e10vq
10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarter ended June 30, 2010
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-31330
Cooper Industries plc
(Exact name of registrant as specified in its charter)
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Ireland
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98-0632292 |
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(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
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5 Fitzwilliam Square
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Dublin 2, Ireland |
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(Address of principal executive offices)
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(Zip Code) |
(713) 209-8400
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report.)
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 (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer þ | |
Accelerated filer o | |
Non-accelerated filer o | |
Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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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 registrants common shares outstanding as of June 30, 2010 was 166,743,287.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
COOPER INDUSTRIES PLC
CONSOLIDATED INCOME STATEMENTS
(unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2010 |
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2009 |
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2010 |
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2009 |
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(in millions, except per share data) |
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Revenues |
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$ |
1,336.7 |
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$ |
1,269.8 |
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$ |
2,565.3 |
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$ |
2,526.6 |
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Cost of sales |
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895.0 |
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885.0 |
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1,716.1 |
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1,769.8 |
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Selling and administrative expenses |
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255.6 |
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249.4 |
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500.4 |
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506.3 |
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Loss related to contribution of net assets
to Tools joint venture |
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134.5 |
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134.5 |
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Restructuring charges |
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3.0 |
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10.4 |
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6.5 |
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19.2 |
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Operating earnings |
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48.6 |
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125.0 |
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207.8 |
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231.3 |
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Interest expense, net |
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11.5 |
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16.3 |
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23.9 |
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31.5 |
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Income from continuing operations
before income taxes |
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37.1 |
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108.7 |
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183.9 |
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199.8 |
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Income taxes expense (benefit) |
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(4.5 |
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19.4 |
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23.7 |
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29.3 |
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Income from continuing operations |
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41.6 |
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89.3 |
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160.2 |
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170.5 |
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Income related to discontinued operations,
net of income taxes |
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18.9 |
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Net income |
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$ |
41.6 |
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$ |
89.3 |
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$ |
160.2 |
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$ |
189.4 |
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Income per common share: |
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Basic: |
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Income from continuing operations |
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$ |
.25 |
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$ |
.53 |
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$ |
.96 |
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$ |
1.02 |
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Income from discontinued operations |
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.11 |
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Net income |
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$ |
.25 |
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$ |
.53 |
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$ |
.96 |
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$ |
1.13 |
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Diluted: |
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Income from continuing operations |
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$ |
.25 |
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$ |
.53 |
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$ |
.95 |
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$ |
1.01 |
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Income from discontinued operations |
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.11 |
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Net income |
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$ |
.25 |
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$ |
.53 |
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$ |
.95 |
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$ |
1.12 |
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Cash dividends declared per common share |
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$ |
.27 |
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$ |
.25 |
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$ |
.54 |
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$ |
.50 |
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The accompanying notes are an integral part of these statements.
-2-
COOPER INDUSTRIES PLC
CONSOLIDATED BALANCE SHEETS
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June 30, |
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December 31, |
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2010 |
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2009 |
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(unaudited) |
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(Note 1) |
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(in millions) |
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ASSETS |
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Cash and cash equivalents |
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$ |
432.0 |
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$ |
381.6 |
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Receivables, less allowances |
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777.2 |
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697.7 |
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Inventories |
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448.7 |
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423.9 |
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Current discontinued operations receivable |
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14.2 |
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12.7 |
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Other current assets |
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204.2 |
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210.1 |
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Total current assets |
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1,876.3 |
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1,726.0 |
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Property, plant and equipment, less accumulated depreciation |
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584.6 |
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639.0 |
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Goodwill |
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2,285.5 |
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2,338.3 |
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Other intangible assets, less accumulated amortization |
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314.4 |
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306.8 |
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Assets to be contributed to Tools joint venture |
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590.8 |
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588.9 |
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Long-term discontinued operations receivable |
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151.6 |
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166.6 |
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Other noncurrent assets |
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260.7 |
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218.8 |
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Total assets |
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$ |
6,063.9 |
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$ |
5,984.4 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Short-term debt |
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$ |
10.0 |
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$ |
9.4 |
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Accounts payable |
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417.0 |
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347.5 |
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Accrued liabilities |
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460.4 |
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460.6 |
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Current discontinued operations liability |
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42.2 |
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43.4 |
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Current maturities of long-term debt |
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2.3 |
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2.3 |
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Total current liabilities |
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931.9 |
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863.2 |
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Long-term debt |
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923.0 |
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922.7 |
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Liabilities to be contributed to Tools joint venture |
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145.7 |
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140.1 |
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Long-term discontinued operations liability |
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727.6 |
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741.1 |
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Other long-term liabilities |
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301.7 |
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354.0 |
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Total liabilities |
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3,029.9 |
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3,021.1 |
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Common stock, $.01 par value |
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1.7 |
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1.7 |
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Retained earnings |
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3,382.0 |
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3,254.1 |
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Treasury stock |
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(103.9 |
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(12.5 |
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Accumulated other nonowner changes in equity |
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(245.8 |
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(280.0 |
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Total shareholders equity |
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3,034.0 |
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2,963.3 |
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Total liabilities and shareholders equity |
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$ |
6,063.9 |
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$ |
5,984.4 |
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The accompanying notes are an integral part of these statements.
-3-
COOPER INDUSTRIES PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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Six Months Ended |
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June 30, |
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2010 |
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2009 |
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(in millions) |
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Cash flows from operating activities: |
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Net income |
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$ |
160.2 |
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$ |
189.4 |
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Adjust: Income related to discontinued operations |
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(18.9 |
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Income from continuing operations |
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160.2 |
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170.5 |
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Adjustments to reconcile to net cash provided by operating activities: |
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Depreciation and amortization |
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74.0 |
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71.2 |
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Deferred income taxes |
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(34.8 |
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(9.3 |
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Excess tax benefits from stock options and awards |
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(4.6 |
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2.1 |
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Loss related to contribution of net assets to Tools joint venture |
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134.5 |
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Restructuring charges |
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6.5 |
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19.2 |
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Changes in assets and liabilities: (1) |
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Receivables |
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(109.2 |
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128.1 |
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Inventories |
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(40.2 |
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108.8 |
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Accounts payable and accrued liabilities |
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62.7 |
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(194.3 |
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Discontinued operations assets and liabilities, net |
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(1.2 |
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33.0 |
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Other assets and liabilities, net |
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3.9 |
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46.8 |
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Net cash provided by operating activities |
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251.8 |
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376.1 |
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Cash flows from investing activities: |
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Proceeds from short-term investments |
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9.3 |
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Capital expenditures |
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(30.2 |
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(55.9 |
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Cash paid for acquired businesses |
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(20.6 |
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(22.2 |
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Proceeds from sales of property, plant and equipment and other |
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0.9 |
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1.1 |
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Net cash used in investing activities |
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(49.9 |
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(67.7 |
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Cash flows from financing activities: |
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Repayments of debt, net |
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0.7 |
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(21.9 |
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Dividends |
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(87.0 |
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(84.0 |
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Purchases of common shares |
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(26.0 |
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Purchases of treasury shares |
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(91.4 |
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Excess tax benefits from stock options and awards |
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4.6 |
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(2.1 |
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Proceeds from exercise of stock options and other |
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30.7 |
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3.5 |
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Net cash used in financing activities |
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(142.4 |
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(130.5 |
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Effect of exchange rate changes on cash and cash equivalents |
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(9.1 |
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13.5 |
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Increase in cash and cash equivalents |
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50.4 |
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191.4 |
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Cash and cash equivalents, beginning of period |
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381.6 |
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258.8 |
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Cash and cash equivalents, end of period |
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$ |
432.0 |
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$ |
450.2 |
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(1) |
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Net of the effects of acquisitions and translation. |
The accompanying notes are an integral part of these statements.
-4-
COOPER INDUSTRIES PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Accounting Policies
Basis of Presentation - The consolidated financial statements of Cooper Industries plc, an
Irish company (Cooper), have been prepared in accordance with generally accepted accounting
principles in the United States.
The financial information presented as of any date other than December 31 has been prepared
from the books and records without audit. Financial information as of December 31 has been derived
from Coopers audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary for a fair presentation of the financial
information for the periods indicated, have been included. For further information regarding
Coopers accounting policies, refer to the Consolidated Financial Statements and related notes for
the year ended December 31, 2009 included in Part IV of Coopers 2009 Annual Report on Form 10-K.
Reclassification Other intangible assets in the December 31, 2009 Consolidated Balance Sheet
have been reclassified to conform to the 2010 presentation. As discussed in Note 2 of the Notes to
Consolidated Financial Statements, the amounts related to the contribution of certain Tools
business assets and liabilities to a joint venture in July 2010 have been reclassified to separate
lines in the Consolidated Balance Sheets.
Note 2. Contribution of Tools Business Assets and Liabilities to Joint Venture
On March 26, 2010, Cooper announced that it entered into a Framework Agreement with Danaher
Corporation to create a joint venture combining Coopers Tools business with certain Tools
businesses from Danahers Tools and Components Segment (the Joint Venture). On July 6, 2010,
Cooper announced the completion of the Joint Venture, named Apex Tool Group, LLC. Cooper and
Danaher each own a 50 percent interest in the Joint Venture, have equal representation on its Board
of Directors and have a 50% voting interest in the Joint Venture. At completion of the transaction
in July, Cooper will deconsolidate the Tools business assets and liabilities contributed to the
Joint Venture and recognize Coopers 50% ownership interest as an equity investment. Subsequently,
Cooper will recognize its proportionate share of the Joint Ventures operating results using the
equity method. Recording the investment at its fair value of $480 million will result in a pretax
loss of $134.5 million related to the transaction. The pretax loss related to the formation of the
Joint Venture will include a $26.5 million gain from the contribution of the Tools business net
assets resulting from the difference in the fair value of the equity investment and the carrying
value of the net assets being contributed and transaction related costs. This gain will be offset
by the write-off of approximately $161.0 million from recognition of the accumulated other nonowner
changes in equity related to the Tools business, primarily related to cumulative currency
translation losses. Due to the loss of Coopers controlling financial interest in the Tools
business net assets from the formation of the Joint Venture, these previously deferred currency
translation losses included in equity are required to be included in the overall loss calculation
on the transaction. The Tools business assets and liabilities contributed to the Joint Venture in
July 2010 have been reclassified to separate lines in the accompanying consolidated balance sheets.
In the second quarter of 2010, Cooper recognized the $134.5 million loss related to the
contribution of the Tools business assets and liabilities to the Joint Venture by recognizing
$126.1 million of the cumulative currency translation losses included in other nonowner changes in
equity (approximately $82.0 million net of the associated tax affect) and transaction related
costs. As a result, Cooper does not expect any material impact to the income statement in the third
quarter of 2010 upon deconsolidation of the Tools business assets and liabilities contributed to
the Joint Venture.
-5-
The following table reflects the components of the Tools business assets and liabilities as of
June 30, 2010 and December 31, 2009.
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June 30, |
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December 31, |
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2010 |
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2009 |
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(in millions) |
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Receivables, less allowances |
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$ |
111.4 |
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$ |
100.0 |
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Inventories |
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64.7 |
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60.0 |
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Other current assets |
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12.5 |
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15.6 |
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Property, plant and equipment, less accumulated depreciation |
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85.0 |
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92.7 |
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Goodwill |
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303.8 |
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304.9 |
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Other intangible assets, less accumulated amortization |
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0.6 |
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0.7 |
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Other noncurrent assets |
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12.8 |
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15.0 |
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Assets to be contributed to Tools joint venture |
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$ |
590.8 |
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$ |
588.9 |
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Accounts payable |
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48.2 |
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36.9 |
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Accrued liabilities |
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55.9 |
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54.6 |
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Other long-term liabilities |
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41.6 |
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48.6 |
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Liabilities to be contributed to Tools joint venture |
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$ |
145.7 |
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$ |
140.1 |
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Note 3. Acquisitions
Cooper completed two acquisitions in the Energy and Safety Solutions segment and acquired
certain intangible assets in the Electrical Products Group segment during the six months ended June
30, 2010. These acquisitions were selected because of their strategic fit with existing Cooper
businesses. The acquisition date fair value of the total consideration for the 2010 transactions
was approximately $25.4 million and resulted in the recognition of aggregate goodwill of $5.9
million. The transactions consummated in 2010 also resulted in the recognition of $19.7 million in
other intangible assets consisting primarily of technology and customer relationships. Total cash
consideration paid for acquisitions during the first six months of 2010 was $20.6 million, net of
cash acquired.
The results of operations of acquisitions are included in the consolidated income statements
since the respective acquisition dates. Pro-forma income from continuing operations and diluted
earnings per share for the six months ended June 30, 2010 and 2009, assuming the acquisitions had
occurred at the beginning of the period, would not be materially different from reported results.
Note 4. Inventories
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(in millions) |
|
Raw materials |
|
$ |
169.8 |
|
|
$ |
170.7 |
|
Work-in-process |
|
|
102.0 |
|
|
|
104.1 |
|
Finished goods |
|
|
292.4 |
|
|
|
265.1 |
|
Perishable tooling and supplies |
|
|
8.3 |
|
|
|
8.5 |
|
|
|
|
|
|
|
|
|
|
|
572.5 |
|
|
|
548.4 |
|
Allowance for excess and obsolete inventory |
|
|
(63.2 |
) |
|
|
(66.8 |
) |
Excess of FIFO costs over LIFO costs |
|
|
(60.6 |
) |
|
|
(57.7 |
) |
|
|
|
|
|
|
|
Net inventories |
|
$ |
448.7 |
|
|
$ |
423.9 |
|
|
|
|
|
|
|
|
-6-
Note 5. Goodwill
Cooper has goodwill of $2.29 billion and $2.34 billion at June 30, 2010 and December 31, 2009,
respectively. Goodwill is subject to an annual impairment test and Cooper has designated January 1
as the date of this test. If an event occurs, or circumstances change, that would more likely than
not reduce the fair value of a reporting unit below its carrying value; an interim impairment test
would be performed between annual tests. Cooper has identified eight reporting units for which
goodwill is tested for impairment. The results of step one of the goodwill impairment tests as of
January 1, 2010 did not require the completion of step two of the test for any reporting unit. As
a result of the Tools joint venture as discussed above, Cooper completed an interim impairment test
for the Tools reporting unit goodwill. The results of step one of the goodwill impairment test for
the Tools reporting unit did not require the completion of step two of the test.
Note 6. Contingencies
Cooper and its subsidiaries are defendants or otherwise involved in a number of lawsuits in
the ordinary course of business. Cooper estimates the range of liability related to pending
litigation when management believes the amount and range of loss can be estimated. Cooper records
its best estimate of a loss when the loss is considered probable. When a liability is probable and
there is a range of estimated loss with no best estimate in the range, Cooper records the minimum
estimated liability related to the lawsuits or claims. As additional information becomes
available, Cooper assesses the potential liability related to pending litigation and claims and
revises its estimates. Due to uncertainties related to the resolution of lawsuits and claims, the
ultimate outcome may differ from the estimates. In the opinion of management and based on
liability accruals provided, the ultimate exposure with respect to these pending lawsuits and
claims is not expected to have a material adverse effect on Coopers consolidated financial
position or cash flows, although they could have a material adverse effect on the results of
operations for a particular reporting period.
The U.S. Federal Government has enacted legislation intended to deny certain federal funding
and government contracts to U.S. companies that reincorporate outside the United States, including
Section 745 of the Consolidated Appropriations Act, 2008 (Public Law 110-161), Section 724(c) of
the Transportation, Treasury, Housing and Urban Development, the Judiciary, and Independent
Agencies Appropriations Act, 2006 (Public Law 109-115), and 6 U.S.C. 395(b) of The Homeland
Security Act. Cooper has self-reported to the Department of Defense certain transactions
aggregating approximately $8 million with U.S. government entities which may be subject to the
legislation. At the time of this filing, it is too early to determine whether any fines or
penalties may be assessed against Cooper.
