<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended March 31, 2000
OR
[ ] 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 1-1175
--------------------------------------------------------
Cooper Industries, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Ohio 31-4156620
- -------------------------------------------------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Travis, Suite 5800 Houston, Texas 77002
- -------------------------------------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
(713) 209-8400
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Number of shares outstanding of issuer's common stock as of April 28, 2000 was
93,178,181.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COOPER INDUSTRIES, INC.
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2000 1999
----------- ---------
(in millions, where applicable)
<S> <C> <C>
Revenues ............................... $ 1,038.9 $ 924.7
Cost of sales .......................... 701.7 622.0
Selling and administrative expenses .... 176.4 156.3
Goodwill amortization .................. 13.4 11.3
Nonrecurring charges ................... -- 3.7
Interest expense, net .................. 18.3 13.2
----------- ---------
Income before income taxes ......... 129.1 118.2
Income taxes ........................... 45.2 42.6
----------- ---------
Net income ......................... $ 83.9 $ 75.6
=========== =========
Income per Common Share:
Basic .............................. $ .89 $ .80
=========== =========
Diluted ............................ $ .89 $ .80
=========== =========
Cash dividends per Common Share ........ $ .35 $ .33
=========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 3
COOPER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------- ------------
ASSETS (in millions)
<S> <C> <C>
Cash and cash equivalents ............... $ 23.4 $ 26.9
Receivables ............................. 809.9 740.3
Inventories ............................. 661.8 569.3
Deferred income taxes and
other current assets .................. 164.2 130.1
---------- ----------
Total current assets ........... 1,659.3 1,466.6
---------- ----------
Property, plant and equipment,
less accumulated depreciation.......... 805.0 768.0
Goodwill, less accumulated
amortization .......................... 1,764.8 1,739.0
Deferred income taxes and other
noncurrent assets ..................... 170.6 169.8
---------- ----------
Total assets ................... $ 4,399.7 $ 4,143.4
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt ......................... $ 112.0 $ 191.2
Accounts payable ........................ 397.9 393.4
Accrued liabilities ..................... 503.1 492.5
Accrued income taxes .................... 36.9 6.6
Current maturities of long-term debt .... 52.0 2.1
---------- ----------
Total current liabilities ...... 1,101.9 1,085.8
---------- ----------
Long-term debt .......................... 1,129.7 894.5
Postretirement benefits other than
pensions .............................. 220.5 224.4
Other long-term liabilities ............. 195.8 195.6
---------- ----------
Total liabilities .............. 2,647.9 2,400.3
---------- ----------
Common stock, $5.00 par value ........... 615.0 615.0
Capital in excess of par value .......... 669.4 671.7
Retained earnings ....................... 2,049.4 1,998.1
Common stock held in treasury, at cost .. (1,483.9) (1,449.3)
Unearned employee stock ownership plan
compensation .......................... (17.6) (23.0)
Accumulated other non-owner changes
in equity ............................. (80.5) (69.4)
---------- ----------
Total shareholders' equity ..... 1,751.8 1,743.1
---------- ----------
Total liabilities and
shareholders' equity ......... $ 4,399.7 $ 4,143.4
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE> 4
COOPER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
2000 1999
-------- -------
(in millions)
<S> <C> <C>
Cash flows from operating activities:
Net income ................................. $ 83.9 $ 75.6
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization .............. 40.0 35.9
Deferred income taxes ...................... 2.8 10.5
Changes in assets and liabilities: (1)
Receivables ............................ (36.5) (50.5)
Inventories ............................ (49.7) (28.5)
Accounts payable and accrued
liabilities .......................... (2.0) (15.1)
Accrued income taxes ................... 30.3 8.2
Other assets and liabilities, net ...... (23.4) (4.3)
-------- -------
Net cash provided by
operating activities ........... 45.4 31.8
Cash flows from investing activities:
Cash paid for acquired businesses .......... (135.2) --
Capital expenditures ....................... (51.5) (35.7)
Proceeds from disposition of business ...... -- 29.1
Proceeds from sales of property,
plant and equipment ...................... 2.9 2.8
-------- -------
Net cash used in investing
activities ..................... (183.8) (3.8)
Cash flows from financing activities:
Proceeds from issuances of debt ............ 208.7 --
Repayments of debt ......................... (2.5) (3.9)
Dividends .................................. (32.7) (31.1)
Acquisition of treasury shares ............. (39.3) --
Activity under employee stock plans ........ 0.6 2.3
-------- -------
Net cash provided by (used in)
financing activities ........... 134.8 (32.7)
Effect of exchange rate changes on cash
and cash equivalents ......................... 0.1 (1.0)
-------- -------
Decrease in cash and cash equivalents .......... (3.5) (5.7)
Cash and cash equivalents, beginning of period . 26.9 20.4
-------- -------
Cash and cash equivalents, end of period ....... $ 23.4 $ 14.7
======== =======
</TABLE>
(1) Net of the effects of acquisitions and translation.
