e10vq
10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarter ended March 31, 2009
OR
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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, Ltd.
(Exact name of registrant as specified in its charter)
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Bermuda
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98-0355628 |
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(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
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600 Travis, Suite 5600
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Houston, Texas 77002 |
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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 o No
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of large accelerated filer, accelerated filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller Reporting Company o |
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
Number of registrants common stock outstanding as of March 31, 2009 was 166,477,223 Class A common
shares that are held by the public and 36,716,158 Class A common shares and 105,420,258 Class B
common shares that are held by the issuers wholly-owned subsidiaries.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
COOPER INDUSTRIES, LTD.
CONSOLIDATED INCOME STATEMENTS
(unaudited)
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Three Months Ended |
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March 31, |
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2009 |
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2008 |
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(in millions, except per share data) |
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Revenues |
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$ |
1,256.8 |
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$ |
1,546.1 |
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Cost of sales |
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884.8 |
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1,022.2 |
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Selling and administrative expenses |
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256.9 |
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301.5 |
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Restructuring charges |
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8.8 |
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Operating earnings |
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106.3 |
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222.4 |
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Interest expense, net |
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15.2 |
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14.9 |
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Income from continuing operations before income taxes |
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91.1 |
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207.5 |
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Income taxes |
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9.9 |
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54.1 |
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Income from continuing operations |
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81.2 |
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153.4 |
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Income related to discontinued operations, net of income taxes |
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18.9 |
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Net income |
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$ |
100.1 |
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$ |
153.4 |
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Income per common share: |
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Basic: |
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Income from continuing operations |
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$ |
.49 |
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$ |
.87 |
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Income from discontinued operations |
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.11 |
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Net income |
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$ |
.60 |
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$ |
.87 |
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Diluted: |
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Income from continuing operations |
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$ |
.48 |
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$ |
.86 |
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Income from discontinued operations |
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.11 |
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Net income |
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$ |
.59 |
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$ |
.86 |
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Cash dividends declared per common share |
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$ |
.25 |
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$ |
.25 |
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The accompanying notes are an integral part of these statements.
-2-
COOPER INDUSTRIES, LTD.
CONSOLIDATED BALANCE SHEETS
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March 31, |
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December 31, |
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2009 |
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2008 |
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(unaudited) |
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(Note 1) |
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(in millions) |
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ASSETS |
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Cash and cash equivalents |
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$ |
303.9 |
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$ |
258.8 |
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Investments |
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15.6 |
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21.9 |
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Receivables |
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900.1 |
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1,011.4 |
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Inventories |
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610.4 |
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641.8 |
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Current discontinued operations receivable |
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13.2 |
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17.5 |
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Deferred income taxes and other current assets |
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209.7 |
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246.5 |
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Total current assets |
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2,052.9 |
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2,197.9 |
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Property, plant and equipment, less accumulated depreciation |
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715.3 |
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728.2 |
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Goodwill |
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2,554.7 |
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2,567.3 |
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Long-term discontinued operations receivable |
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170.1 |
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174.8 |
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Deferred income taxes and other noncurrent assets |
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531.2 |
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496.7 |
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Total assets |
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$ |
6,024.2 |
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$ |
6,164.9 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Short-term debt |
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$ |
19.4 |
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$ |
25.6 |
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Accounts payable |
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451.8 |
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492.5 |
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Accrued liabilities |
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523.8 |
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618.7 |
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Current discontinued operations liability |
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50.2 |
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50.4 |
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Current maturities of long-term debt |
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275.0 |
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275.0 |
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Total current liabilities |
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1,320.2 |
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1,462.2 |
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Long-term debt |
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924.6 |
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932.5 |
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Postretirement benefits other than pensions |
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70.6 |
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71.2 |
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Long-term discontinued operations liability |
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761.5 |
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764.7 |
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Other long-term liabilities |
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315.1 |
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326.9 |
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Total liabilities |
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3,392.0 |
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3,557.5 |
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Common stock, $.01 par value |
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1.7 |
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1.7 |
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Capital in excess of par value |
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Retained earnings |
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2,980.7 |
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2,935.4 |
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Accumulated other nonowner changes in equity |
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(350.2 |
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(329.7 |
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Total shareholders equity |
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2,632.2 |
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2,607.4 |
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Total liabilities and shareholders equity |
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$ |
6,024.2 |
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$ |
6,164.9 |
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The accompanying notes are an integral part of these statements.
-3-
COOPER INDUSTRIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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Three Months Ended |
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March 31, |
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2009 |
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2008 |
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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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$ |
100.1 |
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$ |
153.4 |
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Adjust: Income related to discontinued operations |
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(18.9 |
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Income from continuing operations |
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81.2 |
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153.4 |
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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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35.2 |
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33.5 |
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Deferred income taxes |
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(6.0 |
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12.3 |
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Excess tax benefits from stock options and awards |
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2.2 |
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(2.7 |
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Restructuring charges |
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8.8 |
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Changes in assets and liabilities:(1) |
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Receivables |
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99.4 |
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(35.3 |
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Inventories |
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25.1 |
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(59.9 |
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Accounts payable and accrued liabilities |
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(139.0 |
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(69.3 |
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Discontinued operations assets and liabilities, net |
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36.5 |
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10.0 |
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Other assets and liabilities, net |
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21.8 |
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23.2 |
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Net cash provided by operating activities |
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165.2 |
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65.2 |
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Cash flows from investing activities: |
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Proceeds from short-term investments |
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6.3 |
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29.8 |
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Proceeds from cash restricted for business acquisitions |
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284.5 |
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Capital expenditures |
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(28.7 |
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(23.6 |
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Cash paid for acquired businesses |
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(16.6 |
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(267.1 |
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Proceeds from sales of property, plant and equipment and other |
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0.8 |
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0.3 |
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Net cash provided by (used in) investing activities |
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(38.2 |
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23.9 |
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Cash flows from financing activities: |
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Proceeds from issuance of debt |
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297.6 |
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Proceeds from debt derivatives |
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0.5 |
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Repayments of debt |
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(13.9 |
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(192.8 |
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Dividends |
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(42.1 |
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(38.2 |
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Purchases of common shares |
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(25.9 |
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(266.4 |
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Excess tax benefits from stock options and awards |
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(2.2 |
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2.7 |
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Proceeds from exercise of stock options and other |
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2.4 |
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6.0 |
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Net cash used in financing activities |
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(81.7 |
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(190.6 |
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Effect of exchange rate changes on cash and cash equivalents |
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(0.2 |
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7.9 |
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Increase (decrease) in cash and cash equivalents |
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45.1 |
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(93.6 |
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Cash and cash equivalents, beginning of period |
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258.8 |
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232.8 |
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Cash and cash equivalents, end of period |
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$ |
303.9 |
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$ |
139.2 |
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(1) |
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Net of the effects of acquisitions and translation. |
The accompanying notes are an integral part of these statements.
-4-
COOPER INDUSTRIES, 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 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, 2008 included in Part IV of Coopers 2008 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). Cooper implemented the provisions of SFAS No.
157 as of January 1, 2008 for those assets and liabilities not subject to the deferral described
above. The implementation of SFAS No. 157 as of January 1, 2009 for assets and liabilities
previously subject to the deferral described above did not have a material impact on the Companys
results of operations, financial position or cash flows. See Note 15 of the Notes to the
Consolidated Financial Statements.
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 Cooper. This Statement, together with the
International Accounting Standards Boards (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. Cooper implemented SFAS No. 141(R)
prospectively to business combinations completed on or after January 1, 2009. Cooper recognizes
acquisition-related costs in the period in which such costs are incurred as required by SFAS
141(R).
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 Cooper. This Statement, together with the IASBs 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 January 1, 2009. Cooper did not apply the disclosure provisions of SFAS No. 160 as
the information regarding noncontrolling interests in a subsidiary is immaterial to the
consolidated financial statements.
-5-
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 entitys financial position, results of operations, and cash flows. The
implementation of this Statement as of January 1, 2009 did not have a material impact on the
disclosures to the consolidated financial statements.
Reclassification - Certain amounts in the Consolidated Statements of Cash Flows in 2008 have
been reclassified to conform to the 2009 presentation.
Note 2. Restructuring Charges
During the fourth quarter of 2008, Cooper committed to employment reductions to appropriately
size Coopers workforce to current and anticipated market conditions and downsize a domestic Tools
segment manufacturing operation. Cooper recorded a $35.7 million charge in the fourth quarter of
2008 related to these actions, $25.5 million of which relates to the Electrical Products segment
and $10.2 million relates to the Tools segment. A total of 1,314 hourly and 930 salaried positions
are being eliminated as a result of the fourth quarter 2008 restructuring actions to reduce
Coopers workforce.
During the first quarter of 2009, Cooper committed to additional employment reductions as a
result of managements ongoing assessment of its hourly and salary workforce and its required
production capacity in consideration of current and anticipated market conditions and demand
levels. Cooper recorded an $8.8 million charge in the first quarter of 2009 related to these
actions, $6.2 million of which relates to the Electrical Products segment and $1.1 million relates
to the Tools segment. The remaining $1.5 million relates to reductions in Coopers corporate
staff. A total of 340 hourly and 309 salaried positions are being eliminated as a result of the
first quarter 2009 restructuring actions to reduce Coopers workforce.
The following table reflects activity related to the restructuring actions.
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Contract |
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Involuntary Employee |
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Termination |
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Termination Benefits |
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and Other |
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Headcount |
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Dollars |
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Exit Costs |
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($ in millions) |
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Balance at December 31, 2008 |
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886 |
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$ |
28.0 |
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$ |
1.7 |
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2009 restructuring actions |
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649 |
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8.5 |
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0.3 |
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Headcount reductions or costs incurred |
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(1,005 |
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(16.6 |
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(1.2 |
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Balance at March 31, 2009 |
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530 |
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$ |
19.9 |
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$ |
0.8 |
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The workforce reductions, contract termination and other exit costs and the related cash
payments will be substantially completed in 2009.
Note 3. Goodwill
Cooper
had goodwill of $2.55 billion and $2.57 billion at March 31, 2009 and December 31,
2008, respectively. Under Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS No. 142), goodwill is subject to an annual impairment test. Cooper has
designated January 1 as the date of its annual goodwill impairment test. If an event occurs, or
circumstances change, that would more likely than not reduce the fair value of a reporting unit
below its carrying value; an interim impairment
-6-
test would be performed between annual tests. Cooper has identified eight reporting units for
which goodwill is tested for impairment. The results of step one of the goodwill impairment tests
as of January 1, 2009 did not require the completion of step two of the test for any reporting
unit.
Note 4. Stock-Based Compensation
Cooper has a share-based compensation plan known as the Amended and Restated Stock Incentive
Plan (the Plan). The Plan provides for the granting of stock options, performance-based share
awards and restricted stock units. Since the original Plans inception in 1996, the aggregate
number of shares authorized under the Plan is 41 million. As of March 31, 2009, 5,744,851 shares
were available for future grants under the Plan. Of the total shares available for future grants,
2,796,898 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 $7.3 million
and $9.9 million for the three months ended March 31, 2009 and 2008, respectively. The total
income tax benefit recognized in the income statement for all share-based compensation arrangements
under the Plan was $2.7 million and $3.5 million for the three months ended March 31, 2009 and
2008, respectively. During the three months ended March 31, 2009, Cooper granted 2,408,725 stock
option awards, 370,560 performance-based shares and 49,700 restricted stock units.