In connection with laws and regulations pertaining to the protection of the environment,
Cooper and its subsidiaries are party to several environmental proceedings and remediation
investigations and cleanups and, along with other companies, have been named a potentially
responsible party (PRP) for certain sites at which hazardous substances have been released into the
environment (Superfund sites).
Each of these matters is subject to various uncertainties and it is possible that some of
these matters will be decided unfavorably against Cooper. The resolution of these matters often
spans several years and frequently involves regulatory oversight or adjudication. Additionally,
many remediation requirements are not fixed and are likely to be affected by future technological,
site and regulatory developments. Consequently, the ultimate liability with respect to such
matters, as well as the timing of cash disbursements cannot be determined with certainty.
Environmental remediation costs are accrued based on Coopers current estimates of the most
likely amount of losses that it believes will be incurred on known environmental remediation
exposures and such accruals are adjusted as information develops or circumstances change.
Third-party sites usually involve multiple contributors where Coopers liability will be determined
based on an estimate of Coopers proportionate responsibility for the total cleanup. The amount
actually accrued for such sites is based on these estimates as well as an assessment of the
financial capacity of the other potentially responsible parties.
At June 30, 2010, Cooper had an accrual of $26.0 million with respect to potential
environmental liabilities,
-7-
including $11.4 million classified as a long-term liability. Cooper has
not utilized any form of discounting in establishing its environmental liability accruals.
In the first quarter of 2010, Cooper received two notices of potential liability under Section
107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(CERCLA) from the United States Environmental Protection Agency with respect to the release or
threatened release of hazardous substances, pollutants, and contaminants into the 17-mile stretch
of the river known as the Lower Passaic River Study Area, which is part of the Diamond Alkali
Superfund Site located in Newark, New Jersey. The EPA sent notices to over 125 companies. The
notices to Cooper identified three former sites in the Newark area owned by the former Thomas A.
Edison, Inc. and McGraw-Edison Company. The notice alleges that as the successor to Thomas A.
Edison, Inc. and the McGraw-Edison Company, the former owners and operators of the facilities,
Cooper may be potentially liable for response costs and clean up of the site. The notices do not
state an amount of potential liability and Cooper is investigating the claims. At the time of this
filing, it is too early to determine the amount of Coopers liability, if any, related to this
matter.
Note 7. Debt
At June 30, 2010, Cooper has $10.0 million of short-term debt and has no commercial paper
borrowings outstanding. At June 30, 2010, Cooper has available a $350 million U.S. committed
credit facility that matures in August 2012.
Note 8. Shareholders Equity
At June 30, 2010, Cooper Industries plc had 166,743,287 common shares, $.01 par value issued
and outstanding compared to 167,316,595 common shares, $.01 par value at December 31, 2009. During
the first six months of 2010, Cooper issued 1,424,792 common shares primarily in connection with
employee incentive and benefit plans and Coopers dividend reinvestment program. During the first
six months of 2010, Cooper Industries plc purchased 1,998,100 shares of treasury stock at an
average price of $45.72 per share.
On February 12, 2008, Coopers Board of Directors authorized the purchase of ten million
shares of common stock. On February 9, 2009, Coopers Board of Directors increased the share
repurchase authorization by ten million shares. Coopers Board has also authorized the repurchase
of shares issued from time to time under its equity compensation plans, matched savings plan and
dividend reinvestment plan in order to offset the dilution that results from issuing shares under
these plans. For 2010, Coopers current estimate is that 2.5 million shares would be issued under
equity compensation plans. During the first six months of 2010, Cooper had repurchased 1,998,100
shares under these Board of Directors authorizations. Cooper may continue to repurchase shares
under these authorizations from time to time during 2010. The decision whether to do so will be
dependent on the favorability of market conditions, as well as potential cash requirements for
acquisitions and debt repayments. As of June 30, 2010, 12,973,935 shares remain available to be
repurchased under the authorizations by the Board of Directors. Subsequent to June 30, 2010 and
through the date of this filing, Cooper had repurchased an additional
936,000 shares for
approximately $42.3 million.
-8-
Note 9. Net Income and Other Nonowner Changes in Equity
The components of net income and other nonowner changes in equity, net of taxes, were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(in millions) |
|
Net income |
|
$ |
41.6 |
|
|
$ |
89.3 |
|
|
$ |
160.2 |
|
|
$ |
189.4 |
|
Foreign currency translation gains1 |
|
|
65.4 |
|
|
|
69.4 |
|
|
|
32.2 |
|
|
|
46.5 |
|
Change in fair value of derivatives |
|
|
0.1 |
|
|
|
4.2 |
|
|
|
(2.5 |
) |
|
|
4.7 |
|
Pension and postretirement benefit plans |
|
|
2.3 |
|
|
|
2.3 |
|
|
|
4.5 |
|
|
|
4.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income and other nonowner
changes in equity |
|
$ |
109.4 |
|
|
$ |
165.2 |
|
|
$ |
194.4 |
|
|
$ |
244.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Foreign currency translation gains included in net income and other nonowner
changes in equity for the three and six month periods ended June 30, 2010 includes a gain from the
reclassification of $126.1 million ($82 million net of the associated tax affect) of previously
deferred currency translation losses that were recognized in net income related to the Tools joint
venture as discussed in Note 2. |
Note 10. Segment Information
During the first quarter of 2010, Cooper revised its segment reporting to align its external
reporting with changes to its internal reporting structure and in conjunction with the announcement
of the Tools joint venture. The former Electrical Products segment has been divided into two new
reportable segments. Following this change, Coopers operations consist of three segments: Energy
and Safety Solutions, Electrical Products Group and Tools.
The Energy and Safety Solutions segment includes the business unit results from the Cooper
Crouse-Hinds, Cooper Power Systems, and Cooper Safety divisions. This segment manufactures, markets
and sells electrical protection products, including fittings, specialty connectors, plugs,
receptacles, cable glands, hazardous duty electrical equipment, intrinsically safe explosion proof
instrumentation, emergency lighting, fire detection and mass notification systems and security
products for use in residential, commercial and industrial construction, maintenance and repair
applications. The segment also manufactures, markets and sells products for use by utilities and
in industry for electrical power transmission and distribution, including distribution switchgear,
transformers, transformer terminations and accessories, capacitors, voltage regulators, surge
arresters, energy automation solutions and other related power systems components.
The Electrical Products Group segment includes the business unit results from the Cooper
B-Line, Cooper Bussmann, Cooper Lighting and Cooper Wiring Devices divisions. This segment
manufactures, markets and sells electrical and circuit protection products, support systems,
enclosures, wiring devices, plugs, receptacles, switches, lighting fixtures and controls, and fuses
for use in residential, commercial and industrial construction, maintenance and repair
applications.
The Tools segment manufactures, markets and sells hand tools for industrial, construction,
electronics and consumer markets; automated assembly systems for industrial markets and electric
and pneumatic industrial power tools, related electronics and software control and monitoring
systems for general industry, primarily automotive and aerospace manufacturers.
Cooper manages cash, debt and income taxes centrally. Accordingly, Cooper evaluates
performance of its segments and operating units based on operating earnings exclusive of financing
activities and income taxes. The accounting policies of the segments are the same as those for
Cooper. Intersegment sales and related receivables for each of the years presented were
insignificant.
-9-
All periods have been restated for the changes to the segment reporting structure discussed
above. Financial information by industry segment was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(in millions) |
|
Energy and Safety Solutions |
|
$ |
614.4 |
|
|
$ |
609.7 |
|
|
$ |
1,184.3 |
|
|
$ |
1,216.3 |
|
Electrical Products Group |
|
|
557.6 |
|
|
|
521.4 |
|
|
|
1,069.8 |
|
|
|
1,045.3 |
|
Tools |
|
|
164.7 |
|
|
|
138.7 |
|
|
|
311.2 |
|
|
|
265.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
1,336.7 |
|
|
$ |
1,269.8 |
|
|
$ |
2,565.3 |
|
|
$ |
2,526.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Earnings |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(in millions) |
|
Energy and Safety Solutions |
|
$ |
103.7 |
|
|
$ |
89.4 |
|
|
$ |
199.8 |
|
|
$ |
179.6 |
|
Electrical Products Group |
|
|
82.6 |
|
|
|
64.1 |
|
|
|
156.1 |
|
|
|
113.9 |
|
Tools |
|
|
21.1 |
|
|
|
2.9 |
|
|
|
33.1 |
|
|
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating earnings |
|
|
207.4 |
|
|
|
156.4 |
|
|
|
389.0 |
|
|
|
292.5 |
|
General Corporate expense |
|
|
21.3 |
|
|
|
21.0 |
|
|
|
40.2 |
|
|
|
42.0 |
|
Loss related to contribution of
net assets to Tools joint
venture |
|
|
134.5 |
|
|
|
|
|
|
|
134.5 |
|
|
|
|
|
Restructuring charges |
|
|
3.0 |
|
|
|
10.4 |
|
|
|
6.5 |
|
|
|
19.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating earnings |
|
|
48.6 |
|
|
|
125.0 |
|
|
|
207.8 |
|
|
|
231.3 |
|
Interest expense, net |
|
|
11.5 |
|
|
|
16.3 |
|
|
|
23.9 |
|
|
|
31.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
before income taxes |
|
$ |
37.1 |
|
|
$ |
108.7 |
|
|
$ |
183.9 |
|
|
$ |
199.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 11. Restructuring Charges
During the fourth quarter of 2008, Cooper committed to employment reductions to appropriately
size Coopers workforce to current and anticipated market conditions and to downsize a domestic
Tools segment manufacturing operation. Cooper recorded a $35.7 million charge in the fourth
quarter of 2008 related to these actions, $15.2 million of which related to the Energy and Safety
Solutions segment, $10.3 million related to the Electrical Products Group segment and $10.2 million
related to the Tools segment. A total of 1,314 hourly and 930 salaried positions were eliminated
as a result of the fourth quarter 2008 restructuring actions to reduce Coopers workforce.
During 2009, Cooper committed to additional employment reductions and certain facility
closures as a result of managements ongoing assessment of its hourly and salary workforce and its
required production capacity in consideration of current and anticipated market conditions and
demand levels. Cooper recorded charges of $28.7 million during the year ended December 31, 2009
related to these actions, $8.1 million of which related to the Energy and Safety Solutions segment,
$10.4 million related to the Electrical Products Group segment and $8.6 million related to the
Tools segment. The remaining $1.6 million was related to reductions in Coopers corporate staff.
A total of 1,088 hourly and 772 salaried positions were eliminated as
-10-
a result of the 2009 restructuring actions to reduce Coopers workforce. As part of these
restructuring actions, Cooper approved the closure of ten factories and warehouses, eight of which
were completed by the end of 2009. Cooper recorded non-cash impairment charges of $1.2 million in
the second half of 2009 related to these actions. In the first six months of 2010, Cooper
completed one of the two remaining factory closures and recorded $6.5 million of costs associated
with the ongoing 2009 restructuring actions. The 2010 restructuring costs include $5.6 million
related to the Electrical Products Group segment, $0.8 million related to the Energy and Safety
Solutions segment and $0.1 million related to the Tools segment. Cooper expects to incur
incremental restructuring charges in the range of approximately $2 to $4 million associated with
completion of the planned restructuring activities and additional actions anticipated in 2010,
excluding restructuring that will occur in the Tools Joint Venture.
The following table reflects activity related to the restructuring accrual.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract |
|
|
|
Involuntary Employee |
|
|
Termination |
|
|
|
Termination Benefits |
|
|
and Other |
|
|
|
Headcount |
|
|
Dollars |
|
|
Exit Costs |
|
|
|
|
|
|
($ in millions) |
|
2008 fourth quarter restructuring actions |
|
|
2,244 |
|
|
$ |
33.7 |
|
|
$ |
2.0 |
|
Headcount reductions or costs incurred |
|
|
(1,358 |
) |
|
|
(5.7 |
) |
|
|
(0.3 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
|
|
886 |
|
|
$ |
28.0 |
|
|
$ |
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 restructuring actions |
|
|
1,860 |
|
|
$ |
24.8 |
|
|
$ |
3.9 |
|
Headcount reductions or costs incurred |
|
|
(2,478 |
) |
|
|
(47.7 |
) |
|
|
(4.6 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
|
268 |
|
|
$ |
5.1 |
|
|
$ |
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring actions |
|
|
24 |
|
|
$ |
4.2 |
|
|
$ |
2.3 |
|
Headcount reductions or costs incurred |
|
|
(181 |
) |
|
|
(6.9 |
) |
|
|
(3.0 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010 |
|
|
111 |
|
|
$ |
2.4 |
|
|
$ |
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative restructuring actions
2008 fourth quarter through June 30, 2010 |
|
|
4,128 |
|
|
$ |
62.7 |
|
|
$ |
8.2 |
|
The workforce reductions, contract termination and other exit costs and the related cash
payments will be substantially completed in 2010.
Note 12. Stock-Based Compensation
Cooper has a share-based compensation plan known as the Amended and Restated Stock Incentive
Plan (the Plan). The Plan provides for the granting of stock options, performance-based share
awards and restricted stock units. Since the original Plans inception in 1996, the aggregate
number of shares authorized under the Plan is 41 million. As of June 30, 2010, 4,322,747 shares
were available for future grants under the Plan. Of the total shares available for future grants,
2,510,289 are available for grants of performance-based shares and restricted stock units. Total
compensation expense for all share-based compensation arrangements under the Plan was $16.7 million
and $14.0 million for the six months ended June 30, 2010 and 2009, respectively. The total income
tax benefit recognized in the income statement for all share-based compensation arrangements under
the Plan was $5.9 million and $4.8 million for the six months ended June 30, 2010 and 2009,
respectively. During the six months ended June 30, 2010, Cooper granted 1,598,480 stock option
awards, 516,362 performance-based shares and 81,175 restricted stock units.
-11-
Note 13. Income Taxes
The effective tax rate was 12.9% for the six months ended June 30, 2010 and 14.7% for the six
months ended June 30, 2009. During the second quarter of 2010, Cooper reduced income tax expense
by $40.8 million to recognize the discrete tax affects related to the contribution of net assets to
the Tools joint venture as discussed in Note 2. Cooper reduced income tax expense by $8.4 million
during the first six months of 2009 for discrete tax items primarily related to foreign taxes.
Excluding the discrete tax items, Coopers effective tax rate was 20.2% for the six months ended
June 30, 2010 and 18.9% for the six months ended June 30, 2009.
In June 2009, the Internal Revenue Service (IRS) completed its examination of Coopers 2007
Federal Tax Return and issued a notice of assessment in the amount of $16 million. The IRS
challenged Coopers intercompany pricing with a foreign affiliate. On July 15, 2009, Cooper filed
its protest for this assessment and continues to work with the IRS to resolve this matter. While
the outcome of the proceedings with the IRS cannot be predicted with certainty, management believes
that it is more likely than not that its tax position will prevail.
In June 2008, the German Tax Authorities issued a proposed audit finding related to a 2004
reorganization that was treated as a non-taxable event. In December 2009, at Coopers request, the
German taxing authorities finalized and issued a notice of assessment for 62.8 million, inclusive
of 5.7 million of interest, related to this matter. In order for Cooper to continue to challenge
the German tax authorities finding, Cooper paid the assessment in December 2009 for approximately
$90 million and filed a suit to challenge the notice of assessment. Cooper continues to believe
that the reorganization was properly reflected on its German income tax returns in accordance with
applicable tax laws and regulations in effect during the period involved and will challenge the
assessment vigorously. While the outcome of the proceedings with the German Tax Authorities cannot
be predicted with certainty, management believes that it is more likely than not that its tax
position related to the 2004 reorganization will prevail. As such, Cooper has recognized the 62.8
million tax payment, including interest, in other noncurrent assets in the accompanying balance
sheets. The German tax payment will be available as a foreign tax credit in the United States.