The accompanying notes are an integral part of these statements.
-4-
<PAGE> 5
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
Basis of Presentation - The financial information presented as of any
date other than December 31 has been prepared from the books and records without
audit. Financial information as of December 31 has been derived from Cooper's
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial information for the periods indicated, have
been included. For further information regarding Cooper's accounting policies,
refer to the Consolidated Financial Statements and related notes for the year
ended December 31, 1999 included as Appendix A to Cooper's Proxy Statement dated
March 8, 2000.
Derivative Financial Instruments and Hedging Activities - In June 1998,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS No. 133"). SFAS No. 133 requires that all derivatives be
recognized as assets and liabilities and measured at fair value. The accounting
for changes in the fair value of a derivative depends on the intended use of the
derivative and the resulting designation. SFAS No. 133, as amended by Statement
of Financial Accounting Standards No. 137, Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133, is effective for fiscal years beginning after June 15, 2000 and early
adoption is permitted. Cooper is currently evaluating the effects of the new
standard.
NOTE 2. NONRECURRING CHARGES
During the fourth quarter of 1998, Cooper announced a voluntary and
involuntary severance program and committed to consolidate several facilities.
While both the voluntary and involuntary severance programs were announced in
1998, the amount that could be accrued in 1998 was limited to severance relating
to personnel actually severed in the fourth quarter and the severance provided
by Cooper's written formal policies. During the first quarter of 1999, Cooper
completed the voluntary program and accrued an additional $5.8 million primarily
representing the voluntary severance program premium over the severance provided
under Cooper's established policies. Cooper also accrued $1.5 million related to
severance and other costs for facility closures announced during the first
quarter of 1999. The additional accruals during the first quarter of 1999
totaled $7.3 million. In addition, during the first quarter of 1999, Cooper
reduced legal accruals by $2.8 million related to the favorable settlement of
certain litigation concerning lead in mini-blinds and reassessment of the
required reserve. Cooper also reached agreement and received $.8 million under
an insurance policy related to the unsuccessful offer to acquire TLG plc in
1998. Since the original charge related to the litigation was included as a
nonrecurring item in the Tools & Hardware segment and the costs related to TLG
plc were reflected as a nonrecurring corporate item, the reversal of the accrual
and the reimbursement of the expenses were reflected as nonrecurring items. The
net nonrecurring items for the first quarter of 1999 resulted in a $3.7 million
charge before income taxes and resulted in an after tax charge of $2.4 million
($.02 per diluted common share). See "Nonrecurring Income and Expenses" in
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
-5-
<PAGE> 6
NOTE 3. ACQUISITIONS AND DIVESTITURES
During the first quarter of 2000, Cooper completed two acquisitions in
its Electrical Products segment. In March 2000, Cooper acquired Eagle Electric
for a total cost of $129.8 million. Eagle manufactures and sells electrical
wiring devices including switches, receptacles, plugs and connectors, cords and
other electrical accessories to the residential and commercial markets. Cooper
also acquired a small Indian manufacturer of electrical products.
