a strong business model. a strong company ... - cooper...

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The people behind the tires for the people behind the wheel. TO OUR STOCKHOLDERS: For Cooper Tire & Rubber Company, 2013 was a period of unprecedented circumstances and unique challenges that impacted our performance. Yet, it was also a year in which we delivered a solid profit, demonstrating the resilience of our business model, the strength of our people and the loyalty of our customers and suppliers. Today, we are moving our business forward, confident in our capabilities and in our strategic plan, a roadmap that positions Cooper well to compete and succeed in today’s global tire industry. A STRONG BUSINESS MODEL. A STRONG COMPANY FOR 100 YEARS. We ended 2013 with operating profit of $241 million, the second-best annual operating profit in our company’s 100- year history excluding the divested automotive group, and the fourth-best such outcome including that operation. Cooper maintained our strong balance sheet, giving the company important flexibility to continue to invest in the business and deliver value to our stockholders. Our performance in 2013 followed a year of record sales and operating profit in 2012, representing the type of success that attracted an offer from Apollo Tyres to acquire our company. On June 12, 2013, we announced a merger agreement with Apollo, which represented a compelling business combination. However, issues in response to the merger announcement, including labor actions at the Cooper Chengshan Tire Company Ltd (CCT) joint venture in Rongcheng, China as well as other considerations, complicated the transaction. Ultimately, Cooper terminated the merger agreement with Apollo on December 30, 2013. Following termination, we moved expeditiously to address the issues at CCT as a top priority. Cooper announced an agreement with Chengshan Group, our joint venture partner, and the CCT union on January 31, 2014. This agreement confirmed that operations at CCT would return to normal and established a process and timeline to determine the future ownership of the CCT joint venture, beginning with an independent fair market valuation of the business. This process is underway. Regardless of the outcome of the long-term ownership of CCT, China will remain a key strategic market for Cooper and we believe we have the team and the assets to succeed. While our company experienced merger-related and other challenges during 2013, we are proud of the way our teams around the world navigated through the year, staying focused on our business priorities. Their hard work included the continued development and launching of several new products. During 2013, we introduced the CS3, our core mid-range passenger product; the HT3, the newest Cooper commercial-grade light truck highway tire; and the MXT, our Mastercraft brand mud terrain tire. In addition, we launched numerous size additions and proprietary lines for our national retail and private brand customers. Throughout the year, these products and others received accolades such as awards earned at the 2013 Specialty Equipment Market Association show and a Good Design Award from the Chicago Museum of Architecture and Design.

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Page 1: A STRONG BUSINESS MODEL. A STRONG COMPANY ... - Cooper …coopertire.com/CooperTiresCorporate/media/Documents/Financials/... · A STRONG BUSINESS MODEL. A STRONG COMPANY FOR 100

The people behind the tires for the people behind the wheel.

TO OUR STOCKHOLDERS:

For Cooper Tire & Rubber Company, 2013 was a period of unprecedented circumstances and unique challenges that impacted our performance. Yet, it was also a year in which we delivered a solid profit, demonstrating the resilience of our business model, the strength of our people and the loyalty of our customers and suppliers. Today, we are moving our business forward, confident in our capabilities and in our strategic plan, a roadmap that positions Cooper well to compete and succeed in today’s global tire industry.

A STRONG BUSINESS MODEL. A STRONG COMPANY FOR 100 YEARS.

We ended 2013 with operating profit of $241 million, the second-best annual operating profit in our company’s 100-year history excluding the divested automotive group, and the fourth-best such outcome including that operation. Cooper maintained our strong balance sheet, giving the company important flexibility to continue to invest in the business and deliver value to our stockholders.

Our performance in 2013 followed a year of record sales and operating profit in 2012, representing the type of success that attracted an offer from Apollo Tyres to acquire our company. On June 12, 2013, we announced a merger agreement with Apollo, which represented a compelling business combination. However, issues in response to the merger announcement, including labor actions at the Cooper Chengshan Tire Company Ltd (CCT) joint venture in Rongcheng, China as well as other considerations, complicated the transaction. Ultimately, Cooper terminated the merger agreement with Apollo on December 30, 2013.

Following termination, we moved expeditiously to address the issues at CCT as a top priority. Cooper announced an agreement with Chengshan Group, our joint venture partner, and the CCT union on January 31, 2014. This agreement confirmed that

operations at CCT would return to normal and established a process and timeline to determine the future ownership of the CCT joint venture, beginning with an independent fair market valuation of the business. This process is underway. Regardless of the outcome of the long-term ownership of CCT, China will remain a key strategic market for Cooper and we believe we have the team and the assets to succeed.

