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 September 30, 2011
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
incorporation or organization)
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(I.R.S. Employer
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.
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Large Accelerated Filer þ
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Accelerated Filer o
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Non-Accelerated Filer o
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Smaller Reporting Company o |
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 September 30, 2011 was 158,101,261.
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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Nine Months Ended |
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September 30, |
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September 30, |
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2011 |
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2010 |
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2011 |
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2010 |
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(in millions, except per share data) |
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Revenues |
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$ |
1,389.7 |
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$ |
1,240.7 |
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$ |
4,036.3 |
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$ |
3,806.0 |
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Cost of sales |
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931.2 |
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821.6 |
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2,682.0 |
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2,537.7 |
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Selling and administrative expenses |
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269.2 |
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236.7 |
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779.8 |
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737.1 |
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Equity in (income) of Apex Tool Group, LLC |
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(16.0 |
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(10.5 |
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(44.9 |
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(10.5 |
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Loss related to contribution of net assets
to Apex Tool Group, LLC |
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134.5 |
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Restructuring charges |
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1.5 |
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8.0 |
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Operating earnings |
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205.3 |
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191.4 |
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619.4 |
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399.2 |
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Interest expense, net |
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16.4 |
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12.3 |
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49.8 |
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36.2 |
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Income from continuing operations
before income taxes |
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188.9 |
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179.1 |
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569.6 |
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363.0 |
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Income taxes expense |
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28.7 |
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37.4 |
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92.2 |
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61.1 |
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Income from continuing operations |
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160.2 |
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141.7 |
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477.4 |
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301.9 |
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Income related to discontinued operations,
net of income taxes |
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190.3 |
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Net income |
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$ |
160.2 |
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$ |
141.7 |
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$ |
667.7 |
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$ |
301.9 |
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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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$ |
.99 |
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$ |
.86 |
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$ |
2.91 |
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$ |
1.81 |
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Income from discontinued operations |
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1.16 |
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Net income |
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$ |
.99 |
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$ |
.86 |
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$ |
4.07 |
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$ |
1.81 |
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Diluted: |
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Income from continuing operations |
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$ |
.98 |
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$ |
.85 |
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$ |
2.87 |
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$ |
1.79 |
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Income from discontinued operations |
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1.14 |
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Net income |
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$ |
.98 |
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$ |
.85 |
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$ |
4.01 |
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$ |
1.79 |
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Cash dividends declared per common share |
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$ |
.29 |
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$ |
.27 |
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$ |
.87 |
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$ |
.81 |
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The accompanying notes are an integral part of these statements.
-2-
COOPER INDUSTRIES PLC
CONSOLIDATED BALANCE SHEETS
(unaudited)
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September 30, |
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December 31, |
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2011 |
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2010 |
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(in millions) |
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ASSETS |
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Cash and cash equivalents |
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$ |
430.6 |
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$ |
1,035.3 |
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Receivables, less allowances |
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942.3 |
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795.9 |
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Inventories |
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506.3 |
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438.9 |
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Current discontinued operations receivable |
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3.8 |
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13.0 |
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Other current assets |
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225.8 |
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207.5 |
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Total current assets |
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2,108.8 |
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2,490.6 |
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Property, plant and equipment, less accumulated depreciation |
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615.7 |
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608.3 |
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Investment in Apex Tool Group, LLC |
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531.2 |
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511.3 |
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Goodwill |
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2,513.6 |
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2,356.5 |
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Other intangible assets, less accumulated amortization |
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372.6 |
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333.6 |
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Long-term discontinued operations receivable |
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5.1 |
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150.6 |
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Other noncurrent assets |
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175.0 |
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217.7 |
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Total assets |
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$ |
6,322.0 |
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$ |
6,668.6 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Short-term debt |
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$ |
6.2 |
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$ |
7.7 |
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Accounts payable |
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465.4 |
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462.6 |
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Accrued liabilities |
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527.7 |
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510.1 |
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Current discontinued operations liability |
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9.4 |
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45.4 |
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Current maturities of long-term debt |
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0.7 |
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0.6 |
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Total current liabilities |
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1,009.4 |
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1,026.4 |
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Long-term debt |
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1,420.9 |
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1,420.4 |
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Long-term discontinued operations liability |
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40.5 |
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701.7 |
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Other long-term liabilities |
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398.2 |
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314.0 |
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Total liabilities |
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2,869.0 |
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3,462.5 |
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Common stock, $.01 par value |
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1.7 |
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1.7 |
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Retained earnings |
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4,288.9 |
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3,658.7 |
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Treasury stock |
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(671.6 |
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(288.6 |
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Accumulated other nonowner changes in equity |
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(166.0 |
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(165.7 |
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Total shareholders equity |
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3,453.0 |
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3,206.1 |
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Total liabilities and shareholders equity |
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$ |
6,322.0 |
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$ |
6,668.6 |
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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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Nine Months Ended |
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September 30, |
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2011 |
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2010 |
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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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$ |
667.7 |
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$ |
301.9 |
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(Income) related to discontinued operations |
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(190.3 |
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Income from continuing operations |
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477.4 |
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301.9 |
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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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96.7 |
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107.7 |
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Deferred income taxes |
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53.1 |
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(35.6 |
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Excess tax benefits from stock options and awards |
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(13.3 |
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(4.8 |
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Distribution of earnings from Apex Tool Group, LLC |
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20.9 |
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Equity in (income) of Apex Tool Group, LLC |
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(44.9 |
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(10.5 |
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Loss related to contribution of net assets to Apex Tool Group, LLC |
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134.5 |
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Restructuring charges |
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8.0 |
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Changes in assets and liabilities: (1) |
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Receivables |
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(115.5 |
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(150.7 |
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Inventories |
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(37.3 |
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(61.4 |
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Accounts payable and accrued liabilities |
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(5.5 |
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91.2 |
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Discontinued operations assets and liabilities, net |
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(246.6 |
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(10.2 |
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Other assets and liabilities, net |
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(8.0 |
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26.9 |
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Net cash provided by operating activities |
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177.0 |
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397.0 |
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Cash flows from investing activities: |
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Capital expenditures |
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(84.8 |
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(57.9 |
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Cash paid for acquired businesses |
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(250.1 |
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(21.6 |
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Cash restricted for business acquisition |
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(34.9 |
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Proceeds from sales of property, plant and equipment and other |
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15.8 |
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(4.6 |
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Net cash used in investing activities |
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(319.1 |
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(119.0 |
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Cash flows from financing activities: |
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Short-term debt, net |
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(4.6 |
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(2.3 |
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Debt issuance costs |
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(1.0 |
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Dividends |
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(141.4 |
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(132.7 |
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Purchases of treasury shares |
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(383.0 |
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(276.0 |
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Excess tax benefits from stock options and awards |
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13.3 |
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4.8 |
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Proceeds from exercise of stock options and other |
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54.8 |
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34.5 |
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Net cash used in financing activities |
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(461.9 |
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(371.7 |
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Effect of exchange rate changes on cash and cash equivalents |
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(0.7 |
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8.1 |
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Decrease in cash and cash equivalents |
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(604.7 |
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(85.6 |
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Cash and cash equivalents, beginning of period |
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1,035.3 |
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381.6 |
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Cash and cash equivalents, end of period |
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$ |
430.6 |
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$ |
296.0 |
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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, 2010 included in Part IV of Coopers
2010 Annual Report on Form 10-K.
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% 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 2010 Cooper deconsolidated the Tools business assets and liabilities contributed to the Joint
Venture and recognized Coopers 50% ownership interest as an equity investment. Recording the
investment at its fair value of $480 million resulted in a pretax loss of $134.5 million related to
the transaction, which was recognized in the second quarter of 2010. Beginning in the third
quarter of 2010, Cooper recognizes its proportionate share of the Joint Ventures operating results
using the equity method.
New Accounting Pronouncements In June 2011 the Financial Accounting Standards Board issued
revised guidance on the presentation of comprehensive income that will be effective for Cooper
beginning in 2012. This guidance eliminates the option to present the components of comprehensive
income as part of the statement of shareholders equity and also requires presentation of
reclassification adjustments from other comprehensive income to net income on the face of the
financial statements. The implementation of this revised guidance in 2012 will change the
presentation of our financial statements but will not have any impact on our consolidated financial
condition, results of operations or cash flows.
Note 2. Acquisitions
Cooper has completed a number of acquisitions that were selected because of their strategic
fit with existing Cooper businesses or were new strategic lines that were complementary to Coopers
operations. In the nine month period ended September 30, 2011, Cooper completed four acquisitions,
two in the Energy and Safety Solutions segment (including Gitiesse srl, a manufacturer of marine
and oil and gas communications systems specializing in the manufacture of digital integrated
multimedia communications systems for vessels worldwide) and two in the Electrical Products Group
(including Martek Power, a manufacturer of power electronic components specializing in the
manufacture of highly specialized power management devices for the military, heavy-duty
transportation, aerospace, medical, telecom and hybrid/electrical vehicle markets), and also
acquired certain other intangible assets in the Electrical Products Group. In 2010 Cooper
completed five acquisitions, four in the Energy and Safety Solutions segment and one in the
Electrical Products Group, and also acquired certain other intangible assets in the Electrical
Products Group.
The acquisition date fair value of the total consideration for the 2011 transactions was
approximately $263.3 million and resulted in the preliminary recognition of aggregate goodwill of
$154.4 million, substantially all of which is not expected to be deductible for tax purposes. The
goodwill arising from the
-5-
2011 transactions includes $116.4 million related to the Electrical
Products Group segment and $38.0 million related to the Energy and Safety Solutions segment. The
goodwill arises because the purchase price reflects a number of factors including the future
earnings and cash flow potential of these businesses and the complimentary strategic fit and
resulting synergies these businesses bring to existing operations. The transactions consummated in
2011 also resulted in the preliminary recognition of $57.0 million in other intangible assets
consisting primarily of customer relationships, technology and trademarks. All of the other
intangibles are finite-lived intangible assets that are preliminarily expected to be amortized over
periods of 3 to 15 years with a weighted average amortization period of approximately 10 years.
The following table summarizes the preliminary aggregate estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition for the acquisitions consummated during
the nine months ended September 30, 2011:
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(in millions) |
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Receivables |
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$ |
30.4 |
|
Inventories |
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33.2 |
|
Property, plant and equipment |
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|
6.9 |
|
Goodwill |
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|
154.4 |
|
Other intangible assets |
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57.0 |
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Accounts payable |
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(18.8 |
) |
Debt |
|
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(2.7 |
) |
Other assets and liabilities, net |
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(10.3 |
) |
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Net cash consideration |
|
$ |
250.1 |
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|
The unaudited pro forma information for the periods set forth below gives effect to all prior
acquisitions as if they had occurred at the beginning of the period. This data is presented for
informational purposes only and is not necessarily indicative of the results of operations that
would have been achieved had the acquisitions been consummated as of that time.