The acquisitions have been accounted for as purchase transactions and
the results of the acquisitions are included in Cooper's consolidated income
statements from the date of acquisition.
On October 9, 1998, Cooper completed the sale of the Automotive
Products segment for cash proceeds of $1.9 billion. During the first quarter of
1999, Cooper received an additional $29.1 million as a partial reimbursement of
Cooper's cash funding of international automotive operations prior to the
separation from Cooper.
NOTE 4. INVENTORIES
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
(in millions)
<S> <C> <C>
Raw materials ......................................... $ 222.1 $ 196.9
Work-in-process ....................................... 146.8 133.6
Finished goods ........................................ 350.9 299.5
Perishable tooling and supplies ....................... 20.0 20.1
-------- --------
739.8 650.1
Excess of current standard costs over LIFO costs ...... (78.0) (80.8)
-------- --------
Net inventories ............................ $ 661.8 $ 569.3
======== ========
</TABLE>
NOTE 5. LONG-TERM DEBT
At March 31, 2000, commercial paper and bank loans totaling $500
million were reclassified to long-term debt, reflecting Cooper's intention to
refinance this amount during the 12-month period following the balance sheet
date through either continued short-term borrowing or utilization of available
revolving bank credit facilities.
During 1999, Cooper completed a shelf registration statement to issue
up to $500 million of debt securities. At March 31, 2000, all $500 million of
the shelf registration was available to be issued.
NOTE 6. COMMON STOCK
During the first quarter of 2000, Cooper repurchased 1.1 million shares
of its common stock at a cost of $39.3 million.
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<PAGE> 7
NOTE 7. SEGMENT INFORMATION
<TABLE>
<CAPTION>
REVENUES OPERATING EARNINGS
------------------------ -----------------------
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------ -----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
(in millions)
<S> <C> <C> <C> <C>
Electrical Products................................... $ 839.1 $ 728.5 $ 133.2 $ 121.4
Tools & Hardware...................................... 199.8 196.2 22.0 23.3
--------- --------- --------- ---------
Total management reporting......................... $ 1,038.9 $ 924.7 155.2 144.7
========= =========
Segment nonrecurring and unusual items:
Electrical Products................................ - 3.0
Tools & Hardware................................... - 1.5
--------- ---------
- 4.5
Net segment operating earnings:
Electrical Products................................ 133.2 118.4
Tools & Hardware................................... 22.0 21.8
--------- ---------
155.2 140.2
General corporate expenses............................ 7.8 9.6
General corporate nonrecurring items.................. - (0.8)
Interest expense, net................................. 18.3 13.2
--------- ---------
Income before income taxes............................ $ 129.1 $ 118.2
========= =========
</TABLE>
NOTE 8. NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
BASIC DILUTED
------------------------- ------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------- ------------------------
2000 1999 2000 1999
------------ ---------- ------------ ----------
(in millions)
<S> <C> <C> <C> <C>
Net income applicable to Common stock................. $ 83.9 $ 75.6 $ 83.9 $ 75.6
========= ========= ========= =========
Weighted average Common shares outstanding............ 93.8 94.0 93.8 94.0
========= =========
Incremental shares from assumed conversions:
Options, performance-based stock
awards and other employee awards............... 0.6 0.7
--------- ---------
Weighted average Common shares
and Common share equivalents...................... 94.4 94.7
--------- ---------
</TABLE>
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<PAGE> 8
NOTE 9. NET INCOME AND OTHER NON-OWNER CHANGES IN EQUITY
Net income and other non-owner changes in equity were $72.8 million and
$49.7 million, respectively during the three months ended March 31, 2000 and
1999. The components of net income and other non-owner changes in equity, net of
related taxes, were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2000 1999
----------- -----------
(in millions)
<S> <C> <C>
Net income........................................................................ $ 83.9 $ 75.6
Foreign currency translation losses............................................... (11.1) (25.9)
----------- -----------
Net income and other non-owner changes in equity.................................. $ 72.8 $ 49.7
=========== ===========
</TABLE>
NOTE 10. SUMMARY OF NONCASH INVESTING AND FINANCING ACTIVITIES
The following transactions have been excluded from the consolidated
statements of cash flows during the three months ended March 31, 2000 (in
millions):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed or incurred from the acquisition of
businesses:
Fair value of assets acquired................................................................. $ 161.3
Liabilities assumed or incurred............................................................... (26.1)
------------
Cash used to acquire businesses.......................................................... $ 135.2
============
</TABLE>
NOTE 11. SUBSEQUENT EVENT
On May 1, 2000, Cooper acquired B-Line Systems for $425 million. B-Line
Systems manufactures and markets support systems and enclosures for electrical,
mechanical and telecommunications/data applications. The acquisition will be
accounted for using the purchase method of accounting.