Cooper is under examination by various United States State and Local taxing authorities, as
well as various taxing authorities in other countries. Cooper is no longer subject to U.S. Federal
income tax examinations by tax authorities for years prior to 2007, and with few exceptions, Cooper
is no longer subject to State and Local, or non-U.S. income tax examinations by tax authorities for
years before 2000. Cooper fully cooperates with all audits, but defends existing positions
vigorously. These audits are in various stages of completion. To provide for potential tax
exposures, Cooper maintains a liability for unrecognized tax benefits, which management believes is
adequate. The results of future audit assessments, if any, could have a material effect on
Coopers cash flows as these audits are completed.
Cooper has unrecognized gross tax benefits of $39.1 million at June 30, 2010. Approximately
$32.7 million of the unrecognized tax benefits would favorably impact the effective tax rate if
recognized. Cooper believes it is reasonably possible that additional tax benefits in the range of
approximately $7 to $10 million could be recognized during the next 12 months as audits close and
statutes expire.
At June 30, 2010, Cooper has a foreign deferred tax asset of approximately $1.0 billion
relating to a net operating loss carryforward that was approved by a foreign jurisdiction in
September 2009. While this net operating loss carryforward has an indefinite life, a valuation
allowance of approximately $1.0 billion was recognized because management believes at this time it
is more likely than not that the deferred tax asset will not be realized.
-12-
Note 14. Pension and Other Postretirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(in millions) |
|
Components of net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
0.9 |
|
|
$ |
0.9 |
|
|
$ |
1.8 |
|
|
$ |
1.7 |
|
Interest cost |
|
|
9.6 |
|
|
|
10.4 |
|
|
|
19.5 |
|
|
|
20.8 |
|
Expected return on plan assets |
|
|
(10.7 |
) |
|
|
(9.8 |
) |
|
|
(21.5 |
) |
|
|
(19.5 |
) |
Amortization of prior service cost |
|
|
(0.6 |
) |
|
|
(0.7 |
) |
|
|
(1.3 |
) |
|
|
(1.3 |
) |
Recognized actuarial loss |
|
|
5.3 |
|
|
|
5.7 |
|
|
|
10.7 |
|
|
|
11.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
4.5 |
|
|
$ |
6.5 |
|
|
$ |
9.2 |
|
|
$ |
13.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Postretirement Benefits |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(in millions) |
|
Components of net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost |
|
$ |
1.2 |
|
|
$ |
1.2 |
|
|
$ |
2.4 |
|
|
$ |
2.4 |
|
Amortization of prior service cost |
|
|
(0.5 |
) |
|
|
(0.5 |
) |
|
|
(1.0 |
) |
|
|
(1.0 |
) |
Recognized actuarial gain |
|
|
(0.5 |
) |
|
|
(0.8 |
) |
|
|
(1.0 |
) |
|
|
(1.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (gain) |
|
$ |
0.2 |
|
|
$ |
(0.1 |
) |
|
$ |
0.4 |
|
|
$ |
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
-13-
Note 15. Net Income Per Common Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(in millions) |
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
41.6 |
|
|
$ |
89.3 |
|
|
$ |
160.2 |
|
|
$ |
170.5 |
|
Income from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common stock |
|
$ |
41.6 |
|
|
$ |
89.3 |
|
|
$ |
160.2 |
|
|
$ |
189.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
167.8 |
|
|
|
166.9 |
|
|
|
167.7 |
|
|
|
167.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
41.6 |
|
|
$ |
89.3 |
|
|
$ |
160.2 |
|
|
$ |
170.5 |
|
Income from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common stock |
|
$ |
41.6 |
|
|
$ |
89.3 |
|
|
$ |
160.2 |
|
|
$ |
189.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
167.8 |
|
|
|
166.9 |
|
|
|
167.7 |
|
|
|
167.1 |
|
Incremental shares from assumed conversions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options, performance-based stock
awards and other employee awards |
|
|
1.9 |
|
|
|
1.1 |
|
|
|
1.9 |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
and common share equivalents |
|
|
169.7 |
|
|
|
168.0 |
|
|
|
169.6 |
|
|
|
168.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options and employee awards are not included as common stock equivalents in the calculations
if the effect would be antidilutive. Out of the money options and employee awards of 2.4 million
and 7.8 million shares were excluded from the calculations during the six months ended June 30,
2010 and 2009 respectively.
Note 16. Financial Instruments and Hedging Activities, Concentrations of Credit Risk
and Fair Value of Financial Instruments
Derivative Instruments and Hedging Activities
All derivatives are recognized as assets and liabilities and measured at fair value. For
derivative instruments that are not designated as hedges, the gain or loss on the derivative is
recognized in earnings currently. A derivative instrument may be designated as a hedge of the
exposure to changes in the fair value of an asset or liability or variability in expected future
cash flows if the hedging relationship is expected to be highly effective in offsetting changes in
fair value or cash flows attributable to the hedged risk during the period of designation. If a
derivative is designated as a fair value hedge, the gain or loss on the derivative and the
offsetting loss or gain on the hedged asset, liability or firm commitment is recognized in
earnings. For derivative instruments designated as a cash flow hedge, the effective portion of the
gain or loss on the derivative instrument is reported as a component of accumulated nonowner
changes in equity and reclassified into earnings in the same period that the hedged transaction
affects earnings. The ineffective portion of the gain or loss is immediately recognized in
earnings.
Hedge accounting is discontinued prospectively when (1) it is determined that a
derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged
item; (2) the derivative is sold, terminated or exercised; (3) the hedged item no
longer meets the definition of a firm commitment; or (4)
-14-
it is unlikely that a forecasted transaction will occur within two months of the originally
specified time period.
When hedge accounting is discontinued because it is determined that the derivative no longer
qualifies as an effective fair-value hedge, the derivative will continue to be carried on the
balance sheet at its fair value, and the hedged asset or liability will no longer be adjusted for
changes in fair value. When hedge accounting is discontinued because a hedged item no longer meets
the definition of a firm commitment, the derivative will continue to be carried on the balance
sheet at its fair value, and any asset or liability that was recorded pursuant to recognition of
the firm commitment will be removed from the balance sheet and recognized as a gain or loss
currently in earnings. When hedge accounting is discontinued because it is probable that a
forecasted transaction will not occur within two months of the originally specified time period,
the derivative will continue to be carried on the balance sheet at its fair value, and gains and
losses reported in accumulated nonowner changes in equity will be recognized immediately in
earnings.
As a result of having sales, purchases and certain intercompany transactions denominated in
currencies other than the functional currencies of Coopers businesses, Cooper is exposed to the
effect of currency exchange rate changes on its cash flows and earnings. Cooper enters into
currency forward exchange contracts to hedge significant non-functional currency denominated
transactions for periods consistent with the terms of the underlying transactions. Contracts
generally have maturities that do not exceed one year.
Currency forward exchange contracts executed to hedge forecasted transactions are accounted
for as cash flow hedges. Currency forward exchange contracts executed to hedge a recognized asset,
liability or firm commitment are accounted for as fair value hedges. Cooper sometimes enters into
certain currency forward exchange contracts that are not designated as hedges. These contracts are
intended to reduce cash flow volatility related to short-term intercompany financing transactions.
Cooper also enters into commodity swaps to reduce the volatility of price fluctuations on a portion
of up to eighteen months of forecasted material purchases. These instruments are designated as cash
flow hedges. Cooper does not enter into speculative derivative transactions.
During October 2005, Cooper entered into cross-currency swaps to effectively convert its newly
issued $325 million, 5.25% fixed-rate debt maturing in November 2012 to 272.6 million of 3.55%
fixed-rate debt. The $325 million debt issuance proceeds were swapped to 272.6 million and lent
through an intercompany loan to a non-U.S. subsidiary to partially fund repayment of the 300
million Euro bond debt that matured on October 25, 2005. The cross-currency swaps mature in
November 2012.
Assets and liabilities measured at fair value are based on one or more of three valuation
techniques. Valuation techniques utilized for each individual asset and liability category are
referenced in the tables below. The valuation techniques are as follows:
|
(a) |
|
Market approach Prices and other relevant information generated by market
transactions involving identical or comparable assets or liabilities; |
|
|
(b) |
|
Income approach Techniques to convert future amounts to a single present
amount based on market expectations (including present value techniques, option-pricing
and excess earnings models); |
|
|
(c) |
|
Cost approach Amount that would be required to replace the service capacity
of an asset (replacement cost). |
The inputs used in measuring fair value are prioritized using a three-tier fair value
hierarchy as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level
2) inputs, other than the quoted prices in active markets, that are observable either directly or
indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which
require the reporting entity to develop its own assumptions.
-15-
Assets and liabilities measured at fair value as of June 30, 2010 on a recurring basis are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
Liabilities |
|
|
|
|
Significant other |
|
Significant other |
|
|
|
|
observable inputs |
|
observable inputs |
|
Valuation |
(in millions) |
|
(Level 2) |
|
(Level 2) |
|
Technique |
|
Short-term currency forward
exchange contracts |
|
$ |
18.0 |
|
|
$ |
(33.2 |
) |
|
|
(a |
) |
Long-term currency forward
exchange contracts |
|
|
72.8 |
|
|
|
(30.8 |
) |
|
|
(a |
) |
Short-term commodity swaps |
|
|
0.3 |
|
|
|
(1.3 |
) |
|
|
(a |
) |
Long-term cross-currency swaps |
|
|
1.7 |
|
|
|
|
|
|
|
(a |
) |
|
Currency forward exchange contracts representing approximately $45.0 million of assets and
$33.1 million of liabilities at June 30, 2010 are not designated as hedging instruments. Except as
discussed in the preceding sentence, the currency forward exchange contracts and commodity swaps in
the above table are designated as hedging instruments.
Assets and liabilities measured at fair value as of December 31, 2009 on a recurring basis are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
Liabilities |
|
|
|
|
Significant other |
|
Significant other |
|
|
|
|
observable inputs |
|
observable inputs |
|
Valuation |
(in millions) |
|
(Level 2) |
|
(Level 2) |
|
Technique |
|
Short-term currency forward
exchange contracts |
|
$ |
13.6 |
|
|
$ |
(12.7 |
) |
|
|
(a |
) |
Long-term currency forward
exchange contracts |
|
|
55.8 |
|
|
|
(22.5 |
) |
|
|
(a |
) |
Short-term commodity swaps |
|
|
3.3 |
|
|
|
(0.7 |
) |
|
|
(a |
) |
Long-term cross-currency swaps |
|
|
|
|
|
|
(54.4 |
) |
|
|
(a |
) |
|
Currency forward exchange contracts representing approximately $35.7 million of assets and
$24.1 million of liabilities at December 31, 2009 are not designated as hedging instruments. Except
as discussed in the preceding sentence, the currency forward exchange contracts and commodity swaps
in the above table are designated as hedging instruments.
There were no changes in the valuation techniques used to measure asset or liability fair
values on a recurring basis during the six months ended June 30, 2010.
Gains or losses on derivative instruments are reported in the same line item as the
underlying hedged transaction in the consolidated statements of income. The net gain or loss on
currency forward exchange contracts was not material in the six months ended June 30, 2010 and
2009. For commodity swaps, Cooper recognized, in cost of sales, a net gain of $1.7 million in
the six months ended June 30, 2010 and a net loss of $14.6 million in the six months ended June
30, 2009. At June 30, 2010, Cooper estimates that approximately $0.8 million of net losses on
derivative instruments designated as cash flow hedges will be reclassified from accumulated
other nonowner changes in equity to earnings during the next twelve months. The amount of
discontinued cash flow hedges in the six months ended June 30, 2010 and 2009 was not material.
-16-
The table below summarizes the U. S. dollar equivalent contractual amounts of Coopers forward
exchange contracts at June 30, 2010 and December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(in millions) |
|
U.S. Dollar |
|
$ |
560.7 |
|
|
$ |
533.1 |
|
Euro |
|
|
333.3 |
|
|
|
353.4 |
|
British Pound Sterling |
|
|
308.4 |
|
|
|
294.0 |
|
Canadian Dollar |
|
|
28.1 |
|
|
|
5.7 |
|
Other |
|
|
33.7 |
|
|
|
28.1 |
|
|
|
|
|
|
|
|
|
|
$ |
1,264.2 |
|
|
$ |
1,214.3 |
|
|
|
|
|
|
|
|
The contractual amounts of Coopers commodity swap contracts at June 30, 2010 and December 31,
2009 were approximately $19 million and $15 million, respectively.
Other Instruments
In the normal course of business, Cooper executes stand-by letters of credit, performance
bonds and other guarantees that ensure Coopers performance or payment to third parties that are
not reflected in the consolidated balance sheets. The aggregate notional value of these instruments
was $106.7 million and $107.4 million at June 30, 2010 and December 31, 2009, respectively. In the
past, no significant claims have been made against these financial instruments. Management
believes the likelihood of demand for payment under these instruments is minimal and expects no
material losses to occur in connection with these instruments.
Concentrations of Credit Risk
Concentrations of credit risk with respect to trade receivables are limited due to the wide
variety of customers as well as their dispersion across many different geographic areas with no one
customer receivable exceeding 4.7% of accounts receivable at June 30, 2010 (5.2% at December 31,
2009).
Fair Value of Financial Instruments Other than Derivatives
Coopers financial instruments other than derivative instruments consist primarily of cash and
cash equivalents, trade receivables, trade payables and debt instruments. The book values of cash
and cash equivalents, trade receivables, and trade payables are considered to be representative of
their respective fair values. Cooper had a book value of approximately $935.3 million and $934.4
million for debt instruments at June 30, 2010 and December 31, 2009, respectively. The fair value
of these debt instruments, as represented primarily by quoted market prices, was approximately
$1.04 billion and $1.01 billion at June 30, 2010 and December 31, 2009, respectively.
Note 17. Discontinued Operations Receivable and Liability
Discontinued Operations Liability
In October 1998, Cooper sold its Automotive Products business to Federal-Mogul Corporation
(Federal-Mogul). These discontinued businesses (including the Abex Friction product line
obtained from Pneumo-Abex Corporation (Pneumo) in 1994) were operated through subsidiary
companies, and the stock of those subsidiaries was sold to Federal-Mogul pursuant to a Purchase and
Sale Agreement dated August 17, 1998 (1998 Agreement). In conjunction with the sale,
Federal-Mogul indemnified Cooper for certain liabilities of these subsidiary companies, including
liabilities related to the Abex Friction product line and any potential liability that Cooper may
have to Pneumo pursuant to a 1994 Mutual Guaranty Agreement between Cooper and Pneumo. On October
1, 2001, Federal-Mogul and several of its affiliates filed a
Chapter 11 bankruptcy petition. The Bankruptcy Court for the District of Delaware confirmed
Federal-
-17-
Moguls plan of reorganization and Federal-Mogul emerged from bankruptcy in December 2007.
As part of Federal-Moguls Plan of Reorganization, Cooper and Federal-Mogul reached a settlement
agreement that was subject to approval by the Bankruptcy Court resolving Federal-Moguls
indemnification obligations to Cooper. As discussed further below, on September 30, 2008, the
Bankruptcy Court issued its final ruling denying Coopers participation in the proposed
Federal-Mogul 524(g) trust resulting in implementation of the previously approved Plan B
Settlement. As part of its obligation to Pneumo for any asbestos-related claims arising from the
Abex Friction product line (Abex Claims), Cooper has rights, confirmed by Pneumo, to significant
insurance for such claims. Based on information provided by representatives of Federal-Mogul and
recent claims experience, from August 28, 1998 through June 30, 2010, a total of 148,473 Abex
Claims were filed, of which 133,192 claims have been resolved leaving 15,281 Abex Claims pending at
June 30, 2010. During the six months ended June 30, 2010, 733 claims were filed and 8,281 claims
were resolved. Since August 28, 1998, the average indemnity payment for resolved Abex Claims was
$2,015 before insurance. A total of $175.9 million was spent on defense costs for the period
August 28, 1998 through June 30, 2010. Due to the exhaustion of primary layers of coverage and
litigation with certain excess insurers, existing insurance coverage currently provides
approximately 30% recovery of the total defense and indemnity payments for Abex Claims, although,
in certain periods, insurance recoveries can be higher due to new settlements with insurers.