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
|
(in millions) |
|
Revenues |
|
$ |
1,399.7 |
|
|
$ |
1,287.2 |
|
|
$ |
4,124.4 |
|
|
$ |
3,946.2 |
|
Income from continuing operations |
|
|
160.7 |
|
|
|
144.5 |
|
|
|
481.7 |
|
|
|
310.0 |
|
Diluted earnings per share from continuing operations |
|
$ |
.98 |
|
|
$ |
.87 |
|
|
$ |
2.89 |
|
|
$ |
1.84 |
|
Note 3. Inventories
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2011 |
|
|
2010 |
|
|
|
(in millions) |
|
Raw materials |
|
$ |
206.5 |
|
|
$ |
168.6 |
|
Work-in-process |
|
|
118.9 |
|
|
|
97.9 |
|
Finished goods |
|
|
314.4 |
|
|
|
288.5 |
|
Perishable tooling and supplies |
|
|
7.2 |
|
|
|
7.6 |
|
|
|
|
|
|
|
|
|
|
|
647.0 |
|
|
|
562.6 |
|
Allowance for excess and obsolete inventory |
|
|
(63.9 |
) |
|
|
(57.8 |
) |
Excess of FIFO costs over LIFO costs |
|
|
(76.8 |
) |
|
|
(65.9 |
) |
|
|
|
|
|
|
|
Net inventories |
|
$ |
506.3 |
|
|
$ |
438.9 |
|
|
|
|
|
|
|
|
-6-
Note 4. Goodwill
Cooper has goodwill of $2.51 billion and $2.36 billion at September 30, 2011 and December 31,
2010, respectively. Cooper completed its annual impairment tests for each reporting units
goodwill as of January 1, 2011. The results of step one of the goodwill impairment tests did not
require the completion of step two of the test for any reporting unit.
Note 5. Contingencies
Cooper and its subsidiaries are defendants or otherwise involved in a number of lawsuits in
the ordinary course of business. 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 not possible 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 estimates of known environmental
remediation exposures. Such accruals are adjusted as information develops or circumstances change.
The environmental liability accrual includes amounts related to sites owned by Cooper, retained
environmental liabilities related to sites previously owned by Cooper and third-party sites where
Cooper was a potentially responsible party. 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 September 30, 2011, Cooper had an accrual of $29.7 million
with respect to potential environmental liabilities, including $8.8 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
-7-
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. Although the notices
do not state an amount of potential liability, Cooper has included a provision for this claim in
its environmental accrual assessment based on Coopers current estimate of the most likely amount
of losses that it believes will be incurred.
Note 6. Debt
On May 26, 2011, Cooper entered into a credit agreement that provides a $500 million five-year
committed bank credit facility that replaced Coopers previous credit facility that was to mature
in August 2012. The agreement for the credit facility requires that Cooper maintains a prescribed
limit on debt as a percentage of total capitalization. Retained earnings are unrestricted as to
the payment of dividends, except to the extent that payment would cause a violation of the
prescribed limit on the debt-to-total capitalization ratio. The credit agreement is not subject to
termination based upon a decrease in Coopers debt ratings or a material adverse change. At
September 30, 2011, Cooper has $500 million available under this credit facility.
At September 30, 2011, Cooper has $6.2 million of short-term debt and has no commercial paper
borrowings outstanding.
Note 7. Shareholders Equity
Cooper Industries plc has common shares, $.01 par value outstanding of 158,101,261 (net of 14,325,562 treasury shares) and 164,130,802 (net of 6,537,900 treasury shares) at September 30,
2011 and December 31, 2010, respectively. During the first nine months of 2011, Cooper purchased
7,787,662 shares of treasury stock at an average price of $49.18 per share under the Board of
Directors authorizations discussed below. During the first nine months of 2011, Cooper issued
1,758,121 common shares primarily in connection with employee incentive and benefit plans and
Coopers dividend reinvestment program.
On February 9, 2009, Coopers Board of Directors authorized the purchase of 10 million shares
of common stock. 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 2011 Coopers
current estimate is that 3 million shares would be issued under equity compensation plans. Cooper
may continue to repurchase shares under these authorizations from time to time during 2011. The
decision whether to do so will depend on the favorability of market conditions, as well as
potential cash requirements for acquisitions and debt repayments. As of September 30, 2011,
3,941,073 shares remain available to be repurchased under the authorizations by the Board of
Directors. On November 1, 2011, Coopers Board of Directors increased the share repurchase
authorization by 10 million shares.
-8-
Note 8. Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
|
(in millions) |
|
Segment Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy and Safety Solutions |
|
$ |
752.2 |
|
|
$ |
655.7 |
|
|
$ |
2,184.1 |
|
|
$ |
1,840.0 |
|
Electrical Products Group |
|
|
637.5 |
|
|
|
585.0 |
|
|
|
1,852.2 |
|
|
|
1,654.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Electrical segments |
|
|
1,389.7 |
|
|
|
1,240.7 |
|
|
|
4,036.3 |
|
|
|
3,494.8 |
|
Tools |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
311.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment revenues |
|
$ |
1,389.7 |
|
|
$ |
1,240.7 |
|
|
$ |
4,036.3 |
|
|
$ |
3,806.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy and Safety Solutions |
|
$ |
125.6 |
|
|
$ |
111.1 |
|
|
$ |
375.4 |
|
|
$ |
310.9 |
|
Electrical Products Group |
|
|
88.3 |
|
|
|
94.2 |
|
|
|
270.0 |
|
|
|
250.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Electrical segments |
|
|
213.9 |
|
|
|
205.3 |
|
|
|
645.4 |
|
|
|
561.2 |
|
Tools |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating earnings |
|
|
213.9 |
|
|
|
205.3 |
|
|
|
645.4 |
|
|
|
594.3 |
|
General Corporate expense |
|
|
24.6 |
|
|
|
22.9 |
|
|
|
70.9 |
|
|
|
63.1 |
|
Equity in (income) of Apex Tool Group, LLC |
|
|
(16.0 |
) |
|
|
(10.5 |
) |
|
|
(44.9 |
) |
|
|
(10.5 |
) |
Loss related to contribution of net
assets to Apex Tool Group, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134.5 |
|
Restructuring charges |
|
|
|
|
|
|
1.5 |
|
|
|
|
|
|
|
8.0 |
|
Interest expense, net |
|
|
16.4 |
|
|
|
12.3 |
|
|
|
49.8 |
|
|
|
36.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
before income taxes |
|
$ |
188.9 |
|
|
$ |
179.1 |
|
|
$ |
569.6 |
|
|
$ |
363.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 9. Stock-Based Compensation
Cooper had a share-based compensation plan known as the Amended and Restated Stock Incentive
Plan (the Prior Stock Plan). The Prior Stock Plan provided for the granting of stock options,
performance-based share awards and restricted stock units. Since the Prior Stock Plans original
inception in 1996 the aggregate number of shares authorized under the Prior Stock Plan was 41
million. On May 2, 2011, Cooper shareholders approved the Cooper Industries plc 2011 Omnibus
Incentive Compensation Plan (the 2011 Incentive Plan) which replaced the Prior Stock Plan and the
Management Annual Incentive Plan (the Bonus Plan). The 2011 Incentive Plan is intended to
promote our long-term success and achievement of both our short- and long-term business objectives
and increase shareholder value by attracting, motivating, and retaining non-employee directors,
officers and employees. The 2011 Incentive Plan provides for the granting of stock options, stock
appreciation rights, restricted stock awards, restricted stock units, performance unit awards,
performance share awards, other stock-based awards, cash-based awards and dividend equivalents to
eligible participants. At the time of approval of the 2011 Incentive Plan, there were 10.6 million
shares available for future grants, including approximately 4.0 million shares that were available
for future grants under the Prior Stock Plan and the Bonus Plan which were transferred to and are
now available for issuance under the 2011 Incentive Plan. Shares that are subject to outstanding
awards under the Prior Stock Plan that are forfeited or are otherwise settled or terminated without
a distribution of shares will be transferred to and available for issuance under the 2011 Incentive
Plan. At May 2, 2011, Cooper had approximately 9.4 million stock awards outstanding under the
Prior Stock Plan.
-9-
During the nine month period ended September 30, 2011, Cooper granted 1,316,090 stock option
awards, 402,778 performance-based shares and 223,503 restricted stock units. As of September 30,
2011, 10,824,883 shares were available for future grants under the 2011 Incentive Plan. Total
compensation expense for all share-based compensation arrangements was $28.1 million and $24.1
million for the nine month periods ended September 30, 2011 and 2010, respectively. The total
income tax benefit recognized in the income statement for all share-based compensation arrangements
was $10.3 million and $8.7 million for the nine month periods ended September 30, 2011 and 2010,
respectively.
Note 10. Income Taxes
The effective tax rate for continuing operations was 16.2% for the nine months ended September
30, 2011 and 16.8% for the nine months ended September 30, 2010. Income tax expense for continuing
operations was reduced by $9.7 million during the nine months ended September 30, 2011 for discrete
tax adjustments related to the settlement of the discontinued operations asbestos liability that
was required under accounting principles to be classified in continuing operations. During the
nine months ended September 30, 2010 Cooper reduced income tax expense for continuing operations by
$40.8 million to recognize the discrete tax effects related to the contribution of net assets to
the Tools joint venture. Excluding these discrete tax adjustments, Coopers effective tax rate for
continuing operations was 17.9% for the nine months ended September 30, 2011 and 20.5% for the nine
months ended September 30, 2010.
Net deferred taxes recognized in the balance sheet consist of:
|
|
|
|
|
|
|
|
|
|
|
September |
|
|
December |
|
|
|
30, 2011 |
|
|
31, 2010 |
|
|
|
(in millions) |
|
Other current assets |
|
$ |
91.4 |
|
|
$ |
76.0 |
|
Other noncurrent assets |
|
|
|
|
|
|
42.1 |
|
Other long-term liabilities |
|
|
(114.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities) |
|
$ |
(22.8 |
) |
|
$ |
118.1 |
|
|
|
|
|
|
|
|
The decrease during 2011 in the net deferred tax assets recognized was primarily related to
the settlement of the discontinued operations asbestos liability as further discussed in Note 15 of
the Notes to the Consolidated Financial Statements.
The Internal Revenue Service (IRS) completed its examinations of Coopers 2007 and 2008
Federal Tax Returns and issued notices of assessment in the amounts of $16 million and $14 million,
respectively, primarily by challenging Coopers intercompany pricing with a foreign affiliate.
During the first quarter of 2011 the IRS and Cooper finalized a settlement regarding these matters.
After consideration of the related liability Cooper had recorded, the settlement had no
significant effect on Coopers consolidated financial statements.
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. 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. Although 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.
-10-
The German tax payment has been included in Coopers foreign tax credit
calculations in the United States, which would be amended upon successful defense of the German
reorganization.
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 2010 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.
At September 30, 2011 and December 31, 2010, Cooper has a foreign deferred tax asset of
approximately $1.1 billion and $1.1 billion, respectively, relating to a net operating loss
carryforward that was approved by a foreign jurisdiction in September 2009. Although this net
operating loss carryforward has an indefinite life, a corresponding valuation allowance for the
same amount was recognized because management believes at this time it is more likely than not that
the deferred tax asset will not be realized.