-8-
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1999
Net income for the first quarter of 2000 was $83.9 million on revenues
of $1,038.9 million compared with 1999 first quarter net income of $75.6 million
on revenues of $924.7 million. First quarter diluted earnings per share
increased 11% to $.89 from $.80 in 1999. First quarter 1999 net income includes
$2.4 million, or $.02 per share, of nonrecurring net charges primarily related
to cost control and asset rationalization programs. See "Nonrecurring Income and
Expenses" below.
REVENUES:
Revenues for the first quarter of 2000 increased 12% compared to the
first quarter of 1999. After excluding the effects of acquisitions, revenues
increased 4% when compared to the first quarter of last year. The impact of
foreign currency translation reduced reported revenues by approximately 1% for
the quarter.
First quarter 2000 Electrical Products revenues rose 15% from the same
period last year as all businesses in the segment recorded increased revenues.
Excluding the incremental impact of acquisitions, segment revenues were up 4%
compared to last year. Sales of circuit protection products increased due to
aggressive penetration into high growth electronics and telecommunications
markets. Lighting products sales also improved as a result of new product
offerings. Also, the sales of electrical distribution and hazardous duty
equipment were up slightly over last year. The impact of foreign currency
translation reduced reported Electrical Products segment revenues during the
quarter by approximately 1%.
Tools & Hardware segment revenues for the quarter were up 2% from the
first quarter of 1999. Excluding the incremental impact from acquisitions,
revenues were up 1%. Higher sales of hand tools reflected improvement in the
North American electronic and retail markets and increased demand from Latin
American markets. Continued weakness in the North American power tools markets
partially offset the improved hand tools performance. A strong U.S. Dollar
reduced total Tools & Hardware revenues during the quarter by approximately 2%.
COSTS AND EXPENSES:
Cost of sales, as a percentage of revenues, was 67.5% for the first
quarter of 2000 compared to 67.3% for the comparable 1999 quarter. The increase
in the cost of sales percentage was due to the impact of acquisitions made
during the past twelve months. Excluding this impact, cost of sales as a
percentage of revenues was 67.0% for the 2000 first quarter. Selling and
administrative expenses, as a percentage of revenues, for the first quarter of
2000 were 17.0% compared to 16.9% for the same period in 1999.
Goodwill amortization increased due to several acquisitions completed
during the past year. Interest expense, net for the first quarter of 2000
increased $5.1 million from the 1999 first quarter primarily as a result of
additional borrowings to fund acquisitions and stock repurchases made during the
past twelve months, partially offset by increased capitalized interest.
NONRECURRING INCOME AND EXPENSES:
During the fourth quarter of 1998, Cooper announced a voluntary and
involuntary severance program and committed to consolidate several facilities.