While our company experienced merger-related and other challenges during 2013, we are proud of the way our teams around the world navigated through the year, staying focused on our business priorities.

Their hard work included the continued development and launching of several new products. During 2013, we introduced the CS3, our core mid-range passenger product; the HT3, the newest Cooper commercial-grade light truck highway tire; and the MXT, our Mastercraft brand mud terrain tire. In addition, we launched numerous size additions and proprietary lines for our national retail and private brand customers. Throughout the year, these products and others received accolades such as awards earned at the 2013 Specialty Equipment Market Association show and a Good Design Award from the Chicago Museum of Architecture and Design.

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Singapore, Southeast Asia

Manufacturing FacilitiesClarksdale, Mississippi - bladders/mixingFindlay, Ohio - tiresGuadalajara, Mexico - tiresKruševac, Serbia - tiresKunshan, China - tiresMelksham, United Kingdom - tiresRongcheng, China - tiresTexarkana, Arkansas - tiresTupelo, Mississippi - tires

Distribution CentersAlbany, GeorgiaAllentown, PennsylvaniaBaotou, ChinaBeijing, ChinaBelgrade, SerbiaChangchun, ChinaChengdu, ChinaChongqing, ChinaCompiegne, FranceFindlay, OhioFranklin, IndianaGrand Prairie, TexasGuadalajara, MexicoGuangzhou, China

Guiyang, ChinaJinan, ChinaKruševac, SerbiaKunming, ChinaKunshan, ChinaLanzhou, ChinaLiuzhou, ChinaMadrid, SpainMelksham, United KingdomMilan, ItalyDietzenbach, GermanyNanchang, ChinaOrmalingen, SwitzerlandRancho Cucamonga, California

Rongcheng, ChinaShijiazhuang, ChinaShanghai, ChinaStow, OhioSumner, WashingtonTexarkana, ArkansasTupelo, MississippiWuhan, ChinaXi’An, ChinaXinjiang, ChinaZhang Jiagang, ChinaZhengzhou, China

Technical CentersFindlay, Ohio (2)Melksham, United KingdomPearsall, TexasKunshan, China

Sales OfficesCompiegne, FranceCorona, CaliforniaDreieich, GermanyFindlay, Ohio, company headquartersGuadalajara, MexicoKruševac, SerbiaMadrid, SpainMelksham, United Kingdom, European headquartersMilan, ItalyOrmalingen, SwitzerlandRongcheng City, ChinaShanghai, China (2)Stow, Ohio

Cooper Service StoresFindlay, OhioTexarkana, ArkansasTupelo, Mississippi

Purchasing Office

Our work with Ford Motor Company, which we announced in February 2013, continues to progress well as our first-ever U.S. passenger car original equipment contract. The Cooper Zeon RS3-ATM is original equipment on the Ford Focus SE and Titanium models and we look forward to continuing this positive relationship.

Cooper continued to invest in technology and innovation throughout 2013. As an example, we earned a joint patent with our partner INSA for silica masterbatch (SMB) technology. Cooper has used SMB to manufacture more than two million premium passenger car tires and derived a number of benefits from the technology.

We made significant positive progress in pursuit of growth in Eastern Europe using Serbia-sourced tires from our facility in Kruševac, which continued to increase production levels during 2013 and is now converting much of its production—per our plan—to traditional Cooper brands.

We opened a new Asia Technical Center approximately 30 miles from Shanghai on the grounds of our wholly-owned Cooper Kunshan Tire (CKT) plant. This new facility is home to more than 70 material scientists and tire engineers using state-of-the-art testing equipment and expanded research and development capabilities to design and develop new products specifically for China and the Asian market.

Aligned with our goal to improve organizational effectiveness, Cooper deployed an ERP system in the majority of our U.S. operations. While deployment of such a system is rarely without challenges—and Cooper experienced some that impacted our performance in 2013—we look forward to completing our U.S. deployments in 2014 and benefitting in the long run from the consistency in data and enhanced reporting that ERP will make possible.

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Moving our Business Forward in 2014 and Beyond

Recognizing the importance of continuing to invest in the new product engine that feeds long term sales growth, we expect to launch a significant number of new products in 2014 in all categories for markets around the globe. Technology and innovation, which support new product development, will continue to be a focus of investment as we know that exciting new products that offer an excellent value in the marketplace will continue to distinguish Cooper with our customers.

