10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Cooper Industries, Ltd.

(Exact name of registrant as specified in its charter)

Bermuda		98-0355628
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
600 Travis, Suite 5600		Houston, Texas 77002
(Address of principal executive offices)		(Zip Code)

(713) 209-8400

(Registrant’s 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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 registrant’s common stock outstanding as of June 30, 2008 was 173,993,815 Class A common shares that are held by the public and 29,872,731 Class A common shares and 109,620,258 Class B common shares that are held by the issuer’s wholly-owned subsidiaries.

 

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

COOPER INDUSTRIES, LTD.
CONSOLIDATED INCOME STATEMENTS
(unaudited)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
		(in millions, except per share data)
Revenues		$	1,724.3			$	1,463.7			$	3,270.4			$	2,857.7
Cost of sales			1,163.5				984.6				2,185.7				1,929.5
Selling and administrative expenses			314.4				269.1				615.9				524.5
Operating earnings			246.4				210.0				468.8				403.7
Income from Belden agreement			—				3.3				—				3.3
Interest expense, net			18.3				12.9				33.2				25.8
Income before income taxes			228.1				200.4				435.6				381.2
Income taxes (benefits)			66.2				(8.8	)			120.3				40.1
Net income		$	161.9			$	209.2			$	315.3			$	341.1
Net income per common share:
Basic		$	.93			$	1.14			$	1.79			$	1.86
Diluted		$	.92			$	1.12			$	1.77			$	1.83
Cash dividends declared per common share		$	.25			$	.21			$	.50			$	.42

The accompanying notes are an integral part of these statements.

COOPER INDUSTRIES, LTD.
CONSOLIDATED BALANCE SHEETS

		June 30,				December 31,
		2008				2007
		(unaudited)				(Note 1)
		(in millions)
ASSETS
Cash and cash equivalents		$	154.7			$	232.8
Investments			51.3				93.7
Receivables			1,230.9				1,048.6
Inventories			749.5				643.7
Deferred income taxes and other current assets			270.0				284.2
Total current assets			2,456.4				2,303.0
Restricted cash			—				290.1
Property, plant and equipment, less accumulated depreciation			768.5				719.8
Goodwill			2,741.8				2,540.3
Other noncurrent assets			382.0				280.3
Total assets		$	6,348.7			$	6,133.5
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term debt		$	114.3			$	256.1
Accounts payable			573.6				533.1
Accrued liabilities			565.4				566.7
Current discontinued operations liability			191.3				179.1
Current maturities of long-term debt			0.1				100.1
Total current liabilities			1,444.7				1,635.1
Long-term debt			1,207.5				909.9
Postretirement benefits other than pensions			80.6				81.4
Long-term discontinued operations liability			330.0				330.0
Other long-term liabilities			423.0				335.2
Total liabilities			3,485.8				3,291.6
Common stock, $.01 par value			1.7				1.8
Capital in excess of par value			—				85.7
Retained earnings			2,907.3				2,835.1
Accumulated other nonowner changes in equity			(46.1	)			(80.7	)
Total shareholders’ equity			2,862.9				2,841.9
Total liabilities and shareholders’ equity		$	6,348.7			$	6,133.5

The accompanying notes are an integral part of these statements.

COOPER INDUSTRIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

		Six Months Ended
		June 30,
		2008				2007
		(in millions)
Cash flows from operating activities:
Net income		$	315.3			$	341.1
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization			70.3				57.8
Deferred income taxes			4.9				5.9
Excess tax benefits from stock options and awards			(3.4	)			(20.8	)
Changes in assets and liabilities: (1)
Receivables			(122.2	)			(133.5	)
Inventories			(63.4	)			(25.2	)
Accounts payable and accrued liabilities			(13.1	)			(24.7	)
Other assets and liabilities, net			76.9				8.7
Net cash provided by operating activities			265.3				209.3
Cash flows from investing activities:
Proceeds from short-term investments			41.3				—
Proceeds from cash restricted for business acquisitions			290.1				—
Capital expenditures			(57.9	)			(56.1	)
Cash paid for acquired businesses			(269.6	)			(170.5	)
Proceeds from sales of property, plant and equipment and other			1.0				0.8
Net cash provided by (used in) investing activities			4.9				(225.8	)
Cash flows from financing activities:
Proceeds from issuance of debt			297.6				306.7
Debt issuance costs			(0.5	)			(2.7	)
Proceeds from debt derivatives			0.5				10.0
Repayments of debt			(299.1	)			(3.0	)
Dividends			(82.8	)			(77.9	)
Purchase of common shares			(282.9	)			(74.0	)
Excess tax benefits from stock options and awards			3.4				20.8
Proceeds from exercise of stock options			10.8				49.5
Net cash provided by (used in) financing activities			(353.0	)			229.4
Effect of exchange rate changes on cash and cash equivalents			4.7				3.6
Increase (decrease) in cash and cash equivalents			(78.1	)			216.5
Cash and cash equivalents, beginning of period			232.8				423.5
Cash and cash equivalents, end of period		$	154.7			$	640.0

The accompanying notes are an integral part of these statements.

COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1. Accounting Policies

     Basis of Presentation - The consolidated financial statements of Cooper Industries, Ltd., a Bermuda 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 Cooper’s 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 Cooper’s accounting policies, refer to the Consolidated Financial Statements and related notes for the year ended December 31, 2007 included in Part IV of Cooper’s 2007 Annual Report on Form 10-K.

     In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 provides enhanced guidance for using fair value to measure assets and liabilities. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing assets or liabilities and establishes a hierarchy that prioritizes the information used to develop those assumptions. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. On February 12, 2008, the FASB delayed the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). For Cooper, this action defers the effective date for those assets and liabilities until January 1, 2009. The implementation of SFAS No. 157 as of January 1, 2008 for assets and liabilities not subject to the deferral described above did not have a material impact on the Company’s results of operations, financial position or cash flows. See Note 12 of the Notes to the Consolidated Financial Statements.

     In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 permits companies to choose to measure many eligible recognized financial assets and financial liabilities, financial instruments and certain other eligible items at fair value that are not otherwise required to be measured at fair value. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. For Cooper, the Statement was effective January 1, 2008. The implementation of SFAS No. 159 as of January 1, 2008 did not have any impact on the Company’s results of operations, financial position or cash flows as Cooper did not elect to measure any eligible items at fair value that were not already required to be measured at fair value.