While both the voluntary and involuntary severance programs were announced in
1998, the amount that could be accrued in 1998 was limited to severance relating
to personnel actually severed in the fourth quarter and the severance provided
by Cooper's written formal policies. During the first quarter of 1999, Cooper
completed the voluntary program and accrued an
-9-
<PAGE> 10
additional $5.8 million primarily representing the voluntary severance program
premium over the severance provided under Cooper's established policies. Cooper
also accrued $1.5 million related to severance and other costs for facility
closures announced during the first quarter of 1999. The additional accruals
during the first quarter of 1999 totaled $7.3 million. In addition, during the
first quarter of 1999, Cooper reduced legal accruals by $2.8 million related to
the favorable settlement of certain litigation concerning lead in mini-blinds
and reassessment of the required reserve. Cooper also reached agreement and
received $.8 million under an insurance policy related to the unsuccessful offer
to acquire TLG plc in 1998. Since the original charge related to the litigation
was included as a nonrecurring item in the Tools & Hardware segment and the
costs related to TLG plc were reflected as a nonrecurring corporate item, the
reversal of the accrual and the reimbursement of the expenses were reflected as
nonrecurring items. The net nonrecurring items for the first quarter of 1999
resulted in a $3.7 million charge before income taxes and an after tax charge of
$2.4 million ($.02 per diluted common share).
The following table reflects the activity during the first quarter of
2000 related to the 1998 fourth quarter and the 1999 first quarter employee
reduction and facility consolidation plans.
<TABLE>
<CAPTION>
No. of Accrued Facility
Employees Severance Consolidation
--------- --------------------------------
(in millions)
<S> <C> <C> <C>
Balance at December 31, 1999...................................... 918 $ 10.4 $ 4.7
Cash expenditures................................................. - (1.2) (.2)
-------- -------- ---------
Balance March 31, 2000............................................ 918 $ 9.2 $ 4.5
======== ======== =========
</TABLE>
Cooper anticipates incurring in excess of $9 million related to
severance costs, facility exit costs and disruptions to operations that could
not be accrued as of March 31, 2000. A majority of the $9 million relates to
operating inefficiencies, training, personnel and inventory relocation costs
which are required to be expensed as incurred during 2000 and 2001. Cooper
anticipates that the accrued severance and facility consolidation accruals will
be expended during 2000 and 2001 as terminated employees are paid, the
additional employees leave the employment of Cooper and facility consolidations
are completed. This paragraph contains forward-looking statements and actual
results may differ materially. The statements are based on a number of
assumptions, risks and uncertainties including the number of employees actually
severed, the timing of the facility consolidations, the magnitude of any
disruption from facility consolidations and the ability to achieve the projected
cost reductions. The estimates also assume, without limitation, no significant
change in competitive conditions and such other risk factors as are discussed
from time to time in Cooper's periodic filings with the Securities and Exchange
Commission.
SEGMENT OPERATING EARNINGS:
Electrical Products segment first quarter 2000 operating earnings
increased nearly 10% to $133.2 million from $121.4 million, before nonrecurring
items, for the same quarter of last year. Acquisitions constituted approximately
6% of the improvement for the quarter.
Tools & Hardware segment operating earnings were $22.0 million for the
2000 first quarter, compared to $23.3 million, before nonrecurring items, in the
first quarter of 1999. Expenses related to Cooper's continued rationalization of
its Tools & Hardware businesses were the primary factor in the decrease.
-10-
<PAGE> 11
INCOME TAXES:
Taxes on income increased primarily as a result of increased taxable
earnings, partially offset by a lower tax rate. The effective tax rate was 35%
for the quarter ended March 31, 2000 and 36% for the quarter ended March 31,
1999.