Note 5. Acquisitions
Cooper completed two acquisitions in the Electrical Products segment during the three months
ended March 31, 2009. These acquisitions were selected because of their strategic fit with
existing Cooper businesses.
Cooper makes an initial allocation of the purchase price as of the date of acquisition, based
on its estimate of the fair value of the assets and liabilities acquired. Cooper continues to
evaluate the acquisition date 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 acquisition date fair value of the total consideration for the two acquisitions was
approximately $20.0 million. The acquisitions resulted in the recognition of preliminary estimated
aggregate goodwill of $13.8 million, substantially all of which is not expected to be deductible
for tax purposes. Total cash consideration paid for acquisitions during the first quarter of 2009
was $16.6 million, net of cash acquired.
The results of operations of acquisitions are included in the consolidated income statement
since the respective acquisition dates. Pro-forma income from continuing operations and diluted
earnings per share for the three months ended March 31, 2009 and 2008, assuming the acquisitions
had occurred at the beginning of the period, would not be materially different from reported
results.
Note 6. Inventories
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Raw materials |
|
$ |
220.4 |
|
|
$ |
239.3 |
|
Work-in-process |
|
|
171.3 |
|
|
|
163.2 |
|
Finished goods |
|
|
405.5 |
|
|
|
405.0 |
|
Perishable tooling and supplies |
|
|
13.7 |
|
|
|
13.9 |
|
|
|
|
|
|
|
|
|
|
|
810.9 |
|
|
|
821.4 |
|
Allowance for excess and obsolete inventory |
|
|
(80.9 |
) |
|
|
(77.0 |
) |
Excess of current standard costs over LIFO costs |
|
|
(119.6 |
) |
|
|
(102.6 |
) |
|
|
|
|
|
|
|
Net inventories |
|
$ |
610.4 |
|
|
$ |
641.8 |
|
|
|
|
|
|
|
|
-7-
Note 7. Contingencies
Cooper and its subsidiaries are defendants or otherwise involved in a number of lawsuits in
the ordinary course of business. Cooper estimates the range of liability related to pending
litigation when management believes the amount and range of loss can be estimated. Cooper records
its best estimate of a loss when the loss is considered probable. When a liability is probable and
there is a range of estimated loss with no best estimate in the range, Cooper records the minimum
estimated liability related to the lawsuits or claims. As additional information becomes
available, Cooper assesses the potential liability related to pending litigation and claims and
revises its estimates. Due to uncertainties related to the resolution of lawsuits and claims, the
ultimate outcome may differ from the estimates. In the opinion of management and based on
liability accruals provided, the ultimate exposure with respect to these pending lawsuits and
claims is not expected to have a material adverse effect on Coopers consolidated financial
position or cash flows, although they could have a material adverse effect on the results of
operations for a particular reporting period.
The U.S. Federal Government has enacted legislation intended to deny certain federal funding
and government contracts to U.S. companies that reincorporate outside the United States, including
Section 745 of the Consolidated Appropriations Act, 2008 (Public Law 110-161), Section 724(c) of
the Transportation, Treasury, Housing and Urban Development, the Judiciary, and Independent
Agencies Appropriations Act, 2006 (Public Law 109-115), and 6 U.S.C. 395(b) of The Homeland
Security Act. Cooper has self-reported to the Department of Defense certain transactions
aggregating approximately $8 million with U.S. government entities which may be subject to the
legislation. At the time of this filing, it is too early to determine whether any fines or
penalties may be assessed against Cooper.
Note 8. Debt
At March 31, 2009, Cooper has $19.4 million of short-term debt. At March 31, 2009 Cooper had
no commercial paper borrowings outstanding. At March 31, 2009, Cooper has U.S. committed credit
facilities that total $516 million, of which $16 million matures in September 2009 and $500 million
matures in November 2009.
Cooper is currently negotiating a new committed credit facility prior to the maturity of the
current facility. However, there can be no assurance that a new facility will be negotiated in
that time, or at all, and it is likely that the terms of a new facility will not be as attractive
as in the existing facility that expires in November 2009. Cooper is evaluating the size of the
new facility necessary to provide flexibility in light of the increased costs related to a new
committed credit facility.
Note 9. Shareholders Equity
At March 31, 2009, 166,477,223 Class A common shares, $.01 par value were issued and
outstanding (excluding 36,716,158 Class A common shares held by wholly-owned subsidiaries) compared
to 166,908,287 Class A common shares, $.01 par value (excluding 37,362,915 Class A common shares
held by wholly-owned subsidiaries) at December 31, 2008. During the first quarter of 2009, Cooper
issued 824,736 Class A common shares primarily in connection with employee incentive and benefit
plans and Coopers dividend reinvestment program. During the first quarter of 2009, Cooper and its
wholly-owned subsidiaries purchased 1,255,800 Class A common shares for $25.9 million under the
Companys share repurchase plans. The share purchases are recorded by Coopers wholly-owned
subsidiaries as an investment in its parent company that is eliminated in consolidation.
A wholly-owned subsidiary owns all of the issued and outstanding Class B common shares.
During the first quarter of 2009, Cooper repurchased 4.2 million Class B common shares from its
wholly-owned subsidiary. The subsidiarys 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.
-8-
On February 12, 2008, Coopers Board of Directors authorized the purchase of ten million
shares of common stock. On February 9, 2009, Cooper announced that the Board of Directors
authorized the repurchase of ten million shares of common stock in addition to the remaining
February 12, 2008 authorization. In the first quarter 2009, Cooper repurchased the one million
shares intended to offset dilution from share issuances under equity compensation plans, as well as
255,800 additional shares under the Cooper Board of Directors authorizations discussed above.
Cooper may continue to repurchase shares under these authorizations from time to time during 2009.
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 March 31, 2009, 12,773,635
shares remain available to be repurchased under the authorizations by the Board of Directors.
Note 10. Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
Operating Earnings |
|
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Electrical Products |
|
$ |
1,130.5 |
|
|
$ |
1,361.6 |
|
|
$ |
140.0 |
|
|
$ |
223.5 |
|
Tools |
|
|
126.3 |
|
|
|
184.5 |
|
|
|
(3.9 |
) |
|
|
17.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments |
|
$ |
1,256.8 |
|
|
$ |
1,546.1 |
|
|
|
136.1 |
|
|
|
240.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
8.8 |
|
|
|
|
|
General Corporate expense |
|
|
|
|
|
|
|
|
|
|
21.0 |
|
|
|
18.3 |
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
15.2 |
|
|
|
14.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
before income taxes |
|
|
|
|
|
|
|
|
|
$ |
91.1 |
|
|
$ |
207.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 11. Pension and Other Postretirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Postretirement |
|
|
|
Pension Benefits |
|
|
Benefits |
|
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Components of net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
0.8 |
|
|
$ |
1.0 |
|
|
$ |
|
|
|
$ |
|
|
Interest cost |
|
|
10.4 |
|
|
|
10.5 |
|
|
|
1.2 |
|
|
|
1.3 |
|
Expected return on plan assets |
|
|
(9.7 |
) |
|
|
(12.5 |
) |
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
(0.6 |
) |
|
|
(0.5 |
) |
|
|
(0.5 |
) |
|
|
(0.5 |
) |
Recognized actuarial (gain) loss |
|
|
5.6 |
|
|
|
2.4 |
|
|
|
(0.8 |
) |
|
|
(0.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
6.5 |
|
|
$ |
0.9 |
|
|
$ |
(0.1 |
) |
|
$ |
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-9-
Note 12. Income Taxes
The effective tax rate before discrete adjustments was 20.1% for the three months ended March
31, 2009 and 28.3% for the three months ended March 31, 2008. The decrease is primarily related to
lower earnings in 2009 without a corresponding decrease in projected tax benefits. Cooper reduced
income taxes expense by $8.4 million and $4.6 million during the period ended March 31, 2009 and
2008, respectively, for discrete tax items primarily related to foreign taxes.
Cooper has unrecognized gross tax benefits of $33.3 million at March 31, 2009. Approximately
$25.4 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 $1 to $5 million could be recognized during the next 12 months as audits close and
statutes expire.
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 German tax of
approximately 58 million, which would be available for credit in the United States, plus accrued
interest.
The Internal Revenue Service is examining Coopers 2007 Federal income tax return and Cooper
is under examination by various United States State and Local taxing authorities, as well as
various taxing authorities in other countries. Cooper is no longer subject to U.S. Federal income
tax examinations by tax authorities for years prior to 2007, and with few exceptions, Cooper is no
longer subject to State and Local, or non-U.S. income tax examinations by tax authorities for years
before 2000. Cooper fully cooperates with all audits, but defends existing positions vigorously.
These audits are in various stages of completion. To provide for potential tax exposures, Cooper
maintains a liability for unrecognized tax benefits, which management believes is adequate. The
results of future audit assessments, if any, could have a material effect on Coopers cash flows as
these audits are completed.
Note 13. Net Income Per Common Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
Diluted |
|
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Income from continuing operations |
|
$ |
81.2 |
|
|
$ |
153.4 |
|
|
$ |
81.2 |
|
|
$ |
153.4 |
|
Income from discontinued operations |
|
|
18.9 |
|
|
|
|
|
|
|
18.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common stock |
|
$ |
100.1 |
|
|
$ |
153.4 |
|
|
$ |
100.1 |
|
|
$ |
153.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
167.3 |
|
|
|
177.1 |
|
|
|
167.3 |
|
|
|
177.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incremental shares from assumed conversions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options, performance-based stock
awards and other employee awards |
|
|
|
|
|
|
|
|
|
|
0.9 |
|
|
|
2.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares and common
share equivalents |
|
|
|
|
|
|
|
|
|
|
168.2 |
|
|
|
179.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-10-
Options and employee awards are not considered in the calculations if the effect would be
antidilutive. Out of the money options and employee awards of 7.8 million and 2.8 million shares
were excluded in the period ended March 31, 2009 and 2008, respectively.
Note 14. 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 |
|
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Net income |
|
$ |
100.1 |
|
|
$ |
153.4 |
|
Foreign currency translation gains (losses) |
|
|
(22.9 |
) |
|
|
9.7 |
|
Change in fair value of derivatives |
|
|
0.5 |
|
|
|
10.5 |
|
|
|
|
|
|
|
|
Net income and other nonowner changes in equity |
|
$ |
77.7 |
|
|
$ |
173.6 |
|
|
|
|
|
|
|
|
Note 15. Hedging Activities and Fair Value Measurement
Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS No. 133), as amended, requires that all derivatives be recognized as assets and
liabilities and measured at fair value. For derivative instruments that are not designated as
hedges, the gain or loss on the derivative is recognized in earnings currently. A derivative
instrument may be designated as a hedge of the exposure to changes in the fair value of an asset or
liability or variability in expected future cash flows if the hedging relationship is expected to
be highly effective in offsetting changes in fair value or cash flows attributable to the hedged
risk during the period of designation. If a derivative is designated as a fair value hedge, the
gain or loss on the derivative and the offsetting loss or gain on the hedged asset, liability or
firm commitment is recognized in earnings. For derivative instruments designated as a cash flow
hedge, the effective portion of the gain or loss on the derivative instrument is reported as a
component of accumulated nonowner changes in equity and reclassified into earnings in the same
period that the hedged transaction affects earnings. The ineffective portion of the gain or loss
is immediately recognized in earnings.