Cooper has unrecognized gross tax benefits of $14.2 million at September 30, 2011.
Approximately $9.2 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 $1 to $6 million could be recognized during the next 12 months as audits
close and statutes expire.
Note 11. Pension and Other Postretirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
|
(in millions) |
|
Components of net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
0.6 |
|
|
$ |
0.7 |
|
|
$ |
1.8 |
|
|
$ |
2.5 |
|
Interest cost |
|
|
8.4 |
|
|
|
9.1 |
|
|
|
25.2 |
|
|
|
28.6 |
|
Expected return on plan assets |
|
|
(10.9 |
) |
|
|
(10.6 |
) |
|
|
(32.7 |
) |
|
|
(32.1 |
) |
Amortization of prior service cost |
|
|
(0.6 |
) |
|
|
(0.7 |
) |
|
|
(2.0 |
) |
|
|
(2.0 |
) |
Recognized actuarial loss |
|
|
5.4 |
|
|
|
5.2 |
|
|
|
15.3 |
|
|
|
15.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
2.9 |
|
|
$ |
3.7 |
|
|
$ |
7.6 |
|
|
$ |
12.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-11-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Postretirement Benefits |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
|
(in millions) |
|
Components of net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost |
|
$ |
0.9 |
|
|
$ |
1.1 |
|
|
$ |
2.7 |
|
|
$ |
3.5 |
|
Amortization of prior service cost |
|
|
(0.5 |
) |
|
|
(0.5 |
) |
|
|
(1.5 |
) |
|
|
(1.5 |
) |
Recognized actuarial gain |
|
|
(0.8 |
) |
|
|
(0.5 |
) |
|
|
(2.4 |
) |
|
|
(1.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (gain) |
|
$ |
(0.4 |
) |
|
$ |
0.1 |
|
|
$ |
(1.2 |
) |
|
$ |
0.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 12. Net Income Per Common Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
|
(in millions) |
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
160.2 |
|
|
$ |
141.7 |
|
|
$ |
477.4 |
|
|
$ |
301.9 |
|
Income from discontinued operations |
|
|
|
|
|
|
|
|
|
|
190.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common stock |
|
$ |
160.2 |
|
|
$ |
141.7 |
|
|
$ |
667.7 |
|
|
$ |
301.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
162.3 |
|
|
|
165.3 |
|
|
|
164.3 |
|
|
|
166.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
160.2 |
|
|
$ |
141.7 |
|
|
$ |
477.4 |
|
|
$ |
301.9 |
|
Income from discontinued operations |
|
|
|
|
|
|
|
|
|
|
190.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common stock |
|
$ |
160.2 |
|
|
$ |
141.7 |
|
|
$ |
667.7 |
|
|
$ |
301.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
162.3 |
|
|
|
165.3 |
|
|
|
164.3 |
|
|
|
166.9 |
|
Incremental shares from assumed conversions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options, performance-based stock
awards and other employee awards |
|
|
1.7 |
|
|
|
1.8 |
|
|
|
2.2 |
|
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
and common share equivalents |
|
|
164.0 |
|
|
|
167.1 |
|
|
|
166.5 |
|
|
|
168.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options and employee awards are not included as common stock equivalents in the calculations
if the effect would be anti-dilutive. Anti-dilutive options and employee awards of 1.5 million and
2.6 million shares were excluded from the calculations during the nine month periods ended
September 30, 2011 and 2010 respectively.
-12-
Note 13. 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 |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
|
(in millions) |
|
Net income |
|
$ |
160.2 |
|
|
$ |
141.7 |
|
|
$ |
667.7 |
|
|
$ |
301.9 |
|
Foreign currency translation1 |
|
|
(54.2 |
) |
|
|
67.1 |
|
|
|
(10.5 |
) |
|
|
99.3 |
|
Change in fair value of derivatives |
|
|
4.6 |
|
|
|
(3.3 |
) |
|
|
4.3 |
|
|
|
(5.8 |
) |
Pension and postretirement benefit plans2 |
|
|
2.2 |
|
|
|
3.1 |
|
|
|
5.9 |
|
|
|
7.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income and other nonowner
changes in equity |
|
$ |
112.8 |
|
|
$ |
208.6 |
|
|
$ |
667.4 |
|
|
$ |
403.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Foreign currency translation gains included in net income and other nonowner changes
in equity for the nine month period ended September 30, 2010 includes a gain from the
reclassification from equity of $159.3 million ($103.5 million net of the associated tax affect) of
previously deferred currency translation losses that were recognized in net income as part of the
loss related to the contribution of net assets to the Tools joint venture. |
|
2 |
|
The change in pension and postretirement benefit plans included in net income and
other nonowner changes in equity for the nine month period ended September 30, 2010 includes a gain
from the reclassification from equity of $1.7 million ($0.9 million net of the associated tax
affect) of previously deferred pension plan losses that were recognized in net income as part of
the loss related to the contribution of net assets to the Tools joint venture. |
Note 14. Financial Instruments and Hedging Activities, Concentrations of Credit Risk and Fair Value of Financial Instruments
Derivative Instruments and Hedging Activities
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 generally 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 designated as cash flow hedges 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.
-13-
Assets and liabilities measured on a recurring basis at fair value using Level 2 inputs and a
market approach are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
December 31, 2010 |
|
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
|
|
(in millions) |
|
Short-term currency forward exchange contracts |
|
$ |
17.4 |
|
|
$ |
(23.2 |
) |
|
$ |
23.9 |
|
|
$ |
(24.7 |
) |
Long-term currency forward exchange contracts |
|
|
59.5 |
|
|
|
(24.4 |
) |
|
|
63.3 |
|
|
|
(26.4 |
) |
Short-term commodity swaps |
|
|
|
|
|
|
(3.3 |
) |
|
|
2.9 |
|
|
|
|
|
Long-term cross-currency swaps |
|
|
|
|
|
|
(35.2 |
) |
|
|
|
|
|
|
(30.2 |
) |
Except as discussed below, the currency forward exchange contracts and commodity swaps in the
above table are designated as hedging instruments. Currency forward exchange contracts
representing assets of approximately $38.8 and $48.7 million and liabilities of $28.0 and $38.3
million at September 30, 2011 and December 31, 2010, respectively are not designated as hedging
instruments.
There were no changes in the valuation techniques used to measure asset or liability fair
values on a recurring basis in 2011 or 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 nine month periods ended September
30, 2011 and 2010. For commodity swaps, Cooper recognized, in cost of sales, a net gain of $1.4
and $1.9 million in the nine month periods ended September 30, 2011 and 2010, respectively. At
September 30, 2011, Cooper estimates that approximately $3.6 million of net gains 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 nine month periods ended September 30, 2011 and 2010 was not material.
The table below summarizes the U. S. dollar equivalent contractual amounts of Coopers forward
exchange contracts at September 30, 2011 and December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2011 |
|
|
2010 |
|
|
|
(in millions) |
|
U.S. Dollar |
|
$ |
579.4 |
|
|
$ |
894.8 |
|
Euro |
|
|
411.7 |
|
|
|
335.4 |
|
British Pound Sterling |
|
|
153.2 |
|
|
|
143.9 |
|
Canadian Dollar |
|
|
|
|
|
|
370.6 |
|
Other |
|
|
23.9 |
|
|
|
32.3 |
|
|
|
|
|
|
|
|
|
|
$ |
1,168.2 |
|
|
$ |
1,777.0 |
|
|
|
|
|
|
|
|
The contractual amounts of Coopers commodity swap contracts at September 30, 2011 and
December 31, 2010 was approximately $19 million and $14 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 $119.7 million and $108.7 million at September 30, 2011 and December 31, 2010,
respectively. In the past, no significant claims have been made against these financial
instruments. Management believes the likelihood of demand
-14-
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 4.6% of accounts receivable at September 30, 2011 (5.0% at December
31, 2010). At September 30, 2011, Cooper has approximately 32% of its cash and cash equivalents
held at two financial institutions. Cooper believes these financial institutions to be financially
stable.
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 $1.43 billion and $1.43
billion for debt instruments at September 30, 2011 and December 31, 2010, respectively. The fair
value of these debt instruments, as represented primarily by quoted market prices, was
approximately $1.55 billion and $1.52 billion at September 30, 2011 and December 31, 2010,
respectively.
Note 15. Discontinued Operations Receivable and 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 (the Mutual Guaranty) 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-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. On September 30, 2008, the Bankruptcy Court issued its final ruling denying
Coopers participation in the proposed Federal-Mogul 524(g) trust resulting in Cooper implementing
the previously approved Plan B Settlement, where Cooper continued 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. As discussed further below, on February 1, 2011, Cooper entered into a
settlement agreement that closed on April 5, 2011 resolving Coopers liability under the Mutual
Guaranty with Pneumo.
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. 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.
Although the final determination of whether Cooper would participate in the Federal-Mogul 524(g)
trust was unknown, Coopers management concluded that the most likely outcome in the range of
potential outcomes was a settlement approximating the then current settlement proposals.
Accordingly, the accrual for potential liabilities related to the Automotive Products sale and the
Federal-Mogul bankruptcy during this
-15-
time included estimated payments to a 524(g) trust over 25
years that were undiscounted, and included insurance recoveries 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 was
not approved for any reason, or if Cooper elected not to participate or to pursue participation in
the trust. 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. 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 continued 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 continued to have 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. During 2009 Cooper
recognized after tax gains from discontinued operations of $25.5 million, which is net of a $16.2
million income tax expense, from negotiated insurance settlements consummated in 2009 that were not
previously recognized. At December 31, 2010, 2009 and 2008, Cooper had a discontinued operations
accrual of $747.1 million, $784.5 million and $815.1 million, respectively, and had related
insurance receivables of $163.6 million, $179.3 million and $192.3 million, respectively.
The amounts recognized by Cooper for its asbestos liability and related insurance receivables
under the Plan B settlement were not discounted and relied on assumptions that were 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 have been significantly
lower than the net amounts recognized in the balance sheet. Prior to the first quarter 2011
adjustment for the April 5, 2011 settlement agreement with Pneumo discussed below, Cooper estimated
that the liability for pending and future indemnity and defense costs for the next 45 years was
$736.3 million. This estimated liability was before any tax benefit and was not discounted as the
timing of the actual payments on resolution of claims through the tort system was not reasonably
predictable. The methodology used to project Coopers liability estimate relied 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. Under the Plan B settlement, Cooper, through Pneumo-Abex LLC,
had access to Abex insurance policies with remaining limits on policies with solvent insurers in
excess of $660 million. Insurance recoveries reflected as receivables in the balance sheet
included recoveries where insurance-in-place agreements, settlements or policy recoveries were
considered probable. Prior to the first quarter 2011 adjustment for the April 5, 2011 settlement
agreement with Pneumo discussed below, Coopers receivable for recoveries of costs from insurers
amounted to $151.9 million.