LIQUIDITY AND CAPITAL RESOURCES
Cooper's operating working capital (defined as receivables and
inventories less accounts payable) increased $158 million during the first
quarter of 2000 compared to an increase of $94 million in the first quarter of
1999. The $64 million increase in operating working capital for the 2000 first
quarter is primarily due to accounts receivable and inventories received in
acquisitions. Operating working capital turnover for the 2000 first quarter of
4.2 turns declined from 4.5 turns in the same period of 1999, also primarily due
to the effect of first quarter 2000 acquisitions.
Cash flows from operating activities in the first quarter of 2000
totaled $45 million. These funds, along with $206 million of increased debt,
were used to fund capital expenditures of $52 million, acquisitions of $135
million, share repurchases of $39 million and dividends of $33 million. During
the first quarter of 1999, cash provided by operating activities totaled $32
million. These funds, along with the reimbursement of $29 million related to the
funding of international automotive operations prior to the separation from
Cooper, were used to fund capital expenditures of $36 million and dividends of
$31 million.
On February 10, 2000, Cooper increased the annual dividend rate on its
common stock by 8 cents per share to $1.40, or $.35 cents per quarter.
Anticipated cash flows from operating activities will more than fund
the operating cash requirements for the balance of the year. Cooper currently
anticipates a continuation of its long-term ability to annually generate in
excess of $200 million in cash flow available for acquisitions, debt repayment
and common stock repurchases.
In connection with acquisitions accounted for as purchases, Cooper
records, to the extent appropriate, accruals for the costs of closing duplicate
facilities, severing redundant personnel and integrating the acquired businesses
into existing Cooper operations. Cash flows from operating activities are
reduced by the amounts expended against the various accruals established in
connection with each acquisition. Spending against these accruals for the three
months ended March 31, 2000 and 1999 was $.7 million and $.5 million,
respectively.
Cooper has targeted a 35% to 45% debt-to-capitalization ratio.
Available cash flows are utilized to fund acquisitions, pay down debt or to
purchase shares of Cooper Common stock. Cooper's debt-to-total capitalization
ratio was 42.5% at March 31, 2000, 36.0% at March 31, 1999 and 38.4% at December
31, 1999. The May 1, 2000 acquisition of B-Line Systems will result in a higher
than targeted debt-to-capitalization ratio. Cooper anticipates being within the
targeted range by December 31, 2000, assuming no additional significant
acquisitions.
The statements above concerning anticipated cash flows and the
anticipated debt-to-capitalization ratio contain forward-looking information,
and actual results may differ materially. The statements are based on certain
assumptions, including no significant change in the composition of Cooper's
business segments, no material change in the amount of revenues and no
significant adverse changes in the relationship of the U.S. dollar to the
currencies of countries in which Cooper does business. The statement also
assumes, without limitation, no significant change in competitive conditions and
such other risk factors as are discussed from time to time in Cooper's periodic
filings with the Securities and Exchange Commission.
-11-
<PAGE> 12
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:
<TABLE>
<CAPTION>
MARCH 31,
---------------------
2000 1999
------ ------
(in millions)
<S> <C> <C>
Electrical Products......................................................... $373.5 $334.2
Tools & Hardware............................................................ 95.3 79.5
------ ------
$468.8 $413.7
====== ======
</TABLE>
RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 1 of Notes to Consolidated Financial Statements.
-12-
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The U.S. Attorney for the District of Connecticut ("U.S.
Attorney") is investigating possible criminal violations of federal
environmental laws at a previously owned Cooper facility in Beacon Falls,
Connecticut. The violations concern the discharge of treated wastewater with
contaminants in excess of permitted levels. The U.S. Attorney has advised Cooper
that it, or a former subsidiary, is the target of the investigation, but that no
current Cooper employee or member of senior management is either a target or a
subject of their investigation. Management is of the opinion that the ultimate
disposition of the investigation will not have a material adverse effect on
Cooper's financial condition or results of operations. Cooper has been and will
continue to cooperate fully with the U.S. Attorney in the ongoing investigation.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
12. Computation of Ratios of Earnings to Fixed
Charges for the Calendar Years 1999 through
1995 and the Three Months Ended March 31,
2000 and 1999.