Hedge accounting is discontinued prospectively when (1) it is determined that a derivative is
no longer effective in offsetting changes in the fair value or cash flows of a hedged item; (2) the
derivative is sold, terminated or exercised; (3) the hedged item no longer meets the definition of
a firm commitment; or (4) it is unlikely that a forecasted transaction will occur within two months
of the originally specified time period.
When hedge accounting is discontinued because it is determined that the derivative no longer
qualifies as an effective fair-value hedge, the derivative will continue to be carried on the
balance sheet at its fair value, and the hedged asset or liability will no longer be adjusted for
changes in fair value. When hedge accounting is discontinued because a hedged item no longer meets
the definition of a firm commitment, the derivative will continue to be carried on the balance
sheet at its fair value, and any asset or liability that was recorded pursuant to recognition of
the firm commitment will be removed from the balance sheet and recognized as a gain or loss
currently in earnings. When hedge accounting is discontinued because it is probable that a
forecasted transaction will not occur within two months of the originally specified time period,
the derivative will continue to be carried on the balance sheet at its fair value, and gains and
losses reported in accumulated nonowner changes in equity will be recognized immediately in
earnings.
As a result of having sales, purchases and certain intercompany transactions denominated in
currencies other than the functional currencies of Coopers businesses, Cooper is exposed to the
effect of currency exchange rate changes on its cash flows and earnings. Cooper enters into
currency forward exchange contracts to hedge significant non-functional currency denominated
transactions for periods
-11-
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 also enters into
certain currency forward exchange contracts that are not designated as hedges. These contracts are
intended to reduce cash flow volatility related to short-term intercompany financing transactions.
Cooper sometimes enters into commodity swaps to reduce the volatility of price fluctuations on a
portion of up to eighteen months of forecasted material purchases. These instruments are designated
as cash flow hedges. Cooper does not enter into speculative derivative transactions.
During October 2005, Cooper entered into cross-currency swaps to effectively convert its newly
issued $325 million, 5.25% fixed-rate debt 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.
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 the quoted
prices in active markets, that are observable either directly or indirectly; and (Level 3)
unobservable inputs in which there is little or no market data, which require the reporting entity
to develop its own assumptions.
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. 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 March 31, 2009 on a recurring basis are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
Liabilities |
|
|
|
|
Significant other |
|
Significant other |
|
|
|
|
observable inputs |
|
observable inputs |
|
Valuation |
(in millions) |
|
(Level 2) |
|
(Level 2) |
|
Technique |
Short-term investments |
|
$ |
15.6 |
|
|
$ |
|
|
|
|
(a |
) |
Short-term currency forward
exchange contracts |
|
|
18.8 |
|
|
|
(16.3 |
) |
|
|
(a |
) |
Long-term currency forward
exchange contracts |
|
|
91.7 |
|
|
|
(40.1 |
) |
|
|
(a |
) |
Short-term commodity swaps |
|
|
0.1 |
|
|
|
(21.3 |
) |
|
|
(a |
) |
Long-term cross-currency swaps |
|
|
|
|
|
|
(19.5 |
) |
|
|
(a |
) |
|
|
|
Except as discussed below, the currency forward exchange contracts and commodity swaps in the
above table are designated as hedging instruments under SFAS No. 133. Currency forward exchange
-12-
contracts representing approximately $57 million of assets and $43 million of liabilities at March
31, 2009 are not designated as hedging instruments under SFAS No. 133.
Assets and liabilities measured at fair value as of December 31, 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 |
|
$ |
21.9 |
|
|
$ |
|
|
|
|
(a |
) |
Short-term currency forward
exchange contracts |
|
|
40.0 |
|
|
|
(8.4 |
) |
|
|
(a |
) |
Long-term currency forward
exchange contracts |
|
|
91.3 |
|
|
|
(40.0 |
) |
|
|
(a |
) |
Short-term commodity swaps |
|
|
|
|
|
|
(33.5 |
) |
|
|
(a |
) |
Long-term cross-currency swaps |
|
|
|
|
|
|
(29.1 |
) |
|
|
(a |
) |
|
|
|
There were no changes in our valuation techniques used to measure asset or liability fair
values on a recurring basis in the three months ended March 31, 2009.
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 three months ended March 31, 2009 and 2008. For
commodity swaps, Cooper recognized in cost of sales a net loss of $8.4 million in the three months
ended March 31, 2009 and a net gain of $2.3 million in the three months ended March 31, 2008. At
March 31, 2009, Cooper estimates that approximately $23 million of net losses on derivative
instruments designated as cash flow hedges will be reclassified from accumulated other nonowner
changes in equity to earnings during the next twelve months. The amount of discontinued cash flow
hedges in the three months ended March 31, 2009 and 2008 was not material.
The table below summarizes the U. S. dollar equivalent contractual amounts of Coopers forward
exchange contracts at March 31, 2009 and December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
U.S. Dollar |
|
$ |
665.4 |
|
|
$ |
502.4 |
|
Euro |
|
|
331.6 |
|
|
|
214.6 |
|
British Pound Sterling |
|
|
150.0 |
|
|
|
151.3 |
|
Mexican Peso |
|
|
29.4 |
|
|
|
40.9 |
|
Other |
|
|
42.6 |
|
|
|
43.8 |
|
|
|
|
|
|
|
|
|
|
$ |
1,219.0 |
|
|
$ |
953.0 |
|
|
|
|
|
|
|
|
The contractual amounts of Coopers commodity swap contracts at March 31, 2009 and December
31, 2008 were approximately $53 million and $68 million, respectively.
Note 16. Discontinued Operations Receivable and Liability
Discontinued Operations Liability
In October 1998, Cooper sold its Automotive Products business to Federal-Mogul Corporation
(Federal-Mogul). These discontinued businesses (including the Abex Friction product line
obtained from Pneumo-Abex Corporation (Pneumo) in 1994) were operated through subsidiary
companies, and the stock of those subsidiaries was sold to Federal-Mogul pursuant to a Purchase and
Sale Agreement dated August 17, 1998 (1998 Agreement). In conjunction with the sale,
Federal-Mogul indemnified Cooper for certain
-13-
liabilities of these subsidiary companies, including
liabilities related to the Abex Friction product line and any potential liability that Cooper may
have to Pneumo pursuant to a 1994 Mutual Guaranty Agreement
between Cooper and Pneumo. On October 1, 2001, Federal-Mogul and several of its affiliates
filed a Chapter 11 bankruptcy petition. The Bankruptcy Court for the District of Delaware
confirmed Federal-Moguls plan of reorganization and Federal-Mogul emerged from bankruptcy in
December 2007. As part of Federal-Moguls Plan of Reorganization, Cooper and Federal-Mogul reached
a settlement agreement that was subject to approval by the Bankruptcy Court resolving
Federal-Moguls indemnification obligations to Cooper. As discussed further below, on September
30, 2008, the Bankruptcy Court issued its final ruling denying Coopers participation in the
proposed Federal-Mogul 524(g) trust resulting in implementation of the previously approved Plan B
Settlement. As part of its obligation to Pneumo for any asbestos-related claims arising from the
Abex Friction product line (Abex Claims), Cooper has rights, confirmed by Pneumo, to significant
insurance for such claims. Based on information provided by representatives of Federal-Mogul and
recent claims experience, from August 28, 1998 through March 31, 2009, a total of 146,645 Abex
Claims were filed, of which 123,244 claims have been resolved leaving 23,401 Abex Claims pending at
March 31, 2009. During the three months ended March 31, 2009, 470 claims were filed and 757 claims
were resolved. Since August 28, 1998, the average indemnity payment for resolved Abex Claims was
$2,061 before insurance. A total of $150.4 million was spent on defense costs for the period
August 28, 1998 through March 31, 2009. 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
2007
In December 2005, Cooper reached an initial agreement in negotiations with the representatives
of Federal-Mogul, its bankruptcy committees and the future claimants (the Representatives)
regarding Coopers participation in Federal Moguls proposed 524(g) asbestos trust. By
participating in this trust, Cooper would have resolved its liability for asbestos claims arising
from Coopers former Abex Friction Products business. The proposed settlement agreement was
subject to court approval and certain other approvals. Future claims would have been resolved
through the bankruptcy trust.
Although the final determination of whether Cooper would participate in the Federal-Mogul
524(g) trust was unknown, Coopers management concluded that, at the date of the filing of its 2005
Form 10-K, the most likely outcome in the range of potential outcomes was a settlement
approximating the December 2005 proposed settlement. Accordingly, the accrual for potential
liabilities related to the Automotive Products sale and the Federal-Mogul bankruptcy was $526.3
million at December 31, 2005. The December 31, 2005 discontinued operations accrual included
payments to a 524(g) trust over 25 years that were undiscounted, and included $215 million of
insurance recoveries where insurance in place agreements, settlements or policy recoveries were
probable.
Throughout 2006 and 2007, Cooper continued to believe that the most likely outcome in the
range of potential outcomes was a revised settlement with Cooper resolving its asbestos obligations
through participation in the proposed Federal-Mogul 524(g) trust. While the details of the
proposed settlement agreement evolved during the on-going negotiations throughout 2006 and 2007,
the underlying principles of the proposed settlement arrangements being negotiated principally
included fixed payments to a 524(g) trust over 25 years that were subject to reduction for
insurance proceeds received in the future.
As a result of the then current status of settlement negotiations, Cooper recorded a $20.3
million after-tax discontinued operations charge, net of an $11.4 million income tax benefit, in
the second quarter of 2006 to reflect the revised terms of the proposed settlement agreement at
that time. The discontinued operations accrual was $509.1 million and $529.6 million as of
December 31, 2007 and 2006, respectively, and included payments to a 524(g) trust over 25 years
that were undiscounted, and included insurance recoveries of $230 million and $239 million,
respectively, where insurance in place agreements, settlements or policy recoveries were probable.
-14-
The U.S. Bankruptcy Court for the District of Delaware confirmed Federal-Moguls plan of
reorganization on November 8, 2007, and the U.S. District Court for the District of Delaware
affirmed the Bankruptcy Courts order on November 14, 2007. As part of its ruling, the Bankruptcy
Court approved the
Plan B Settlement between Cooper and Federal-Mogul, which would require payment of $138
million to Cooper in the event Coopers participation in the Federal-Mogul 524(g) trust is not
approved for any reason, or if Cooper elected not to participate or to pursue participation in the
trust. The Bankruptcy Court stated that it would consider approving Coopers participation in the
Federal-Mogul 524(g) trust at a later time, and that its order confirming the plan of
reorganization and approving the settlement between Cooper and Federal-Mogul did not preclude later
approval of Coopers participation in the 524(g) trust. Accordingly, in an effort to continue
working towards approval of Coopers participation in the trust and to address certain legal issues
identified by the Court, Cooper, Pneumo-Abex, Federal-Mogul, and other plan supporters filed the
Modified Plan A Settlement Documents on December 13, 2007. The Modified Plan A Settlement
Documents would have required Cooper to make an initial payment of $248.5 million in cash to the
Federal-Mogul trust upon implementation of Plan A with additional annual payments of up to $20
million each due over 25 years. If the Bankruptcy Court had approved the modified settlement and
that settlement was implemented, Cooper, through Pneumo-Abex LLC, would have continued to have
access to Abex insurance policies.