     In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), Business Combinations (“SFAS No. 141(R)”). SFAS No. 141(R) provides enhanced guidance related to the measurement of identifiable assets acquired, liabilities assumed and disclosure of information related to business combinations and their effect on the Company. This Statement, together with the International Accounting Standards Board’s (“IASB”) IFRS 3, Business Combinations, completes a joint effort by the FASB and IASB to improve financial reporting about business combinations and promotes the international convergence of accounting standards. For Cooper, SFAS No. 141(R) applies prospectively to business combinations completed on or after January 1, 2009 and is not subject to early adoption. Cooper is currently evaluating the potential impact of SFAS No. 141(R) on business combinations and related valuations.

     In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidating Financial Statements (“SFAS No. 160”). SFAS No. 160 provides enhanced guidance related to the disclosure of information regarding noncontrolling interests in a subsidiary and their effect on the Company. This Statement, together with the IASB’s IAS 27, Consolidated and Separate Financial Statements, concludes a joint effort by the FASB and IASB to improve the accounting for and reporting of noncontrolling interests in consolidated financial statements and promotes international convergence of accounting standards. For Cooper, SFAS No. 160 is effective in 2009. Cooper is currently evaluating the impact of this Statement on its consolidated financial statements.

     In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (“SFAS No. 161”). SFAS No. 161 requires entities to provide greater transparency about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, and (c) how derivative instruments and related hedged items affect an entity’s financial position, results of operations, and cash flows. For Cooper, SFAS No. 161 is effective in 2009. Cooper is currently evaluating the impact of this Statement on the disclosures to its consolidated financial statements.

Note 2. Stock-Based Compensation

     Cooper has a share-based compensation plan known as the Amended and Restated Stock Incentive Plan (the “Plan”). The Plan provides for the granting of stock options, performance-based share awards and restricted stock units. The Plan was updated in April 2008 to increase by 7 million the number of authorized shares available under the Plan, to extend the term of the Plan from November 7, 2010 to November 7, 2015 and for certain other matters. Since the original Plan’s inception in 1996, the aggregate number of shares authorized under the Plan is 41 million. As of June 30, 2008, 8,112,563 shares were available for future grants under the Plan. Of the total shares available for future grants, 3,104,058 are available for grants of performance-based shares and restricted stock units. Total compensation expense for all share-based compensation arrangements under the Plan was $18.5 million and $19.0 million for the six months ended June 30, 2008 and 2007, respectively. The total income tax benefit recognized in the income statement for all share-based compensation arrangements under the Plan was $6.4 million and $6.9 million for the six months ended June 30, 2008 and 2007, respectively. During the six months ended June 30, 2008, Cooper granted 1,888,750 stock option awards, 567,800 performance-based shares and 134,280 restricted stock units.

Note 3. Acquisitions

     Cooper completed two acquisitions during the six months ended June 30, 2008. These acquisitions were selected because of their strategic fit with existing Cooper businesses or were new strategic lines that were complementary to Cooper’s operations. Approximately two-thirds of the revenues of these businesses are outside of the United States.

     In February 2008, Cooper completed the acquisition of MTL Instruments Group plc (“MTL”). MTL is a leader in the development and supply of electronic instrumentation and protection equipment for use in hazardous environments. The total purchase price, including assumed debt, was approximately $325 million. The MTL acquisition resulted in the recognition of a preliminary estimate of goodwill of $177.3 million, primarily related to the future earnings and cash flow potential from MTL’s worldwide customer base. The MTL acquisition is included in the Electrical Products segment.

     Total cash paid for the two acquisitions was $261.1 million, net of cash acquired, including acquisition costs. The acquisitions resulted in the recognition of preliminary estimated aggregate goodwill of $178.0 million.

     Cooper makes an initial allocation of the purchase price as of the date of acquisition, based on its understanding of the fair value of the assets and liabilities acquired. In the months after the closing of the transaction, Cooper obtains additional information about the assets and liabilities acquired, and finalizes allocation of the purchase price.

     The following table summarizes the aggregate estimated preliminary fair values of the assets acquired and the liabilities assumed at the acquisition date for the acquisitions completed during the six months ended June 30, 2008:

		MTL				Other				Total
		(in millions)
Receivables		$	43.0			$	0.7			$	43.7
Inventories			32.2				0.4				32.6
Property, Plant and Equipment			41.7				1.5				43.2
Goodwill			177.3				0.7				178.0
Other intangible assets			100.5				0.4				100.9
Accounts payable			(12.4	)			(0.2	)			(12.6	)
Short-term debt			(56.6	)			—				(56.6	)
Other assets and liabilities, net			(68.0	)			(0.1	)			(68.1	)
Net cash consideration		$	257.7			$	3.4			$	261.1

     During 2007, Cooper completed thirteen acquisitions. Six of the acquisitions, representing approximately 28% of the cash consideration, were outside of the United States. All of these acquired businesses are included in the Electrical Products segment.

     The following table summarizes the aggregate estimated preliminary fair values of the assets acquired and the liabilities assumed at the date of acquisition for the acquisitions consummated during the year ended December 31, 2007:

		(in millions)
Receivables		$	58.0
Inventories			48.8
Property, Plant and Equipment			41.7
Goodwill			183.0
Other intangible assets			122.3
Accounts payable			(36.5	)
Other assets and liabilities, net			(72.8	)
Net cash consideration		$	344.5

     Cooper continues to evaluate the fair value of the assets and liabilities acquired and will adjust the allocations as additional information relative to the businesses becomes available for up to one year from the acquisition date. This includes finalization of amount by major asset class and weighted-average amortization period for other intangible assets acquired.