2005 2007
In December 2005, Cooper reached an initial agreement in negotiations with the representatives
of Federal-Mogul, its bankruptcy committees and the future claimants (the Representatives)
regarding Coopers participation in Federal Moguls proposed 524(g) asbestos trust. By
participating in this trust, Cooper would have resolved its liability for asbestos claims arising
from Coopers former Abex Friction Products business. The proposed settlement agreement was
subject to court approval and certain other approvals. Future claims would have been resolved
through the bankruptcy trust.
Although the final determination of whether Cooper would participate in the Federal-Mogul
524(g) trust was unknown, Coopers management concluded that, at the date of the filing of its 2005
Form 10-K, the most likely outcome in the range of potential outcomes was a settlement
approximating the December 2005 proposed settlement. Accordingly, the accrual for potential
liabilities related to the Automotive Products sale and the Federal-Mogul bankruptcy was $526.3
million at December 31, 2005. The December 31, 2005 discontinued operations accrual included
payments to a 524(g) trust over 25 years that were undiscounted, and included $215 million of
insurance recoveries where insurance in place agreements, settlements or policy recoveries were
probable.
Throughout 2006 and 2007, Cooper continued to believe that the most likely outcome in the
range of potential outcomes was a revised settlement with Cooper resolving its asbestos obligations
through participation in the proposed Federal-Mogul 524(g) trust. While the details of the
proposed settlement agreement evolved during the on-going negotiations throughout 2006 and 2007,
the underlying principles of the proposed settlement arrangements being negotiated principally
included fixed payments to a 524(g) trust over 25 years that were subject to reduction for
insurance proceeds received in the future.
As a result of the then current status of settlement negotiations, Cooper recorded a $20.3
million after-tax discontinued operations charge, net of an $11.4 million income tax benefit, in
the second quarter of 2006 to reflect the revised terms of the proposed settlement agreement at
that time. The discontinued operations accrual was $509.1 million and $529.6 million as of
December 31, 2007 and 2006, respectively, and included payments to a 524(g) trust over 25 years
that were undiscounted, and included insurance recoveries of $230 million and $239 million,
respectively, where insurance in place agreements, settlements or policy recoveries were probable.
The U.S. Bankruptcy Court for the District of Delaware confirmed Federal-Moguls plan of
reorganization on November 8, 2007, and the U.S. District Court for the District of Delaware
affirmed the Bankruptcy Courts order on November 14, 2007. As part of its ruling, the Bankruptcy
Court approved the
Plan B Settlement between Cooper and Federal-Mogul, which would require payment of $138
million to Cooper in the event Coopers participation in the Federal-Mogul 524(g) trust is not
approved for any reason,
-18-
or if Cooper elected not to participate or to pursue participation in the
trust. The Bankruptcy Court stated that it would consider approving Coopers participation in the
Federal-Mogul 524(g) trust at a later time, and that its order confirming the plan of
reorganization and approving the settlement between Cooper and Federal-Mogul did not preclude later
approval of Coopers participation in the 524(g) trust. Accordingly, in an effort to continue
working towards approval of Coopers participation in the trust and to address certain legal issues
identified by the Court, Cooper, Pneumo-Abex, Federal-Mogul, and other plan supporters filed the
Modified Plan A Settlement Documents on December 13, 2007. The Modified Plan A Settlement
Documents would have required Cooper to make an initial payment of $248.5 million in cash to the
Federal-Mogul trust upon implementation of Plan A with additional annual payments of up to $20
million each due over 25 years. If the Bankruptcy Court had approved the modified settlement and
that settlement was implemented, Cooper, through Pneumo-Abex LLC, would have continued to have
access to Abex insurance policies.
2008 2010
During the first quarter of 2008, the Bankruptcy Court concluded hearings on Plan A. On
September 30, 2008, the Bankruptcy Court issued its ruling denying the Modified Plan A Settlement
resulting in Cooper not participating in the Federal-Mogul 524(g) trust and instead proceeding with
the Plan B Settlement that had previously been approved by the Bankruptcy Court. As a result of
the Plan B Settlement, Cooper received the $138 million payment, plus interest of $3 million, in
October 2008 from the Federal-Mogul Bankruptcy estate and will continue to resolve through the tort
system the asbestos related claims arising from the Abex Friction product line that it had sold to
Federal-Mogul in 1998. Additionally, under Plan B, Cooper has access to Abex insurance policies.
As a result of the September 30, 2008 Bankruptcy Court ruling discussed above, Cooper adjusted its
accounting in the third quarter of 2008 to reflect the separate assets and liabilities related to
the on-going activities to resolve the potential asbestos related claims through the tort system.
Cooper recorded income from discontinued operations of $16.6 million, net of a $9.4 million income
tax expense, in the third quarter of 2008 to reflect the Plan B Settlement.
The following table presents the separate assets and liabilities under the Plan B settlement
and the cash activity under the Plan B Settlement.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(in millions) |
|
Asbestos liability analysis (undiscounted): |
|
|
|
|
|
|
|
|
Total liability for unpaid, pending and future indemnity and
defense costs at end of period |
|
$ |
769.8 |
|
|
$ |
784.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asbestos receivable analysis (undiscounted): |
|
|
|
|
|
|
|
|
Insurance receivable for previously paid claims and insurance
settlements |
|
$ |
56.2 |
|
|
$ |
64.6 |
|
Insurance-in-place agreements available for pending and future claims |
|
|
109.6 |
|
|
|
114.7 |
|
|
|
|
|
|
|
|
Total estimated asbestos receivable at end of period |
|
$ |
165.8 |
|
|
$ |
179.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(in millions) |
|
Cash Flow: |
|
|
|
|
|
|
|
|
Indemnity and defense payments |
|
$ |
(13.5 |
) |
|
$ |
(9.9 |
) |
Insurance recoveries |
|
|
13.5 |
|
|
|
43.1 |
|
Other |
|
|
(1.2 |
) |
|
|
(0.2 |
) |
|
|
|
|
|
|
|
Net cash flow |
|
$ |
(1.2 |
) |
|
$ |
33.0 |
|
|
|
|
|
|
|
|
-19-
During the first quarter of 2009, Cooper recognized a gain from discontinued operations of
$18.9 million, net of a $12.0 million income tax expense, from negotiated insurance settlements
consummated in the first quarter of 2009 that were not previously recognized. Cooper believes that
it is likely that additional insurance recoveries will be recorded in the future as new
insurance-in-place agreements are consummated or settlements with insurance carriers are completed.
Timing and value of these agreements and settlements cannot be currently estimated as they may be
subject to extensive additional negotiation and litigation.
Asbestos Liability Estimate
As of June 30, 2010, Cooper estimates that the liability for pending and future indemnity and
defense costs for the next 45 years will be $769.8 million. The amount included for unpaid
indemnity and defense costs is not significant at June 30, 2010. The estimated liability is before
any tax benefit and is not discounted as the timing of the actual payments is not reasonably
predictable.
The methodology used to project Coopers liability estimate relies upon a number of
assumptions including Coopers recent claims experience and declining future asbestos spending
based on past trends and publicly available epidemiological data, changes in various jurisdictions,
managements judgment about the current and future litigation environment, and the availability to
claimants of other payment sources.
Abex discontinued using asbestos in the Abex Friction product line in the 1970s and
epidemiological studies that are publicly available indicate the incidence of asbestos-related
disease is in decline and should continue to decline steadily. However, there can be no assurance
that these studies, or other assumptions, will not vary significantly from the estimates utilized
to project the undiscounted liability.
Although Cooper believes that its estimated liability for pending and future indemnity and
defense costs represents the best estimate of its future obligation, Cooper utilized scenarios that
it believed were reasonably possible that indicate a broader range of potential estimates from $505
to $877 million (undiscounted).
Asbestos Receivable Estimate
As of June 30, 2010, Cooper, through Pneumo-Abex LLC, has access to Abex insurance policies
with remaining limits on policies with solvent insurers in excess of $670 million. Insurance
recoveries reflected as receivables in the balance sheet include recoveries where
insurance-in-place agreements, settlements or policy recoveries are probable. As of June 30, 2010,
Coopers receivable for recoveries of costs from insurers amounted to $165.8 million, of which
$56.2 million relate to costs previously paid or insurance settlements. Coopers arrangements with
the insurance carriers may defer certain amounts of insurance and settlement proceeds that Cooper
is entitled to receive beyond twelve months. Approximately 92% of the $165.8 million receivable
from insurance companies at June 30, 2010 is due from domestic insurers whose AM Best rating is
Excellent (A-) or better. The remaining balance of the insurance receivable has been significantly
discounted to reflect managements best estimate of the recoverable amount.
Cooper believes that it is likely that additional insurance recoveries will be recorded in the
future as new insurance-in-place agreements are consummated or settlements with insurance carriers
are completed. Timing and value of these agreements and settlements cannot be currently estimated
as they may be subject to extensive additional negotiation and litigation.
Critical Accounting Assumptions
The amounts recorded by Cooper for its asbestos liability and related insurance receivables
are not discounted and rely on assumptions that are based on currently known facts and strategy.
The value of the liability on a discounted basis net of the amount of insurance recoveries likely
to materialize in the future would be significantly lower than the net amounts currently recognized
in the balance sheet. Coopers actual asbestos costs or insurance recoveries could be
significantly higher or lower than those recorded if
assumptions used in the estimation process vary significantly from actual results over time. As
the estimated liability is not discounted and extends over 45 years, any changes in key assumptions
could have a significant impact on the recorded liability. Key variables in these assumptions
include the number and type
-20-
of new claims filed each year, the average indemnity and defense costs
of resolving claims, the number of years these assumptions are projected into the future, and the
resolution of on-going negotiations of additional settlement or coverage-in-place agreements with
insurance carriers. Assumptions with respect to these variables are subject to greater uncertainty
as the projection period lengthens. Other factors that may affect Coopers liability and ability
to recover under its insurance policies include uncertainties surrounding the litigation process
from jurisdiction to jurisdiction and from case to case, reforms that may be made by state and
federal courts, and the passage of state or federal tort reform legislation. Cooper will review
these assumptions on a periodic basis to determine whether any adjustments are required to the
estimate of its recorded asbestos liability and related insurance receivables.
From a cash flow perspective, Cooper management believes that the annual cash outlay for its
potential asbestos liability, net of insurance recoveries, will not be material to Coopers
operating cash flow.
Note 18. Consolidating Financial Information
Cooper Industries plc, Cooper Industries, Ltd. and certain of Coopers principal operating
subsidiaries (the Guarantors) fully and unconditionally guarantee, on a joint and several basis,
the registered debt securities of Cooper Industries, LLC and Cooper US, Inc. Cooper Industries plc
was incorporated on June 4, 2009 and replaced Cooper Industries, Ltd. as the ultimate parent
company on September 8, 2009. The following condensed consolidating financial information is
included so that separate financial statements of Cooper Industries, LLC, Cooper US, Inc. or the
Guarantors are not required to be filed with the Securities and Exchange Commission. The
consolidating financial statements present investments in subsidiaries using the equity method of
accounting. Intercompany investments in the Class A and Class B common shares of Cooper
Industries, Ltd. that are held by wholly-owned subsidiaries are accounted for using the cost
method.