2008 2009
During the first quarter of 2008, the Bankruptcy Court concluded hearings on Plan A. On
September 30, 2008, the Bankruptcy Court issued its ruling denying the Modified Plan A Settlement
resulting in Cooper not participating in the Federal-Mogul 524(g) trust and instead proceeding with
the Plan B Settlement that had previously been approved by the Bankruptcy Court. As a result of
the Plan B Settlement, Cooper received the $138 million payment, plus interest of $3 million, in
October 2008 from the Federal-Mogul Bankruptcy estate and will continue to resolve through the tort
system the asbestos related claims arising from the Abex Friction product line that it had sold to
Federal-Mogul in 1998. Additionally, under Plan B, Cooper has access to Abex insurance policies.
The accrual for potential liabilities related to the Automotive Products sale and the
Federal-Mogul bankruptcy and a progression of the activity is presented in the following table
assuming resolution through participation in the Federal-Mogul 524(g) trust up until September 30,
2008 when the accounting was adjusted to reflect the Plan B Settlement.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
March 31, 2008 |
|
|
September 30, 2008 |
|
|
|
(in millions) |
|
Accrual at beginning of period (under Plan A) |
|
$ |
509.1 |
|
|
$ |
509.1 |
|
Indemnity and defense payments |
|
|
(5.2 |
) |
|
|
(16.9 |
) |
Insurance recoveries |
|
|
15.8 |
|
|
|
25.4 |
|
Other |
|
|
(0.6 |
) |
|
|
(1.6 |
) |
|
|
|
|
|
|
|
Accrual at end of period (under Plan A) * |
|
$ |
519.1 |
|
|
$ |
516.0 |
|
|
|
|
|
|
|
|
|
|
|
* |
|
The $516.0 million liability reflects the estimated liability under Plan A immediately prior
to adjusting the accounting on September 30, 2008 to reflect the Plan B Settlement. |
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.
-15-
The following table presents the separate assets and liabilities under the Plan B settlement
and the cash activity under the Plan B Settlement.
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Asbestos liability analysis: |
|
|
|
|
|
|
|
|
Total liability for unpaid, pending and future indemnity and
defense costs at end of period |
|
$ |
811.7 |
|
|
$ |
815.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asbestos receivable analysis |
|
|
|
|
|
|
|
|
Insurance receivable for previously paid claims and insurance
settlements |
|
$ |
66.9 |
|
|
$ |
74.6 |
|
Insurance-in-place agreements available for pending and future claims |
|
|
116.4 |
|
|
|
117.7 |
|
|
|
|
|
|
|
|
Total estimated asbestos receivable at end of period |
|
$ |
183.3 |
|
|
$ |
192.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, 2009 |
|
|
|
(in millions) |
|
Cash Flow: |
|
|
|
|
Indemnity and defense payments |
|
$ |
(3.2 |
) |
Insurance recoveries |
|
|
39.9 |
|
Other |
|
|
(0.2 |
) |
|
|
|
|
Net cash flow |
|
$ |
36.5 |
|
|
|
|
|
During the first quarter of 2009, Cooper recognized a gain from discontinued operations of
$18.9 million, net of a $12.0 million income tax expense, from negotiated insurance settlements
consummated in the first quarter that were not previously recognized. Cooper believes that it is
likely that additional insurance recoveries will be recorded in the future as new
insurance-in-place agreements are consummated or settlements with insurance carriers are completed.
Timing and value of these agreements and settlements cannot be currently estimated as they may be
subject to extensive additional negotiation and litigation.
Asbestos Liability Estimate
As of March 31, 2009, Cooper estimates that the liability for pending and future indemnity and
defense costs for the next 45 years will be $811.7 million. The amount included for unpaid
indemnity and defense costs is not significant at March 31, 2009. The estimated liability is
before any tax benefit and is not discounted as the timing of the actual payments is not reasonably
predictable.
The methodology used to project Coopers liability estimate relies upon a number of
assumptions including Coopers recent claims experience and declining future asbestos spending
based on past trends and publicly available epidemiological data, changes in various jurisdictions,
managements judgment about the current and future litigation environment, and the availability to
claimants of other payment sources.
Abex discontinued using asbestos in the Abex Friction product line in the 1970s and
epidemiological studies that are publicly available indicate the incidence of asbestos-related
disease is in decline and should continue to decline steadily. However, there can be no assurance
that these studies, or other assumptions, will not vary significantly from the estimates utilized
to project the undiscounted liability.
Although Cooper believes that its estimated liability for pending and future indemnity and
defense costs represents the best estimate of its future obligation, Cooper utilized scenarios that
it believed were reasonably possible that indicate a broader range of potential estimates from $735
to $950 million (undiscounted).
-16-
Asbestos Receivable Estimate
As of March 31, 2009, Cooper, through Pneumo-Abex LLC, has access to Abex insurance policies
with remaining limits on policies with solvent insurers in excess of $700 million. Insurance
recoveries reflected as receivables in the balance sheet include recoveries where
insurance-in-place agreements, settlements or policy recoveries are probable. As of March 31,
2009, Coopers receivable for recoveries of costs from insurers amounted to $183.3 million, of
which $66.9 million relate to costs previously paid or insurance settlements. Coopers
arrangements with the insurance carriers defer certain amounts of insurance and settlement proceeds
that Cooper is entitled to receive beyond twelve months. Approximately 90% of the $183.3 million
receivable from insurance companies at March 31, 2009 is due from domestic insurers whose AM Best
rating is Excellent (A-) or better. The remaining balance of the insurance receivable has been
significantly discounted to reflect managements best estimate of the recoverable amount.
Cooper believes that it is likely that additional insurance recoveries will be recorded in the
future as new insurance-in-place agreements are consummated or settlements with insurance carriers
are completed. However, extensive litigation with the insurance carriers may be required to
receive those additional recoveries.
Critical Accounting Assumptions
The amounts recorded by Cooper for its asbestos liability and related insurance receivables
rely on assumptions that are based on currently known facts and strategy. Coopers actual asbestos
costs or insurance recoveries could be significantly higher or lower than those recorded if
assumptions used in the estimation process vary significantly from actual results over time. Key
variables in these assumptions include the number and type of new claims filed each year, the
average indemnity and defense costs of resolving claims, the number of years these assumptions are
projected into the future, and the resolution of on-going negotiations of additional settlement or
coverage-in-place agreements with insurance carriers. Assumptions with respect to these variables
are subject to greater uncertainty as the projection period lengthens. Other factors that may
affect Coopers liability and ability to recover under its insurance policies include uncertainties
surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms
that may be made by state and federal courts, and the passage of state or federal tort reform
legislation. Cooper will review these assumptions on a periodic basis to determine whether any
adjustments are required to the estimate of its recorded asbestos liability and related insurance
receivables.
From a cash flow perspective, Cooper management believes that the annual cash outlay for its
potential asbestos liability, net of insurance recoveries, will not be material to Coopers
operating cash flow.
-17-
Note 17. 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 March 31, 2009
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries, |
|
|
US, |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
Cooper |
|
|
LLC |
|
|
Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
769.4 |
|
|
$ |
604.7 |
|
|
$ |
(117.3 |
) |
|
$ |
1,256.8 |
|
Cost of sales |
|
|
|
|
|
|
(0.6 |
) |
|
|
0.1 |
|
|
|
575.1 |
|
|
|
427.5 |
|
|
|
(117.3 |
) |
|
|
884.8 |
|
Selling and administrative
expenses |
|
|
2.9 |
|
|
|
2.4 |
|
|
|
17.6 |
|
|
|
123.7 |
|
|
|
110.3 |
|
|
|
|
|
|
|
256.9 |
|
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
1.4 |
|
|
|
3.5 |
|
|
|
3.9 |
|
|
|
|
|
|
|
8.8 |
|
Interest expense, net |
|
|
0.1 |
|
|
|
4.0 |
|
|
|
11.5 |
|
|
|
|
|
|
|
(0.4 |
) |
|
|
|
|
|
|
15.2 |
|
Equity in earnings of
subsidiaries, net of tax |
|
|
144.0 |
|
|
|
(4.3 |
) |
|
|
48.4 |
|
|
|
13.4 |
|
|
|
69.2 |
|
|
|
(270.7 |
) |
|
|
|
|
Intercompany income
(expense) |
|
|
(7.8 |
) |
|
|
(11.4 |
) |
|
|
24.1 |
|
|
|
(35.0 |
) |
|
|
63.2 |
|
|
|
(33.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
before income taxes |
|
|
133.2 |
|
|
|
(21.5 |
) |
|
|
41.9 |
|
|
|
45.5 |
|
|
|
195.8 |
|
|
|
(303.8 |
) |
|
|
91.1 |
|
Income tax expense
(benefit) |
|
|
|
|
|
|
(7.5 |
) |
|
|
(27.3 |
) |
|
|
14.5 |
|
|
|
30.2 |
|
|
|
|
|
|
|
9.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations |
|
|
133.2 |
|
|
|
(14.0 |
) |
|
|
69.2 |
|
|
|
31.0 |
|
|
|
165.6 |
|
|
|
(303.8 |
) |
|
|
81.2 |
|
Income from discontinued
operations, net of tax |
|
|
|
|
|
|
18.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
133.2 |
|
|
$ |
4.9 |
|
|
$ |
69.2 |
|
|
$ |
31.0 |
|
|
$ |
165.6 |
|
|
$ |
(303.8 |