     The results of operations of the acquisitions are included in the consolidated income statement since the respective acquisition dates. The unaudited pro-forma data for the periods set forth below gives effect to the above noted acquisitions as if they had occurred at the beginning of the periods presented. 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:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
		(in millions, except per share amounts)
Revenues		$	1,724.3			$	1,558.6			$	3,289.7			$	3,048.2
Net income		$	161.9			$	210.5			$	314.5			$	338.3
Diluted earnings per share		$	.92			$	1.13			$	1.77			$	1.81

Note 4. Inventories

		June 30,				December 31,
		2008				2007
		(in millions)
Raw materials		$	252.3			$	221.5
Work-in-process			199.7				178.8
Finished goods			467.4				396.2
Perishable tooling and supplies			14.6				15.0
			934.0				811.5
Allowance for excess and obsolete inventory			(84.5	)			(77.9	)
Excess of current standard costs over LIFO costs			(100.0	)			(89.9	)
Net inventories		$	749.5			$	643.7

Note 5. Debt

     At June 30, 2008, Cooper has $114.3 million of short-term debt, of which $89.8 million is U.S. commercial paper. In connection with the acquisition of MTL in February 2008, Cooper assumed short-term debt of approximately $47.8 million which has subsequently been repaid and issued short-term loan notes of $8.8 million. At June 30, 2008 Cooper has $8.8 million of loan notes related to MTL included in short-term debt. At June 30, 2008 Cooper has U.S. committed credit facilities that total $553 million, of which $53 million matures in March 2009 and of which $500 million matures in November 2009.

     On March 27, 2008, Cooper US, Inc., a subsidiary of Cooper, issued $300 million of 5.45% senior unsecured notes that mature on April 1, 2015. Payment of the notes is guaranteed by Cooper and certain of its principal operating subsidiaries. Proceeds from the financing were used to repay outstanding commercial paper. Combined with the debt issuance discount, underwriting commissions and interest rate hedges implemented in anticipation of the financing, the notes have an effective annual cost to Cooper of 5.56%.

Note 6. Shareholders’ Equity

     At June 30, 2008, 173,993,815 Class A common shares, $.01 par value were issued and outstanding (excluding 29,872,731 Class A common shares held by wholly-owned subsidiaries) compared to 179,453,923 Class A common shares, $.01 par value (excluding 27,195,002 Class A common shares held by wholly-owned subsidiaries) at December 31, 2007. During the six months ended June 30, 2008, Cooper issued 1,200,071 Class A common shares primarily in connection with employee incentive and benefit plans and Cooper’s dividend reinvestment program. During the six months ended June 30, 2008, Cooper and its wholly-owned subsidiaries purchased 6,660,179 Class A common shares for $282.9 million under the

Company’s share repurchase plans. The share purchases are recorded by Cooper’s wholly-owned subsidiaries as an investment in its parent company that is eliminated in consolidation.

     A wholly-owned subsidiary also owns all of the issued and outstanding Class B common shares. The subsidiary’s investment in the Class B common shares is eliminated in consolidation. If at any time a dividend is declared and paid on the Class A common shares, a like dividend shall be declared and paid on the Class B common shares in an equal amount per share.

     On February 12, 2008, Cooper’s Board of Directors increased the annual dividend rate of Cooper’s common stock by $.16 per share to $1.00. On February 12, 2008, Cooper’s Board of Directors authorized the purchase of ten million shares of common stock in addition to the remaining November 2, 2004 authorization. In the six months ended June 30, 2008, Cooper repurchased the 3 million shares intended to offset dilution from share issuances under equity compensation plans, as well as approximately 3.7 million additional shares under the Cooper Board of Directors’ authorizations discussed above. Cooper may continue to repurchase shares under this authorization from time to time during 2008. The decision whether to do so will be dependent on the favorability of market conditions, as well as potential cash requirements for acquisitions. As of June 30, 2008, 10,778,968 shares remain available to be repurchased under the authorizations by the Board of Directors.

Note 7. Segment Information

		Revenues
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
		(in millions)
Electrical Products		$	1,510.0			$	1,272.3			$	2,871.6			$	2,482.9
Tools			214.3				191.4				398.8				374.8
Total revenues		$	1,724.3			$	1,463.7			$	3,270.4			$	2,857.7

		Operating Earnings
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
		(in millions)
Electrical Products		$	259.0			$	213.9			$	482.5			$	407.4
Tools			14.7				21.6				31.9				43.4
Segment operating earnings			273.7				235.5				514.4				450.8
General Corporate expense			27.3				25.5				45.6				47.1
Total operating earnings			246.4				210.0				468.8				403.7
Income from Belden agreement			—				3.3				—				3.3
Interest expense, net			18.3				12.9				33.2				25.8
Income before income taxes		$	228.1			$	200.4			$	435.6			$	381.2

     The Tools segment operating earnings for the three and six month periods ended June 30, 2008 includes $7.6 million in severance costs for downsizing an international facility. General corporate expense includes currency losses primarily related to tax reorganizations and financing the MTL acquisition of $5.4 million and $0.3 million in the three and six month periods ended June 30, 2008, respectively. General corporate expense includes $2.4 million of incremental legal costs in the three and six month periods ended June 30, 2007.

Note 8. Pension and Other Postretirement Benefits

		Pension Benefits
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
		(in millions)
Components of net periodic benefit cost:
Service cost		$	.9			$	1.0			$	1.9			$	2.0
Interest cost			10.6				10.2				21.1				20.4
Expected return on plan assets			(12.5	)			(12.8	)			(25.0	)			(25.6	)
Amortization of prior service cost			(0.6	)			(0.5	)			(1.1	)			(1.0	)
Recognized actuarial loss			2.4				2.7				4.8				5.3
Net periodic benefit cost		$	0.8			$	0.6			$	1.7			$	1.1

		Other Postretirement Benefits
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
		(in millions)
Components of net periodic benefit cost:
Interest cost		$	1.3			$	1.3			$	2.6			$	2.6
Amortization of prior service cost			(0.5	)			(0.5	)			(1.0	)			(1.0	)
Recognized actuarial gain			(0.6	)			(0.6	)			(1.2	)			(1.2	)
Net periodic benefit cost		$	0.2			$	0.2			$	0.4			$	0.4

Note 9. Income Taxes

     The effective tax rate was 27.6% for the six months ended June 30, 2008 and 10.5% for the six months ended June 30, 2007. As discussed below, the 2007 second quarter includes a $63.5 million reduction of income tax expense. Cooper reduced income tax expense by $4.6 million during the six months ended June 30, 2008 for discrete tax items primarily related to foreign taxes. Excluding the discrete tax items, Cooper’s effective tax rate for the six months ended June 30, 2008 and 2007 was 28.7% and 27.2%, respectively. The increase in 2008 is primarily related to increased taxable earnings in 2008 without a corresponding increase in projected tax benefits.