On February 1, 2011, Cooper entered into a settlement agreement that following satisfaction of
various closing conditions closed on April 5, 2011. The settlement agreement terminated the Mutual
Guaranty between Cooper and Pneumo and created a Settlement Trust. As a result of the April 2011
settlement the Company and its subsidiaries have no further obligations under the Mutual Guaranty.
Under the settlement agreement, a subsidiary of Cooper will make payments to the Settlement Trust
totaling $307.5
-16-
million ($250 million was paid at closing and the remainder is due in installments
over four years, subject to certain adjustments). Cooper made the $250 million initial payment to
the Settlement Trust on April 5, 2011. Other payments due under the settlement agreement total
approximately $49.6 million, after certain reductions for indemnity and defense payments made by
Cooper subsequent to the February 1, 2011 settlement agreement and prior to the closing on April 5,
2011. At September 30, 2011, the remaining payments are due in installments in April of each year
as follows: $9.1 million in 2012, $17.0 million in 2013, and $11.75 million in each of 2014 and
2015.
As discussed above, the Company had previously recorded an estimated accrual on an
undiscounted basis for pending and future indemnity and defense costs under the Mutual Guaranty. In
addition, the Company had recorded receivables for related insurance recoveries where
insurance-in-place agreements, settlements or policy recoveries were considered probable. As a
result of the settlement agreement, in the first quarter of 2011 Cooper adjusted its previously
recorded net liability for its obligations under the Mutual Guaranty to the amounts payable under
the settlement agreement and related unpaid legal expenses resulting in the recognition of an
after-tax gain from discontinued operations of $190.3 million, which is net of a $105.6 million
income tax expense. Cooper also has approximately $8.9 million in receivables for non-Abex related
insurance recoveries remaining on the balance sheet at September 30, 2011 due through 2014 under
previously recognized insurance settlements.
The following table presents the cash activity related to these discontinued operations assets
and liabilities through September 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
|
(in millions) |
|
Cash Flow: |
|
|
|
|
|
|
|
|
Indemnity and defense payments |
|
$ |
(10.5 |
) |
|
$ |
(23.0 |
) |
Insurance recoveries |
|
|
14.9 |
|
|
|
14.5 |
|
Payment to Pneumo Settlement Trust |
|
|
(250.0 |
) |
|
|
|
|
Other |
|
|
(1.0 |
) |
|
|
(1.7 |
) |
|
|
|
|
|
|
|
Net cash flow related to discontinued operations assets and liabilities |
|
$ |
(246.6 |
) |
|
$ |
(10.2 |
) |
|
|
|
|
|
|
|
Note 16. Consolidating Financial Information
Cooper Industries plc along with 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 US, Inc. The following condensed
consolidating financial information is included so that the separate financial statements of 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.
-17-
Consolidating Income Statements
Three Months Ended September 30, 2011
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries |
|
|
Cooper |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
plc |
|
|
US, Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
886.5 |
|
|
$ |
688.3 |
|
|
$ |
(185.1 |
) |
|
$ |
1,389.7 |
|
Cost of sales |
|
|
|
|
|
|
(0.9 |
) |
|
|
621.9 |
|
|
|
495.3 |
|
|
|
(185.1 |
) |
|
|
931.2 |
|
Selling and
administrative expenses |
|
|
0.2 |
|
|
|
18.5 |
|
|
|
134.1 |
|
|
|
120.7 |
|
|
|
(4.3 |
) |
|
|
269.2 |
|
Equity in (income) of
Apex Tool Group, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16.0 |
) |
|
|
|
|
|
|
(16.0 |
) |
Interest expense, net |
|
|
|
|
|
|
16.3 |
|
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
16.4 |
|
Equity in earnings of
subsidiaries, net of tax |
|
|
156.4 |
|
|
|
88.7 |
|
|
|
139.3 |
|
|
|
207.2 |
|
|
|
(591.6 |
) |
|
|
|
|
Intercompany income
(expense) |
|
|
(0.3 |
) |
|
|
(13.8 |
) |
|
|
(37.2 |
) |
|
|
51.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes |
|
|
155.9 |
|
|
|
41.0 |
|
|
|
232.6 |
|
|
|
346.7 |
|
|
|
(587.3 |
) |
|
|
188.9 |
|
Income tax expense
(benefit) |
|
|
|
|
|
|
(20.6 |
) |
|
|
33.7 |
|
|
|
15.6 |
|
|
|
|
|
|
|
28.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
155.9 |
|
|
$ |
61.6 |
|
|
$ |
198.9 |
|
|
$ |
331.1 |
|
|
$ |
(587.3 |
) |
|
$ |
160.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Income Statements
Three Months Ended September 30, 2010
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries |
|
|
Cooper |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
plc |
|
|
US, Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
820.1 |
|
|
$ |
596.5 |
|
|
$ |
(175.9 |
) |
|
$ |
1,240.7 |
|
Cost of sales |
|
|
|
|
|
|
(0.9 |
) |
|
|
579.4 |
|
|
|
419.0 |
|
|
|
(175.9 |
) |
|
|
821.6 |
|
Selling and
administrative expenses |
|
|
0.5 |
|
|
|
17.7 |
|
|
|
124.5 |
|
|
|
96.3 |
|
|
|
(2.3 |
) |
|
|
236.7 |
|
Equity in (income) of
Apex Tool Group, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10.5 |
) |
|
|
|
|
|
|
(10.5 |
) |
Loss related to
contribution of net
assets to Apex Tool
Group, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.5 |
) |
|
|
0.5 |
|
|
|
|
|
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
2.0 |
|
|
|
(0.5 |
) |
|
|
|
|
|
|
1.5 |
|
Interest expense, net |
|
|
|
|
|
|
12.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.3 |
|
Equity in earnings of
subsidiaries, net of tax |
|
|
73.1 |
|
|
|
74.5 |
|
|
|
139.6 |
|
|
|
42.2 |
|
|
|
(329.4 |
) |
|
|
|
|
Intercompany income
(expense) |
|
|
(0.3 |
) |
|
|
(19.2 |
) |
|
|
(44.7 |
) |
|
|
60.4 |
|
|
|
3.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes |
|
|
72.3 |
|
|
|
26.2 |
|
|
|
209.1 |
|
|
|
195.3 |
|
|
|
(323.8 |
) |
|
|
179.1 |
|
Income tax expense
(benefit) |
|
|
|
|
|
|
(16.1 |
) |
|
|
33.4 |
|
|
|
20.1 |
|
|
|
|
|
|
|
37.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
72.3 |
|
|
$ |
42.3 |
|
|
$ |
175.7 |
|
|
$ |
175.2 |
|
|
$ |
(323.8 |
) |
|
$ |
141.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-18-
Consolidating Income Statements
Nine Months Ended September 30, 2011
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries |
|
|
Cooper |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
plc |
|
|
US, Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
2,600.4 |
|
|
$ |
1,987.5 |
|
|
$ |
(551.6 |
) |
|
$ |
4,036.3 |
|
Cost of sales |
|
|
|
|
|
|
(2.7 |
) |
|
|
1,822.5 |
|
|
|
1,413.8 |
|
|
|
(551.6 |
) |
|
|
2,682.0 |
|
Selling and
administrative expenses |
|
|
|
|
|
|
92.4 |
|
|
|
389.7 |
|
|
|
342.8 |
|
|
|
(45.1 |
) |
|
|
779.8 |
|
Equity in (income) of
Apex Tool Group, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44.9 |
) |
|
|
|
|
|
|
(44.9 |
) |
Interest expense, net |
|
|
|
|
|
|
50.0 |
|
|
|
|
|
|
|
(0.2 |
) |
|
|
|
|
|
|
49.8 |
|
Equity in earnings of
subsidiaries, net of tax |
|
|
623.3 |
|
|
|
457.2 |
|
|
|
602.5 |
|
|
|
480.6 |
|
|
|
(2,163.6 |
) |
|
|
|
|
Intercompany income
(expense) |
|
|
(1.0 |
) |
|
|
(54.6 |
) |
|
|
(121.5 |
) |
|
|
176.8 |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
before income taxes |
|
|
622.3 |
|
|
|
262.9 |
|
|
|
869.2 |
|
|
|
933.4 |
|
|
|
(2,118.2 |
) |
|
|
569.6 |
|
Income tax expense
(benefit) |
|
|
|
|
|
|
(72.1 |
) |
|
|
105.5 |
|
|
|
58.8 |
|
|
|
|
|
|
|
92.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations |
|
|
622.3 |
|
|
|
335.0 |
|
|
|
763.7 |
|
|
|
874.6 |
|
|
|
(2,118.2 |
) |
|
|
477.4 |
|
Income from
discontinued
operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
190.3 |
|
|
|
|
|
|
|
190.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
622.3 |
|
|
$ |
335.0 |
|
|
$ |
763.7 |
|
|
$ |
1,064.9 |
|
|
$ |
(2,118.2 |
) |
|
$ |
667.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Income Statements
Nine Months Ended September 30, 2010
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries |
|
|
Cooper |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
plc |
|
|
US, Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
2,292.6 |
|
|
$ |
2,007.3 |
|
|
$ |
(493.9 |
) |
|
$ |
3,806.0 |
|
Cost of sales |
|
|
|
|
|
|
(0.7 |
) |
|
|
1,626.2 |
|
|
|
1,406.1 |
|
|
|
(493.9 |
) |
|
|
2,537.7 |
|
Selling and
administrative expenses |
|
|
2.6 |
|
|
|
80.1 |
|
|
|
352.8 |
|
|
|
334.8 |
|
|
|
(33.2 |
) |
|
|
737.1 |
|
Equity in (income) of
Apex Tool Group, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10.5 |
) |
|
|
|
|
|
|
(10.5 |
) |
Loss related to
contribution of net
assets to Apex Tool
Group, LLC |
|
|
|
|
|
|
2.4 |
|
|
|
|
|
|
|
131.6 |
|
|
|
0.5 |
|
|
|
134.5 |
|
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
3.8 |
|
|
|
4.2 |
|
|
|
|
|
|
|
8.0 |
|
Interest expense, net |
|
|
|
|
|
|
36.7 |
|
|
|
|
|
|
|
(0.5 |
) |
|
|
|
|
|
|
36.2 |
|
Equity in earnings of
subsidiaries, net of tax |
|
|
143.9 |
|
|