) |
|
$ |
100.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Income Statements
Three Months Ended March 31, 2008
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries, |
|
|
US, |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
Cooper |
|
|
LLC |
|
|
Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
921.0 |
|
|
$ |
709.6 |
|
|
$ |
(84.5 |
) |
|
$ |
1,546.1 |
|
Cost of sales |
|
|
(0.2 |
) |
|
|
(0.1 |
) |
|
|
1.2 |
|
|
|
632.0 |
|
|
|
473.8 |
|
|
|
(84.5 |
) |
|
|
1,022.2 |
|
Selling and administrative
expenses |
|
|
2.2 |
|
|
|
2.5 |
|
|
|
22.8 |
|
|
|
144.9 |
|
|
|
133.2 |
|
|
|
(4.1 |
) |
|
|
301.5 |
|
Interest expense, net |
|
|
|
|
|
|
5.6 |
|
|
|
11.7 |
|
|
|
|
|
|
|
(2.4 |
) |
|
|
|
|
|
|
14.9 |
|
Equity in earnings of
subsidiaries, net of tax |
|
|
194.3 |
|
|
|
5.0 |
|
|
|
106.5 |
|
|
|
31.3 |
|
|
|
114.8 |
|
|
|
(451.9 |
) |
|
|
|
|
Intercompany income
(expense) |
|
|
(9.4 |
) |
|
|
(9.2 |
) |
|
|
31.7 |
|
|
|
(44.3 |
) |
|
|
64.9 |
|
|
|
(33.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes |
|
|
182.9 |
|
|
|
(12.2 |
) |
|
|
102.5 |
|
|
|
131.1 |
|
|
|
284.7 |
|
|
|
(481.5 |
) |
|
|
207.5 |
|
Income tax expense
(benefit) |
|
|
|
|
|
|
(6.5 |
) |
|
|
(12.3 |
) |
|
|
41.1 |
|
|
|
31.8 |
|
|
|
|
|
|
|
54.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
182.9 |
|
|
$ |
(5.7 |
) |
|
$ |
114.8 |
|
|
$ |
90.0 |
|
|
$ |
252.9 |
|
|
$ |
(481.5 |
) |
|
$ |
153.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-18-
Consolidating Balance Sheets
March 31, 2009
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries, |
|
|
US, |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
Cooper |
|
|
LLC |
|
|
Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Cash and cash equivalents |
|
$ |
0.1 |
|
|
$ |
|
|
|
$ |
133.3 |
|
|
$ |
3.9 |
|
|
$ |
166.6 |
|
|
$ |
|
|
|
$ |
303.9 |
|
Investments |
|
|
|
|
|
|
|
|
|
|
15.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15.6 |
|
Receivables |
|
|
|
|
|
|
|
|
|
|
0.2 |
|
|
|
463.6 |
|
|
|
436.3 |
|
|
|
|
|
|
|
900.1 |
|
Inventories |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
316.0 |
|
|
|
294.4 |
|
|
|
|
|
|
|
610.4 |
|
Current discontinued
operations receivable |
|
|
|
|
|
|
13.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.2 |
|
Deferred income taxes and
other current assets |
|
|
6.0 |
|
|
|
25.8 |
|
|
|
52.0 |
|
|
|
31.1 |
|
|
|
94.8 |
|
|
|
|
|
|
|
209.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
6.1 |
|
|
|
39.0 |
|
|
|
201.1 |
|
|
|
814.6 |
|
|
|
992.1 |
|
|
|
|
|
|
|
2,052.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, less
accumulated depreciation |
|
|
|
|
|
|
|
|
|
|
65.0 |
|
|
|
325.6 |
|
|
|
324.7 |
|
|
|
|
|
|
|
715.3 |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,277.8 |
|
|
|
1,276.9 |
|
|
|
|
|
|
|
2,554.7 |
|
Investment in subsidiaries |
|
|
2,619.9 |
|
|
|
561.1 |
|
|
|
4,537.6 |
|
|
|
1,149.4 |
|
|
|
2,862.4 |
|
|
|
(11,730.4 |
) |
|
|
|
|
Investment in parent |
|
|
|
|
|
|
|
|
|
|
3,425.0 |
|
|
|
|
|
|
|
312.7 |
|
|
|
(3,737.7 |
) |
|
|
|
|
Intercompany accounts
receivable |
|
|
|
|
|
|
915.9 |
|
|
|
|
|
|
|
1,581.7 |
|
|
|
1,553.1 |
|
|
|
(4,050.7 |
) |
|
|
|
|
Intercompany notes
receivable |
|
|
3,345.0 |
|
|
|
24.0 |
|
|
|
1,371.8 |
|
|
|
0.1 |
|
|
|
4,105.0 |
|
|
|
(8,845.9 |
) |
|
|
|
|
Long-term discontinued
operations receivable |
|
|
|
|
|
|
170.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170.1 |
|
Deferred income taxes and
other noncurrent assets |
|
|
|
|
|
|
251.7 |
|
|
|
33.5 |
|
|
|
(88.2 |
) |
|
|
334.2 |
|
|
|
|
|
|
|
531.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,971.0 |
|
|
$ |
1,961.8 |
|
|
$ |
9,634.0 |
|
|
$ |
5,061.0 |
|
|
$ |
11,761.1 |
|
|
$ |
(28,364.7 |
) |
|
$ |
6,024.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
19.4 |
|
|
$ |
|
|
|
$ |
19.4 |
|
Accounts payable |
|
|
41.9 |
|
|
|
6.7 |
|
|
|
25.8 |
|
|
|
178.0 |
|
|
|
199.4 |
|
|
|
|
|
|
|
451.8 |
|
Accrued liabilities |
|
|
7.0 |
|
|
|
30.5 |
|
|
|
84.6 |
|
|
|
204.3 |
|
|
|
197.4 |
|
|
|
|
|
|
|
523.8 |
|
Current discontinued
operations liability |
|
|
|
|
|
|
50.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50.2 |
|
Current maturities of
long-term debt |
|
|
|
|
|
|
275.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
48.9 |
|
|
|
362.4 |
|
|
|
110.4 |
|
|
|
382.3 |
|
|
|
416.2 |
|
|
|
|
|
|
|
1,320.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
2.2 |
|
|
|
922.3 |
|
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
924.6 |
|
Intercompany accounts
payable |
|
|
90.8 |
|
|
|
|
|
|
|
3,959.9 |
|
|
|
|
|
|
|
|
|
|
|
(4,050.7 |
) |
|
|
|
|
Intercompany notes
payable |
|
|
1,274.5 |
|
|
|
851.6 |
|
|
|
1,213.8 |
|
|
|
1,742.1 |
|
|
|
3,763.9 |
|
|
|
(8,845.9 |
) |
|
|
|
|
Long-term discontinued
operations liability |
|
|
|
|
|
|
761.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
761.5 |
|
Other long-term
liabilities |
|
|
|
|
|
|
50.2 |
|
|
|
86.8 |
|
|
|
72.3 |
|
|
|
176.4 |
|
|
|
|
|
|
|
385.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,414.2 |
|
|
|
2,027.9 |
|
|
|
6,293.2 |
|
|
|
2,196.7 |
|
|
|
4,356.6 |
|
|
|
(12,896.6 |
) |
|
|
3,392.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock |
|
|
2.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.3 |
) |
|
|
1.7 |
|
Class B common stock |
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.1 |
) |
|
|
|
|
Subsidiary preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
325.5 |
|
|
|
(325.5 |
) |
|
|
|
|
Subsidiary common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
285.8 |
|
|
|
(285.8 |
) |
|
|
|
|
Capital in excess of
par value |
|
|
3,248.0 |
|
|
|
|
|
|
|
751.7 |
|
|
|
1,490.2 |
|
|
|
2,655.8 |
|
|
|
(8,145.7 |
) |
|
|
|
|
Retained earnings |
|
|
1,523.6 |
|
|
|
81.9 |
|
|
|
2,888.9 |
|
|
|
1,441.9 |
|
|
|
4,529.4 |
|
|
|
(7,485.0 |
) |
|
|
2,980.7 |
|
Accumulated other non-owner changes in equity |
|
|
(217.9 |
) |
|
|
(148.0 |
) |
|
|
(299.8 |
) |
|
|
(67.8 |
) |
|
|
(392.0 |
) |
|
|
775.3 |
|
|
|
(350.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
4,556.8 |
|
|
|
(66.1 |
) |
|
|
3,340.8 |
|
|
|
2,864.3 |
|
|
|
7,404.5 |
|
|
|
(15,468.1 |
) |
|
|
2,632.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
5,971.0 |
|
|
$ |
1,961.8 |
|
|
$ |
9,634.0 |
|
|
$ |
5,061.0 |
|
|
$ |
11,761.1 |
|
|
$ |
(28,364.7 |
) |
|
$ |
6,024.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-19-
Consolidating Balance Sheets
December 31, 2008
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries, |
|
|
US, |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
Cooper |
|
|
LLC |
|
|
Inc. |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
81.6 |
|
|
$ |
1.3 |
|
|
$ |
175.9 |
|
|
$ |
|
|
|
$ |
258.8 |
|
Investments |
|
|
|
|
|
|
|
|
|
|
21.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.9 |
|
Receivables |
|
|
|
|
|
|
|
|
|
|
0.5 |
|
|
|
521.8 |
|
|
|
489.1 |
|
|
|
|
|
|
|
1,011.4 |
|
Inventories |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
336.2 |
|
|
|
305.6 |
|
|
|
|
|
|
|
641.8 |
|
Current discontinued
operations receivable |
|
|
|
|
|
|
17.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17.5 |
|
Deferred income taxes and
other current assets |
|
|
10.8 |
|
|
|
24.8 |
|
|
|
79.6 |
|
|
|
33.1 |
|
|
|
98.2 |
|
|
|
|
|
|
|
246.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
10.8 |
|
|
|
42.3 |
|
|
|
183.6 |
|
|
|
892.4 |
|
|
|
1,068.8 |
|
|
|
|
|
|
|
2,197.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, less
accumulated depreciation |
|
|
|
|
|
|
|
|
|
|
61.2 |
|
|
|
324.3 |
|
|
|
342.7 |
|
|
|
|
|
|
|
728.2 |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,266.4 |
|
|
|
1,300.9 |
|
|
|
|
|
|
|
2,567.3 |
|
Investment in subsidiaries |
|
|
2,541.5 |
|
|
|
587.4 |
|
|
|
4,438.5 |
|
|
|
1,116.9 |
|
|
|
2,734.1 |
|
|
|
(11,418.4 |
) |
|
|
|
|
Investment in parent |
|
|
|
|
|
|
|
|
|
|
3,532.7 |
|
|
|
|
|
|
|
312.7 |
|
|
|
(3,845.4 |
) |
|
|
|
|
Intercompany accounts
receivable |
|
|
|
|
|
|
903.8 |
|
|
|
|
|
|
|
1,546.2 |
|
|
|
1,564.2 |
|
|
|
(4,014.2 |
) |
|
|
|
|
Intercompany notes
receivable |
|
|
3,345.0 |
|
|
|
24.0 |
|
|
|
1,361.7 |
|
|
|
0.2 |
|
|
|
4,028.5 |
|
|
|
(8,759.4 |
) |
|
|
|
|
Long-term discontinued
operations receivable |
|
|
|
|
|
|
174.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
174.8 |
|
Deferred income taxes and
other noncurrent assets |
|
|
|
|
|
|
248.2 |
|
|
|
(9.0 |
) |
|
|
(116.5 |
) |
|
|
374.0 |
|
|
|
|
|
|
|
496.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,897.3 |
|
|
$ |
1,980.5 |
|
|
$ |
9,568.7 |
|
|
$ |
5,029.9 |
|
|
$ |
11,725.9 |
|
|
$ |
(28,037.4 |
) |
|
$ |
6,164.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
25.6 |
|
|
$ |
|
|
|
$ |
25.6 |
|
Accounts payable |
|
|
42.5 |
|
|
|
3.1 |
|
|
|
18.9 |
|
|
|
207.8 |
|
|
|
220.2 |
|
|
|
|
|
|
|
492.5 |
|
Accrued liabilities |
|
|
6.5 |
|
|
|
33.0 |
|
|
|
106.7 |
|
|
|
255.3 |
|
|
|
217.2 |
|
|
|
|
|
|
|
618.7 |
|
Current discontinued
operations liability |
|
|
|
|
|
|
50.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50.4 |
|
Current maturities of
long-term debt |
|
|
|
|
|
|
275.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
49.0 |
|
|
|
361.5 |
|
|
|
125.6 |
|
|
|
463.1 |
|
|
|
463.0 |
|
|
|
|
|
|
|
1,462.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
2.2 |
|
|
|
922.1 |
|
|
|
8.0 |
|
|
|
0.2 |
|
|
|
|
|
|
|
932.5 |
|
Intercompany accounts
payable |
|
|
10.6 |
|
|
|
|
|
|
|
4,003.6 |
|
|
|
|
|
|
|
|
|
|
|
(4,014.2 |
) |
|
|
|
|
Intercompany notes
payable |
|
|
1,155.7 |
|
|
|
851.6 |
|
|
|
1,217.1 |
|
|
|
1,742.0 |
|
|
|
3,793.0 |
|
|
|
(8,759.4 |
) |
|
|
|
|
Long-term discontinued
operations liability |
|
|
|
|
|
|
764.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
764.7 |
|
