pre-Tax Savings Plan Committee
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
We have audited the accompanying statements of net assets available for benefits of the Cooper Tire
& Rubber Company Spectrum Investment Savings Plan (the Plan) as of December 31, 2005 and 2004, and
the related statement of changes in net assets available for benefits for the year ended December
31, 2005. These financial statements are the responsibility of the Plan’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. We
were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Plan’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the net assets available for benefits of the Plan at December 31, 2005 and 2004, and the
changes in its net assets available for benefits for the year ended December 31, 2005, in
conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial statements taken
as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December
31, 2005 is presented for the purpose of additional analysis and is not a required part of the
financial statements but is supplementary information required by the Department of Labor’s Rules
and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedule is the responsibility of the Plan’s management. The supplemental
schedule has been subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, is fairly stated in all material respects in relation to the
financial statements taken as a whole.
/ s / Ernst & Young LLP
June 2, 2006
1
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
Statements of Net Assets Available for Benefits
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December 31 |
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2005 |
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2004 |
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Investments, at market or contract value: |
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Interest in investment trust |
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$ |
138,329,848 |
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$ |
173,222,433 |
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Mutual funds and common stock |
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66,636,614 |
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68,165,475 |
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Participant loans |
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4,160,388 |
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7,353,243 |
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209,126,850 |
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248,741,151 |
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Cash, non-interest-bearing |
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1,275,944 |
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1,143,918 |
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Receivables: |
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Participant contributions |
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103,012 |
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123,047 |
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Employer contributions |
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— |
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796,061 |
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Interest receivable |
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6,917 |
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494 |
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Total assets |
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210,512,723 |
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250,804,671 |
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Loans transfer payable |
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— |
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(3,145,369 |
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Net assets available for benefits |
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$ |
210,512,723 |
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$ |
247,659,302 |
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See accompanying notes.
2
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2005
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Additions |
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Investment income (Notes 3 and 4): |
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Interest and dividends |
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$ |
7,199,640 |
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Other |
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23,383 |
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7,223,023 |
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Contributions: |
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Participant |
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13,031,236 |
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Total additions |
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20,254,259 |
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Deductions |
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Net depreciation in fair value of investments |
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25,189,560 |
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Participant withdrawals |
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32,169,822 |
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Allocation to other plan |
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41,456 |
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Total deductions |
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57,400,838 |
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Net decrease |
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(37,146,579 |
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Net assets available for benefits: |
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Beginning of year |
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247,659,302 |
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End of year |
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$ |
210,512,723 |
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See accompanying notes.
3
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
Notes to Financial Statements
December 31, 2005
1. Description of the Plan
The following description of Cooper Tire & Rubber Company Spectrum Investment Savings Plan (the
Plan) provides only general information. Participants should refer to the Plan agreement for a more
complete description of the Plan’s provisions.
General
The Plan, as amended and restated effective January 1, 2002, is a defined contribution plan
covering all salaried employees of the Cooper Tire & Rubber Company (the Company and the Plan
Administrator). The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974 (ERISA).
The Company sold its automotive operations, known as Cooper-Standard Automotive (Automotive), in a
transaction which closed on December 23, 2004. The balances of all Automotive participants, which
amounted to $116,672,711, were transferred out of the Plan into another qualified plan sponsored by
the buyer. Of the total amount transferred out of the Plan, $3,145,369 related to participant
loans, which had not been transferred to the other qualified plan as of December 31, 2004, and is
classified as a liability on the statement of net assets available for benefits at December 31,
2004. In January 2005 participant loan balances of $3,145,369 were transferred to the other
qualified plan, along with balances of additional Automotive participants in the amount of $41,456.
Contributions
Each year, participants may contribute up to 50% of their pretax compensation and up to 50% of
their post-tax compensation. In no event shall the aggregate of a participant’s contributions
exceed 50% of their compensation. Participants may direct their contributions to any of the Plan’s
investment fund options.
The Company contributions are made annually as provided in the Plan document and at the discretion
of the Company’s Board of Directors. All employer contributions are invested by the Investment
Trust (see Note 4) in Cooper Tire & Rubber Company common stock until they become vested, after
which they are invested as directed by the participant. There were no Company contributions to the
Plan for the year ended December 31, 2005.
4
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Participant Accounts
Individual accounts are maintained for each participant in the Plan. Each participant’s account is
credited with the participant’s contributions, allocation of the Company’s contributions and Plan
earnings. The benefit to which a participant is entitled is the benefit that can be provided from
the participant’s account.