|
133.8 |
|
|
|
301.4 |
|
|
|
8.7 |
|
|
|
(587.8 |
) |
|
|
|
|
Intercompany income
(expense) |
|
|
0.1 |
|
|
|
(60.2 |
) |
|
|
(120.5 |
) |
|
|
176.8 |
|
|
|
3.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes |
|
|
141.4 |
|
|
|
(44.9 |
) |
|
|
490.7 |
|
|
|
327.1 |
|
|
|
(551.3 |
) |
|
|
363.0 |
|
Income tax expense
(benefit) |
|
|
|
|
|
|
(53.7 |
) |
|
|
84.5 |
|
|
|
30.3 |
|
|
|
|
|
|
|
61.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
141.4 |
|
|
$ |
8.8 |
|
|
$ |
406.2 |
|
|
$ |
296.8 |
|
|
$ |
(551.3 |
) |
|
$ |
301.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-19-
Consolidating Balance Sheets
September 30, 2011
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries |
|
|
Cooper |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
plc |
|
|
US, Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Cash and cash equivalents |
|
$ |
78.0 |
|
|
$ |
118.6 |
|
|
$ |
8.1 |
|
|
$ |
225.9 |
|
|
$ |
|
|
|
$ |
430.6 |
|
Receivables, less allowances |
|
|
0.2 |
|
|
|
0.5 |
|
|
|
266.8 |
|
|
|
674.8 |
|
|
|
|
|
|
|
942.3 |
|
Inventories |
|
|
|
|
|
|
|
|
|
|
257.9 |
|
|
|
248.4 |
|
|
|
|
|
|
|
506.3 |
|
Current discontinued
operations receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.8 |
|
|
|
|
|
|
|
3.8 |
|
Other current assets |
|
|
0.9 |
|
|
|
73.6 |
|
|
|
38.0 |
|
|
|
113.3 |
|
|
|
|
|
|
|
225.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
79.1 |
|
|
|
192.7 |
|
|
|
570.8 |
|
|
|
1,266.2 |
|
|
|
|
|
|
|
2,108.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, less
accumulated depreciation |
|
|
|
|
|
|
38.8 |
|
|
|
320.8 |
|
|
|
256.1 |
|
|
|
|
|
|
|
615.7 |
|
Investment in Apex Tool
Group, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
531.2 |
|
|
|
|
|
|
|
531.2 |
|
Investment in subsidiaries |
|
|
990.3 |
|
|
|
3,371.5 |
|
|
|
5,244.8 |
|
|
|
4,865.0 |
|
|
|
(14,471.6 |
) |
|
|
|
|
Investment in parent |
|
|
|
|
|
|
3,428.0 |
|
|
|
|
|
|
|
312.7 |
|
|
|
(3,740.7 |
) |
|
|
|
|
Intercompany accounts
receivable |
|
|
81.4 |
|
|
|
|
|
|
|
1,102.3 |
|
|
|
983.4 |
|
|
|
(2,167.1 |
) |
|
|
|
|
Intercompany notes
receivable |
|
|
9,564.5 |
|
|
|
564.9 |
|
|
|
6,956.3 |
|
|
|
4,003.6 |
|
|
|
(21,089.3 |
) |
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
1,288.3 |
|
|
|
1,225.3 |
|
|
|
|
|
|
|
2,513.6 |
|
Other intangible assets,
less accumulated
amortization |
|
|
|
|
|
|
|
|
|
|
85.3 |
|
|
|
287.3 |
|
|
|
|
|
|
|
372.6 |
|
Long-term discontinued
operations receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.1 |
|
|
|
|
|
|
|
5.1 |
|
Other noncurrent assets |
|
|
0.5 |
|
|
|
(3.9 |
) |
|
|
1.5 |
|
|
|
176.9 |
|
|
|
|
|
|
|
175.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
10,715.8 |
|
|
$ |
7,592.0 |
|
|
$ |
15,570.1 |
|
|
$ |
13,912.8 |
|
|
$ |
(41,468.7 |
) |
|
$ |
6,322.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
6.2 |
|
|
$ |
|
|
|
$ |
6.2 |
|
Accounts payable |
|
|
46.6 |
|
|
|
23.9 |
|
|
|
173.1 |
|
|
|
221.8 |
|
|
|
|
|
|
|
465.4 |
|
Accrued liabilities |
|
|
1.3 |
|
|
|
59.8 |
|
|
|
212.6 |
|
|
|
255.6 |
|
|
|
(1.6 |
) |
|
|
527.7 |
|
Current discontinued
operations liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.4 |
|
|
|
|
|
|
|
9.4 |
|
Current maturities of long-
term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.7 |
|
|
|
|
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
47.9 |
|
|
|
83.7 |
|
|
|
385.7 |
|
|
|
493.7 |
|
|
|
(1.6 |
) |
|
|
1,009.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
1,419.4 |
|
|
|
|
|
|
|
1.5 |
|
|
|
|
|
|
|
1,420.9 |
|
Intercompany accounts
payable |
|
|
|
|
|
|
2,167.1 |
|
|
|
|
|
|
|
|
|
|
|
(2,167.1 |
) |
|
|
|
|
Intercompany notes
payable |
|
|
419.1 |
|
|
|
1,815.1 |
|
|
|
1,849.0 |
|
|
|
17,006.1 |
|
|
|
(21,089.3 |
) |
|
|
|
|
Long-term discontinued
operations liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40.5 |
|
|
|
|
|
|
|
40.5 |
|
Other long-term liabilities |
|
|
|
|
|
|
34.8 |
|
|
|
203.2 |
|
|
|
160.2 |
|
|
|
|
|
|
|
398.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
467.0 |
|
|
|
5,520.1 |
|
|
|
2,437.9 |
|
|
|
17,702.0 |
|
|
|
(23,258.0 |
) |
|
|
2,869.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.7 |
|
Subsidiary preferred stock |
|
|
|
|
|
|
|
|
|
|
2,872.0 |
|
|
|
335.1 |
|
|
|
(3,207.1 |
) |
|
|
|
|
Subsidiary common stock |
|
|
|
|
|
|
|
|
|
|
9.2 |
|
|
|
257.8 |
|
|
|
(267.0 |
) |
|
|
|
|
Capital in excess of
par value |
|
|
10,251.5 |
|
|
|
820.9 |
|
|
|
6,300.5 |
|
|
|
(8,320.4 |
) |
|
|
(9,052.5 |
) |
|
|
|
|
Retained earnings |
|
|
624.2 |
|
|
|
1,377.9 |
|
|
|
4,089.5 |
|
|
|
4,106.6 |
|
|
|
(5,909.3 |
) |
|
|
4,288.9 |
|
Treasury stock |
|
|
(671.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(671.6 |
) |
Accumulated other non-
owner changes in equity |
|
|
43.0 |
|
|
|
(126.9 |
) |
|
|
(139.0 |
) |
|
|
(168.3 |
) |
|
|
225.2 |
|
|
|
(166.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
10,248.8 |
|
|
|
2,071.9 |
|
|
|
13,132.2 |
|
|
|
(3,789.2 |
) |
|
|
(18,210.7 |
) |
|
|
3,453.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
10,715.8 |
|
|
$ |
7,592.0 |
|
|
$ |
15,570.1 |
|
|
$ |
13,912.8 |
|
|
$ |
(41,468.7 |
) |
|
$ |
6,322.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-20-
Consolidating Balance Sheets
December 31, 2010
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries |
|
|
Cooper |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
plc |
|
|
US, Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Cash and cash equivalents |
|
$ |
63.2 |
|
|
$ |
36.8 |
|
|
$ |
2.6 |
|
|
$ |
932.7 |
|
|
$ |
|
|
|
$ |
1,035.3 |
|
Receivables, less allowances |
|
|
|
|
|
|
2.5 |
|
|
|
218.7 |
|
|
|
574.7 |
|
|
|
|
|
|
|
795.9 |
|
Inventories |
|
|
|
|
|
|
|
|
|
|
234.7 |
|
|
|
204.2 |
|
|
|
|
|
|
|
438.9 |
|
Current discontinued
operations receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.0 |
|
|
|
|
|
|
|
13.0 |
|
Other current assets |
|
|
0.6 |
|
|
|
72.4 |
|
|
|
30.7 |
|
|
|
103.8 |
|
|
|
|
|
|
|
207.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
63.8 |
|
|
|
111.7 |
|
|
|
486.7 |
|
|
|
1,828.4 |
|
|
|
|
|
|
|
2,490.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, less
accumulated depreciation |
|
|
|
|
|
|
42.1 |
|
|
|
316.8 |
|
|
|
249.4 |
|
|
|
|
|
|
|
608.3 |
|
Investment in Apex Tool
Group, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
511.3 |
|
|
|
|
|
|
|
511.3 |
|
Investment in subsidiaries |
|
|
3,035.5 |
|
|
|
2,923.6 |
|
|
|
4,608.9 |
|
|
|
741.6 |
|
|
|
(11,309.6 |
) |
|
|
|
|
Investment in parent |
|
|
|
|
|
|
3,428.1 |
|
|
|
|
|
|
|
312.7 |
|
|
|
(3,740.8 |
) |
|
|
|
|
Intercompany accounts
receivable |
|
|
71.9 |
|
|
|
|
|
|
|
1,974.1 |
|
|
|
1,244.2 |
|
|
|
(3,290.2 |
) |
|
|
|
|
Intercompany notes
receivable |
|
|
40.0 |
|
|
|
1,674.8 |
|
|
|
3,348.3 |
|
|
|
5,394.7 |
|
|
|
(10,457.8 |
) |
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
1,288.3 |
|
|
|
1,068.2 |
|
|
|
|
|
|
|
2,356.5 |
|
Other intangible assets,
less accumulated
amortization |
|
|
|
|
|
|
|
|
|
|
85.7 |
|
|
|
247.9 |
|
|
|
|
|
|
|
333.6 |
|
Long-term discontinued
operations receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150.6 |
|
|
|
|
|
|
|
150.6 |
|
Other noncurrent assets |
|
|
|
|
|
|
13.1 |
|
|
|
(178.2 |
) |
|
|
382.8 |
|
|
|
|
|
|
|
217.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
3,211.2 |
|
|
$ |
8,193.4 |
|
|
$ |
11,930.6 |
|
|
$ |
12,131.8 |
|
|
$ |
(28,798.4 |
) |
|
$ |
6,668.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
7.7 |
|
|
$ |
|
|
|
$ |
7.7 |
|
Accounts payable |
|
|
44.7 |
|
|
|
20.3 |
|
|
|
201.8 |
|
|
|
195.8 |
|
|
|
|
|
|
|
462.6 |
|
Accrued liabilities |
|
|
1.2 |
|
|
|
66.3 |
|
|
|
210.4 |
|
|
|
233.6 |
|
|
|
(1.4 |
) |
|
|
510.1 |
|
Current discontinued
operations liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45.4 |
|
|
|
|
|
|
|
45.4 |
|
Current maturities of
long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.6 |
|
|
|
|
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
45.9 |
|
|
|
86.6 |
|
|
|
412.2 |
|
|
|
483.1 |
|
|
|
(1.4 |
) |
|
|
1,026.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
1,418.5 |
|
|
|
|
|
|
|
1.9 |
|
|
|
|
|
|
|
1,420.4 |
|
Intercompany accounts
payable |
|
|
|
|
|
|
3,290.2 |
|
|
|
|
|
|
|
|
|
|
|
(3,290.2 |
) |
|
|
|
|
Intercompany notes
payable |
|
|
419.7 |
|
|
|
1,587.2 |
|
|
|
4,436.2 |
|
|
|
4,014.7 |
|
|
|
(10,457.8 |
) |
|
|
|
|
Long-term discontinued
operations liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
701.7 |
|
|
|
|
|
|
|
701.7 |
|
Other long-term liabilities. |
|
|
|
|
|
|
103.6 |
|
|
|
54.5 |
|
|
|
155.9 |
|
|
|
|
|
|
|
314.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
465.6 |
|
|
|
6,486.1 |
|
|
|
4,902.9 |
|
|
|
5,357.3 |
|
|
|
(13,749.4 |
) |
|
|
3,462.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.7 |
|
Subsidiary preferred stock |
|
|
|
|
|
|
|
|
|
|
2,872.1 |
|
|
|
335.1 |
|
|
|
(3,207.2 |
) |
|
|
|
|
Subsidiary common stock |
|
|
|
|
|
|
|
|
|
|
9.2 |
|
|
|
257.8 |
|
|
|
