Cooper Industries Reports Third Quarter Revenues Up 15 Percent; Earnings from Continuing Operations of $1.08 Per Share, Including $.11 Per Share Gain From Discrete Tax Items

Business Wire, Oct 23, 2008

Continuing Earnings Per Share Up 17 Percent to $.97, Excluding Unusual Items

HOUSTON -- Cooper Industries, Ltd. (NYSE:CBE) today reported third quarter 2008 earnings per share from continuing operations of $1.08 (diluted), compared with $.93 for the third quarter of 2007. Excluding discrete tax items, the third quarter 2008 earnings per share from continuing operations of $.97, including a favorable impact of a lower effective tax rate substantially offset by a pension plan curtailment, is 17 percent higher than prior year results of $.83 (excluding Belden income and legal matters). Third quarter 2008 revenues increased 15 percent to $1.73 billion, compared with $1.50 billion for the same period last year. For the third quarter of 2008, income from continuing operations excluding unusual items rose 12 percent to $170.9 million, compared with $153.1 million for the prior year's third quarter.

"In the third quarter, we delivered strong core revenue growth of 7 percent supplemented by acquisitions, which contributed over 7 percent, as well as approximately 1 percent from currency translation. We are very pleased with our performance in light of the unprecedented market volatility that occurred late in the third quarter," said Cooper Industries' Chairman and Chief Executive Officer Kirk S. Hachigian.

As of September 30, 2008, the company's debt net of cash and investments, which totaled only $944.1 million, to total capitalization was 24.3 percent compared to 24.8 percent at December 31, 2007. "We continue to forecast free cash flow to exceed recurring income for the eighth year in a row. Cooper's consistent ability to deliver strong free cash flow and our conservative capital structure enable us to maintain a disciplined strategy of investing in growth, as well as returning capital to our shareholders throughout this period of volatile credit markets," said Hachigian.

Revenues for the first nine months of 2008 were $5.0 billion, a 15 percent increase from the $4.36 billion in revenues for the first nine months of 2007. For the first nine months of 2008, income from continuing operations excluding unusual items rose 13 percent to $487.1 million, compared with $430.1 million for the prior year's first nine months. Earnings per share from continuing operations excluding unusual items were $2.75 or up 19 percent, compared with prior year's $2.31.

As was previously announced on October 1, 2008, Cooper will not participate in the Federal Mogul Corporation Asbestos Trust and is instead proceeding under Plan B. Therefore, the Federal Mogul bankruptcy estate paid Cooper $141 million in early October. Cooper's financial statements reflect the assets and liabilities related to the on-going activities under Plan B. As a result of these adjustments, the Company recognized an after-tax discontinued operations income of $16.6 million or $.09 per share in the third quarter of 2008.

Segment Results

Electrical Products segment revenues for the third quarter of 2008 increased 17 percent to $1.53 billion, compared with $1.30 billion in the third quarter 2007. Core revenues increased by over 8 percent with acquisitions contributing over 8 percent and currency translation contributing nearly 1 percent to the year-over-year growth. Segment operating earnings were $249.7 million, an increase of approximately 11 percent from $224.2 million in the prior year's third quarter. Segment operating margin decreased 80 basis points to 16.4 percent for the third quarter of 2008, compared to the third quarter of 2007.

"The strong Electrical core revenue growth followed an outstanding third quarter in 2007, where core revenues increased 10 percent. Electrical margins pulled back from the second quarter levels which matched our best quarterly performance in over five years to 16.4 percent as a result of product mix, material price inflation and inventory production reductions," said Hachigian.

The increase in revenues for the Electrical Products segment reflects strength in the industrial, utility and energy markets, with international market initiatives providing further growth for the third quarter of 2008. The continued softness in the U.S. residential markets and slowing in selected European markets partially offset the segment's overall revenue growth.

Tools segment revenues for the third quarter of 2008 were $201.7 million, up 1 percent from 2007 third quarter revenues of $199.4 million. Excluding the effects of currency translation, revenues for the quarter were approximately 3 percent lower than 2007 third quarter on declining North American aerospace, retail and automotive results and weaker European demand, partially offset by increased revenue in Asia and the rest of the world. Segment operating earnings were $24.1 million, up 10 percent from the third quarter 2007 levels of $22.0 million. Segment operating margin for the third quarter 2008 was 11.9 percent compared to 11.0 percent for the comparable prior year period.

Revenues for the first nine months of 2008 increased 5 percent to $600.5 million, compared with $574.2 million for the same period last year. Segment operating earnings for the nine months of 2008 declined to $63.6 million excluding severance related costs, compared to $65.4 million in the prior-year period.