Business Segments

6 Months Ended

Jun. 30, 2019

The Company has four segments under ASC 280, "Segments":


•	North America, composed of the Company’s operations in the United States and Canada;


•	Latin America, composed of the Company’s operations in Mexico, Central America and South America;


•	Europe; and


•	Asia.

North America and Latin America meet the criteria for aggregation in accordance with ASC 280, as they are similar in their production and distribution processes and exhibit similar economic characteristics. The aggregated North America and Latin America segments are presented as “Americas Tire Operations” in the segment disclosure. The Americas Tire Operations segment manufactures and markets passenger car and light truck tires, primarily for sale in the U.S. replacement market. The segment also has a joint venture manufacturing operation in Mexico, Corporacion de Occidente SA de CV ("COOCSA"), which supplies passenger car tires to the North American, Mexican, Central American and South American markets. The segment also markets and distributes racing, TBR and motorcycle tires. The racing and motorcycle tires are manufactured by the Company’s European Operations segment and by others. TBR tires are sourced from GRT and through an off-take agreement that was entered with Prinx Chengshan (Shandong) Tire Company Ltd. ("PCT"), the Company's former joint venture. In December 2017, the Company signed an off-take agreement with Sailun Vietnam, effective from January 1, 2018 through December 31, 2020, as an additional source of TBR tires. On April 5, 2019, Cooper Vietnam, a wholly owned subsidiary of Cooper, and Sailun Vietnam established a joint venture in Vietnam which will produce and sell TBR tires. The new joint venture is expected to begin producing tires in 2020. Major distribution channels and customers include independent tire dealers, wholesale distributors, regional and national retail tire chains, large retail chains that sell tires as well as other automotive products, mass merchandisers and digital channels. The segment does not currently sell its products directly to end users, except through three Company-owned retail stores. The segment sells a limited number of tires to OEMs.

Both the Europe and Asia segments have been determined to be individually immaterial, as they do not meet the quantitative requirements for segment disclosure under ASC 280. In accordance with ASC 280, information about operating segments that are not reportable shall be combined and disclosed in an all other category separate from other reconciling items. As a result, these two segments have been combined in the segment operating results discussion. The results of the combined Europe and Asia segments are presented as “International Tire Operations.” The European operations include manufacturing operations in the U.K. and Serbia. The U.K. entity manufactures and markets passenger car, light truck, motorcycle and racing tires and tire retread material for domestic and global markets. The Serbian entity manufactures passenger car and light truck tires primarily for the European markets and for export to the North American segment. The Asian operations are located in the PRC and Vietnam. Cooper Kunshan Tire manufactures passenger car and light truck tires both for the Chinese domestic market and for export to markets outside of the PRC. GRT, a joint venture manufacturing facility located in the PRC, serves as a global source of TBR tire production for the Company. The segment also procures certain TBR and passenger car tires under off-take agreements with PCT through mid-2021 and, in December 2017, the Company signed an off-take agreement with Sailun Vietnam, as a source of TBR tires through December 31, 2020. On April 5, 2019, Cooper Vietnam and Sailun Vietnam established a joint venture in Vietnam which will produce and sell TBR tires in addition to the off-take agreement. The new joint venture is expected to begin producing tires in 2020. The segment sells a majority of its tires in the replacement market, with a portion also sold to OEMs.

On January 17, 2019, Cooper Tire Europe, a wholly owned subsidiary of the Company, committed to a plan to cease light vehicle tire production at its Melksham, U.K. facility. Phasing out of light vehicle tire production is expected to be completed in the third quarter of 2019. An estimated 300 roles will be eliminated at the site. Cooper Tire Europe will obtain light vehicle tires to meet customer needs from other production sites within the Company’s global production network. Approximately 400 roles will remain in Melksham to support the functions that continue there, including motorsports and motorcycle tire production, the materials business, Cooper Tire Europe headquarters, sales and marketing, and the Europe Technical Center.

The following table details segment financial information:



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net sales:
Americas Tire
External customers	$	570,537		$	573,807		$	1,075,295		$	1,052,634
Intercompany	11,770			10,605			21,948			17,170
	582,307			584,412			1,097,243			1,069,804
International Tire
External customers	108,593			124,601			222,999			247,270
Intercompany	29,921			43,238			59,300			81,813
	138,514			167,839			282,299			329,083
Eliminations	(41,691		)	(53,843		)	(81,249		)	(98,983		)
Consolidated net sales	679,130			698,408			1,298,293			1,299,904
Operating profit (loss):
Americas Tire	46,814			40,480			85,603			71,715
International Tire	(1,296		)	5,652			(2,635		)	13,086
Unallocated corporate charges	(13,278		)	(13,705		)	(23,730		)	(25,670		)
Eliminations	(569		)	336			(1,136		)	87
Consolidated operating profit	31,671			32,763			58,102			59,218

Interest expense	(7,810		)	(8,417		)	(16,123		)	(16,108		)
Interest income	1,999			1,988			5,379			4,303
Other pension and postretirement benefit expense	(9,288		)	(6,967		)	(18,650		)	(13,953		)
Other non-operating expense	(1,463		)	(1,391		)	(84		)	(3,050		)
Income before income taxes	$	15,109		$	17,976		$	28,624		$	30,410