-21-
Consolidating Income Statements
Three Months Ended June 30, 2010
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
Cooper |
|
|
Cooper |
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries |
|
|
Industries, |
|
|
Industries, |
|
|
US, |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
plc |
|
|
Ltd. |
|
|
LLC |
|
|
Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
777.5 |
|
|
$ |
730.7 |
|
|
$ |
(171.5 |
) |
|
$ |
1,336.7 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
0.2 |
|
|
|
0.7 |
|
|
|
550.6 |
|
|
|
515.0 |
|
|
|
(171.5 |
) |
|
|
895.0 |
|
Selling and
administrative expenses |
|
|
2.1 |
|
|
|
(0.2 |
) |
|
|
|
|
|
|
15.8 |
|
|
|
117.7 |
|
|
|
120.2 |
|
|
|
|
|
|
|
255.6 |
|
Loss related to
contribution of net
assets to Tools joint
venture |
|
|
|
|
|
|
|
|
|
|
3.7 |
|
|
|
2.4 |
|
|
|
|
|
|
|
128.4 |
|
|
|
|
|
|
|
134.5 |
|
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.4 |
|
|
|
1.6 |
|
|
|
|
|
|
|
3.0 |
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.1 |
|
|
|
|
|
|
|
(0.6 |
) |
|
|
|
|
|
|
11.5 |
|
Equity in earnings of
subsidiaries, net of tax |
|
|
23.3 |
|
|
|
47.3 |
|
|
|
(71.2 |
) |
|
|
(10.9 |
) |
|
|
10.7 |
|
|
|
(42.2 |
) |
|
|
43.0 |
|
|
|
|
|
Intercompany income
(expense) |
|
|
0.5 |
|
|
|
(4.4 |
) |
|
|
1.4 |
|
|
|
(20.1 |
) |
|
|
(32.1 |
) |
|
|
54.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
before income taxes |
|
|
21.7 |
|
|
|
43.1 |
|
|
|
(73.7 |
) |
|
|
(62.0 |
) |
|
|
86.4 |
|
|
|
(21.4 |
) |
|
|
43.0 |
|
|
|
37.1 |
|
Income tax expense
(benefit) |
|
|
|
|
|
|
|
|
|
|
0.5 |
|
|
|
(19.8 |
) |
|
|
30.4 |
|
|
|
(15.6 |
) |
|
|
|
|
|
|
(4.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations |
|
|
21.7 |
|
|
|
43.1 |
|
|
|
(74.2 |
) |
|
|
(42.2 |
) |
|
|
56.0 |
|
|
|
(5.8 |
) |
|
|
43.0 |
|
|
|
41.6 |
|
Income from
discontinued
operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
21.7 |
|
|
$ |
43.1 |
|
|
$ |
(74.2 |
) |
|
$ |
(42.2 |
) |
|
$ |
56.0 |
|
|
$ |
(5.8 |
) |
|
$ |
43.0 |
|
|
$ |
41.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Income Statements
Three Months Ended June 30, 2009
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
Cooper |
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries, |
|
|
Industries, |
|
|
US, |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
Ltd. |
|
|
LLC |
|
|
Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
748.9 |
|
|
$ |
631.7 |
|
|
$ |
(110.8 |
) |
|
$ |
1,269.8 |
|
Cost of sales |
|
|
|
|
|
|
(0.7 |
) |
|
|
|
|
|
|
535.0 |
|
|
|
461.5 |
|
|
|
(110.8 |
) |
|
|
885.0 |
|
Selling and administrative
expenses |
|
|
4.9 |
|
|
|
2.6 |
|
|
|
14.5 |
|
|
|
118.6 |
|
|
|
110.4 |
|
|
|
(1.6 |
) |
|
|
249.4 |
|
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
|
2.8 |
|
|
|
7.5 |
|
|
|
|
|
|
|
10.4 |
|
Interest expense, net |
|
|
(0.1 |
) |
|
|
4.0 |
|
|
|
12.1 |
|
|
|
0.4 |
|
|
|
(0.1 |
) |
|
|
|
|
|
|
16.3 |
|
Equity in earnings of
subsidiaries, net of tax |
|
|
135.2 |
|
|
|
(5.3 |
) |
|
|
60.3 |
|
|
|
18.3 |
|
|
|
59.6 |
|
|
|
(268.1 |
) |
|
|
|
|
Intercompany income
(expense) |
|
|
(7.5 |
) |
|
|
6.5 |
|
|
|
8.5 |
|
|
|
(34.5 |
) |
|
|
62.1 |
|
|
|
(35.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
before income taxes |
|
|
122.9 |
|
|
|
(4.7 |
) |
|
|
42.1 |
|
|
|
75.9 |
|
|
|
174.1 |
|
|
|
(301.6 |
) |
|
|
108.7 |
|
Income tax expense
(benefit) |
|
|
|
|
|
|
1.0 |
|
|
|
(17.5 |
) |
|
|
22.4 |
|
|
|
13.5 |
|
|
|
|
|
|
|
19.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations |
|
|
122.9 |
|
|
|
(5.7 |
) |
|
|
59.6 |
|
|
|
53.5 |
|
|
|
160.6 |
|
|
|
(301.6 |
) |
|
|
89.3 |
|
Income from discontinued
operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
122.9 |
|
|
$ |
(5.7 |
) |
|
$ |
59.6 |
|
|
$ |
53.5 |
|
|
$ |
160.6 |
|
|
$ |
(301.6 |
) |
|
$ |
89.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-22-
Consolidating Income Statements
Six Months Ended June 30, 2010
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
Cooper |
|
|
Cooper |
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries |
|
|
Industries, |
|
|
Industries, |
|
|
US, |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
plc |
|
|
Ltd. |
|
|
LLC |
|
|
Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,472.5 |
|
|
$ |
1,410.8 |
|
|
$ |
(318.0 |
) |
|
$ |
2,565.3 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
1,046.8 |
|
|
|
986.9 |
|
|
|
(318.0 |
) |
|
|
1,716.1 |
|
Selling and
administrative expenses |
|
|
2.1 |
|
|
|
(0.2 |
) |
|
|
2.0 |
|
|
|
62.4 |
|
|
|
228.5 |
|
|
|
236.5 |
|
|
|
(30.9 |
) |
|
|
500.4 |
|
Loss related to
contribution of net
assets to Tools joint
venture |
|
|
|
|
|
|
|
|
|
|
3.7 |
|
|
|
2.4 |
|
|
|
|
|
|
|
128.4 |
|
|
|
|
|
|
|
134.5 |
|
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.8 |
|
|
|
4.7 |
|
|
|
|
|
|
|
6.5 |
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
|
24.4 |
|
|
|
|
|
|
|
(0.6 |
) |
|
|
|
|
|
|
23.9 |
|
Equity in earnings of
subsidiaries, net of tax |
|
|
70.8 |
|
|
|
140.1 |
|
|
|
(64.8 |
) |
|
|
59.3 |
|
|
|
21.7 |
|
|
|
(33.5 |
) |
|
|
(193.6 |
) |
|
|
|
|
Intercompany income
(expense) |
|
|
0.4 |
|
|
|
(9.3 |
) |
|
|
4.0 |
|
|
|
(41.0 |
) |
|
|
(66.5 |
) |
|
|
112.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
before income taxes |
|
|
69.1 |
|
|
|
131.0 |
|
|
|
(66.8 |
) |
|
|
(71.1 |
) |
|
|
150.6 |
|
|
|
133.8 |
|
|
|
(162.7 |
) |
|
|
183.9 |
|
Income tax expense
(benefit) |
|
|
|
|
|
|
|
|
|
|
0.7 |
|
|
|
(37.6 |
) |
|
|
51.1 |
|
|
|
9.5 |
|
|
|
|
|
|
|
23.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations |
|
|
69.1 |
|
|
|
131.0 |
|
|
|
(67.5 |
) |
|
|
(33.5 |
) |
|
|
99.5 |
|
|
|
124.3 |
|
|
|
(162.7 |
) |
|
|
160.2 |
|
Income from
discontinued
operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
69.1 |
|
|
$ |
131.0 |
|
|
$ |
(67.5 |
) |
|
$ |
(33.5 |
) |
|
$ |
99.5 |
|
|
$ |
124.3 |
|
|
$ |
(162.7 |
) |
|
$ |
160.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Income Statements
Six Months Ended June 30, 2009
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
Cooper |
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries, |
|
|
Industries, |
|
|
US, |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
Ltd. |
|
|
LLC |
|
|
Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,518.3 |
|
|
$ |
1,236.4 |
|
|
$ |
(228.1 |
) |
|
$ |
2,526.6 |
|
Cost of sales |
|
|
|
|
|
|
(1.3 |
) |
|
|
0.1 |
|
|
|
1,110.1 |
|
|
|
889.0 |
|
|
|
(228.1 |
) |
|
|
1,769.8 |
|
Selling and administrative
expenses |
|
|
7.8 |
|
|
|
5.0 |
|
|
|
32.1 |
|
|
|
242.3 |
|
|
|
220.7 |
|
|
|
(1.6 |
) |
|
|
506.3 |
|
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
1.5 |
|
|
|
6.3 |
|
|
|
11.4 |
|
|
|
|
|
|
|
19.2 |
|
Interest expense, net |
|
|
|
|
|
|
8.0 |
|
|
|
23.6 |
|
|
|
0.4 |
|
|
|
(0.5 |
) |
|
|
|
|
|
|
31.5 |
|
Equity in earnings of
subsidiaries, net of tax |
|
|
279.2 |
|
|
|
(9.6 |
) |
|
|
108.7 |
|
|
|
31.7 |
|
|
|
128.8 |
|
|
|
(538.8 |
) |
|
|
|
|
Intercompany income
(expense) |
|
|
(15.3 |
) |
|
|
(4.9 |
) |
|
|
32.6 |
|
|
|
(69.5 |
) |
|
|
125.3 |
|
|
|
(68.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
before income taxes |
|
|
256.1 |
|
|
|
(26.2 |
) |
|
|
84.0 |
|
|
|
121.4 |
|
|
|
369.9 |
|
|
|
(605.4 |
) |
|
|
199.8 |
|
Income tax expense
(benefit) |
|
|
|
|
|
|
(6.5 |
) |
|
|
(44.8 |
) |
|
|
36.9 |
|
|
|
43.7 |
|
|
|
|
|
|
|
29.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations |
|
|
256.1 |
|
|
|
(19.7 |
) |
|
|
128.8 |
|
|
|
84.5 |
|
|
|
326.2 |
|
|
|
(605.4 |
) |
|
|
170.5 |
|
Income from discontinued
operations, net of tax |
|
|
|
|
|
|
18.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
256.1 |
|
|
$ |
(0.8 |
) |
|
$ |
128.8 |
|
|
$ |
84.5 |
|
|
$ |
326.2 |
|
|
$ |
(605.4 |
) |
|
$ |
189.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-23-
Consolidating Balance Sheets
June 30, 2010
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
Cooper |
|
|
Cooper |
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries |
|
|
Industries, |
|
|
Industries, |
|
|
US, |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
plc |
|
|
Ltd. |
|
|
LLC |
|
|
Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Cash and cash equivalents |
|
$ |
47.1 |
|
|
$ |
0.1 |
|
|
$ |
(6.3 |
) |
|
$ |
80.1 |
|
|
$ |
(4.0 |
) |
|
$ |
315.0 |
|
|
$ |
|
|
|
$ |
432.0 |
|
Receivables, less allowances |
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
429.7 |
|
|
|
347.3 |
|
|
|
|
|
|
|
777.2 |
|
Inventories |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
255.2 |
|
|
|
193.5 |
|
|
|
|
|
|
|
448.7 |
|
Current discontinued
operations receivable |
|
|
|
|
|
|
|
|
|
|
14.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14.2 |
|
Other current assets |
|
|
0.2 |
|
|
|
0.3 |
|
|
|
25.6 |
|
|
|
60.4 |
|
|
|
36.3 |
|
|
|
81.4 |
|
|
|
|
|
|
|
204.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
47.3 |
|
|
|
0.4 |
|
|
|
33.6 |
|
|
|
140.6 |
|
|
|
717.2 |
|
|
|
937.2 |
|
|
|
|
|
|
|
1,876.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, less
accumulated depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49.1 |
|
|
|
316.2 |
|
|
|
219.3 |
|
|
|
|
|
|
|
584.6 |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,288.5 |
|
|
|
997.0 |
|
|
|
|
|
|
|
2,285.5 |
|
Assets to be contributed to
Tools joint venture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
590.8 |
|
|
|
|
|
|
|
590.8 |
|
Investment in subsidiaries |
|
|
2,743.4 |
|
|
|
3,220.1 |
|
|
|
671.4 |
|
|
|
4,959.7 |
|
|
|
941.3 |
|
|
|
2,630.7 |
|
|
|
(15,166.6 |
) |
|
|
|
|
Investment in parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,418.5 |
|
|
|
|
|
|
|
312.7 |
|
|
|
(3,731.2 |
) |
|
|
|
|
Intercompany accounts
receivable |
|
|
113.6 |
|
|
|
47.7 |
|
|
|
|
|
|
|
|
|
|
|
1,928.2 |
|
|
|
1,563.4 |
|
|
|
(3,652.9 |
) |
|
|
|
|
Intercompany notes
receivable |
|
|
|
|
|
|
3,339.6 |
|
|
|
1.7 |
|
|
|
911.9 |
|
|
|
5.1 |
|
|
|
4,388.2 |
|
|
|
(8,646.5 |
) |
|
|
|
|
Long-term discontinued
operations receivable |
|
|
|
|
|
|
|
|
|
|
151.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151.6 |
|
Other noncurrent assets |
|
|
|
|
|
|
|
|
|
|
255.0 |
|
|
|
(21.4 |
) |
|
|
(78.7 |
) |
|
|
420.2 |
|
|
|
|
|
|
|
575.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,904.3 |
|
|
$ |
6,607.8 |
|
|
$ |
1,113.3 |
|
|
$ |
9,458.4 |
|
|
$ |
5,117.8 |
|
|
$ |
12,059.5 |
|
|
$ |
(31,197.2 |
) |
|
$ |
6,063.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
10.0 |
|
|
$ |
|
|
|
$ |
10.0 |
|
Accounts payable |
|
|
45.2 |
|
|
|
|
|
|
|
0.3 |
|
|
|
16.8 |
|
|
|
161.8 |
|
|
|
192.9 |
|
|
|
|
|
|
|
417.0 |
|
Accrued liabilities |
|
|
1.0 |
|
|
|
|
|
|
|
42.2 |
|
|
|
64.4 |
|
|
|
185.3 |
|
|
|
167.5 |
|
|
|
|
|
|
|
460.4 |
|
Current discontinued
operations liability |
|
|
|
|
|
|
|
|
|
|
42.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42.2 |
|
Current maturities of
long-term debt |
|
|
|
|
|
|
|
|
|
|
2.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
46.2 |
|
|
|
|
|
|
|
87.0 |
|
|
|
81.2 |
|
|
|
347.1 |
|
|
|
370.4 |
|
|
|
|
|
|
|
931.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
923.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
923.0 |
|
Liabilities to be
contributed to Tools joint
venture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145.7 |
|
|
|
|
|
|
|
145.7 |
|
Intercompany accounts
payable |
|
|
|
|
|
|
|
|
|
|
136.4 |
|
|
|
3,516.5 |
|
|
|
|
|
|
|
|
|
|
|
(3,652.9 |
) |
|
|
|
|
Intercompany notes
payable |
|
|
230.0 |
|
|
|
1,608.0 |
|
|
|
93.8 |
|
|
|
1,258.1 |
|
|
|
1,772.8 |
|
|
|
3,683.8 |
|
|
|
(8,646.5 |
) |
|
|
|
|
Long-term discontinued
operations liability |
|
|
|
|
|
|
|
|
|
|
727.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
727.6 |
|
Other long-term liabilities |
|
|
|
|
|
|
|
|
|
|
73.6 |
|
|
|
68.8 |
|
|
|
67.3 |
|
|
|
92.0 |
|
|
|
|
|
|
|
301.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
276.2 |
|
|
|
1,608.0 |
|
|
|
1,118.4 |
|
|
|
5,847.6 |
|
|
|
2,187.2 |
|
|
|
4,291.9 |
|
|
|
(12,299.4 |
) |
|
|
3,029.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.7 |
|
Subsidiary preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
325.5 |
|
|
|
(325.5 |
) |
|
|
|
|
Subsidiary common stock |
|
|
|
|
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
7.5 |
|
|
|
310.3 |
|
|
|
(320.9 |
) |
|
|
|
|
Capital in excess of
par value |
|
|
2,710.5 |
|
|
|
3,280.7 |
|
|
|
|
|
|
|
761.2 |
|
|
|
1,517.5 |
|
|
|
2,484.1 |
|
|
|
(10,754.0 |
) |
|
|
|
|
Retained earnings |
|
|
20.3 |
|
|
|
1,852.5 |
|
|
|
57.5 |
|
|
|
3,033.2 |
|
|
|
1,475.7 |
|
|
|
4,797.0 |
|
|
|
(7,854.2 |
) |
|
|
3,382.0 |
|
Treasury stock |
|
|
(103.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(103.9 |
) |
Accumulated other non-
owner changes in equity |
|
|
(0.5 |
) |
|
|
(136.5 |
) |
|
|
(62.6 |
) |
|
|
(183.6 |
) |
|
|
(70.1 |
) |
|
|
(149.3 |
) |
|
|
356.8 |
|
|
|
(245.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
2,628.1 |
|
|
|
4,999.8 |
|
|
|
(5.1 |
) |
|
|
3,610.8 |
|
|
|
2,930.6 |
|
|
|
7,767.6 |
|
|
|
(18,897.8 |
) |
|
|
3,034.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
2,904.3 |
|
|
$ |
6,607.8 |
|
|
$ |
1,113.3 |
|
|
$ |
9,458.4 |
|
|
$ |
5,117.8 |
|
|
$ |
12,059.5 |
|
|
$ |
(31,197.2 |
) |
|
$ |
6,063.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-24-
Consolidating Balance Sheets
December 31, 2009
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
Cooper |
|
|
Cooper |
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries |
|
|
Industries, |
|
|
Industries, |
|
|
US, |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
plc |
|
|
Ltd. |
|
|
LLC |
|
|
Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Cash and cash equivalents |
|
$ |
146.0 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
27.9 |
|
|
$ |
0.3 |
|
|
$ |
207.4 |
|
|
$ |
|
|
|
$ |
381.6 |
|
Receivables, less allowances |
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
370.6 |
|
|
|
326.9 |
|
|
|
|
|
|
|
697.7 |
|
Inventories |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
236.2 |
|
|
|
187.7 |
|
|
|
|
|
|
|
423.9 |
|
Current discontinued
operations receivable |
|
|
|
|
|
|
|
|
|
|
12.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.7 |
|
Other current assets |
|
|
0.6 |
|
|
|
|
|
|
|
22.1 |
|
|
|
70.0 |
|
|
|
38.2 |
|
|
|
79.2 |
|
|
|
|
|
|
|
210.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
146.6 |
|
|
|