(267.0 |
) |
|
|
|
|
Capital in excess of
par value |
|
|
2,811.0 |
|
|
|
770.4 |
|
|
|
1,936.7 |
|
|
|
2,106.3 |
|
|
|
(7,624.4 |
) |
|
|
|
|
Retained earnings |
|
|
145.0 |
|
|
|
1,049.4 |
|
|
|
2,288.5 |
|
|
|
4,133.5 |
|
|
|
(3,957.7 |
) |
|
|
3,658.7 |
|
Treasury stock |
|
|
(288.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(288.6 |
) |
Accumulated other non-
owner changes in equity |
|
|
76.5 |
|
|
|
(112.5 |
) |
|
|
(78.8 |
) |
|
|
(58.2 |
) |
|
|
7.3 |
|
|
|
(165.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
2,745.6 |
|
|
|
1,707.3 |
|
|
|
7,027.7 |
|
|
|
6,774.5 |
|
|
|
(15,049.0 |
) |
|
|
3,206.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
3,211.2 |
|
|
$ |
8,193.4 |
|
|
$ |
11,930.6 |
|
|
$ |
12,131.8 |
|
|
$ |
(28,798.4 |
) |
|
$ |
6,668.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-21-
Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2011
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries |
|
|
Cooper |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
plc |
|
|
US, Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Net cash provided by (used in)
operating activities |
|
$ |
1.8 |
|
|
$ |
(94.9 |
) |
|
$ |
83.9 |
|
|
$ |
186.2 |
|
|
$ |
|
|
|
$ |
177.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
(8.9 |
) |
|
|
(51.3 |
) |
|
|
(24.6 |
) |
|
|
|
|
|
|
(84.8 |
) |
Cash paid for acquired businesses |
|
|
|
|
|
|
|
|
|
|
(3.5 |
) |
|
|
(246.6 |
) |
|
|
|
|
|
|
(250.1 |
) |
Loans to affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,275.2 |
) |
|
|
1,275.2 |
|
|
|
|
|
Repayments of loans from affiliates |
|
|
|
|
|
|
1,118.4 |
|
|
|
|
|
|
|
634.9 |
|
|
|
(1,753.3 |
) |
|
|
|
|
Dividends from affiliates |
|
|
|
|
|
|
22.0 |
|
|
|
18.8 |
|
|
|
|
|
|
|
(40.8 |
) |
|
|
|
|
Proceeds from sales of property,
plant and equipment and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15.8 |
|
|
|
|
|
|
|
15.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities |
|
|
|
|
|
|
1,131.5 |
|
|
|
(36.0 |
) |
|
|
(895.7 |
) |
|
|
(518.9 |
) |
|
|
(319.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4.6 |
) |
|
|
|
|
|
|
(4.6 |
) |
Debt issuance costs |
|
|
(0.5 |
) |
|
|
(0.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.0 |
) |
Borrowings from affiliates |
|
|
455.2 |
|
|
|
820.0 |
|
|
|
|
|
|
|
|
|
|
|
(1,275.2 |
) |
|
|
|
|
Repayments of loans to affiliates |
|
|
(42.8 |
) |
|
|
(592.1 |
) |
|
|
(1,045.0 |
) |
|
|
(73.4 |
) |
|
|
1,753.3 |
|
|
|
|
|
Other intercompany financing
activities |
|
|
70.7 |
|
|
|
(1,195.5 |
) |
|
|
1,002.6 |
|
|
|
122.2 |
|
|
|
|
|
|
|
|
|
Dividends |
|
|
(141.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(141.4 |
) |
Dividends paid to affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(40.8 |
) |
|
|
40.8 |
|
|
|
|
|
Purchases of treasury shares |
|
|
(383.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(383.0 |
) |
Excess tax benefits from stock
options and awards |
|
|
|
|
|
|
13.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.3 |
|
Proceeds from exercise of stock
options and other |
|
|
54.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities |
|
|
13.0 |
|
|
|
(954.8 |
) |
|
|
(42.4 |
) |
|
|
3.4 |
|
|
|
518.9 |
|
|
|
(461.9 |
) |
Effect of exchange rate changes on
cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.7 |
) |
|
|
|
|
|
|
(0.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents |
|
|
14.8 |
|
|
|
81.8 |
|
|
|
5.5 |
|
|
|
(706.8 |
) |
|
|
|
|
|
|
(604.7 |
) |
Cash and cash equivalents,
beginning of period |
|
|
63.2 |
|
|
|
36.8 |
|
|
|
2.6 |
|
|
|
932.7 |
|
|
|
|
|
|
|
1,035.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of
period |
|
$ |
78.0 |
|
|
$ |
118.6 |
|
|
$ |
8.1 |
|
|
$ |
225.9 |
|
|
$ |
|
|
|
$ |
430.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-22-
Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2010
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries |
|
|
Cooper |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
plc |
|
|
US, Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Net cash provided by (used in)
operating activities |
|
$ |
1.2 |
|
|
$ |
(68.1 |
) |
|
$ |
230.8 |
|
|
$ |
233.1 |
|
|
$ |
|
|
|
$ |
397.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
(3.6 |
) |
|
|
(26.7 |
) |
|
|
(27.6 |
) |
|
|
|
|
|
|
(57.9 |
) |
Cash paid for acquired businesses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21.6 |
) |
|
|
|
|
|
|
(21.6 |
) |
Cash restricted for business acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34.9 |
) |
|
|
|
|
|
|
(34.9 |
) |
Investments in affiliates |
|
|
(1.9 |
) |
|
|
(44.0 |
) |
|
|
|
|
|
|
(67.9 |
) |
|
|
113.8 |
|
|
|
|
|
Loans to affiliates |
|
|
(40.0 |
) |
|
|
(604.1 |
) |
|
|
|
|
|
|
(1,752.7 |
) |
|
|
2,396.8 |
|
|
|
|
|
Repayments of loans from affiliates |
|
|
|
|
|
|
447.3 |
|
|
|
5.0 |
|
|
|
1,112.5 |
|
|
|
(1,564.8 |
) |
|
|
|
|
Dividends from affiliates |
|
|
|
|
|
|
1.9 |
|
|
|
13.3 |
|
|
|
270.4 |
|
|
|
(285.6 |
) |
|
|
|
|
Proceeds from sales of property,
plant and equipment and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4.6 |
) |
|
|
|
|
|
|
(4.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities |
|
|
(41.9 |
) |
|
|
(202.5 |
) |
|
|
(8.4 |
) |
|
|
(526.4 |
) |
|
|
660.2 |
|
|
|
(119.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.3 |
) |
|
|
|
|
|
|
(2.3 |
) |
Borrowings from affiliates |
|
|
419.1 |
|
|
|
600.4 |
|
|
|
909.2 |
|
|
|
468.1 |
|
|
|
(2,396.8 |
) |
|
|
|
|
Repayments of loans to affiliates |
|
|
(154.9 |
) |
|
|
(162.0 |
) |
|
|
(1,239.6 |
) |
|
|
(8.3 |
) |
|
|
1,564.8 |
|
|
|
|
|
Other intercompany financing
activities |
|
|
63.5 |
|
|
|
129.2 |
|
|
|
109.1 |
|
|
|
(301.8 |
) |
|
|
|
|
|
|
|
|
Dividends |
|
|
(132.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(132.7 |
) |
Dividends paid to affiliates |
|
|
|
|
|
|
(270.4 |
) |
|
|
|
|
|
|
(15.2 |
) |
|
|
285.6 |
|
|
|
|
|
Purchases of treasury shares |
|
|
(276.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(276.0 |
) |
Excess tax benefits from stock
options and awards |
|
|
|
|
|
|
4.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.8 |
|
Issuance of stock to affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113.8 |
|
|
|
(113.8 |
) |
|
|
|
|
Proceeds from exercise of stock
options and other |
|
|
34.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities |
|
|
(46.5 |
) |
|
|
302.0 |
|
|
|
(221.3 |
) |
|
|
254.3 |
|
|
|
(660.2 |
) |
|
|
(371.7 |
) |
Effect of exchange rate changes on
cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.1 |
|
|
|
|
|
|
|
8.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents |
|
|
(87.2 |
) |
|
|
31.4 |
|
|
|
1.1 |
|
|
|
(30.9 |
) |
|
|
|
|
|
|
(85.6 |
) |
Cash and cash equivalents,
beginning of period |
|
|
146.0 |
|
|
|
27.9 |
|
|
|
0.3 |
|
|
|
207.4 |
|
|
|
|
|
|
|
381.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of
period |
|
$ |
58.8 |
|
|
$ |
59.3 |
|
|
$ |
1.4 |
|
|
$ |
176.5 |
|
|
$ |
|
|
|
$ |
296.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-23-
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.
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% 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 2010 Cooper deconsolidated the Tools business assets and liabilities contributed to the Joint
Venture and recognized Coopers 50% ownership interest as an equity investment. Recording the
investment at its fair value of $480 million resulted in a pretax loss of $134.5 million related to
the transaction, which was recognized in the second quarter 2010. Beginning in the third quarter
of 2010 Cooper recognizes its proportionate share of the Joint Ventures operating results using
the equity method.
Three Months Ended September 30, 2011 Compared With Three Months Ended September 30, 2010
Net income for the third quarter of 2011 was $160.2 million on revenues of $1,389.7 million
compared with 2010 third quarter net income of $141.7 million on revenues of $1,240.7 million.
Third
-24-
quarter diluted earnings per share was $.98 in 2011 compared to $.85 in 2010. The 2010 third
quarter included restructuring charges of $1.5 million or $.01 per share.
Revenues:
Revenues for the third quarter of 2011 increased 12.0% compared to the third quarter of 2010.
Core revenues in the third quarter of 2011 were 7.1% higher than the prior year. Currency
translation increased revenues in the third quarter of 2011 by 1.6% with acquisitions increasing
reported revenues by approximately 3.3%.
Energy & Safety Solutions segment revenues for the third quarter of 2011 increased 14.7%
compared to the third quarter of 2010. Core revenues were 9.3% higher in the third quarter of 2011
primarily related to continued demand for utility products with solid demand from global industrial
and energy markets. Favorable currency translation increased reported revenues by approximately
2.5% with acquisitions adding 2.9% to reported revenues in the quarter.