Other long-term liabilities |
|
|
|
|
|
|
49.8 |
|
|
|
62.0 |
|
|
|
70.0 |
|
|
|
216.3 |
|
|
|
|
|
|
|
398.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,215.3 |
|
|
|
2,029.8 |
|
|
|
6,330.4 |
|
|
|
2,283.1 |
|
|
|
4,472.5 |
|
|
|
(12,773.6 |
) |
|
|
3,557.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock |
|
|
2.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.3 |
) |
|
|
1.7 |
|
Class B common stock |
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.1 |
) |
|
|
|
|
Subsidiary preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
325.5 |
|
|
|
(325.5 |
) |
|
|
|
|
Subsidiary common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
348.6 |
|
|
|
(348.6 |
) |
|
|
|
|
Capital in excess of
par value |
|
|
3,365.0 |
|
|
|
|
|
|
|
753.9 |
|
|
|
1,455.0 |
|
|
|
2,561.0 |
|
|
|
(8,134.9 |
) |
|
|
|
|
Retained earnings |
|
|
1,511.3 |
|
|
|
94.4 |
|
|
|
2,778.8 |
|
|
|
1,342.3 |
|
|
|
4,381.8 |
|
|
|
(7,173.2 |
) |
|
|
2,935.4 |
|
Accumulated other non-owner changes in equity |
|
|
(197.4 |
) |
|
|
(143.7 |
) |
|
|
(294.4 |
) |
|
|
(50.5 |
) |
|
|
(363.5 |
) |
|
|
719.8 |
|
|
|
(329.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
4,682.0 |
|
|
|
(49.3 |
) |
|
|
3,238.3 |
|
|
|
2,746.8 |
|
|
|
7,253.4 |
|
|
|
(15,263.8 |
) |
|
|
2,607.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
5,897.3 |
|
|
$ |
1,980.5 |
|
|
$ |
9,568.7 |
|
|
$ |
5,029.9 |
|
|
$ |
11,725.9 |
|
|
$ |
(28,037.4 |
) |
|
$ |
6,164.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-20-
Consolidating Statements of Cash Flows
Three Months Ended March 31, 2009
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries, |
|
|
US, |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
Cooper |
|
|
LLC |
|
|
Inc |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Net cash provided by (used in)
operating activities |
|
$ |
(10.5 |
) |
|
$ |
12.3 |
|
|
$ |
19.0 |
|
|
$ |
41.0 |
|
|
$ |
103.4 |
|
|
$ |
|
|
|
$ |
165.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from short-term
investments |
|
|
|
|
|
|
|
|
|
|
6.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.3 |
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
(8.9 |
) |
|
|
(9.4 |
) |
|
|
(10.4 |
) |
|
|
|
|
|
|
(28.7 |
) |
Cash paid for acquired businesses |
|
|
|
|
|
|
|
|
|
|
(10.9 |
) |
|
|
(2.6 |
) |
|
|
(3.1 |
) |
|
|
|
|
|
|
(16.6 |
) |
Investments in affiliates |
|
|
|
|
|
|
(0.2 |
) |
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
0.4 |
|
|
|
|
|
Loans to affiliates |
|
|
|
|
|
|
|
|
|
|
(63.7 |
) |
|
|
|
|
|
|
(319.9 |
) |
|
|
383.6 |
|
|
|
|
|
Repayments of loans from affiliates |
|
|
|
|
|
|
|
|
|
|
115.4 |
|
|
|
|
|
|
|
234.7 |
|
|
|
(350.1 |
) |
|
|
|
|
Dividends from affiliates |
|
|
|
|
|
|
|
|
|
|
33.9 |
|
|
|
7.4 |
|
|
|
2.7 |
|
|
|
(44.0 |
) |
|
|
|
|
Proceeds from sales of property,
plant and equipment and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8 |
|
|
|
|
|
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities |
|
|
|
|
|
|
(0.2 |
) |
|
|
71.9 |
|
|
|
(4.6 |
) |
|
|
(95.2 |
) |
|
|
(10.1 |
) |
|
|
(38.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8.0 |
) |
|
|
(5.9 |
) |
|
|
|
|
|
|
(13.9 |
) |
Borrowings from affiliates |
|
|
357.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26.6 |
|
|
|
(383.6 |
) |
|
|
|
|
Repayments of loans to affiliates |
|
|
(314.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35.9 |
) |
|
|
350.1 |
|
|
|
|
|
Other intercompany financing
activities |
|
|
70.0 |
|
|
|
(12.1 |
) |
|
|
(37.0 |
) |
|
|
(25.8 |
) |
|
|
4.9 |
|
|
|
|
|
|
|
|
|
Dividends |
|
|
(42.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(42.1 |
) |
Dividends paid to affiliates |
|
|
(36.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7.4 |
) |
|
|
44.0 |
|
|
|
|
|
Purchases of common shares |
|
|
(25.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25.9 |
) |
Excess tax benefits from stock
options and awards |
|
|
|
|
|
|
|
|
|
|
(2.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.2 |
) |
Issuance of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.4 |
|
|
|
(0.4 |
) |
|
|
|
|
Proceeds from exercise of stock
options |
|
|
2.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities |
|
|
10.6 |
|
|
|
(12.1 |
) |
|
|
(39.2 |
) |
|
|
(33.8 |
) |
|
|
(17.3 |
) |
|
|
10.1 |
|
|
|
(81.7 |
) |
Effect of exchange rate changes on
cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.2 |
) |
|
|
|
|
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents |
|
|
0.1 |
|
|
|
|
|
|
|
51.7 |
|
|
|
2.6 |
|
|
|
(9.3 |
) |
|
|
|
|
|
|
45.1 |
|
Cash and cash equivalents,
beginning of period |
|
|
|
|
|
|
|
|
|
|
81.6 |
|
|
|
1.3 |
|
|
|
175.9 |
|
|
|
|
|
|
|
258.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of
period |
|
$ |
0.1 |
|
|
$ |
|
|
|
$ |
133.3 |
|
|
$ |
3.9 |
|
|
$ |
166.6 |
|
|
$ |
|
|
|
$ |
303.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-21-
Consolidating Statements of Cash Flows
Three Months Ended March 31, 2008
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooper |
|
|
Cooper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries, |
|
|
US, |
|
|
|
|
|
|
Other |
|
|
Consolidating |
|
|
|
|
|
|
Cooper |
|
|
LLC |
|
|
Inc |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Net cash provided by (used in)
operating activities |
|
$ |
(9.6 |
) |
|
$ |
(4.2 |
) |
|
$ |
(0.8 |
) |
|
$ |
(39.3 |
) |
|
$ |
119.1 |
|
|
$ |
|
|
|
$ |
65.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from short-term
investments |
|
|
|
|
|
|
|
|
|
|
29.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.8 |
|
Proceeds from cash restricted for
business acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
284.5 |
|
|
|
|
|
|
|
284.5 |
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
(2.4 |
) |
|
|
(11.0 |
) |
|
|
(10.2 |
) |
|
|
|
|
|
|
(23.6 |
) |
Cash paid for acquired businesses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(267.1 |
) |
|
|
|
|
|
|
(267.1 |
) |
Investments in affiliates |
|
|
|
|
|
|
|
|
|
|
(4.3 |
) |
|
|
(3.1 |
) |
|
|
|
|
|
|
7.4 |
|
|
|
|
|
Loans to affiliates |
|
|
(90.8 |
) |
|
|
|
|
|
|
(168.5 |
) |
|
|
|
|
|
|
(303.6 |
) |
|
|
562.9 |
|
|
|
|
|
Repayments of loans from affiliates |
|
|
162.4 |
|
|
|
|
|
|
|
161.2 |
|
|
|
|
|
|
|
150.3 |
|
|
|
(473.9 |
) |
|
|
|
|
Dividends from affiliates |
|
|
|
|
|
|
|
|
|
|
34.1 |
|
|
|
|
|
|
|
|
|
|
|
(34.1 |
) |
|
|
|
|
Proceeds from sales of property,
plant and equipment and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2 |
|
|
|
0.1 |
|
|
|
|
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities |
|
|
71.6 |
|
|
|
|
|
|
|
49.9 |
|
|
|
(13.9 |
) |
|
|
(146.0 |
) |
|
|
62.3 |
|
|
|
23.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of debt |
|
|
|
|
|
|
|
|
|
|
297.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
297.6 |
|
Proceeds from debt derivatives |
|
|
|
|
|
|
|
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.5 |
|
Repayments of debt |
|
|
|
|
|
|
|
|
|
|
(186.2 |
) |
|
|
|
|
|
|
(6.6 |
) |
|
|
|
|
|
|
(192.8 |
) |
Borrowings from affiliates |
|
|
460.8 |
|
|
|
3.3 |
|
|
|
5.0 |
|
|
|
3.1 |
|
|
|
90.7 |
|
|
|
(562.9 |
) |
|
|
|
|
Repayments of loans to affiliates |
|
|
(304.2 |
) |
|
|
|
|
|
|
(65.4 |
) |
|
|
|
|
|
|
(104.3 |
) |
|
|
473.9 |
|
|
|
|
|
Other intercompany financing
activities |
|
|
2.0 |
|
|
|
0.9 |
|
|
|
6.6 |
|
|
|
54.9 |
|
|
|
(68.6 |
) |
|
|
4.2 |
|
|
|
|
|
Dividends |
|
|
(38.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(38.2 |
) |
Dividends paid to affiliates |
|
|
(34.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34.1 |
|
|
|
|
|
Purchases of common shares |
|
|
(153.9 |
) |
|
|
|
|
|
|
(112.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(266.4 |
) |
Excess tax benefits from stock
options and awards |
|
|
|
|
|
|
|
|
|
|
2.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.7 |
|
Issuance of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.4 |
|
|
|
(7.4 |
) |
|
|
|
|
Proceeds from exercise of stock
options |
|
|
4.3 |
|
|
|
|
|
|
|
5.9 |
|
|
|
|
|
|
|
|
|
|
|
(4.2 |
) |
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities |
|
|
(63.3 |
) |
|
|
4.2 |
|
|
|
(45.8 |
) |
|
|
58.0 |
|
|
|
(81.4 |
) |
|
|
(62.3 |
) |
|
|
(190.6 |
) |
Effect of exchange rate changes on
cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.9 |
|
|
|
|
|
|
|
7.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents |
|
|
(1.3 |
) |
|
|
|
|
|
|
3.3 |
|
|
|
4.8 |
|
|
|
(100.4 |
) |
|
|
|
|
|
|
(93.6 |
) |
Cash and cash equivalents,
beginning of period |
|
|
1.3 |
|
|
|
|
|
|
|
23.1 |
|
|
|
(1.1 |
) |
|
|
209.5 |
|
|
|
|
|
|
|
232.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of
period |
|
$ |
|
|
|
$ |
|
|
|
$ |
26.4 |
|
|
$ |
3.7 |
|
|
$ |
109.1 |
|
|
$ |
|
|
|
$ |
139.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-22-
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 magnitude of any disruptions from manufacturing rationalizations, changes in mix of
products sold, mergers and acquisitions and their integration into Cooper, the timing and amount of
any stock repurchases by Cooper, changes in financial markets including currency exchange rate
fluctuations, changing legislation and regulations including changes in tax law, tax treaties or
tax regulations, and the resolution of potential liabilities and insurance recoveries resulting
from on-going Pneumo-Abex related asbestos claims.
The above description of risks and uncertainties is by no means all-inclusive, but is designed to
highlight what we believe are important factors to consider. For a more detailed description of
risk factors, please see Part II 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 Ltd. and, where the context
requires, includes our subsidiaries.