     The United States Internal Revenue Service (“IRS”) challenged Cooper’s treatment of gains and interest deductions claimed on its 2000 through 2003 federal income tax returns, relating to transactions involving government securities. If the proposed adjustments were upheld, it would have required Cooper to pay approximately $93.7 million in taxes plus accrued interest. During the second quarter of 2007, the IRS and Cooper finalized a settlement regarding these transactions.

     On February 1, 2007, the IRS issued its examination report for the 2002-2004 tax years. In addition to the finding related to transactions involving government securities discussed above, the IRS challenged Cooper’s treatment of certain interest payments made during these years to a subsidiary. If the proposed adjustments were upheld, it would have required Cooper to pay approximately $140 million of federal

withholding tax plus accrued interest. On May 2, 2007, the IRS issued a letter to Cooper accepting Cooper’s position regarding treatment of these interest payments for the 2002 through 2004 tax years.

     As a result of the settlements discussed above, Cooper recognized $55.7 million of previously unrecognized tax benefits in the 2007 second quarter. A change in rates for the Texas margin tax and other developments in the 2007 second quarter represented the remaining $7.8 million of income taxes expense reduction.

     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. Cooper believes 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. Cooper is preparing a response related to the proposed audit finding and will challenge the proposed finding vigorously. While the outcome of the proceedings with the German Tax Authorities cannot be predicted with certainty, management believes that it is more likely than not that its tax position related to the 2004 reorganization will prevail. If the proposed audit finding is upheld, it would require Cooper to pay approximately $90 million of German tax, which would be available for credit in the United States, plus accrued interest.

     Cooper has unrecognized gross tax benefits of $55.9 million at June 30, 2008. Approximately $44.2 million of unrecognized tax benefits, if recognized, would favorably impact the effective tax rate. Cooper believes it is reasonably possible that additional tax benefits in the range of approximately $10 to $15 million could be recognized during the next 12 months as audits close and statutes expire.

     During the second quarter of 2008, the IRS completed their examination of Cooper’s 2005 and 2006 Federal income tax returns which had no material impact on the Company’s financial statements. The Internal Revenue Service has begun an examination of Cooper’s 2007 Federal income tax return. Also, Cooper is under examination by various United States State and Local taxing authorities, as well as various taxing authorities in other countries. Cooper is no longer subject to U.S. Federal income tax examinations by tax authorities for years prior to 2007, and with few exceptions, Cooper is no longer subject to State and Local, or non-U.S. income tax examinations by tax authorities for years before 1999. 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 Cooper’s cash flows as these audits are completed.

Note 10. Net Income Per Common Share

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
		(in millions)
Basic:
Net income applicable to common stock		$	161.9			$	209.2			$	315.3			$	341.1
Weighted average common shares outstanding			174.3				183.7				175.7				183.4
Diluted:
Net income applicable to common stock		$	161.9			$	209.2			$	315.3			$	341.1
Weighted average common shares outstanding			174.3				183.7				175.7				183.4
Incremental shares from assumed conversions:
Options, performance-based stock awards and other employee awards			2.2				3.2				2.2				3.3
Weighted average common shares and common share equivalents			176.5				186.9				177.9				186.7

     Options and employee awards are not considered in the calculations if the effect would be antidilutive.

Note 11. Net Income and Other Nonowner Changes in Equity

     The components of net income and other nonowner changes in equity, net of related taxes, were as follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
		(in millions)
Net income		$	161.9			$	209.2			$	315.3			$	341.1
Foreign currency translation gains			14.0				12.9				23.7				11.8
Change in fair value of derivatives			(0.5	)			4.2				10.0				8.9
Net income and other nonowner changes in equity		$	175.4			$	226.3			$	349.0			$	361.8

Note 12. Fair Value Measurement

     Cooper enters into currency forward exchange contracts and commodity futures contracts and swaps to reduce the risks of adverse changes in currency exchange rates and commodity prices. Cooper entered into cross-currency swaps in 2005 to reduce the currency risk associated with an intercompany financing transaction. Cooper does not enter into speculative derivative transactions.

     As a result of having sales, purchases and certain intercompany transactions denominated in currencies other than the functional currencies of Cooper’s 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. Cooper enters into commodity swaps to reduce the volatility of price fluctuations on a portion of up to eighteen months of certain forecasted material purchases.

     During October 2005, Cooper entered into cross-currency swaps to effectively convert its newly issued $325 million, 5.25% fixed-rate debt 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.

     As described in Note 1, Cooper adopted SFAS No. 157 effective January 1, 2008. SFAS No. 157 expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis.

     SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

     Assets and liabilities measured at fair value are based on one or more of three valuation techniques described in SFAS No. 157. Valuation techniques utilized for each individual asset and liability category are referenced in the tables below. Where more than one technique is noted, individual assets or liabilities were valued using multiple techniques. The valuation techniques are as follows:

	(a)		Market approach – Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;
	(b)		Income approach – Techniques to convert future amounts to a single present amount based on market expectations (including present value techniques, option-pricing and excess earnings models);
	(c)		Cost approach – Amount that would be required to replace the service capacity of an asset (replacement cost).

     Assets and liabilities measured at fair value as of June 30, 2008 on a recurring basis are as follows:

		Assets				Liabilities
		Significant other				Significant other
		observable inputs				observable inputs				Valuation
(in millions)		(Level 2)				(Level 2)				Technique
Short-term investments		$	51.3			$	—				(a	)
Currency forward exchange contracts			18.1				(8.3	)			(a	)
Commodity swaps			7.3				(0.3	)			(a	)
Cross-currency swaps			—				(66.8	)			(a	)

     There were no changes in our valuation techniques used to measure asset or liability fair values on a recurring basis in the six months ended June 30, 2008.