Forfeitures
At December 31, 2005 forfeited nonvested accounts totaled $106,884. These accounts will be used to
reduce future employer contributions. The 2004 employer contribution received by the Plan was
reduced by $60,000 from forfeited nonvested accounts.
Vesting
The participants are immediately vested in their contributions plus actual earnings thereon. After
three years, the participants are 100% vested in the Company’s contributions plus actual earnings
thereon.
Participant Loans
Participants may borrow the lesser of 50% of the vested value of their entire account or $50,000.
The interest rate is established based on the prime rate. Interest rates as of December 31, 2005,
range from 4.00% to 9.5%. The loan repayment schedule can be no longer than 60 months. Principal
and interest is paid ratably through payroll deductions.
Participant Withdrawals
In the event of retirement, death, termination, permanent disability, or other separation from
service, participants are entitled to receive an amount equal to the value of the vested interest
in their accounts. Payments of benefits are taken in a lump sum distribution. The Plan was amended
in 2005 to state that participants who are entitled to a benefit for the reasons outlined above are
required to take a distribution if their vested balance is less than $1,000.
5
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
In the event of hardship, as defined, participants may make a partial or full distribution of their
accounts, subject to certain tax withholdings.
Termination of the Plan
Although it has not expressed any intent to do so, the Company has the right, under the Plan to
discontinue its contributions at any time, and to terminate the Plan subject to the provisions of
ERISA. In the event of Plan termination, participants will become 100% vested in their accounts.
2. Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements are prepared on the accrual basis of accounting. Participant
withdrawals are recorded upon distribution.
Investment Valuation and Income Recognition
Except for the investment contracts held in the Investment Trust, the Plan’s investments are stated
at fair value, which equals the quoted market price on the last business day of the plan year. The
shares of mutual funds are valued at quoted market prices, which represent the net asset value of
shares held by the Plan at year-end. The participant loans are valued at their outstanding
balances, which approximate fair value.
Investment contracts are recorded at their contract values, which represent contributions and
reinvested income, less any withdrawals plus accrued interest, because these investments have fully
benefit-responsive features. There are no reserves against contract values for credit risk of
contract issues or otherwise. The average yield was approximately 4.6% and 4.5% in 2005 and 2004,
respectively. The crediting interest rate for these investment contracts is reset monthly by the
issuer but cannot be less than zero and ranged from 3.9% to 8.4% at December 31, 2005 and 3.5% to
6.6% at December 31, 2004.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded
on the accrual basis. Dividends are recorded on the ex-dividend date.
6
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
Notes to Financial Statements (continued)
2. Summary of Accounting Policies (continued)
Administrative Expenses
The Company pays the administrative expenses of the Plan, unless the expenses relate to certain
participant-directed transactions.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those estimates.
New Accounting Pronouncement
In December 2005, the Financial Accounting Standards Board issued Staff Position AAG INV-1 and SOP
94-4-1 (FSP), Reporting of Fully Benefit Responsive Investment Contracts Held by Certain Investment
Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare
and Pension Plans. This FSP requires that fully benefit-responsive investment contracts be reported
at fair value. The effective date for implementation of this FSP is for fiscal years ending after
December 15, 2006. Upon adoption in 2006, the implementation of this FSP is not expected to have a
material impact on the Plan’s financial statements.
7
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
Notes to Financial Statements (continued)
3. Investments
During 2005, the Plan’s investments (including investments purchased, sold, as well as held during
the year) (depreciated) appreciated in fair value as determined by quoted market prices as follows:
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Net Realized |
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and Unrealized |
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(Depreciation) |
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Appreciation in |
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Fair Value of |
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Investments |
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Interest in investment trust |
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$ |
(25,994,577 |
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Mutual funds and common stock |
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805,017 |
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$ |
(25,189,560 |
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Investments in mutual funds and common stock that represent 5% of the fair value of the Plan net
assets available for benefits are as follows:
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December 31 |
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2005 |
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2004 |
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American Washington Mutual Investors Fund |
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$ |
24,769,088 |
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$ |
25,245,556 |
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Investment Company of America Fund |
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17,637,529 |
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18,335,372 |
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4. Investment Trust
Certain investments of the Plan are held in an Investment Trust, which also combines similar
investments of the other defined contribution plans sponsored by the Company. Each participating
retirement plan has an undivided interest in the Investment Trust. Cooper Tire & Rubber Company
common stock held in the Investment Trust includes non-participant-directed and
participant-directed investments. The Plan’s interest in the Investment Trust was determined by the
Plan’s relative asset value to the Investment Trust’s total asset value at the end of the year.