|
|
|
|
34.9 |
|
|
|
98.0 |
|
|
|
645.3 |
|
|
|
801.2 |
|
|
|
|
|
|
|
1,726.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, less
accumulated depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57.4 |
|
|
|
334.2 |
|
|
|
247.4 |
|
|
|
|
|
|
|
639.0 |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,288.7 |
|
|
|
1,049.6 |
|
|
|
|
|
|
|
2,338.3 |
|
Assets to be contributed to
Tools joint venture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
588.9 |
|
|
|
|
|
|
|
588.9 |
|
Investment in subsidiaries |
|
|
2,663.2 |
|
|
|
3,092.0 |
|
|
|
569.5 |
|
|
|
4,789.6 |
|
|
|
991.4 |
|
|
|
2,589.9 |
|
|
|
(14,695.6 |
) |
|
|
|
|
Investment in parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,418.5 |
|
|
|
|
|
|
|
312.7 |
|
|
|
(3,731.2 |
) |
|
|
|
|
Intercompany accounts
receivable |
|
|
37.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,883.3 |
|
|
|
1,487.4 |
|
|
|
(3,407.8 |
) |
|
|
|
|
Intercompany notes
receivable |
|
|
|
|
|
|
3,340.0 |
|
|
|
29.6 |
|
|
|
754.9 |
|
|
|
8.9 |
|
|
|
4,364.0 |
|
|
|
(8,497.4 |
) |
|
|
|
|
Long-term discontinued
operations receivable |
|
|
|
|
|
|
|
|
|
|
166.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166.6 |
|
Other noncurrent assets |
|
|
|
|
|
|
|
|
|
|
238.6 |
|
|
|
(18.3 |
) |
|
|
(76.8 |
) |
|
|
382.1 |
|
|
|
|
|
|
|
525.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,846.9 |
|
|
$ |
6,432.0 |
|
|
$ |
1,039.2 |
|
|
$ |
9,100.1 |
|
|
$ |
5,075.0 |
|
|
$ |
11,823.2 |
|
|
$ |
(30,332.0 |
) |
|
$ |
5,984.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
9.4 |
|
|
$ |
|
|
|
$ |
9.4 |
|
Accounts payable |
|
|
41.9 |
|
|
|
2.3 |
|
|
|
0.1 |
|
|
|
16.8 |
|
|
|
131.2 |
|
|
|
155.2 |
|
|
|
|
|
|
|
347.5 |
|
Accrued liabilities |
|
|
0.9 |
|
|
|
1.0 |
|
|
|
36.1 |
|
|
|
65.7 |
|
|
|
208.3 |
|
|
|
148.6 |
|
|
|
|
|
|
|
460.6 |
|
Current discontinued
operations liability |
|
|
|
|
|
|
|
|
|
|
43.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43.4 |
|
Current maturities of
long-term debt |
|
|
|
|
|
|
|
|
|
|
2.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
42.8 |
|
|
|
3.3 |
|
|
|
81.9 |
|
|
|
82.5 |
|
|
|
339.5 |
|
|
|
313.2 |
|
|
|
|
|
|
|
863.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
922.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
922.7 |
|
Liabilities to be
contributed to Tools joint
venture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140.1 |
|
|
|
|
|
|
|
140.1 |
|
Intercompany accounts
payable |
|
|
|
|
|
|
26.9 |
|
|
|
214.2 |
|
|
|
3,166.7 |
|
|
|
|
|
|
|
|
|
|
|
(3,407.8 |
) |
|
|
|
|
Intercompany notes
payable |
|
|
154.7 |
|
|
|
1,520.9 |
|
|
|
|
|
|
|
1,274.7 |
|
|
|
1,773.7 |
|
|
|
3,773.4 |
|
|
|
(8,497.4 |
) |
|
|
|
|
Long-term discontinued
operations liability |
|
|
|
|
|
|
|
|
|
|
741.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
741.1 |
|
Other long-term liabilities |
|
|
|
|
|
|
|
|
|
|
43.4 |
|
|
|
122.1 |
|
|
|
69.7 |
|
|
|
118.8 |
|
|
|
|
|
|
|
354.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
197.5 |
|
|
|
1,551.1 |
|
|
|
1,080.6 |
|
|
|
5,568.7 |
|
|
|
2,182.9 |
|
|
|
4,345.5 |
|
|
|
(11,905.2 |
) |
|
|
3,021.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.7 |
|
Subsidiary preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
325.5 |
|
|
|
(325.5 |
) |
|
|
|
|
Subsidiary common stock |
|
|
|
|
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
7.6 |
|
|
|
301.4 |
|
|
|
(312.1 |
) |
|
|
|
|
Capital in excess of
par value |
|
|
2,626.2 |
|
|
|
3,276.1 |
|
|
|
|
|
|
|
756.6 |
|
|
|
1,559.2 |
|
|
|
2,215.0 |
|
|
|
(10,433.1 |
) |
|
|
|
|
Retained earnings |
|
|
41.5 |
|
|
|
1,751.0 |
|
|
|
88.5 |
|
|
|
3,040.6 |
|
|
|
1,380.5 |
|
|
|
4,926.4 |
|
|
|
(7,974.4 |
) |
|
|
3,254.1 |
|
Treasury stock |
|
|
(12.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12.5 |
) |
Accumulated other non-
owner changes in equity |
|
|
(7.5 |
) |
|
|
(149.3 |
) |
|
|
(129.9 |
) |
|
|
(265.8 |
) |
|
|
(55.2 |
) |
|
|
(290.6 |
) |
|
|
618.3 |
|
|
|
(280.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
2,649.4 |
|
|
|
4,880.9 |
|
|
|
(41.4 |
) |
|
|
3,531.4 |
|
|
|
2,892.1 |
|
|
|
7,477.7 |
|
|
|
(18,426.8 |
) |
|
|
2,963.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
2,846.9 |
|
|
$ |
6,432.0 |
|
|
$ |
1,039.2 |
|
|
$ |
9,100.1 |
|
|
$ |
5,075.0 |
|
|
$ |
11,823.2 |
|
|
$ |
(30,332.0 |
) |
|
$ |
5,984.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-25-
Consolidating Statements of Cash Flows
Six Months Ended June 30, 2010
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
Cooper |
|
|
Cooper |
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries |
|
|
Industries, |
|
|
Industries, |
|
|
US, |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
plc |
|
|
Ltd. |
|
|
LLC |
|
|
Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Net cash provided by (used in)
operating activities |
|
$ |
2.8 |
|
|
$ |
(12.6 |
) |
|
$ |
(2.0 |
) |
|
$ |
(18.8 |
) |
|
$ |
37.8 |
|
|
$ |
244.6 |
|
|
$ |
|
|
|
$ |
251.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3.0 |
) |
|
|
(13.6 |
) |
|
|
(13.6 |
) |
|
|
|
|
|
|
(30.2 |
) |
Cash paid for acquired businesses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20.6 |
) |
|
|
|
|
|
|
(20.6 |
) |
Investments in affiliates |
|
|
(1.9 |
) |
|
|
|
|
|
|
(65.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67.3 |
|
|
|
|
|
Loans to affiliates |
|
|
|
|
|
|
|
|
|
|
(32.2 |
) |
|
|
(248.3 |
) |
|
|
|
|
|
|
(1,003.3 |
) |
|
|
1,283.8 |
|
|
|
|
|
Repayments of loans from affiliates |
|
|
|
|
|
|
0.5 |
|
|
|
29.5 |
|
|
|
32.7 |
|
|
|
3.8 |
|
|
|
984.3 |
|
|
|
(1,050.8 |
) |
|
|
|
|
Dividends from affiliates |
|
|
|
|
|
|
|
|
|
|
69.3 |
|
|
|
|
|
|
|
13.4 |
|
|
|
|
|
|
|
(82.7 |
) |
|
|
|
|
Proceeds from sales of property,
plant and equipment and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.9 |
|
|
|
|
|
|
|
0.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities |
|
|
(1.9 |
) |
|
|
0.5 |
|
|
|
1.2 |
|
|
|
(218.6 |
) |
|
|
3.6 |
|
|
|
(52.3 |
) |
|
|
217.6 |
|
|
|
(49.9 |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of debt, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.7 |
|
|
|
|
|
|
|
0.7 |
|
Borrowings from affiliates |
|
|
205.2 |
|
|
|
879.9 |
|
|
|
132.1 |
|
|
|
30.0 |
|
|
|
|
|
|
|
36.6 |
|
|
|
(1,283.8 |
) |
|
|
|
|
Repayments of loans to affiliates |
|
|
(129.9 |
) |
|
|
(796.0 |
) |
|
|
(38.3 |
) |
|
|
(48.5 |
) |
|
|
(1.0 |
) |
|
|
(37.1 |
) |
|
|
1,050.8 |
|
|
|
|
|
Other intercompany financing
activities |
|
|
(27.4 |
) |
|
|
(71.7 |
) |
|
|
(99.3 |
) |
|
|
303.5 |
|
|
|
(44.7 |
) |
|
|
(60.4 |
) |
|
|
|
|
|
|
|
|
Dividends |
|
|
(87.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87.0 |
) |
Dividends paid to affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(82.7 |
) |
|
|
82.7 |
|
|
|
|
|
Purchases of treasury shares |
|
|
(91.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(91.4 |
) |
Excess tax benefits from stock
options and awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.6 |
|
Issuance of stock to affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67.3 |
|
|
|
(67.3 |
) |
|
|
|
|
Proceeds from exercise of stock
options and other |
|
|
30.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities |
|
|
(99.8 |
) |
|
|
12.2 |
|
|
|
(5.5 |
) |
|
|
289.6 |
|
|
|
(45.7 |
) |
|
|
(75.6 |
) |
|
|
(217.6 |
) |
|
|
(142.4 |
) |
Effect of exchange rate changes on
cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9.1 |
) |
|
|
|
|
|
|
(9.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents |
|
|
(98.9 |
) |
|
|
0.1 |
|
|
|
(6.3 |
) |
|
|
52.2 |
|
|
|
(4.3 |
) |
|
|
107.6 |
|
|
|
|
|
|
|
50.4 |
|
Cash and cash equivalents,
beginning of period |
|
|
146.0 |
|
|
|
|
|
|
|
|
|
|
|
27.9 |
|
|
|
0.3 |
|
|
|
207.4 |
|
|
|
|
|
|
|
381.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of
period |
|
$ |
47.1 |
|
|
$ |
0.1 |
|
|
$ |
(6.3 |
) |
|
$ |
80.1 |
|
|
$ |
(4.0 |
) |
|
$ |
315.0 |
|
|
$ |
|
|
|
$ |
432.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-26-
Consolidating Statements of Cash Flows
Six Months Ended June 30, 2009
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
Cooper |
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries, |
|
|
Industries, |
|
|
US, |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
Ltd. |
|
|
LLC |
|
|
Inc |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Net cash provided by (used in)
operating activities |
|
$ |
(21.5 |
) |
|
$ |
11.4 |
|
|
$ |
25.2 |
|
|
$ |
132.4 |
|
|
$ |
228.6 |
|
|
$ |
|
|
|
$ |
376.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from short-term
investments |
|
|
|
|
|
|
|
|
|
|
9.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.3 |
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
(11.5 |
) |
|
|
(18.7 |
) |
|
|
(25.7 |
) |
|
|
|
|
|
|
(55.9 |
) |
Cash paid for acquired businesses |
|
|
|
|
|
|
|
|
|
|
(10.9 |
) |
|
|
(7.9 |
) |
|
|
(3.4 |
) |
|
|
|
|
|
|
(22.2 |
) |
Investments in affiliates |
|
|
(0.1 |
) |
|
|
(0.2 |
) |
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
0.5 |
|
|
|
|
|
Loans to affiliates |
|
|
|
|
|
|
|
|
|
|
(154.8 |
) |
|
|
|
|
|
|
(746.7 |
) |
|
|
901.5 |
|
|
|
|
|
Repayments of loans from affiliates |
|
|
|
|
|
|
|
|
|
|
189.2 |
|
|
|
|
|
|
|
597.2 |
|
|
|
(786.4 |
) |
|
|
|
|
Dividends from affiliates |
|
|
|
|
|
|
|
|
|
|
66.8 |
|
|
|
9.8 |
|
|
|
5.3 |
|
|
|
(81.9 |
) |
|
|
|
|
Proceeds from sales of property,
plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.1 |
|
|
|
|
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities |
|
|
(0.1 |
) |
|
|
(0.2 |
) |
|
|
87.9 |
|
|
|
(16.8 |
) |
|
|
(172.2 |
) |
|
|
33.7 |
|
|
|
(67.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of debt, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8.0 |
) |
|
|
(13.9 |
) |
|
|
|
|
|
|
(21.9 |
) |
Borrowings from affiliates |
|
|
826.6 |
|
|
|
|
|
|
|
46.7 |
|
|
|
|
|
|
|
28.2 |
|
|
|
(901.5 |
) |
|
|
|
|
Repayments of loans to affiliates |
|
|
(702.8 |
) |
|
|
|
|
|
|
(47.5 |
) |
|
|
|
|
|
|
(36.1 |
) |
|
|
786.4 |
|
|
|
|
|
Other intercompany financing
activities |
|
|
76.4 |
|
|
|
(11.2 |
) |
|
|
20.9 |
|
|
|
(103.1 |
) |
|
|
17.0 |
|
|
|
|
|
|
|
|
|
Dividends |
|
|
(84.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(84.0 |
) |
Dividends paid to affiliates |
|
|
(72.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9.8 |
) |
|
|
81.9 |
|
|
|
|
|
Purchases of common shares |
|
|
(26.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26.0 |
) |
Excess tax benefits from stock
options and awards |
|
|
|
|
|
|
|
|
|
|
(2.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.1 |
) |
Issuance of stock to affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.5 |
|
|
|
(0.5 |
) |
|
|
|
|
Proceeds from exercise of stock
options and other |
|
|
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities |
|
|
21.6 |
|
|
|
(11.2 |
) |
|
|
18.0 |
|
|
|
(111.1 |
) |
|
|
(14.1 |
) |
|
|
(33.7 |
) |
|
|
(130.5 |
) |
Effect of exchange rate changes on
cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.5 |
|
|
|
|
|
|
|
13.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash
equivalents |
|
|
|
|
|
|
|
|
|
|
131.1 |
|
|
|
4.5 |
|
|
|
55.8 |
|
|
|
|
|
|
|
191.4 |
|
Cash and cash equivalents,
beginning of period |
|
|
|
|
|
|
|
|
|
|
81.6 |
|
|
|
1.3 |
|
|
|
175.9 |
|
|
|
|
|
|
|
258.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of
period |
|
$ |
|
|
|
$ |
|
|
|
$ |
212.7 |
|
|
$ |
5.8 |
|
|
$ |
231.7 |
|
|
$ |
|
|
|
$ |
450.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-27-
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
We often discuss expectations regarding our future markets, demand for our products and
services, and our performance in our annual and quarterly reports, press releases, and other
written and oral statements. Statements that relate to matters that are not historical facts are
forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the
Securities Act of 1933 and Section 21E of the Exchange Act. These forward-looking statements are
based on an analysis of currently available competitive, financial and economic data and our
operating plans. They are inherently uncertain and investors should recognize that events and
actual results could turn out to be significantly different from our expectations. By way of
illustration, when used in this document, words such as anticipate, believe, expect, plan,
intend, estimate, project, will, should, could, may, predict and similar
expressions are intended to identify forward-looking statements.
This Quarterly Report on Form 10-Q, including Managements Discussion and Analysis of
Financial Condition and Results of Operations, includes forward-looking statements.
Forward-looking statements include, but are not limited to, any statements regarding future
revenues, costs and expenses, earnings, earnings per share, margins, cash flows, dividends and
capital expenditures. Important factors which may affect the actual results include, but are not
limited to, political developments, market and economic conditions, changes in raw material,
transportation and energy costs, industry competition, the ability to execute and realize the
expected benefits from strategic initiatives including revenue growth plans and cost control and
productivity improvement programs, the ability to develop and introduce new products, the magnitude
of any disruptions from manufacturing rationalizations, changes in mix of products sold, mergers
and acquisitions and their integration into Cooper, the timing and amount of any stock repurchases
by Cooper, changes in financial markets including currency exchange rate fluctuations, changing
legislation and regulations including changes in tax law, tax treaties or tax regulations, and the
resolution of potential liabilities and insurance recoveries resulting from on-going Pneumo-Abex
related asbestos claims.
The above description of risks and uncertainties is by no means all-inclusive, but is designed
to highlight what we believe are important factors to consider. For a more detailed description of
risk factors, please see Part I Item 1A. Risk Factors.
Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to
we, us, our, the Company, or Cooper means Cooper Industries plc and, where the context
requires, includes our subsidiaries.