Note 13. Discontinued Operations Liability

     In October 1998, Cooper sold its Automotive Products business to Federal-Mogul Corporation (“Federal-Mogul”). These discontinued businesses (including the Abex 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 product line and any potential liability

that Cooper may have to Pneumo pursuant to a 1994 Mutual Guaranty Agreement between Cooper and Pneumo. On October 1, 2001, Federal-Mogul and several of its affiliates filed a Chapter 11 bankruptcy petition. The Bankruptcy Court for the District of Delaware has confirmed Federal-Mogul’s plan of reorganization and Federal-Mogul emerged from bankruptcy in December 2007. As part of Federal-Mogul’s Plan of Reorganization, Cooper and Federal-Mogul have reached a settlement agreement, subject to approval by the Bankruptcy Court as discussed further below, resolving Federal-Mogul’s indemnification obligations to Cooper. As part of its obligation to Pneumo for any asbestos-related claims arising from the Abex product line (“Abex Claims”), Cooper has rights, confirmed by Pneumo, to significant insurance for such claims. Based on information provided by representatives of Federal-Mogul and recent claims experience, from August 28, 1998 through June 30, 2008, a total of 145,070 Abex Claims were filed, of which 119,329 claims have been resolved leaving 25,741 Abex Claims pending at June 30, 2008. During the six months ended June 30, 2008, 1,536 claims were filed and 5,245 claims were resolved. Since August 28, 1998, the average indemnity payment for resolved Abex Claims was $2,100 before insurance. A total of $138 million was spent on defense costs for the period August 28, 1998 through June 30, 2008. Historically, existing insurance coverage has provided 50% to 80% of the total defense and indemnity payments for Abex Claims. However, insurance recovery is currently at a lower percentage (approximately 30%) due to exhaustion of primary layers of coverage and litigation with certain excess insurers.

2005

     In December 2005, Cooper reached an agreement in negotiations with the representatives of Federal-Mogul, its bankruptcy committees and the future claimants (the “Representatives”) regarding Cooper’s participation in Federal Mogul’s proposed 524(g) asbestos trust. By participating in this trust, Cooper would resolve its liability for asbestos claims arising from Cooper’s former Abex Friction Products business. The proposed settlement agreement was subject to court approval, approval of 75 percent of the current Abex asbestos claimants and certain other approvals. The settlement would have resolved more than 38,000 pending Abex Claims as of December 2005. Future claims would have been resolved through the bankruptcy trust. This December 2005 proposed settlement agreement has been subsequently renegotiated and replaced with a revised agreement in July 2006, as discussed below.

     Key terms and aspects of the December 2005 proposed settlement agreement included Cooper agreeing to pay $130 million in cash into the trust, with $115 million payable upon Federal-Mogul’s emergence from bankruptcy. The remainder would have been due on January 15, 2007, or upon emergence from bankruptcy, if later. Cooper would have received a total of $37.5 million during the funding period from other parties associated with the Federal-Mogul bankruptcy. Cooper would have further provided the trust 1.4 million shares of the Company’s stock upon Federal-Mogul’s emergence from bankruptcy.

     The December 2005 proposed settlement agreement also provided for further payments by Cooper subject to the amount and timing of insurance proceeds. Cooper had agreed to make 25 annual payments of up to $20 million each, reduced by certain insurance proceeds received by the trust. In years that the insurance proceeds exceeded $17 million, Cooper would have been required to contribute $3 million with the excess insurance proceeds carried over to the next year. The trust would have retained 10 percent of the insurance proceeds for indemnity claims paid by the trust until Cooper’s obligation was satisfied and would have retained 15 percent thereafter. The agreement had also provided for Cooper to receive the insurance proceeds related to indemnity and defense costs paid prior to the date a stay of current claims was entered by the Bankruptcy Court. Cooper would also have been required to forego certain claims and objections in the Federal-Mogul bankruptcy proceedings. In addition, the parties involved had agreed to petition the court for a stay on all current claims outstanding.

     A critical term of the December 2005 proposed settlement was the issuance of a preliminary injunction staying all pending Abex asbestos claims. At a hearing on January 20, 2006, other parties to the bankruptcy proceedings were unable to satisfy the court’s requirements to grant the required preliminary injunction. As a result, the proposed settlement agreement required renegotiation of certain terms. The final determination of whether Cooper would participate in the Federal-Mogul 524(g) trust was unknown. However, Cooper management concluded that, at the date of the filing of its 2005 Form 10-K, the most likely

outcome in the range of potential outcomes was a revised settlement approximating the December 2005 proposed settlement. Accordingly, the accrual for potential liabilities related to the Automotive Products sale and the Federal-Mogul bankruptcy was $526.3 million at December 31, 2005.

     The December 31, 2005 discontinued operations accrual included payments to a 524(g) trust over 25 years that were undiscounted, and included $215 million of insurance recoveries where insurance in place agreements, settlements or policy recoveries were probable.

2006

     On July 7, 2006, Cooper announced a revised agreement had been reached regarding Cooper’s participation in Federal-Mogul’s 524(g) trust. The revised proposed settlement agreement was subject to court approval and to certain other approvals and has been subsequently modified in December 2007, as discussed below.

     Key terms and aspects of the revised proposed settlement agreement included Cooper and another party agreeing to pay $256 million in cash into the trust on the date Federal-Mogul would emerge from bankruptcy, which included elimination of the previously proposed contribution of 1.4 million common shares to the trust by increasing the cash contribution. Cooper’s net contribution into the trust is $248.5 million.

     As in the December 2005 agreement, Cooper had agreed to make 25 annual payments of up to $20 million each to the trust with such payments being reduced by insurance proceeds. The minimum annual payment of $3 million in the December 2005 agreement was eliminated. However, Cooper has also agreed to make advances, beginning in 2015 through 2021, in the event the trust is unable to pay outstanding qualified claims at 100 percent of the value provided for in the trust agreement. In the event that advances are made by Cooper, they will accrue interest at 5 percent per annum, and will be repaid in years where excess funds are available in the trust or credited against the future year annual payments. The maximum advances are $36.6 million.

     Under the revised agreement, Cooper would pay all defense costs through the date Federal-Mogul would emerge from bankruptcy and would be reimbursed for indemnity payments to the extent such payments are eligible for payment from the trust. Cooper would retain the rights to receive the insurance proceeds related to indemnity and defense costs paid prior to the date Federal-Mogul would emerge from bankruptcy. For claims paid by the trust, the trust would have retained 10 percent of any reimbursed insurance proceeds for the first 25 years and thereafter would have retained 15 percent.