Electrical Products Group segment revenues increased 9.0% compared to the third quarter of
2010. Core revenues in the third quarter of 2011 were 4.6% higher than the prior years quarter
with acquisitions increasing reported revenues by approximately 3.7% and favorable currency
translation adding 0.7%. Core revenue growth was driven primarily by demand for energy efficiency
products and broad industrial demand offset partially by slowing demand for electronic components
and the already weak residential and non-residential construction markets.
Costs and Expenses:
Cost of sales, as a percentage of revenues, was 67.0% for the third quarter of 2011 compared
to 66.2% for the comparable 2010 quarter. The increase in the cost of sales percentage resulted
from the impact of material and manufacturing cost inflation not being fully offset by pricing
actions during the quarter and investments made in resources to accelerate new product development.
This unfavorable impact was mitigated by higher production volumes and the positive impact of
Coopers activities to improve overall cost productivity.
Energy & Safety Solutions segment costs of sales, as a percentage of revenues, was 66.9% for
the third quarter of 2011 compared to 66.9% for the third quarter of 2010. Cost of sales as a
percentage of revenues remained unchanged with the favorable impact of higher production volumes
for selected markets and the positive impact of Coopers activities to improve overall cost
productivity being substantially offset by investments made in resources to accelerate new product
development.
Electrical Products Group segment cost of sales, as a percentage of revenues, was 67.2% for
the third quarter of 2011 compared to 65.3% for the third quarter of 2010. Pricing actions taken
in the third quarter of 2011 in selected construction related markets was not sufficient to offset
material inflation and additional investments made in resources to accelerate new product
development. This unfavorable impact was partially offset by favorable leverage of fixed costs
from improved demand due to the recovery in selected global markets and the favorable impact of
actions taken to adjust operating costs.
Selling and administrative expenses, as a percentage of revenues, for the third quarter of
2011 was 19.4% compared to 19.1% for the third quarter of 2010. The increase in percentage is
reflective of the favorable impact of higher revenue levels offset by expenses associated with
global growth initiatives and increases in certain environmental, legal and acquisition related
expenses.
Energy & Safety Solutions segment selling and administrative expenses, as a percentage of
revenues for the third quarter of 2011, was 16.4% compared to 16.2% for the third quarter of 2010.
The increase in percentage reflects the impact of almost 15% higher comparable revenue levels for
the third quarter 2011 being offset by increases in certain environmental and legal expenses and
investments in resources designed to improve global growth.
-25-
Electrical Products Group segment selling and administrative expenses, as a percentage of
revenues for the third quarter of 2011, was 18.9% compared to 18.6% for the third quarter of 2010.
The increase in percentage reflects the investment in sales and marketing resources focused on
driving improved global demand for products and acquisition related expenses partially offset by
the impact of 9% higher comparable revenue levels for the third quarter of 2011.
Net interest expense in the third quarter of 2011 increased $4.1 million from the 2010 third
quarter, primarily as a result of the December 7, 2010 issuances of $250 million of 2.375% fixed
rate senior unsecured notes due in 2016 and $250 million of 3.875% fixed rate senior unsecured
notes due in 2020. Average debt balances were $1.42 billion and $0.93 billion and average interest
rates were 4.69% and 5.09% for the third quarter of 2011 and 2010, respectively.
Operating Earnings:
Energy & Safety Solutions third quarter 2011 segment operating earnings increased 13.1% to
$125.6 million from $111.1 million for the same quarter of last year. The increase resulted from
the favorable impact of higher production volumes partially offset by higher environmental and
legal costs. The Energy & Safety Solutions segment continues its investment in productivity
initiatives which includes manufacturing productivity improvements, product redesign and investment
in developing markets to increase global revenues.
Electrical Products Group third quarter 2011 segment operating earnings decreased 6.3% to
$88.3 million from $94.2 million for the same quarter of last year. The decrease resulted from the
investment in developing markets to increase global revenues and material price inflation
encountered not fully recovered through pricing actions taken during the third quarter of 2011.
These higher costs were partially offset by the higher production volumes resulting from improved
demand in most global markets. The Electrical Products Group segment continues its investment in
productivity initiatives which includes manufacturing productivity improvements and product
redesign.
Equity income from Apex Tool Group was $16.0 million in the third quarter of 2011 compared to
$10.5 million in the third quarter of 2010. The increase in equity income resulted from the
favorable impact of higher production volumes and the positive impact of Apexs activities to
improve overall cost productivity.
General Corporate expense increased $1.7 million to $24.6 million during the third quarter of
2011 compared to $22.9 million during the same period of 2010. The increase in General Corporate
expense in the third quarter of 2011 primarily relates to higher costs for environmental matters
related to previously divested businesses.
Income Taxes:
The effective tax rate was 15.2% for the third quarter of 2011 compared to 20.9% for the same
period in 2010. The decrease in the effective tax rate in the third quarter 2011 is primarily
related to an increase in tax benefits without a corresponding relative increase in earnings and
the favorable impact from finalization of prior year tax benefits.
Nine Months Ended September 30, 2011 Compared With Nine Months Ended September 30, 2010
Income from continuing operations for the nine months ended September 30, 2011 was $477.4 million on revenues of $4,036.3 million compared with income from continuing operations in
the nine months ended September 30, 2010 of $301.9 million on revenues of $3,806.0 million.
Diluted earnings per share from continuing operations was $2.87 in the nine months ended September
30, 2011 compared to $1.79 in the same period of 2010. Reported net income in the nine months
ended September 30, 2010 was reduced by the non-cash after-tax charge of $93.7 million or $.55 per
share related to the formation of the Tools Joint
-26-
Venture and included restructuring charges of $8.0 million or $.04 per share. Reported income
from continuing operations for the nine months ended September 30, 2011 was increased by $9.7
million or $.06 per share for discrete tax adjustments related to the settlement of the
discontinued operations asbestos liability that was required under accounting principles to be
classified in continuing operations.
Revenues:
Revenues for the nine months ended September 30, 2011 increased 6.1% compared to the nine
months ended September 30, 2010. Excluding the impact of the revenues from the now deconsolidated
Tools segment, comparable revenues increased 15.5% in the nine months ended September 30, 2011
compared to the same period in 2010. Core revenues for the combined Electrical Segments in the
nine months ended September 30, 2011 were 11.7% higher than the prior year. Acquisitions increased
comparable revenues in the nine months ended September 30, 2011 by 2.2% with currency translation
also increasing reported revenues by approximately 1.6%.
Energy & Safety Solutions segment revenues for the nine months ended September 30, 2011
increased 18.7% compared to the same period in 2010. Core revenues were 13.5% higher in the nine
months ended September 30, 2011 as a result of strong demand in utility markets and improving
demand from energy and industrial markets. Favorable currency translation increased reported
revenues by approximately 2.3% with acquisitions adding 2.9% to reported revenues in 2011.
Electrical Products Group segment revenues in 2011 increased 11.9% compared to the nine months
ended September 30, 2010. Core revenues in the nine months ended September 30, 2011 were 9.7%
higher than the same period in the prior year with acquisitions increasing reported revenues by
approximately 1.5% and favorable currency translation adding 0.7%. Strong demand from our
Industrial and Electrical markets with added demand for energy-efficient technologies such as LED
products improved results from the non-residential markets partially offset by slowing demand for
Electronic products in the Asian market.
Costs and Expenses:
Cost of sales, as a percentage of revenues, was 66.4% for the nine months ended September 30,
2011 compared to 66.7% for the comparable 2010 period. The decrease in the cost of sales
percentage resulted from favorable impact of higher production volumes and the positive impact of
Coopers activities to improve overall cost productivity. This favorable impact was partially
offset by material price inflation not fully recovered by pricing actions taken in 2011 and
investments made in resources to accelerate new product development.
Energy & Safety Solutions segment cost of sales, as a percentage of revenues, was 66.5% for
the nine months ended September 30, 2011 compared to 66.7% for the same period in 2010. The
decrease in the cost of sales percentage resulted from the favorable impact of higher production
volumes for selected markets and the positive impact of Coopers activities to improve overall cost
productivity. Material price inflation was fully covered by pricing actions taken in 2011 with
investments made in resources to accelerate new product development partially offsetting the
favorable volume leverage.
Electrical Products Group segment cost of sales, as a percentage of revenues, was 66.4% for
the for the nine months ended September 30, 2011 compared to 66.1% for the same period in 2010.
The increase in cost of sales as a percentage of revenues in comparison to the prior year period
was due to the favorable leverage of fixed costs from improved demand due to the recovery in
selected global markets and the favorable impact of actions taken to adjust operating costs being
more than offset by material price inflation not fully covered by pricing actions taken in 2011 and
investments made in resources to accelerate new product development.
Selling and administrative expenses, as a percentage of revenues, for the nine months ended
September 30, 2011 was 19.3% compared to 19.4% for the comparable period in 2010. The decrease in
percentage is reflective of the favorable impact of higher revenue levels and the benefit from the
higher
-27-
percentage of selling and administrative expenses associated with the now deconsolidated Tools
segment included in the first half of 2010, nearly offset by expenses associated with global growth
initiatives and higher environmental and legal expenses.
Energy & Safety Solutions segment selling and administrative expenses, as a percentage of
revenues for the nine months ended September 30, 2011 was 16.3% compared to 16.4% for the same
period in 2010. The decrease in percentage reflects the impact of cost leverage on the almost 19%
higher comparable revenue levels in 2011 that was offset by investments in resources designed to
improve global growth and higher environmental and legal expenses.
Electrical Products Group segment selling and administrative expenses, as a percentage of
revenues was 19.0% for the nine months ended September 30, 2011 compared to 18.7% for the nine
months ended September 30, 2010. The increase in percentage reflects the investment in sales and
marketing resources focused on driving improved global demand for products partially offset by the
impact of 12% higher comparable revenue levels in 2011.
Net interest expense for the nine months ended September 30, 2011 increased $13.6 million from
the same period in 2010, primarily as a result of the December 7, 2010 issuances of $250 million of
2.375% fixed rate senior unsecured notes due in 2016 and $250 million of 3.875% fixed rate senior
unsecured notes due in 2020. Average debt balances were $1.42 billion and $0.93 billion and
average interest rates were 4.79% and 5.30% in the nine months ended September 30, 2011 and 2010,
respectively.
Operating Earnings:
Energy & Safety Solutions segment operating earnings for the nine months ended September 30,
2011 increased 20.7% to $375.4 million from $310.9 million for the same period of last year. The
increase resulted from the improved demand for industrial and utility products and included
material price inflation that was fully recovered through pricing actions taken during 2011
partially offset by higher environmental and legal costs. The Energy & Safety Solutions
segment continues its investment in productivity initiatives which includes manufacturing
productivity improvements, product redesign and investment in developing markets to increase global
revenues.
Electrical Products Group segment operating earnings for the nine months ended September 30,
2011 increased 7.9% to $270.0 million from $250.3 million for the same period in 2010. The
increase resulted from the improvement in demand from most global markets and the continuing
favorable impact of restructuring actions offset partially by material price inflation that was not
fully recovered through pricing actions taken during 2011. The Electrical Products Group segment
continues its investment in productivity initiatives which includes manufacturing productivity
improvements, product redesign and investment in developing markets to increase global revenues.