Results of Operations
On March 26, 2010, Cooper announced that it entered into a Framework Agreement with Danaher
Corporation to create a joint venture combining Coopers Tools business with certain Tools
businesses from Danahers Tools and Components Segment (the Joint Venture). On July 6, 2010,
Cooper announced the completion of the Joint Venture, named Apex Tool Group, LLC. Cooper and
Danaher each own a 50 percent interest in the Joint Venture, have equal representation on its Board
of Directors and have a 50% voting interest in the Joint Venture. At completion of the transaction
in July, Cooper will deconsolidate the Tools business assets and liabilities contributed to the
Joint Venture and recognize Coopers 50% ownership interest as an equity investment. Subsequently,
Cooper will recognize its proportionate share of the Joint Ventures operating results using the
equity method. Recording the investment at its fair value of $480 million will result in a pretax
loss of $134.5 million related to the transaction. The pretax loss related to the formation of the
Joint Venture will include a $26.5 million gain from the contribution of the Tools business net
assets resulting from the difference in the fair value of the equity investment and the carrying
value of the net assets being contributed and transaction related costs. This gain will be offset
by the write-off of approximately $161.0 million from recognition of the accumulated other nonowner
changes in equity related to the Tools business, primarily related to cumulative currency
translation losses. Due to the loss of Coopers controlling financial interest in the Tools
business net assets from the formation of the Joint
-28-
Venture, these previously deferred currency translation losses included in equity are required
to be included in the overall loss calculation on the transaction. The Tools business assets and
liabilities contributed to the Joint Venture in July 2010 have been reclassified to separate lines
in the accompanying consolidated balance sheets. In the second quarter of 2010, Cooper recognized
the $134.5 million loss related to the contribution of the Tools business assets and liabilities to
the Joint Venture by recognizing $126.1 million of the cumulative currency translation losses
included in other nonowner changes in equity (approximately $82.0 million net of the associated tax
affect) and transaction related costs. As a result, Cooper does not expect any material impact to
the income statement in the third quarter of 2010 upon deconsolidation of the Tools business assets
and liabilities contributed to the Joint Venture.
In conjunction with the announcement of the Tools joint venture and certain changes in
Coopers management structure in the first quarter of 2010, Cooper modified its disclosures related
to segment activities. The former Electrical Products segment has been divided into two segments.
The Energy & Safety Solutions segment will include business unit results from the Cooper
Crouse-Hinds, Cooper Power Systems, and Cooper Safety Divisions. The Electrical Products Group
segment will include business unit results from the Cooper B-Line, Cooper Bussmann, Cooper
Lighting, and Cooper Wiring Devices Divisions. The Tools segment will continue as a segment until
the joint venture is consummated in the third quarter, at which time the future results of the
Joint Venture will be reported as equity income. All segment information included in this
Quarterly Report on Form 10-Q has been restated for changes to the segment reporting structure.
Three Months Ended June 30, 2010 Compared With Three Months Ended June 30, 2009
Net income for the second quarter of 2010 was $41.6 million on revenues of $1,336.7 million
compared with 2009 second quarter net income of $89.3 million on revenues of $1,269.8 million.
Second quarter diluted earnings per share from operations was $.25 compared to $.53 in 2009.
During the second quarter of 2010, reported net income was reduced by the non-cash after-tax charge
of $93.7 million or $.55 per share related to the formation of the previously announced Tools Joint
Venture. The second quarter of 2010 also included restructuring charges of $3.0 million or $.01 per
share compared to restructuring charges of $10.4 million or $.05 per share in the second quarter of
2009.
Revenues:
Revenues for the second quarter of 2010 increased 5.3% compared to the second quarter of 2009.
Core revenues in the second quarter of 2010 were 4.8% higher than the prior year while
acquisitions increased reported revenues by 0.5% with currency translation having a nominal affect
for the quarter.
Energy & Safety Solutions segment revenues for the second quarter of 2010 increased 0.8%
compared to the second quarter of 2009. Core revenues were 0.6% higher in the second quarter of
2010 as a result of improving demand from Commercial and Industrial markets mitigated by continued
weakness in the North American utility markets. Unfavorable currency translation decreased
reported revenues by 0.9% with acquisitions adding 1.1% to reported revenues in the quarter.
Electrical Products Group segment revenues increased 6.9% compared to the second quarter of
2009. Core revenues in the second quarter of 2010 were 6.4% higher than the prior years second
quarter with favorable currency translation increasing reported revenues by 0.5% for the quarter.
Despite continued weakness in Commercial markets, the Residential, Industrial and Electronic
markets improved with particular strength in the International markets.
Tools segment revenues for the second quarter of 2010 increased 18.8% from the second quarter
of 2009. Recovery in retail market activity, stronger demand in the North American and Western
European industrial markets, increased demand for assembly systems for the light passenger vehicle
markets and strength in the electronics markets drove the 16.7% overall improvement in core
revenue. Favorable currency translation increased revenues by 2.1% over the second quarter of 2009.
-29-
Costs and Expenses:
Cost of sales, as a percentage of revenues, was 67.0% for the second quarter of 2010 compared
to 69.7% for the comparable 2009 quarter. The decrease in the cost of sales percentage resulted
from the favorable impact of restructuring actions taken during 2008 and 2009 to lower
manufacturing costs; favorable impact of higher production volumes and the positive impact of
on-going activities to improve overall cost productivity.
Energy & Safety Solutions segment costs of sales, as a percentage of revenues, was 67.0% for
the second quarter of 2010 compared to 69.2% for the second quarter of 2009. The decrease in costs
of sales as a percentage of revenues in comparison to the prior year second quarter was due to the
favorable impact of restructuring actions taken during 2008 and 2009 to lower manufacturing costs
and the positive impact of Coopers activities to improve overall cost productivity partially
offset by unfavorable mix and pricing for transformer products.
Electrical Products Group segment cost of sales, as a percentage of revenues, was 66.7% for
the second quarter of 2010 compared to 69.0% for the second quarter of 2009. The decrease in cost
of sales as a percentage of revenues in comparison to the prior year second quarter was due to the
favorable impact of restructuring actions taken during 2008 and 2009 to lower manufacturing costs
and favorable leverage of fixed costs from improved demand due to the recovery in selected global
markets and the positive impact of Coopers activities to improve overall cost productivity.
Tools segment cost of sales, as a percentage of revenues, was 67.3% for the second quarter of
2010 compared to 75.1% for the second quarter of 2009. The decrease in the cost of sales as a
percentage of revenues was driven by the favorable impact of restructuring actions taken during
2008 and 2009 to lower manufacturing costs and favorable leverage of fixed costs due to higher
production volumes and the positive impact of Coopers activities to improve overall cost
productivity.
Selling and administrative expenses, as a percentage of revenues, for the second quarter of
2010 was 19.1% compared to 19.6% for the second quarter of 2009. The decrease in percentage is
reflective of improved revenue coupled with the cost reduction actions taken to align the overall
selling and administrative expenses with market demand, partially offset by continued investments
to enhance marketing programs and international expansion.
Energy & Safety Solutions segment selling and administrative expenses, as a percentage of
revenues for the second quarter of 2010, were 16.1% compared to 16.2% for the second quarter of
2009. The decrease in percentage for the second quarter 2010 reflects the impact of higher
comparable revenue levels and cost reduction actions taken throughout 2009 to adjust segment
selling and administrative expenses partially offset by continued investments primarily in
international markets.
Electrical Products Group segment selling and administrative expenses, as a percentage of
revenues for the second quarter of 2010, were 18.5% compared to 18.7% for the second quarter of
2009. The decrease in percentage for the second quarter 2010 reflects the impact of higher
comparable revenue levels coupled with cost reduction actions previously taken to adjust segment
selling and administrative expenses to global market conditions.
Tools segment selling and administrative expenses, as a percentage of revenues for the second
quarter of 2010, were 19.8% compared to 22.9% for the second quarter of 2009. The decrease in
selling and administrative expenses, as a percentage of revenues, was driven by the 19% increase in
comparable second quarter 2010 revenues and the favorable impact of cost reduction actions
previously taken.
Net interest expense in the second quarter of 2010 decreased $4.8 million from the 2009 second
quarter. The decrease resulted primarily from the retirement of $275 million of 5.5% senior
unsecured notes upon maturity in the fourth quarter of 2009 and lower average interest rates on
outstanding debt. Average
-30-
debt balances were $0.94 billion and $1.22 billion and average interest rates were 5.23% and
5.33% for the second quarter of 2010 and 2009, respectively.
Operating Earnings:
Energy & Safety Solutions segment second quarter 2010 operating earnings increased 16% to
$103.7 million from $89.4 million for the same quarter of last year. The increase resulted from
the favorable impact of restructuring actions previously taken to adjust the segments overall cost
structure and overall demand partially offset by unfavorable product mix and pricing for
transformer products. The Energy & Safety Solutions segment continues its investment in
productivity initiatives which include manufacturing productivity improvements, product redesign
and investment in developing markets to increase global revenues.
Electrical Products Group segment second quarter 2010 operating earnings increased 29% to
$82.6 million from $64.1 million for the same quarter of last year. The increase resulted from the
improvement in demand in most global markets and demand for maintenance and repair products in the
industrial markets, the continuing favorable impact of restructuring actions previously taken and
favorable product mix. The Electrical Products Group segment continues its investment in
productivity initiatives which include manufacturing productivity improvements, product redesign
and investment in developing markets to increase global revenues.
Tools segment second quarter 2010 operating earnings were $21.1 million, an increase of $18.2
million compared to the operating earnings of $2.9 million reported in the second quarter of 2009.
The increase resulted from the impact of improved demand for products and the favorable impact of
cost reduction actions previously taken.
General Corporate expense increased $0.3 million to $21.3 million during the second quarter of
2010 compared to $21.0 million during the same period of 2009.
Restructuring Charges:
Cooper recognized pre-tax restructuring charges of $3.0 million and $10.4 million in the
second quarter of 2010 and 2009, respectively, related to its restructuring activities as discussed
further below.
Income Taxes:
The effective tax rate was a negative 12.3% for the three months ended June 30, 2010 and 17.8%
for the three months ended June 30, 2009. During the second quarter of 2010, Cooper reduced income
tax expense by $40.8 million to recognize the discrete tax affects on the loss related to the
contribution of net assets to the Tools joint venture as discussed above. Excluding the discrete
tax items, Coopers effective tax rate was 21.1% for the three months ended June 30, 2010. The
increase in the effective tax rate in the second quarter 2010 is primarily related to the increase
in earnings, excluding the loss related to the formation of the Tools joint venture.
Six Months Ended June 30, 2010 Compared With Six Months Ended June 30, 2009
Income from continuing operations for the first six months of 2010 was $160.2 million on
revenues of $2,565.3 million compared with 2009 first half income from continuing operations of
$170.5 million on revenues of $2,526.6 million. First half diluted earnings per share from
continuing operations was $0.95 in 2010, compared to $1.01 in 2009. Reported net income in the
first half of 2010 was reduced by the non-cash after-tax charge of $93.7 million or $.55 per share
related to the formation of the previously announced Tools Joint Venture and includes restructuring
charges of $6.5 million or $.03 per share. Income from continuing operations in the first half of
2009 included restructuring charges of $19.2 million or $.09 per share and was favorably impacted
by discrete tax items related to foreign taxes which improved earnings by $.05 per share.
-31-
Revenues:
Revenues for the first six months of 2010 increased 1.5% compared to the first six months of
2009. The impact of acquisitions increased comparable revenues for the first six months of 2010 by
0.5% with currency translation increasing revenues by 1.1% for the six month period.
Energy & Safety Solutions segment revenues for the first six months of 2010 decreased 2.6%
compared to the first half of 2009. Core revenues were 4.1% lower in the first half of 2010 on
weakness in utility markets primarily in North America and slow demand from Commercial and
Industrial markets. The core growth achieved in the second quarter was more than offset by the
lower demand experienced during the first three months of 2010. Favorable currency translation
increased reported revenues by 0.5% with acquisitions adding 1.0% to reported revenues in the first
six months of 2010.
Electrical Products Group segment revenues increased 2.3% compared to the first half of 2009.
Core revenues in the first six months of 2010 were 1.4% higher than the prior years first half
with favorable currency translation increasing reported revenues by 0.9%. Despite continued
weakness in Commercial markets, the Residential, Industrial and Electronic markets are growing with
particular strength through International channels.
Tools segment revenues for the first six months of 2010 increased 17.4% from the same period
in 2009. Recovery in retail market activity, stronger demand in the North American and Western
European industrial markets, higher requirements for assembly systems for the light passenger
vehicle markets and strength in the electronics markets drove the 13.1% overall improvement in core
revenue. Favorable currency translation increased revenues by 4.3% over the first half of 2009.
Costs and Expenses:
Cost of sales, as a percentage of revenues, was 66.9% for the first six months of 2010
compared to 70.0% for the comparable 2009 period. The decrease in cost of sales as a percentage of
revenues primarily resulted from improved productivity reflecting the benefits of restructuring
actions taken during 2008 and 2009 to lower manufacturing costs coupled with favorable leverage on
fixed costs from improved demand for products.
Energy & Safety Solutions segment cost of sales, as a percentage of revenues, was 66.7% for
the first six months of 2010 compared to 68.8% for the first half of 2009. The decrease in cost of
sales as a percentage of revenues was primarily due to the benefits from restructuring actions
taken during 2008 and 2009 to lower manufacturing costs and continued focus on on-going
productivity efforts partially offset by the unfavorable leverage of fixed costs from the continued
weak global market demand and unfavorable price trends for transformer products.
Electrical Products Group segment cost of sales, as a percentage of revenues, was 66.6% for
the first six months of 2010 compared to 70.0% for the first half of 2009. The decrease in cost of
sales as a percentage of revenues in comparison to the prior year six month period was primarily
due to the benefits from restructuring actions taken during 2008 and 2009 to lower manufacturing
costs and favorable leverage of fixed costs from the increase in revenues.
Tools segment cost of sales, as a percentage of revenues, was 69.0% for the first half of 2010
compared to 76.4% for the same period of 2009. The decrease in cost of sales as a percentage of
revenues was driven by the benefits from restructuring actions taken during 2008 and 2009 to lower
manufacturing costs and favorable leverage of fixed costs due to higher production volumes.
Selling and administrative expenses, as a percentage of revenues, for the first six months of
2010 was 19.5% compared to 20.0% for the first half of 2009. The decrease in percentage is
reflective of the improved revenue levels coupled with cost containment actions taken to align the
overall selling and administrative expenses with current and projected market demand.
-32-
Energy & Safety Solutions segment selling and administrative expenses, as a percentage of
revenues, for the first six months of 2010 was 16.5% compared to 16.4% for the first half of 2009.
The slight increase in percentage reflects the impact of reduced revenues nearly offset by on-going
cost reduction actions taken to adjust segment selling and administrative expenses to global market
conditions.
Electrical Products Group segment selling and administrative expenses, as a percentage of
revenues, for the first six months of 2010 was 18.8% compared to 19.1% for the first half of 2009.
The decrease in percentage reflects the impact of improving comparable revenue levels in 2010
coupled with the cost reduction actions previously taken to adjust segment selling and
administrative expenses to global market conditions.
Tools segment selling and administrative expenses, as a percentage of revenues, for the first
six months of 2010 was 20.4% compared to 24.0% for the first six months of 2009. The decrease in
selling and administrative expenses, as a percentage of revenues, was driven by the 17% increase in
comparable six month revenues coupled with the cost reduction actions implemented for the segment.
Net interest expense for the first six months of 2010 decreased $7.6 million from the 2009
first six months. The decrease resulted primarily from the retirement of $275 million of 5.5%
senior unsecured notes upon maturity in the fourth quarter of 2009. Average debt balances were
$0.93 billion and $1.22 billion and average interest rates were 5.40% and 5.34% for the first six
months of 2010 and 2009, respectively.
Operating Earnings:
Energy & Safety Solutions segment first half 2010 operating earnings increased 11% to $199.8
million from $179.6 million for the same period of last year. The increase primarily resulted from
the impact of favorable productivity from cost reduction actions previously taken partially offset
by lower production volumes and unfavorable pricing trends for transformer products.