Our efforts to drive cost efficiencies at our plants will continue worldwide as these programs have shown promise to make our facilities even more competitive in the future.

Cooper believes we will begin to recover unit volumes from 2013 levels and grow at a rate that is equal to or better than the industry in our key markets in 2014. This will allow us to leverage our flexible global footprint and our evolved business model to deliver on the goals of our strategic plan.

The strategic plan and business model evolution that we put in place in 2008, which led to the record results we had achieved by 2012, remains in place. Its overarching goal continues to be stockholder value creation. Its key strategic priorities are unchanged:

• Continuing to improve our competitive cost structure and profitability

• Driving top-line profitable growth

• Building organizational capabilities

It is this core strategy that created a business model that was strong enough to ride out the unprecedented circumstances and unique challenges of 2013 and still deliver the second-best operating profit in our company’s 100-year history.

To all of our employees, customers, suppliers, and to our investors, thank you for moving us forward on our journey over the last century and on the road we’ll take together for the next 100 years.

Roy V. Armes Chairman, Chief Executive Officer and President

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Executive OfficesCooper Tire & Rubber Company701 Lima AvenueFindlay, OH 45840419-423-1321

For InformationTire products 800-854-6288Investor Relations 419-424-4165Web site www.coopertire.com

Annual MeetingThe 2014 Annual Meeting of Stockholders of Cooper Tire & Rubber Company will be held at The Westin Hotel, Detroit Metropolitan Airport, 2501 Worldgateway Place, Detroit, Michigan 48242, Friday, May 23, 2014 at 10:00 a.m. Eastern Daylight Time. All stockholders are cordially invited to attend. Proxy material is sent to stockholders together with this report.

Transfer Agent & RegistrarComputershare Inc.PO Box 30170College Station, TX 77842-3170

888-294-8217 (toll free)24 hours automated or Mon. - Fri. 8:30 a.m. to 5:30 p.m. (Central Time)www.computershare.com/investorhttps://www-us.computershare.com/investor/Contact

Stockholders requiring a change of name, address or ownership of stock as well as information about stockholder records, lost or stolen certificates, dividend checks, dividend direct deposit and dividend reinvestment should contact our transfer agent by mail, by telephone or through its web site.

Filing CertificationsThe Company has filed the certification required by Section 302 of the Sarbanes-Oxley Act of 2002 as an exhibit to its Form 10-K for the fiscal year ending December 31, 2013, filed with the Securities and Exchange Commission. On May 13, 2013, the Company filed with the New York Stock Exchange its Annual CEO Certification.

Direct Investment PlanComputershare Investor Services serves as Administrator for a direct investment plan for the purchase, sale and/or dividend reinvestment of Cooper Tire & Rubber Company common stock. For information, call Computershare Investor Services at 888-294-8217.

STOCKHOLDER INFORMATION

Board of Directors

Roy V. Armes Chairman, Chief Executive Officer and President Cooper Tire & Rubber Company

Thomas P. Capo 2

Former Chairman of the Board,Dollar Thrifty Automotive Group, Inc.

Steven M. Chapman1, 2

Group VP, China and Russia, Cummins, Inc.

John J. Holland 1, 3

President,The International Copper Association

John F. Meier 1, 3, 4

Chairman of the Board, Applied Industrial Technologies

Cynthia Niekamp 2

Senior Vice President, Automotive Coatings, PPG Industries, Inc.

John H. Shuey 1, 2

Former Chairman of the Board, President and Chief Executive Officer, Amcast Industrial Corporation

Richard L. Wambold 3

Former Chairman of the Board and Chief Executive Officer, Pactiv Corporation

Robert D. Welding 3

Former Non-Executive Chairman, Public Safety Equipment (Int’l) Limited

1 Member of the Nominating and Governance Committee

2 Member of the Audit Committee3 Member of the Compensation Committee4 Lead Director

Executive Officers

Roy V. Armes Chairman, Chief Executive Officer and President

Brenda S. HarmonSenior Vice President andChief Human Resources Officer

Bradley E. HughesVice President, Chief Financial Officer and Treasurer

Harold C. MillerVice President

Christopher E. OstranderVice President

Stephen ZamanskyVice President, General Counsel and Secretary

Other Corporate Officers

Marjorie J. GriffingVice President

Jack J. McCrackenAssistant Secretary

Gregory E. MeyersAssistant General Counsel