     As in the December 2005 proposed agreement, Cooper would forego certain claims and objections in the Federal-Mogul bankruptcy proceedings. However, under the revised proposed agreement, which was subject to court approval, in the event that Cooper’s participation in the Federal-Mogul 524(g) trust was not approved for any reason, or if Cooper elects not to participate or to pursue participation in the trust, Cooper and another party would receive a cash payment of $140 million ($138 million would be paid to Cooper) on the date Federal-Mogul emerged from bankruptcy and 20 percent of any insurance policy settlements related to the former Wagner business purchased by Federal-Mogul in 1998. If Cooper participates in the trust, it would receive 12 percent of any Wagner insurance settlements.

     Cooper recorded a $20.3 million after-tax discontinued operations charge, net of an $11.4 million income tax benefit, in the second quarter of 2006 to reflect the revised terms of the agreement.

     The revised proposed settlement agreement was incorporated into Federal-Mogul’s Fourth Amended Joint Plan of Reorganization filed on November 21, 2006.

2007

     On February 2, 2007, the U.S. Bankruptcy Court for the District of Delaware approved the adequacy of Federal-Mogul’s Supplemental Disclosure Statement describing the Fourth Amended Joint Plan of Reorganization. The Court also approved the Voting Procedures and ordered that the voting period would

expire on April 6, 2007. At a hearing on April 13, Federal-Mogul announced that the Abex settlement had received a favorable vote of approximately 94%, well in excess of the required vote. In addition, any objections to the Fourth Amended Plan were filed with the Court by April 24, 2007 and hearings on confirmation of the Plan were held the week of July 9th. The Court also held hearings on October 1 and 2, 2007 for final briefs and hearings. At the conclusion of these hearings, the Court neither approved nor rejected the revised proposed settlement agreement.

     The U.S. Bankruptcy Court for the District of Delaware confirmed Federal-Mogul’s plan of reorganization on November 8, 2007, and the U.S. District Court for the District of Delaware affirmed the Bankruptcy Court’s order on November 14, 2007. As part of its ruling, the Bankruptcy Court approved the settlement between Cooper and Federal-Mogul, which would require payment of $138 million to Cooper in the event Cooper’s participation in the Federal-Mogul 524(g) trust is not approved for any reason, or if Cooper elects not to participate or to pursue participation in the trust. The Bankruptcy Court stated that it would consider approving Cooper’s participation in the Federal-Mogul 524(g) trust at a later time, and that its order confirming the plan of reorganization and approving the settlement between Cooper and Federal-Mogul does not preclude later approval of Cooper’s participation in the 524(g) trust. Accordingly, in an effort to continue working towards approval of Cooper’s 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 are the same in all material respects as the settlement documents filed with the Bankruptcy Court on July 7, 2006, except that the Modified Plan A Settlement Documents remove certain provisions relating to insurance to which various insurers and others had objected, and require a final, non-appealable order before Cooper is obligated to contribute to the asbestos claims settlement trust. If the Bankruptcy Court approves the modified settlement and that settlement is implemented, Cooper, through Pneumo-Abex LLC, will continue to have access to Abex insurance policies, but the settlement no longer provides for the retention of insurance proceeds by the trust.

2008

     During the first quarter of 2008, the Bankruptcy Court concluded hearings on Plan A. In the second quarter of 2008, the Representatives filed a brief with the Court requesting a preliminary injunction staying Abex asbestos claims. On June 2, 2008, the Bankruptcy Court denied the Representatives’ request. The Bankruptcy Court also stated that it was giving full consideration of Plan A and was hopeful that it would be in a position of ruling on Plan A in September 2008. However, there can be no assurance that the Court will rule on Plan A in that timeframe.

     The accrual for potential liabilities related to the Automotive Products sale and the Federal-Mogul bankruptcy and a progression of the activity assuming resolution through participation in the Federal-Mogul 524(g) trust is presented in the following table.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
		(in millions)
Accrual at beginning of period		$	519.1			$	559.5			$	509.1			$	529.6
Indemnity and defense payments			(6.7	)			(15.8	)			(11.9	)			(24.6	)
Insurance recoveries			9.6				—				25.4				39.3
Other			(0.7	)			(0.7	)			(1.3	)			(1.3	)
Accrual at end of period		$	521.3			$	543.0			$	521.3			$	543.0

     The discontinued operations accrual includes an initial payment of $248.5 million in cash to the Federal-Mogul 524(g) trust with additional annual payments of up to $20 million each due over 25 years, and the insurance recoveries include recoveries where insurance-in-place agreements, settlements or policy recoveries are probable. Cooper, through Pneumo-Abex LLC, has access to Abex insurance policies with remaining limits on policies with solvent insurers in excess of $750 million. Cooper included insurance

recoveries of approximately $205 million and $230 million in the discontinued operations accrual as of June 30, 2008 and December 31, 2007, respectively. Cooper believes that it is likely that additional insurance recoveries will be recorded in the future as new insurance-in-place agreements are consummated and settlements with insurance carriers are completed. However, extensive litigation with the insurance carriers may be required to receive those additional recoveries.

     Although the payments related to the settlement could extend to 25 years and the collection of insurance proceeds could extend beyond 25 years, the liability and insurance are not discounted on Cooper’s balance sheet as the amount of the actual annual payments is not reasonably predictable.

     From a cash flow perspective, Cooper management continues to believe that a settlement on the terms of the Modified Plan A Settlement Documents would allow Cooper to continue to grow through acquisitions and return cash to shareholders through dividends and stock repurchases. The settlement agreement remains subject to Bankruptcy Court approval and other matters. At this time, the exact manner in which this issue will be resolved is not known.

     If Cooper is unable to reach a settlement to participate in the Federal-Mogul 524(g) trust, the accrual for discontinued operations may have to be adjusted to reflect the estimated liability and related insurance recoveries through the tort system. There are numerous assumptions that are required to project the estimated liability and related insurance recoveries in this scenario and Cooper is currently assessing the analysis to reasonably estimate such amounts. Cooper believes that such net amounts are unlikely to exceed the current discontinued operations accrual; however, there can be no such assurance until the analysis is completed.

Note 14. Consolidating Financial Information

     Cooper and certain of its principal operating subsidiaries (the “Guarantors”) fully and unconditionally guarantee, on a joint and several basis, the registered debt securities of Cooper Industries, LLC and Cooper US, Inc. The following condensed consolidating financial information is included so that separate financial statements of Cooper Industries, LLC, Cooper US, Inc. or the Guarantors are not required to be filed with the Securities and Exchange Commission. The consolidating financial statements present investments in subsidiaries using the equity method of accounting. Intercompany investments in the Class A and Class B common shares are accounted for using the cost method.