Electrical Products Group segment first half 2010 operating earnings increased 37% to $156.1
million from $113.9 million for the same period of last year. The increase primarily resulted from
the improved global market demand and impact from the favorable productivity from the higher
volumes and cost reduction actions previously taken.
Tools segment first half 2010 operating earnings were $33.1 million compared to an operating
loss of $1.0 million in the same period of 2009. The increase resulted from the impact of higher
unit volumes and previously implemented cost reduction actions to lower the segments fixed
overhead.
General Corporate expense decreased $1.8 million to $40.2 million during the first six months
of 2010 compared to $42.0 million during the same period of 2009. The decrease primarily related
to actions taken to reduce General Corporate expense to align with global market demand for Cooper
products.
Restructuring Charges:
As a result of the downturn in economic conditions in the latter half of 2008, Cooper
committed in the fourth quarter of 2008 to employment reductions to appropriately size Coopers
workforce to current and anticipated market conditions and to downsize a domestic Tools segment
manufacturing operation. During 2009, Cooper committed to additional employment reductions and
certain facility closures as a result of managements ongoing assessment of its hourly and salary
workforce and its required production capacity in consideration of the global economic recession.
Cooper recorded a $35.7 million charge in the fourth quarter of 2008 related to these actions,
$15.2 million of which related to the Energy and Safety Solutions segment, $10.3 million related to
the Electrical Products Group segment and $10.2 million related to the Tools segment. A total of
1,314 hourly and 930 salaried positions were eliminated as a result of the fourth quarter 2008
restructuring actions to reduce Coopers workforce. Cooper recorded additional charges of $28.7
million during the year ended December 31, 2009 related to these actions, $8.1 million of which
related to
-33-
the Energy and Safety Solutions segment, $10.4 million related to the Electrical Products
Group segment and $8.6 million related to the Tools segment. The remaining $1.6 million was
related to reductions in Coopers corporate staff. A total of 1,088 hourly and 772 salaried
positions were eliminated as a result of the 2009 restructuring actions to reduce Coopers
workforce. As part of these restructuring actions, Cooper approved the closure of ten factories and
warehouses, eight of which were completed by the end of 2009. Cooper recorded non-cash impairment
charges of $1.2 million in the second half of 2009 related to these actions. At December 31,
2009, Cooper had an accrual of $6.1 million for future cash expenditures related to its
restructuring actions.
In the first half of 2010, Cooper completed one of the two remaining factory closures and
recorded $6.5 million of costs associated with the ongoing 2009 restructuring actions. The 2010
restructuring costs include $5.6 million related to the Electrical Products Group segment, $0.8
million related to the Energy and Safety Solutions segment and $0.1 million related to the Tools
segment. During the first half of 2010, Cooper expended $9.9 million in cash related to its
restructuring actions. At June 30, 2010, Cooper has an accrual for future cash expenditures related
to the restructuring actions of $2.7 million. Cooper expects to incur incremental restructuring
charges in the range of approximately $2 to $4 million associated with completion of the planned
restructuring activities and additional actions anticipated in 2010, excluding restructuring that
will occur in the Tools Joint Venture. The workforce reductions, contract termination and other
exit costs and the related cash payments will be substantially completed in 2010. See Note 11 of
the Notes to Consolidated Financial Statements.
Income Taxes:
The effective tax rate was 12.9% for the six months ended June 30, 2010 and 14.7% for the six
months ended June 30, 2009. During the second quarter of 2010, Cooper reduced income tax expense
by $40.8 million to recognize the discrete tax affects related to the contribution of net assets to
the Tools Joint Venture. Cooper reduced income tax expense by $8.4 million during the first six
months of 2009 for discrete tax items primarily related to foreign taxes. Excluding the discrete
tax items, Coopers effective tax rate was 20.2% for the six months ended June 30, 2010 and 18.9%
for the six months ended June 30, 2009.
Income Related to Discontinued Operations:
During the first quarter of 2009, Cooper recognized an after tax gain from discontinued
operations of $18.9 million, which is net of a $12.0 million income tax expense (or $.11 per
diluted share) related to its asbestos liability regarding the Automotive Products segment, which
was sold in 1998. The income resulted from negotiated insurance settlements consummated in the
first quarter of 2009 that were not previously recognized. Cooper believes that it is likely that
additional insurance recoveries will be recorded in the future as new insurance-in-place agreements
are consummated or settlements with insurance carriers are completed. Timing and value of these
agreements and settlements cannot be currently estimated as they may be subject to extensive
additional negotiation and litigation. See Note 17 of the Notes to the Consolidated Financial
Statements.
Liquidity and Capital Resources
Liquidity:
Coopers operating working capital (defined as receivables and inventories less accounts
payable) increased $39.6 million during the first six months of 2010, inclusive of the Tools
business contributed to a joint venture in July 2010. A $90.9 million increase in receivables and a
$29.5 million increase in inventories were partially offset by an $80.8 million increase in
accounts payable. Operating working capital turnover (defined as annualized quarterly revenues
divided by average quarterly operating working capital) for the first six months of 2010 was 5.7
turns as compared to the 4.6 turns reported for the same period of 2009 reflecting efficient
working capital utilization.
-34-
Cash provided by operating activities was $251.8 million during the first six months of 2010.
This cash, plus $30.7 million of cash received from stock option exercises, was primarily used to
fund capital expenditures of $30.2 million, acquisitions of $20.6 million, dividends of $87.0
million and share purchases of $91.4 million.
Cash provided by operating activities was $376.1 million during the first six months of 2009.
This cash, plus $9.3 million from redemption of short-term investments and $3.5 million of cash
received from stock option exercises, significantly exceeded the funds utilized to fund capital
expenditures of $55.9 million, acquisitions of $22.2 million, dividends of $84.0 million, debt
repayments of $21.9 million and share purchases of $26.0 million.
As discussed in Note 17 of the Notes to Consolidated Financial Statements, Coopers contingent
liabilities related to the Automotive Products sale to Federal-Mogul in 1998 will continue to be
resolved through the tort system. Cooper anticipates that the annual cash outlay for its potential
asbestos liability, net of insurance recoveries, will average in the range of $20 to $30 million,
although the amounts will vary as the amount of the actual net cash outlay is not reasonably
predictable.
Coopers financial position and liquidity remained strong during the recent global economic
recession. While the length and depth of the recession was more severe than predicted by most
experts, Cooper proactively and aggressively adjusted its cost structure. In this regard, in the
fourth quarter of 2008, Cooper implemented contingency plans to reduce our cost structure and
recognized a restructuring charge of $35.7 million primarily related to reductions in our workforce
in excess of 2,200 employees. During 2009, Cooper further reduced its workforce by approximately
1,900 additional employees and recognized restructuring charges of $28.7 million. As part of these
restructuring actions, Cooper approved the closure of ten factories and warehouses, eight of which
were completed at the end of the 2009. In the first half of 2010, Cooper completed one of the two
remaining factory closures and recorded $6.5 million of costs associated with the ongoing 2009
restructuring actions.
Cash flows from operating activities in the first six months of 2010 and 2009 have been reduced by
$9.9 million and $35.7 million, respectively for the amounts expended in connection with the
restructuring actions. At June 30, 2010, Cooper has an accrual for future cash expenditures related
to the restructuring actions of $2.7 million. Cooper expects to incur incremental restructuring
charges in the range of approximately $2 to $4 million associated with completion of the planned
restructuring activities and additional actions anticipated in 2010, excluding restructuring that
will occur in the Tools Joint Venture. The workforce reductions, contract termination and other
exit costs and the related cash payments will be substantially completed in 2010. See Note 11 of
the Notes to Consolidated Financial Statements for further information.
Cooper currently anticipates that it will annually generate in excess of $500 million in cash
flow available for acquisitions, debt repayment, dividends and common stock repurchases in 2010.
Capital Resources:
Cooper targets a 30% to 40% debt-to-total capitalization ratio. Excess cash flows are
utilized to fund acquisitions or to purchase shares of Cooper common stock. Coopers debt-to-total
capitalization ratio was 23.6% at June 30, 2010, 24.0% at December 31, 2009 and 30.4% at June 30,
2009.
At June 30, 2010 and December 31, 2009, Cooper had cash and cash equivalents of $432.0 million
and $381.6 million, respectively. Cooper had short-term debt of $10.0 million at June 30, 2010 and
$9.4 million at December 31, 2009.
Coopers practice is to back up its short-term debt balance with a combination of cash, cash
equivalents, and committed credit facilities. At June 30, 2010, Cooper has available a $350
million U.S. committed credit facility that matures in August 2012. Short-term debt, to the extent
not backed up by cash
-35-
or short-term investments, reduces the amount of additional liquidity provided by the
committed credit facility.
The credit facility agreement is not subject to termination based on a decrease in Coopers
debt ratings or a material adverse change clause. The principal financial covenants in the
agreement limits Coopers debt-to-total capitalization ratio to 60% and requires Cooper to maintain
a minimum earnings before interest expense, income taxes, depreciation and amortization to interest
ratio of 3 to 1. Cooper is in compliance with all covenants set forth in the credit facility
agreement.
Coopers access to the commercial paper market could be adversely affected by a change in the
credit ratings assigned to its commercial paper. Should Coopers access to the commercial paper
market be adversely affected due to a change in its credit ratings, Cooper would rely on a
combination of available cash and its committed credit facilities to provide short-term funding.
The committed credit facilities do not contain any provision, which makes their availability to
Cooper dependent on Coopers credit ratings.
Critical Accounting Estimates and Recently Issued Accounting Standards
We disclosed our critical accounting policies in our Annual Report on Form 10-K for the year
ended December 31, 2009 and no significant change has occurred to those policies.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
As of June 30, 2010, there have been no material changes to Coopers off-balance sheet
arrangements and contractual obligations as described in its Annual Report on Form 10-K for the
year ended December 31, 2009.
Backlog
Sales backlog represents the dollar amount of all firm open orders for which all terms and
conditions pertaining to the sale have been approved such that a future sale is reasonably
expected. Sales backlog by segment was as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(in millions) |
|
Energy & Safety Solutions |
|
$ |
444.6 |
|
|
$ |
407.6 |
|
Electrical Products Group |
|
|
207.7 |
|
|
|
178.6 |
|
Tools |
|
|
80.6 |
|
|
|
52.8 |
|
|
|
|
|
|
|
|
|
|
$ |
732.9 |
|
|
$ |
639.0 |
|
|
|
|
|
|
|
|
Item 4. Controls and Procedures
The Companys management, with the participation of the Companys Chairman and Chief Executive
Officer and Senior Vice President and Chief Financial Officer, has evaluated the effectiveness of
the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on
such evaluation, the Companys Chairman and Chief Executive Officer and Senior Vice President and
Chief Financial Officer have concluded that, as of the end of such period, the Companys disclosure
controls and procedures are effective, at the reasonable assurance level, in recording, processing,
summarizing and reporting, on a timely basis, information required to be disclosed by the Company
in the reports that it files or submits under the Exchange Act and are effective, at the reasonable
assurance level, in ensuring that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is accumulated and communicated to the
Companys management, including the Companys Chairman and Chief Executive Officer and Senior Vice
President and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.
-36-
There have not been any changes in the Companys internal control over financial reporting
(identified in connection with the evaluation required by paragraph (d) in Rules 13a-15 and 15d-15
under the Exchange Act) during the most recently completed fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the Companys internal control over
financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Discontinued Operations Liability
Information regarding the discontinued operations liability is incorporated by reference to
Note 17 of the Notes to Consolidated Financial Statements included in Part I of this Form 10-Q.
Other Matters
Information regarding other matters is incorporated by reference to Note 6 of the Notes to
Consolidated Financial Statements included in Part I of this Form 10-Q.
Item 1A. Risk Factors
There have been no material changes in the risk factors previously disclosed in Coopers
Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
The following table reflects activity related to equity securities purchased by Cooper during
the three months ended June 30, 2010:
Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of Shares |
|
|
Maximum Number of |
|
|
|
|
|
|
|
|
|
|
|
Purchased as Part of |
|
|
Shares that May Yet Be |
|
|
|
Total Number of |
|
|
Average Price |
|
|
Publicly Announced Plans |
|
|
Purchased Under the Plans |
|
Period |
|
Shares Purchased |
|
|
Paid per Share |
|
|
or Programs (1) |
|
|
or Programs (1) |
|
As of 3/31/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,340,335 |
|
4/01/10 4/30/10 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
14,340,335 |
|
5/01/10 5/31/10 |
|
|
639,500 |
|
|
$ |
46.76 |
|
|
|
639,500 |
|
|
|
13,700,835 |
|
6/01/10 6/30/10 |
|
|
726,900 |
|
|
$ |
47.25 |
|
|
|
736,900 |
|
|
|
12,973,935 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,366,400 |
|
|
$ |
47.02 |
|
|
|
1,366,400 |
|
|
|
|
|
|
|
|
(1) |
|
On February 12, 2008, Coopers Board of Directors authorized the purchase of
ten million shares of common stock. On February 9, 2009, Coopers Board of Directors
increased the share repurchase authorization by ten million shares. Coopers Board has also
authorized the repurchase of shares issued from time to time under its equity compensation
plans, matched savings plan and dividend reinvestment plan in order to offset the dilution
that results from issuing shares under these plans. For 2010, Coopers current estimate is
that 2.5 million shares would be issued under equity compensation plans, which is reflected in
the above table. |
|
(2) |
|
As of the date of this filing in 2010, Cooper had repurchased the 2.5
million shares intended to offset the dilution from share issuances under equity compensation
plans, as well as 434,100 additional shares under the Board of Directors authorizations
discussed above. Cooper may continue to repurchase shares under these authorizations from
time to time during 2010. The decision whether to do so will be dependent on the favorability
of market conditions, as well as potential cash requirements for acquisitions and debt
repayments. |
-37-
Item 3. Defaults Upon Senior Securities
Not applicable
Item 6. Exhibits
|
12. |
|
Computation of Ratios of Earnings to Fixed Charges for the Calendar Years 2005
through 2009 and the Six Months Ended June 30, 2010 and 2009. |
|
|
31.1 |
|
Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
31.2 |
|
Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
32.1 |
|
Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
32.2 |
|
Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
101.INS
|
|
XBRL Instance Document |
|
|
|
|
|
101.SCH
|
|
XBRL Schema Document |
|
|
|
|
|
101.CAL
|
|
XBRL Calculation Linkbase Document |
|
|
|
|
|
101.LAB
|
|
XBRL Label Linkbase Document |
|
|
|
|
|
101.PRE
|
|
XBRL Presentation Linkbase Document |
|
|
|
|
|
101.DEF
|
|
XBRL Definition Linkbase Document |
Pursuant to Rule 406T of Regulation S-T, the interactive data included in Exhibit 101 is
deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or
12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities
Exchange Act of 1934, and otherwise is not subject to liability under these sections.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Cooper Industries plc |
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(Registrant)
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Date: August 6, 2010
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/s/ David A. Barta |
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David A. Barta, Senior Vice President and
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Chief Financial Officer |
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Date: August 6, 2010
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/s/ Rick L. Johnson |
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Rick L. Johnson, Vice President, Controller and
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Chief Accounting Officer |
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-38-
Exhibit Index
Exhibit No.
12. |
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Computation of Ratios of Earnings to Fixed Charges for the Calendar Years 2005
through 2009 and the Six Months ended June 30, 2010 and 2009. |
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31.1 |
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Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
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31.2 |
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Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
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32.1 |
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Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
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32.2 |
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Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
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101.INS
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XBRL Instance Document |
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101.SCH
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XBRL Schema Document |
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101.CAL
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XBRL Calculation Linkbase Document |
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101.LAB
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XBRL Label Linkbase Document |
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101.PRE
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XBRL Presentation Linkbase Document |
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101.DEF
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XBRL Definition Linkbase Document |
Pursuant to Rule 406T of Regulation S-T, the interactive data included in Exhibit 101 is
deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or
12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities
Exchange Act of 1934, and otherwise is not subject to liability under these sections.