Investment income is allocated to the Plan based on its pro rata share in the net assets of the
Investment Trust.
8
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
Notes to Financial Statements (continued)
4. Investment Trust (continued)
At December 31, 2005 and 2004, the Plan’s interest in the net assets of the Investment Trust was
approximately 78% and 79%, respectively.
The following presents the fair value of investments in the Investment Trust:
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December 31 |
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2005 |
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2004 |
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Investments, at fair value: |
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Cooper Tire & Rubber Company common stock* |
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$ |
85,020,990 |
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$ |
129,838,642 |
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Investment contracts |
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90,449,621 |
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84,373,742 |
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Money market mutual fund |
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2,649,180 |
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4,005,526 |
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Total assets |
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$ |
178,119,791 |
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$ |
218,217,946 |
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| * Includes non-participant-directed shares |
The fair value of the investment contracts was $91,025,547 and $88,049,780 at December 31, 2005 and
2004, respectively.
Investment income (loss) for the Investment Trust for the year ended December 31, 2005 is as
follows:
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Interest and dividends |
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$ |
6,518,273 |
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Net depreciation of fair value of investments, as
determined by quoted prices: |
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Common stock |
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(34,602,678 |
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$ |
(28,084,405 |
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9
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
Notes to Financial Statements (continued)
5. Non-Participant-Directed Investment
Cooper Tire & Rubber Company common stock held in the Investment Trust includes
non-participant-directed investments. Information about the significant components of changes in
net assets related to the non-participant-directed investments for the year ended December 31,
2005, is as follows:
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Contributions |
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$ |
11,793,230 |
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Dividends |
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2,444,195 |
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Net depreciation of fair value of investment |
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(34,602,678 |
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Participant withdrawals |
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Transfers out to other investment options |
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(24,452,399 |
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6. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service dated July 13, 2004,
stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code)
and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the
Internal Revenue Service, the Plan was amended. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is
being operated in compliance with the applicable requirements of the Code and, therefore, believes
that the Plan, as amended, is qualified and the related trust is tax exempt.
7. Related-Party Transactions
Certain plan investments are shares of mutual funds managed by the trustee, National City Bank,
and, therefore, these transactions qualify as party-in-interest transactions. There have been no
known prohibited transactions with a party in interest.
8. Risks and Uncertainties
The plan invests in various investment securities. Investment securities are exposed to various
risks such as interest rate, market, and credit. Due to the level of risk associated with certain
investment securities, it is at least reasonably possible that the changes in the values of
investment securities will occur in the near term and that such changes could materially affect
participants’ account balances and the amounts reported in the statements of net assets available
for benefits.
10
Cooper Tire & Rubber Company
Spectrum Investment Savings Plan
EIN # 34-4297750 Plan #005
Schedule H, Line 4i – Schedule of Assets
(Held at End of Year)
December 31, 2005
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Description of Investment |
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| Identity of Issue, |
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Including Maturity Date, |
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| Borrower, Lessor, or |
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Rate of Interest, Collateral, |
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Current |
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| Identity of Issue |
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Par, or Maturity Value |
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Value |
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Investments held by
National City Bank: |
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Mutual Funds: |
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American Funds |
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803,148.11 shares, American Washington Mutual Investors Fund |
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$ |
24,769,088 |
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562,421.21 shares, Investment Company of America Fund |
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17,637,529 |
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*Allegiant |
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415,426.32 shares, Allegiant Equity Index Fund #42 |
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4,453,370 |
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Aim Funds Group |
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340,886.85 shares, Balanced Fund Class A Shares |
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4,175,864 |
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297,797.01 shares, Dynamics Fund |
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5,422,884 |
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Janus Funds |
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127,661.61 shares, Worldwide Fund |
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5,532,854 |
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MFS Family of Funds |
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344,931.62 shares, Massachusetts Investors Growth Stock Funds |
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4,428,922 |
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Money Market Funds: |
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201,518.28 shares, Government Money Market Fund #509 |
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201,518 |
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* Allegiant |
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Common Stock: |
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* Cooper Tire
& Rubber
Company |
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952.00 shares, Common Stock |
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14,585 |
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* Participant loans |
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Interest rates ranging from 4.00% to 9.5%, with the longest maturity date of May 2011 |
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4,160,388 |
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$ |
70,797,002 |
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