Consolidating Income Statements
Three Months Ended June 30, 2008
(in millions)

						Cooper				Cooper
						Industries,				US,								Other				Consolidating
		Cooper				LLC				Inc.				Guarantors				Subsidiaries				Adjustments				Total
Revenues		$	—			$	—			$	—			$	1,004.1			$	822.7			$	(102.5	)		$	1,724.3
Cost of sales			0.1				(0.1	)			1.9				705.2				558.9				(102.5	)			1,163.5
Selling and administrative expenses			3.3				3.5				20.3				142.5				149.9				(5.1	)			314.4
Interest expense, net			—				4.6				13.0				—				0.7				—				18.3
Equity in earnings of subsidiaries, net of tax			205.2				7.6				124.8				33.9				129.9				(501.4	)			—
Intercompany income (expense)			(10.1	)			(10.2	)			26.9				(38.3	)			66.5				(34.8	)			—
Income (loss) before income taxes			191.7				(10.6	)			116.5				152.0				309.6				(531.1	)			228.1
Income tax expense (benefit)			—				(6.8	)			(13.3	)			47.2				39.1				—				66.2
Net income (loss)		$	191.7			$	(3.8	)		$	129.8			$	104.8			$	270.5			$	(531.1	)		$	161.9

Consolidating Income Statements
Three Months Ended June 30, 2007
(in millions)

						Cooper				Cooper
						Industries,				US,								Other				Consolidating
		Cooper				LLC				Inc.				Guarantors				Subsidiaries				Adjustments				Total
Revenues		$	—			$	—			$	—			$	943.1			$	582.8			$	(62.2	)		$	1,463.7
Cost of sales			—				—				0.5				658.5				387.8				(62.2	)			984.6
Selling and administrative expenses			3.0				4.2				18.8				137.2				105.9				—				269.1
Income from Belden agreement																			3.3								3.3
Interest expense, net			(0.4	)			11.2				3.7				—				(1.6	)			—				12.9
Equity in earnings of subsidiaries, net of tax			248.4				10.2				111.0				24.9				177.0				(571.5	)			—
Intercompany income (expense)			(8.0	)			(4.5	)			13.3				(44.4	)			72.4				(28.8	)			—
Income (loss) before income taxes			237.8				(9.7	)			101.3				127.9				343.4				(600.3	)			200.4
Income tax expense (benefit)			—				(7.5	)			(75.7	)			38.0				36.4				—				(8.8	)
Net income (loss)		$	237.8			$	(2.2	)		$	177.0			$	89.9			$	307.0			$	(600.3	)		$	209.2

Consolidating Income Statements
Six Months Ended June 30, 2008
(in millions)

						Cooper				Cooper
						Industries,				US,								Other				Consolidating
		Cooper				LLC				Inc.				Guarantors				Subsidiaries				Adjustments				Total
Revenues		$	—			$	—			$	—			$	1,925.1			$	1,532.3			$	(187.0	)		$	3,270.4
Cost of sales			(0.1	)			(0.2	)			3.1				1,337.2				1,032.7				(187.0	)			2,185.7
Selling and administrative expenses			5.5				6.0				43.1				287.4				283.1				(9.2	)			615.9
Interest expense, net			—				10.2				24.7				—				(1.7	)			—				33.2
Equity in earnings of subsidiaries, net of tax			399.5				12.6				231.3				65.2				244.7				(953.3	)			—
Intercompany income (expense)			(19.5	)			(19.4	)			58.6				(82.6	)			131.4				(68.5	)			—
Income (loss) before income taxes			374.6				(22.8	)			219.0				283.1				594.3				(1,012.6	)			435.6
Income tax expense (benefit)			—				(13.3	)			(25.6	)			88.3				70.9				—				120.3
Net income (loss)		$	374.6			$	(9.5	)		$	244.6			$	194.8			$	523.4			$	(1,012.6	)		$	315.3

Six Months Ended June 30, 2007
(in millions)

						Cooper				Cooper
						Industries,				US,								Other				Consolidating
		Cooper				LLC				Inc.				Guarantors				Subsidiaries				Adjustments				Total
Revenues		$	—			$	—			$	—			$	1,861.6			$	1,119.2			$	(123.1	)		$	2,857.7
Cost of sales			—				0.1				0.8				1,303.6				748.1				(123.1	)			1,929.5
Selling and administrative expenses			5.4				7.7				34.5				270.5				206.4				—				524.5
Income from Belden agreement																			3.3								3.3
Interest expense, net			(1.0	)			22.4				7.4				—				(3.0	)			—				25.8
Equity in earnings of subsidiaries, net of tax			417.6				21.0				206.7				45.1				279.9				(970.3	)			—
Intercompany income (expense)			(14.9	)			(8.8	)			28.4				(83.8	)			136.4				(57.3	)			—
Income (loss) before income taxes			398.3				(18.0	)			192.4				248.8				587.3				(1,027.6	)			381.2
Income tax expense (benefit)			—				(14.8	)			(87.4	)			76.8				65.5				—				40.1
Net income (loss)		$	398.3			$	(3.2	)		$	279.8			$	172.0			$	521.8			$	(1,027.6	)		$	341.1

Consolidating Balance Sheets
June 30, 2008
(in millions)