27. Financial Data Schedule
(b) Reports on Form 8-K
Cooper filed a report on Form 8-K dated January 27,
2000, which included a copy of a press release
containing Cooper's financial results for the quarter
and year ended December 31, 1999.
Cooper filed a report on Form 8-K dated February 10,
2000, announcing that Cooper has increased the annual
dividend rate on its common stock by 8 cents per
share to $1.40, or 35 cents per quarter.
Cooper filed a report on Form 8-K dated February 15,
2000, which included the business outlook for 2000.
-13-
<PAGE> 14
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Cooper Industries, Inc.
-----------------------------------
(Registrant)
Date: May 12, 2000 /s/ D. BRADLEY MCWILLIAMS
- ----------------------------------- -----------------------------------
D. Bradley McWilliams
Senior Vice President and
Chief Financial Officer
Date: May 12, 2000 /s/ JEFFREY B. LEVOS
- ----------------------------------- -----------------------------------
Vice President and Controller
and Chief Accounting Officer
-14-
<PAGE> 15
Exhibit Index
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S> <C> <C>
12. Computation of Ratios of Earnings to Fixed Charges for the Calendar Years 1999 through 1995 and
the Three Months Ended March 31, 2000 and 1999.
27. Financial Data Schedule.
</TABLE>
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<PAGE> 1
EXHIBIT 12
COOPER INDUSTRIES, INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
---------------------- ------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Expense $ 18,300 $ 13,200 $ 55,200 $ 101,900 $ 90,400 $ 142,100 $ 151,000
Capitalized Interest 1,200 -- -- -- -- -- --
Estimated Interest Portion of
Rent Expense 3,827 3,755 13,948 12,352 10,864 10,035 10,064
--------- --------- --------- --------- --------- --------- ---------
Fixed Charges $ 23,327 $ 16,955 $ 69,148 $ 114,252 $ 101,264 $ 152,135 $ 161,064
========= ========= ========= ========= ========= ========= =========
Income From Continuing
Operations Before Income Taxes $ 129,100 $ 118,200 $ 518,600 $ 523,600 $ 483,200 $ 470,700 $ 297,300
Add: Fixed Charges 22,127 16,955 69,148 114,252 101,264 152,135 161,064
Dividends From Less Than
50% Owned Companies -- -- -- -- -- 287 968
Less: Equity in (Earnings) / Losses
of Less Than 50% Owned
Companies (1,289) 245 (1,069) 595 (320) (1,609) (996)
--------- --------- --------- --------- --------- --------- ---------
Earnings Before Fixed Charges $ 149,938 $ 135,400 $ 586,679 $ 638,447 $ 584,144 $ 621,513 $ 458,336
========= ========= ========= ========= ========= ========= =========
Ratio of Earnings to Fixed Charges 6.4x 8.0x 8.5x 5.6x 5.8x 4.1x 2.8x
</TABLE>
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 23,400
<SECURITIES> 0
<RECEIVABLES> 809,900
<ALLOWANCES> 0
<INVENTORY> 661,800
<CURRENT-ASSETS> 1,659,300
<PP&E> 1,752,500
<DEPRECIATION> (947,500)
<TOTAL-ASSETS> 4,399,700
<CURRENT-LIABILITIES> 1,101,900
<BONDS> 1,129,700
0
0
<COMMON> 615,000
<OTHER-SE> 1,136,800
<TOTAL-LIABILITY-AND-EQUITY> 4,399,700
<SALES> 1,038,900
<TOTAL-REVENUES> 1,038,900
<CGS> 701,700
<TOTAL-COSTS> 701,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,300
<INCOME-PRETAX> 129,100
<INCOME-TAX> 45,200
<INCOME-CONTINUING> 83,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,900
<EPS-BASIC> .89
<EPS-DILUTED> .89
</TABLE>