Results of Operations
Three Months Ended March 31, 2009 Compared With Three Months Ended March 31, 2008
Income from continuing operations for the first quarter of 2009 was $81.2 million on revenues
of $1,256.8 million compared with 2008 first quarter income from continuing operations of $153.4
million on revenues of $1,546.1 million. First quarter diluted earnings per share from continuing
operations decreased 44% to $.48 from $.86 in 2008. During the first quarter of 2009, reported
income from continuing operations was reduced by restructuring charges of $8.8 million or $.04 per
share. Reported income from continuing operations was favorably impacted by discrete tax items
related to foreign taxes which improved reported earnings per share by $.05 per share. During the
first quarter of 2008, currency related gains and discrete tax items increased earnings per share
from continuing operations by $.05 per share.
-23-
Revenues:
Revenues for the first quarter of 2009 decreased 19% compared to the first quarter of 2008.
The impact of acquisitions increased comparable revenues for the first quarter 2009 by
approximately 2% with currency translation decreasing reported revenues by 4% for the quarter.
Electrical Products segment revenues decreased 17% compared to the first quarter of 2008. The
impact of acquisitions increased revenues by approximately 2% for the quarter and unfavorable
currency translation decreased reported revenues by nearly 4% for the quarter. The global
recession resulted in weakness in all markets for the Electrical Products segment, especially the
North America and Western European markets which reported revenue declines of nearly 18%.
Tools segment revenues for the first quarter of 2009 decreased 32% from the first quarter of
2008. Unfavorable currency translation decreased revenues by approximately 7% over the first
quarter of 2008. Continuing lower revenues from declining retail market activity, weaker demand in
the North American and Western Europe industrial market and lower requirements for assembly systems
for the light passenger vehicle markets drove the reduction in revenue.
Costs and Expenses:
Cost of sales, as a percentage of revenues, was 70.4% for the first quarter of 2009 compared
to 66.1% for the comparable 2008 quarter. The increase in the cost of sales percentage resulted
from negative leverage on fixed costs due to lower demand for products, additional production
curtailments to reduce overall inventory levels to align with slowing market demands, and the
higher cost of commodities not fully offset by available market price increases in certain product
lines.
Electrical Products segment cost of sales, as a percentage of revenues, was 69.7% for the
first quarter of 2009 compared to 65.7% for the first quarter of 2008. The increase in cost of
sales as a percentage of revenues in comparison to the prior year first quarter was due to negative
leverage of fixed costs from reduced demand due to the global market slowdown, additional actions
taken to adjust inventory levels to forecasted declining market conditions and higher cost of
commodities subject to extended purchase contracts and hedging activities not fully offset by
available market price increases in certain product lines. Tools segment cost of sales, as a
percentage of revenues, was 77.9% for the first quarter of 2009 compared to 68.9% for the first
quarter of 2008. The increase in the cost of sales percentage was driven by unfavorable leverage
of fixed costs due to lower production volumes and further actions taken to adjust inventory levels
to market conditions.
Selling and administrative expenses, as a percentage of revenues, for the first quarter of
2009 was 20.4% compared to 19.5% for the first quarter of 2008. The increase in percentage is
reflective of the reduced revenue levels offset by cost reduction actions taken to align the
overall selling and administrative expenses with current and projected market demand. Currency
related gains of $5.1 million in the first quarter of 2008 reduced the comparative corporate
selling and administrative expenses.
Electrical Products segment selling and administrative expenses, as a percentage of revenues
for the first quarter of 2009, were 18.0% compared to 17.9% for the first quarter of 2008. The
increase in percentage reflects the impact of 17% lower comparable revenue levels for the first
quarter 2009 which impact was nearly offset by cost reduction actions taken during the fourth
quarter of 2008 and the first quarter of 2009 to adjust segment selling and administrative expenses
to global market conditions.
Tools segment selling and administrative expenses, as a percentage of revenues for the first
quarter of 2009, were 25.2% compared to 21.8% for the first quarter of 2008. The increase in
selling and administrative expenses, as a percentage of revenues, was driven by the 32% reduction
in comparable first quarter 2009 revenues partially offset by cost reduction actions implemented
for the segment.
-24-
Net interest expense in the first quarter of 2009 increased $0.3 million from the 2008 first
quarter, primarily as a result of higher average interest rates partially offset by lower average
borrowings and lower interest earned on cash invested. Average debt balances were $1.23 billion
and $1.39 billion and average interest rates were 5.34% and 5.05% for the first quarter of 2009 and
2008, respectively.
Operating Earnings:
Electrical Products segment first quarter 2009 operating earnings decreased 37% to $140.0
million from $223.5 million for the same quarter of last year. The decrease resulted from the
reduced global market demand, adjustments to production volumes to align with the market demand and
the impact of higher costs for commodities not offset by available price increases in the market
for certain product lines. The Electrical Products segment continues its investment in productivity
initiatives which include manufacturing productivity improvements, product redesign and selling and
administrative expense reductions to improve operating earnings in addition to continuing review of
additional restructuring actions.
Tools segment first quarter 2009 operating loss was $3.9 million compared to operating
earnings of $17.2 million in the first quarter of 2008. The decrease resulted from the impact of
lower unit volumes and further curtailment of production volumes to adjust inventory levels to
current and forecasted market demand. The Tools segment continues its investment in productivity
initiatives to improve operating earnings in addition to continuing review of additional
restructuring actions.
Restructuring:
At December 31, 2008, Cooper had an accrual of $29.7 million for future cash expenditures
related to its fourth quarter 2008 restructuring actions. The fourth quarter 2008 restructuring
actions included the elimination of 1,314 hourly and 930 salaried positions.
In the first quarter of 2009, Cooper recorded a pre-tax restructuring charge of $8.8 million
primarily for severance costs as a result of managements ongoing assessment of its hourly and
salary workforce and its required production capacity in consideration of current and anticipated
market conditions and demand levels. An incremental total of 340 hourly and 309 salary positions
are being eliminated as a result of the first quarter 2009 restructuring actions to reduce Coopers
workforce.
During the first quarter of 2009, Cooper expended $15.9 million in cash related to its fourth
quarter 2008 restructuring actions and an additional $1.9 million for the first quarter 2009
restructuring actions. At March 31, 2009, Cooper has an accrual for future cash expenditures
related to the restructuring actions of $20.7 million. The related cash payments will be
substantially completed in 2009. See Note 2 of the Notes to the Consolidated Financial Statements.
Income Taxes:
The effective tax rate was 10.9% for the three months ended March 31, 2009 and 26.1% for the
three months ended March 31, 2008. Cooper reduced income taxes expense by $8.4 million and $4.6
million in the first quarter of 2009 and 2008, respectively, for discrete tax items primarily
related to foreign taxes. Excluding the impacts of these discrete items, Coopers effective tax
rate for the first quarter of 2009 would have been 20.1% and 28.3 % in the first quarter of 2008.
This decrease is primarily related to lower earnings in 2009 without a corresponding decrease in
projected tax benefits.
Income Related to Discontinued Operations:
During the first quarter of 2009, Cooper recognized a gain from discontinued operations of
$18.9 million, net of a $12.0 million income tax expense (or $.11 per diluted share) related to its
asbestos liability regarding the Automotive Products segment, which was sold in 1998. The income
resulted from negotiated insurance settlements consummated in the first quarter of 2009 that were
not previously recognized. Cooper believes that it is likely that additional insurance recoveries
will be recorded in the future as new insurance-
-25-
in-place agreements are consummated or settlements with insurance carriers are completed.
Timing and value of these agreements and settlements cannot be currently estimated as they may be
subject to extensive additional negotiation and litigation. See Note 16 of the Notes to the
Consolidated Financial Statements.
Liquidity and Capital Resources
Liquidity:
Coopers operating working capital (defined as receivables and inventories less accounts
payable) decreased $102.0 million during the first quarter of 2009. A $111.3 million decrease in
receivables and a $31.4 million decrease in inventories, partially offset by a $40.7 million
decrease in accounts payable, were driven primarily by a 19% decrease in sales and aggressive
actions to right size Coopers businesses for current market conditions. Coopers operating
working capital at March 31, 2009 was approximately 20% lower than at March 31, 2008 as operating
working capital levels were adjusted to the current lower operating levels. Operating working
capital turnover (defined as annualized revenues divided by average quarterly operating working
capital) for the 2009 first quarter was 4.5 turns as compared to the 5.0 turns reported for the
same period of 2008.
Cash provided by operating activities was $165.2 million during the 2009 first quarter. This
cash, plus $6.3 million from redemption of short-term investments and $2.4 million of cash received
from stock option exercises, was primarily used to fund capital expenditures of $28.7 million,
acquisitions of $16.6 million, dividends of $42.1 million, debt repayments of $13.9 million and
share purchases of $25.9 million.
Cash provided by operating activities was $65.2 million during the 2008 first quarter. This
cash, plus $298.1 million of proceeds from a debt issuance, $284.5 million of proceeds from cash
previously restricted, $29.8 million from redemption of short-term investments, $6.0 million of
cash received from stock option exercises and an additional $93.6 million of cash and cash
equivalents, was primarily used to fund capital expenditures of $23.6 million, acquisitions of
$267.1 million, dividends of $38.2 million, debt repayments of $192.8 million and share purchases
of $266.4 million.
As discussed in Note 16 of Notes to the Consolidated Financial Statements, Coopers contingent
liabilities related to the Automotive Products sale to Federal-Mogul in 1998 will continue to be
resolved through the tort system. Cooper anticipates that the annual cash outlay for its potential
asbestos liability, net of insurance recoveries, will average in the range of $20 to $30 million,
although the amounts will vary as the amount of the actual net cash outlay is not reasonably
predictable. In 2009, insurance recoveries will likely exceed cash outlays.
Historically, Cooper has relied on the commercial paper markets to fund its operations.
Although recent distress in the financial markets has not had a significant impact on Coopers
financial position or liquidity as of the date of this filing in 2009, management continues to
monitor the financial markets and general global economic conditions. If changes in financial
markets or other areas of the economy adversely affect Coopers access to the commercial paper
markets, Cooper would expect to rely on available cash to provide short-term funding.
Coopers financial position and liquidity remains strong as the global economic recession
continues. It is likely that most markets that Cooper services will experience declines over the
next twelve months. While the length and depth of the recession are not predictable, Cooper is
proactively adjusting our cost structure. In this regard, in the fourth quarter of 2008, Cooper
implemented contingency plans to reduce our cost structure and recognized a restructuring charge of
$35.7 million primarily related to reductions in our workforce in excess of 2,200 employees. In the
first quarter of 2009, Cooper further reduced its workforce by another 650 employees and recognized
a restructuring charge of $8.8 million. Cooper anticipates that these restructuring activities
related to reductions in the workforce, contract terminations, and other exit costs and the related
cash payments will be substantially completed in 2009. At March 31, 2009, Cooper had a $20.7
million accrual related to these activities. Cash flows from operating activities for the first
quarter of 2009
-26-
are reduced by the $17.8 million expended in connection with the restructuring actions. See Note 2
of the Notes to the Consolidated Financial Statements for further information.
Cooper currently anticipates that it will implement additional restructuring actions during
2009 as it continues to evaluate its cost structure and currently expects to incur restructuring
charges in the range of $24 to $30 million during 2009, with approximately $10 million expected
during the second quarter of 2009.