						Cooper				Cooper
						Industries,				US,								Other				Consolidating
		Cooper				LLC				Inc.				Guarantors				Subsidiaries				Adjustments				Total
Cash and cash equivalents		$	—			$	—			$	17.5			$	4.5			$	132.7			$	—			$	154.7
Investments			—				—				51.3				—				—				—				51.3
Receivables			—				—				0.1				600.5				630.3				—				1,230.9
Inventories			—				—				—				383.5				366.0				—				749.5
Deferred income taxes and other current assets			—				115.9				48.2				25.6				80.3				—				270.0
Total current assets			—				115.9				117.1				1,014.1				1,209.3				—				2,456.4
Property, plant and equipment, less accumulated depreciation			—				—				59.6				324.5				384.4				—				768.5
Goodwill			—				—				—				1,261.9				1,479.9				—				2,741.8
Investment in subsidiaries			5,595.6				626.5				5,028.9				1,138.5				4,353.7				(16,743.2	)			—
Investment in parent			—				—				2,981.4				—				312.7				(3,294.1	)			—
Intercompany accounts receivable			—				777.1				—				1,347.2				885.2				(3,009.5	)			—
Intercompany notes receivable			93.7				25.8				1,353.5				0.3				4,541.3				(6,014.6	)			—
Other noncurrent assets			—				21.8				3.8				58.4				298.0				—				382.0
Total assets		$	5,689.3			$	1,567.1			$	9,544.3			$	5,144.9			$	13,464.5			$	(29,061.4	)		$	6,348.7
Short-term debt		$	—			$	—			$	89.8			$	—			$	24.5			$	—			$	114.3
Accounts payable			43.8				2.8				18.8				240.4				267.8				—				573.6
Accrued liabilities			6.5				37.8				71.2				231.0				218.9				—				565.4
Current discontinued operations liability			—				191.3				—				—				—				—				191.3
Current maturities of long-term debt			—				—				—				—				0.1				—				0.1
Total current liabilities			50.3				231.9				179.8				471.4				511.3				—				1,444.7
Long-term debt			—				277.2				921.9				8.0				0.4				—				1,207.5
Intercompany accounts payable			26.4				—				2,983.1				—				—				(3,009.5	)			—
Intercompany notes payable			1,052.6				804.6				1,806.9				1,742.0				608.5				(6,014.6	)			—
Long-term discontinued operations liability			—				330.0				—				—				—				—				330.0
Other long-term liabilities			—				(91.0	)			120.9				181.2				292.5				—				503.6
Total liabilities			1,129.3				1,552.7				6,012.6				2,402.6				1,412.7				(9,024.1	)			3,485.8
Class A common stock			2.0				—				—				—				—				(0.3	)			1.7
Class B common stock			1.1				—				—				—				—				(1.1	)			—
Subsidiary common stock			—				—				170.0				—				371.4				(541.4	)			—
Capital in excess of par value			3,337.2				—				747.2				1,448.1				7,780.0				(13,312.5	)			—
Retained earnings			1,133.5				85.1				2,704.0				1,263.4				3,885.0				(6,163.7	)			2,907.3
Accumulated other non-owner changes in equity			86.2				(70.7	)			(89.5	)			30.8				15.4				(18.3	)			(46.1	)
Total shareholders’ equity			4,560.0				14.4				3,531.7				2,742.3				12,051.8				(20,037.3	)			2,862.9
Total liabilities and shareholders’ equity		$	5,689.3			$	1,567.1			$	9,544.3			$	5,144.9			$	13,464.5			$	(29,061.4	)		$	6,348.7

Consolidating Balance Sheets
December 31, 2007
(in millions)

						Cooper				Cooper
						Industries,				US,								Other				Consolidating
		Cooper				LLC				Inc.				Guarantors				Subsidiaries				Adjustments				Total
Cash and cash equivalents		$	1.3			$	—			$	23.1			$	(1.1	)		$	209.5			$	—			$	232.8
Investments			—				—				93.7				—				—				—				93.7
Receivables			1.1				—				0.3				539.3				507.9				—				1,048.6
Inventories			—				—				—				346.2				297.5				—				643.7
Deferred income taxes and other current assets			0.7				119.2				64.3				44.8				55.2				—				284.2
Total current assets			3.1				119.2				181.4				929.2				1,070.1				—				2,303.0
Restricted cash			—				—				—				—				290.1				—				290.1
Property, plant and equipment, less accumulated depreciation			—				—				63.9				326.9				329.0				—				719.8
Goodwill			—				—				—				1,249.7				1,290.6				—				2,540.3
Investment in subsidiaries			5,158.1				620.3				4,779.5				1,030.8				3,785.5				(15,374.2	)			—
Investment in parent			—				—				2,872.2				—				312.7				(3,184.9	)			—
Intercompany accounts receivable			—				787.4				—				1,337.0				737.7				(2,862.1	)			—
Intercompany notes receivable			162.4				25.8				1,155.2				0.3				4,422.1				(5,765.8	)			—
Other noncurrent assets			—				14.5				8.0				48.9				208.9				—				280.3
Total assets		$	5,323.6			$	1,567.2			$	9,060.2			$	4,922.8			$	12,446.7			$	(27,187.0	)		$	6,133.5
Short-term debt		$	—			$	—			$	228.7			$	—			$	27.4			$	—			$	256.1
Accounts payable			37.8				5.1				19.1				218.2				252.9				—				533.1
Accrued liabilities			6.2				39.0				72.2				261.5				187.8				—				566.7
Current discontinued operations liability			—				179.1				—				—				—				—				179.1
Current maturities of long-term debt			—				100.1				—				—				—				—				100.1
Total current liabilities			44.0				323.3				320.0				479.7				468.1				—				1,635.1
Long-term debt			—				277.2				624.1				8.0				0.6				—				909.9
Intercompany accounts payable			34.8				—				2,826.1				—				—				(2,860.9	)			—
Intercompany notes payable			815.0				692.6				1,869.0				1,741.8				647.2				(5,765.6	)			—
Long-term discontinued operations liability			—				330.0				—				—				—				—				330.0
Other long-term Liabilities			—				(86.1	)			155.6				187.8				159.3				—				416.6
Total liabilities			893.8				1,537.0				5,794.8				2,417.3				1,275.2				(8,626.5	)			3,291.6
Class A common stock			2.1				—				—				—				—				(0.3	)			1.8
Class B common stock			1.1				—				—				—				—				(1.1	)			—
Subsidiary common stock			—				—				170.0				—				371.4				(541.4	)			—
Capital in excess of par value			3,458.5				—				743.7				1,427.0				7,496.1				(13,039.6	)			85.7
Retained earnings			916.4				116.2				2,468.7				1,055.3				3,335.9				(5,057.4	)			2,835.1
Accumulated other non-owner changes in equity			51.7				(86.0	)			(117.0	)			23.2				(31.9	)			79.3				(80.7	)
Total shareholders’ equity			4,429.8				30.2				3,265.4				2,505.5				11,171.5				(18,560.5	)			2,841.9
Total liabilities and shareholders’ equity		$	5,323.6			$	1,567.2			$	9,060.2			$	4,922.8			$	12,446.7			$	(27,187.0	)		$	6,133.5