Equity income from the Apex Tool Group joint venture is included in operating earnings
commencing in the third quarter of 2010. Reported equity income from Apex Tool Group was $44.9
million in the nine months ended September 30, 2011 compared to equity income from Apex Tool Group
of $10.5 million in the third quarter of 2010 and operating earnings reported from the Tools
segment of $33.1 million in the first half of 2010.
General Corporate expense increased $7.8 million to $70.9 million during the nine months ended
September 30, 2011 compared to $63.1 million during the same period of 2010. The increase in
General Corporate expense in 2011 primarily includes approximately $6 million for environmental
costs related to previously divested businesses, higher legal expenses and incremental costs
associated with acquisition activities.
-28-
Income Taxes:
The effective tax rate for continuing operations was 16.2% for the nine months ended September
30, 2011 and 16.8% for the nine months ended September 30, 2010. Income tax expense from
continuing operations was reduced by $9.7 million during the first quarter of 2011 for discrete tax
adjustments related to the settlement of the discontinued operations asbestos liability that was
required under accounting principles to be classified in continuing operations. 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. Excluding the
discrete tax items and the loss related to the contribution of net assets to the Tools joint
venture, Coopers effective tax rate was 17.9% for the nine months ended September 30, 2011 and
20.5% for the nine months ended September 30, 2010. The decrease in the effective tax rate in 2011
is primarily related to an increase in tax benefits without a corresponding relative increase in
earnings and the favorable impact from finalization of prior year tax benefits.
Income Related to Discontinued Operations:
As discussed in Note 15 of the Notes to the Consolidated Financial Statements, on February 1,
2011, Cooper entered into a settlement agreement that closed on April 5, 2011 related to its
asbestos liability regarding the Automotive Products segment, which was sold in 1998. The
settlement terminates the 1994 Mutual Guaranty Agreement between Cooper and Pneumo and creates a
Settlement Trust. After the closing of the settlement in April 2011 the Company and its
subsidiaries have no further obligations under the Mutual Guaranty Agreement. Under the settlement
agreement, a subsidiary of Cooper will make payments to the Settlement Trust totaling $307.5
million ($250 million was paid at closing and the remainder is due in installments over four years,
subject to certain adjustments). Cooper made the $250 million initial payment to the Settlement
Trust on April 5, 2011. Other payments due under the settlement agreement total approximately
$49.6 million, after certain reductions for indemnity and defense payments made by Cooper
subsequent to the February 1, 2011 settlement agreement and prior to the closing on April 5, 2011.
The remaining payments are due in installments at the anniversary of the closing over the next four
years.
As discussed in Note 15 of the Notes to the Consolidated Financial Statements, the Company had
previously recorded an estimated accrual on an undiscounted basis for pending and future indemnity
and defense costs under the Mutual Guaranty. In addition, the Company had recorded receivables for
related insurance recoveries where insurance-in-place agreements, settlements or policy recoveries
were considered probable. As a result of the settlement agreement, Cooper adjusted is previously
recorded net liability for its obligations under the Mutual Guaranty agreement to the amounts
payable under the settlement agreement and related unpaid legal expenses as of March 31, 2011
resulting in the recognition in the first quarter of 2011of an after tax gain from discontinued
operations of $190.3 million, which is net of a $105.6 million income tax expense.
Liquidity and Capital Resources
Liquidity:
Coopers operating working capital (defined as receivables and inventories less accounts
payable) increased $211.0 million during the nine months ended September 30, 2011 reflecting
working capital investments to support revenue growth and global growth initiatives, including
acquisitions. A $146.4 million increase in receivables and a $67.4 million increase in inventories
were partially offset by a $2.8 million increase in accounts payable. Operating working capital
turnover (defined as annualized quarterly revenues divided by average quarterly operating working
capital) for the third quarter of 2011 was 5.8 turns as compared to 5.8 turns in the third quarter
of 2010, exclusive of the Tools business contributed to Apex Tool Group in July 2010, reflecting
efficient working capital utilization.
As discussed above and in Note 15 of the Notes to Consolidated Financial Statements, Coopers
contingent liabilities related to the Automotive Products sale to Federal-Mogul in 1998 were
resolved on April 5, 2011 with the closing of a settlement agreement with Pneumo Abex LLC. The
settlement agreement
-29-
terminated the 1994 Mutual Guaranty Agreement between Cooper and Pneumo and requires Cooper to
make payments totaling $307.5 million, subject to certain reductions, to a settlement trust.
Cooper used existing cash on hand to make the $250 million initial payment to the settlement trust
at the closing of the settlement agreement in April 2011 with the remaining payments due in
installments over four years.
Cash provided by operating activities was $177.0 million during the nine months ended
September 30, 2011, inclusive of the $250 million asbestos settlement trust payment discussed
above. This cash, plus an additional $604.7 million of cash and cash equivalents and $54.8 million
of cash received from stock option exercises, was primarily used to fund share purchases of $383.0
million, acquisitions of $250.1 million, dividends of $141.4 million and capital expenditures of
$84.8 million.
Cash provided by operating activities was $397.0 million during the nine months ended
September 30, 2010. This cash, plus an additional $85.6 million of cash and cash equivalents and
$34.5 million of cash received from stock option exercises, was primarily used to fund share
purchases of $276.0 million, dividends of $132.7 million, capital expenditures of $57.9 million,
acquisitions of $21.6 million and $34.9 million to place funds in an escrow account related to an
acquisition that closed in the fourth quarter of 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 29.3% at September 30, 2011, 30.8% at December 31, 2010 and 23.5% at
September 30, 2010.
At September 30, 2011 and December 31, 2010, Cooper had cash and cash equivalents of $430.6
million and $1.0 billion, respectively. Cooper had short-term debt of $6.2 million and $7.7
million at September 30, 2011 and December 31, 2010, respectively. Coopers practice is to back up
its short-term debt balance with a combination of cash, cash equivalents, and committed credit
facilities.
On May 26, 2011, Cooper entered into a credit agreement that provides a $500 million five-year
committed bank credit facility that replaced Coopers previous credit facility that was to mature
in August 2012. The credit facility agreement is not subject to termination based on a decrease in
Coopers debt ratings or a material adverse change clause. The only financial covenant in the
agreement limits Coopers debt-to-total capitalization ratio to 60%. Cooper is in compliance with
all covenants set forth in the credit facility agreement. At September 30, 2011, Cooper has $500
million available under this credit facility.
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 facility to provide short-term funding. The
committed credit facility does not contain any provision which makes its availability to Cooper
dependent on Coopers credit ratings.
Cooper believes our internal cash generation together with existing cash and cash equivalent
balances and availability under the committed credit facility is sufficient to fund current
operations, projected capital expenditures, scheduled debt repayments, the current rate of cash
dividends, and anticipated common stock repurchases. Cooper evaluates opportunities to expand
through acquisitions as well as through the growth of our current businesses. While a significant
acquisition may require additional debt and/or equity financing, Cooper believes its conservative
financial structure and access to capital markets provides the strength and flexibility to support
the liquidity needs to achieve its strategic objectives.
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, 2010 and no significant change has occurred to those policies.
-30-
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
As of September 30, 2011, 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, 2010.
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:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
|
(in millions) |
|
Energy & Safety Solutions |
|
$ |
531.3 |
|
|
$ |
470.7 |
|
Electrical Products Group |
|
|
201.4 |
|
|
|
210.3 |
|
|
|
|
|
|
|
|
|
|
$ |
732.7 |
|
|
$ |
681.0 |
|
|
|
|
|
|
|
|
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.
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.
-31-
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Discontinued Operations Liability
Information regarding the discontinued operations liability is incorporated by reference to
Note 15 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 5 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, 2010.
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 September 30, 2011:
Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased as |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Part of Publicly |
|
|
Maximum Number of Shares |
|
|
|
Total Number of |
|
|
Average Price Paid |
|
|
Announced Plans or |
|
|
that May Yet Be Purchased |
|
Period |
|
Shares Purchased |
|
|
per Share |
|
|
Programs (1) |
|
|
Under the Plans or Programs (1) |
|
As of 6/30/11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,083,462 |
|
7/01/11 7/31/11 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
11,083,462 |
|
8/01/11 8/31/11 |
|
|
5,592,389 |
|
|
$ |
48.49 |
|
|
|
5,592,389 |
|
|
|
5,491,073 |
|
9/01/11 9/30/11 |
|
|
1,550,000 |
|
|
$ |
46.06 |
|
|
|
1,550,000 |
|
|
|
3,941,073 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
7,142,389 |
|
|
$ |
47.96 |
|
|
|
7,142,389 |
|
|
|
|
|
|
|
|
(1) |
|
On February 9, 2009, Coopers Board of Directors authorized the repurchase of
10 million shares of Cooper common stock. 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 2011, Coopers current estimate is that 3 million shares would
be issued under equity compensation plans, which is reflected in the above table. On November
1, 2011, Coopers Board of Directors increased the share repurchase authorization by 10
million shares, which is not reflected in the above table. |
|
(2) |
|
During the nine months ended September 30, 2011, Cooper had repurchased
the 3 million shares intended to offset the dilution from share issuances under equity
compensation plans, as well as 4.8 million additional shares under the Board of Directors
authorizations discussed above. Cooper may continue to repurchase shares under these
authorizations from time to time during 2011. The decision whether to do so will depend on
the favorability of market conditions, as well as potential cash requirements for acquisitions
and debt repayments. |
Item 3. Defaults Upon Senior Securities
Not applicable
-32-
Item 6. Exhibits
|
10.1 |
|
Amendment to Second Amended and Restated Rights Agreement dated as of September
2, 2011 between Cooper Industries plc and Computershare Trust Company, N.A. as Rights
Agent (incorporated by reference to Exhibit 4.1 to Coopers Current Report on Form 8-K
filed September 2, 2011). |
|
|
12. |
|
Computation of Ratios of Earnings to Fixed Charges for the Calendar Years 2006
through 2010 and the Nine Months Ended September 30, 2011 and 2010. |
|
|
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 |
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.
|
|
|
|
|
|
|
|
|
Cooper Industries plc
|
|
|
(Registrant)
|
|
|
Date: November 3, 2011 |
/s/ David A. Barta
|
|
|
David A. Barta, Senior Vice President and
Chief Financial Officer |
|
|
|
|
Date: November 3, 2011 |
/s/ Rick L. Johnson
|
|
|
Rick L. Johnson, Vice President, Controller and
Chief Accounting Officer |
|
-33-
Exhibit Index
Exhibit No.
|
10.1 |
|
Amendment to Second Amended and Restated Rights Agreement dated as of September
2, 2011 between Cooper Industries plc and Computershare Trust Company, N.A. as Rights
Agent (incorporated by reference to Exhibit 4.1 to Coopers Current Report on Form 8-K
filed September 2, 2011). |
|
|
12. |
|
Computation of Ratios of Earnings to Fixed Charges for the Calendar Years 2006
through 2010 and the Nine Months ended September 30, 2011 and 2010. |
|
|
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 |