Cooper has $275 million of long-term debt that matures in November 2009. Cooper currently
anticipates that it will annually generate in excess of $500 million in cash flow available for
acquisitions, debt repayments, dividends and common stock repurchases.
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 31.7% at March 31, 2009, 32.1% at December 31, 2008 and 34.4% at March 31,
2008.
At March 31, 2009 and December 31, 2008, Cooper had cash and cash equivalents of $303.9
million and $258.8 million, respectively and short-term investments of $15.6 million and $21.9
million, respectively. At March 31, 2009 and December 31, 2008, Cooper had short-term debt of
$19.4 million and $25.6 million, respectively.
Coopers practice is to back up its short-term debt balance with a combination of cash, cash
equivalents, and committed credit facilities. At March 31, 2009, Cooper has $516 million of
committed credit facilities, of which $16 million matures in September 2009 and $500 million
matures in November 2009. Short-term debt, to the extent not backed up by cash or short-term
investments, reduces the amount of additional liquidity provided by the committed credit
facilities.
The credit facility agreements are not subject to termination based on a decrease in Coopers
debt ratings or a material adverse change clause. The principal financial covenants in the
agreements limit Coopers debt-to-total capitalization ratio to 60% and require Cooper to maintain
a minimum earnings before interest expense, income taxes, depreciation and amortization to interest
ratio of 3 to 1. Cooper is in compliance with all covenants set forth in the credit facility
agreements.
Cooper is currently negotiating a new committed credit facility prior to the maturity of the
current facility. However, there can be no assurance that a new facility will be negotiated in
that time, or at all, and it is likely that the terms of a new facility will not be as attractive
as in the existing facility that expires in November 2009. Cooper is evaluating the size of the
new facility necessary to provide flexibility in light of the increased costs related to a new
committed 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 facilities to provide short-term funding.
The committed credit facilities do not contain any provision, which makes their availability to
Cooper dependent on Coopers credit ratings.
Even though the commercial paper markets have been stable and conducive to issuances during
the first quarter of 2009, the continued volatility in the credit and financial markets could
result in the commercial paper markets not being conducive to the issuance of commercial paper or,
if issued, the commercial paper may not be at reasonably attractive interest rates. See further
discussion above under Liquidity.
-27-
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, 2008. No significant changes have occurred to those policies except our adoption
of SFAS No. 141(R) effective January 1, 2009. 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 Cooper. Cooper implemented SFAS No. 141(R)
prospectively to business combinations completed on or after January 1, 2009. See Note 1 of the
Notes to the Consolidated Financial Statements.
Cooper had goodwill of $2.55 billion and $2.57 billion at March 31, 2009 and December 31,
2008, respectively. Cooper records goodwill related to business acquisitions when the purchase
price exceeds the fair value of identified assets and liabilities acquired. Under Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS No. 142),
goodwill is subject to an annual impairment test. Cooper has designated January 1 as the date of
its annual goodwill impairment test. If an event occurs, or circumstances change, that would more
likely than not reduce the fair value of a reporting unit below its carrying value; an interim
impairment test would be performed between annual tests. Cooper has identified eight reporting
units for which goodwill is tested for impairment.
Goodwill impairment is evaluated using a two-step process. The first step of the goodwill
impairment test compares the fair value of a reporting unit with its carrying value. If the
carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill
impairment test shall be performed. The second step compares the implied fair value of the
reporting units goodwill to the carrying amount of its goodwill to measure the amount of
impairment loss. The implied fair value of goodwill is determined in the same manner as the amount
of goodwill recognized in a business combination (e.g., the fair value of the reporting unit is
allocated to all of the assets and liabilities, including any unrecognized intangible assets, as if
the reporting unit had been acquired in a business combination and the fair value of the reporting
unit was the purchase price paid to acquire the reporting unit).
The primary technique we utilize in estimating the fair value of our reporting units is
discounted cash flow analysis. Discounted cash flow analysis requires us to make various judgments,
estimates and assumptions about future sales, operating margins, growth rates, capital
expenditures, working capital and discount rates. The starting point for these assumptions is the
long range financial forecast. The detailed planning process that we undertake to prepare the long
range financial forecast takes into consideration a multitude of factors including inflationary and
deflationary forces, pricing strategies, customer analysis, operational issues, competitor
analysis, customer needs and other marketplace data, among others. Assumptions are also made for
perpetual growth rates for periods beyond the long range financial forecast period.
The long range financial forecast is typically completed in the third quarter of each year,
and it serves as the primary basis for our estimate of reporting unit fair values, absent
significant changes in our outlook on future results. In the fourth quarter of 2008, the global
financial and credit crisis and economic slowdown impacted the majority of our businesses. As a
result, we revised the operating plans and discounted cash flows included in our initial long range
financial forecast for each reporting unit to reflect our most current assessment of estimated fair
value for purposes of the January 1, 2009 goodwill impairment test. In addition, we compared the
sum of the fair values that resulted from our discounted cash flow analysis to our market
capitalization to determine that our estimates of fair value were reasonable. As of December 31,
2008, our equity market capitalization was approximately $5.1 billion, compared to the $2.6 billion
book value of equity.
In the first step of our January 1, 2009 impairment tests, we determined that, in all cases,
the estimated fair value of each reporting unit exceeded its carrying value by at least 35 percent;
therefore, step two of the goodwill impairment test was not required for any reporting unit. There
are significant inherent uncertainties and management judgment involved in estimating the fair
value of each reporting unit. While we believe we have made reasonable estimates and assumptions to
estimate the fair value of our reporting
-28-
units, it is possible that a material change could occur. If actual results are not consistent
with our current estimates and assumptions, we may be required to perform the second step of the
impairment test, which could result in a material impairment of our goodwill.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
As of March 31, 2009, 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, 2008.
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:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Electrical Products |
|
$ |
616.0 |
|
|
$ |
804.2 |
|
Tools |
|
|
55.1 |
|
|
|
71.3 |
|
|
|
|
|
|
|
|
|
|
$ |
671.1 |
|
|
$ |
875.5 |
|
|
|
|
|
|
|
|
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.
PART II OTHER INFORMATION
Item 1.
Legal Proceedings
Discontinued Operations Liability
Information regarding the discontinued operations liability is incorporated by reference to
Note 16 of Notes to the Consolidated Financial Statements included in Part I of this Form 10-Q.
-29-
Other Matters
Cooper and its subsidiaries are defendants or otherwise involved in a number of lawsuits in
the ordinary course of business. We estimate the range of our liability related to pending
litigation when we believe the amount and range of loss can be estimated. We record our 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, we record the minimum estimated
liability related to the lawsuits or claims. As additional information becomes available, we
assess the potential liability related to our pending litigation and claims and revise our
estimates. Due to uncertainties related to the resolution of lawsuits and claims, the ultimate
outcome may differ from our estimates. In the opinion of management and based on liability
accruals provided, our ultimate exposure with respect to these pending lawsuits and claims is not
expected to have a material adverse effect on our consolidated financial position or cash flows,
although they could have a material adverse effect on our 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. The Company has self-reported to the Department of Defense certain transactions
aggregating approximately $8 million with U.S. government entities which may be subject to the
legislation. At the time of this filing, it is too early to determine whether any fines or
penalties may be assessed against the Company.
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, 2008.
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 March 31, 2009:
Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total Number of Shares |
|
|
Maximum Number of |
|
|
|
Total Number of |
|
|
Average Price |
|
|
Purchased as Part of |
|
|
Shares that May Yet Be |
|
|
|
Shares |
|
|
Paid per |
|
|
Publicly Announced Plans |
|
|
Purchased Under the |
|
Period |
|
Purchased |
|
|
Share |
|
|
or Programs (1) |
|
|
Plans or Programs (1) |
|
As of 12/31/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,029,435 |
|
1/01/09 1/31/09 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
4,029,435 |
|
2/01/09 2/28/09 |
|
|
113,461 |
|
|
$ |
22.37 |
|
|
|
113,461 |
|
|
|
13,915,974 |
|
3/01/09 3/31/09 |
|
|
1,142,339 |
|
|
$ |
20.43 |
|
|
|
1,142,339 |
|
|
|
12,773,635 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total |
|
|
1,255,800 |
|
|
$ |
20.61 |
|
|
|
1,255,800 |
|
|
|
|
|
|
|
|
(1) |
|
On February 12, 2008, Coopers Board of Directors authorized the repurchase of up to
ten million shares of Cooper Class A common stock. On February 9, 2009, Cooper announced that
the Board of Directors authorized the repurchase of ten million shares of common stock in
addition to the remaining February 12, 2008 authorization, which is reflected in the above
table. Cooper has also announced that the Board 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 2009, Coopers current estimate is that one million shares will be issued under
equity compensation plans, which is reflected in the above table. |
|
(2) |
|
As of the date of this filing in 2009, Cooper had repurchased the one million shares
intended to offset dilution from share issuances under equity compensation plans, as well as
262,800 additional shares |
-30-
|
|
|
|
|
under the Cooper Board of Directors authorizations discussed above. Cooper may continue to
repurchase shares under this authorization from time to time during 2009. 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
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 6.
Exhibits
|
10.1 |
|
Form of Cooper US, Inc. Executive Stock Incentive Agreement for the 2009
Performance Period. |
|
|
10.2 |
|
First Amendment to Cooper Industries, Ltd. Amended and Restated Directors
Deferred Compensation Plan (November 4, 2008 Restatement). |
|
|
10.3 |
|
First Amendment to Cooper Industries, Ltd. Amended and Restated Directors
Stock Plan (November 4, 2008 Restatement). |
|
|
10.4 |
|
First Amendment to Cooper Industries, Ltd. Amended and Restated Directors
Retainer Fee Stock Plan (November 4, 2008 Restatement). |
|
|
12. |
|
Computation of Ratios of Earnings to Fixed Charges for the Calendar Years 2004
through 2008 and the Three Months Ended March 31, 2009 and 2008. |
|
|
31.1 |
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
31.2 |
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
32.1 |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
32.2 |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
-31-
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Cooper Industries, Ltd. |
|
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(Registrant)
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Date: April 30, 2009
|
|
/s/ Terry A. Klebe |
|
|
|
|
|
|
|
|
|
Terry A. Klebe, Senior Vice President and |
|
|
|
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Chief Financial Officer |
|
|
|
|
|
|
|
Date: April 30, 2009
|
|
/s/ Rick L. Johnson |
|
|
|
|
|
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|
|
|
Rick L. Johnson, Vice President, Controller and |
|
|
|
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Chief Accounting Officer |
|
|
-32-
Exhibit Index
Exhibit No.
|
10.1 |
|
Form of Cooper US, Inc. Executive Stock Incentive Agreement for the 2009
Performance Period. |
|
|
10.2 |
|
First Amendment to Cooper Industries, Ltd. Amended and Restated Directors
Deferred Compensation Plan (November 4, 2008 Restatement). |
|
|
10.3 |
|
First Amendment to Cooper Industries, Ltd. Amended and Restated Directors
Stock Plan (November 4, 2008 Restatement). |
|
|
10.4 |
|
First Amendment to Cooper Industries, Ltd. Amended and Restated Directors
Retainer Fee Stock Plan (November 4, 2008 Restatement). |
|
|
12. |
|
Computation of Ratios of Earnings to Fixed Charges for the Calendar Years 2004
through 2008 and the three months ended March 31, 2009 and 2008. |
|
|
31.1 |
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
31.2 |
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
32.1 |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
32.2 |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |