<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 September 30, 1998

                                       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)

                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)

                                 (713) 209-8400
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since lastreport.)

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 November 6, 1998 was
103,456,225.


<PAGE>   2



                         PART I - FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                             COOPER INDUSTRIES, INC.
                         CONSOLIDATED INCOME STATEMENTS


<TABLE>
<CAPTION>
                                                  Three Months Ended        Nine Months Ended
                                                     September 30,            September 30,
                                                 ---------------------    ---------------------
                                                   1998         1997        1998         1997
                                                 ---------   ---------    ---------   ---------
                                                         (in millions, except per share data)
<S>                                              <C>         <C>          <C>         <C>      
REVENUES ...................................     $   924.0   $   830.3    $ 2,769.3   $ 2,576.9

Cost of sales ..............................         621.8       554.4      1,863.5     1,733.7
Selling and administrative expenses ........         151.0       138.0        462.5       442.9
Goodwill amortization ......................          11.2         8.1         32.4        23.9
Nonrecurring gains .........................            --       (23.2)          --       (93.0)
Nonrecurring charges .......................            --         3.8           --        40.5
Interest expense ...........................          34.8        19.4         87.5        70.3
                                                 ---------   ---------    ---------   ---------
    Income from continuing operations before                                                    
      income taxes..........................         105.2       129.8        323.4       358.6
Income taxes ...............................          37.9        48.2        116.4       133.2
                                                 ---------   ---------    ---------   ---------
Income from continuing operations ..........          67.3        81.6        207.0       225.4

Income from discontinued operations,
    net of income taxes ....................          25.9        20.9         84.2        60.3
                                                 ---------   ---------    ---------   ---------
    NET INCOME .............................     $    93.2   $   102.5    $   291.2   $   285.7
                                                 =========   =========    =========   =========


INCOME PER COMMON SHARE:
Basic:
    Income from continuing operations ......     $    0.59   $    0.68    $    1.76   $    1.93
    Income from discontinued operations ....          0.23        0.17          .72        0.52
                                                 ---------   ---------    ---------   ---------
    Net Income .............................     $    0.82   $    0.85    $    2.48   $    2.45
                                                 =========   =========    =========   =========
Diluted:
    Income from continuing operations ......     $    0.59   $    0.67    $    1.74   $    1.87
    Income from discontinued operations ....          0.22        0.17         0.71        0.49
                                                 ---------   ---------    ---------   ---------
    Net income .............................     $    0.81   $    0.84    $    2.45   $    2.36
                                                 =========   =========    =========   =========


CASH DIVIDENDS PER COMMON SHARE ............     $    0.33   $    0.33    $    0.99   $    0.99
</TABLE>


The accompanying notes are an integral part of these statements.

                                      -2-
<PAGE>   3



                            COOPER INDUSTRIES, INC.
                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                  September 30, December 31,
                                                                      1998         1997
                                                                   ----------    ----------
                           ASSETS                                         (in millions)
                                                                           
<S>                                                                <C>           <C>       
Cash and cash equivalents .......................................  $     19.2    $     30.3
Receivables .....................................................       673.5         596.4
Inventories .....................................................       522.0         484.8
Other ...........................................................        75.9         106.6
                                                                   ----------    ----------
         Total current assets ...................................     1,290.6       1,218.1
                                                                   ----------    ----------
Net assets of discontinued operations ...........................     1,900.0       1,973.7
Property, plant and equipment, less accumulated depreciation ....       701.9         673.3
Intangibles, less accumulated amortization ......................     1,454.9       1,279.0
Investments in marketable equity securities .....................       243.6         274.8
Deferred income taxes and other assets ..........................       241.1          88.4
                                                                   ----------    ----------
         Total assets ...........................................  $  5,832.1    $  5,507.3
                                                                   ==========    ==========

                       LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt .................................................  $     97.2    $    139.0
Accounts payable ................................................       358.8         397.3
Accrued liabilities .............................................       487.9         426.8
Accrued income taxes ............................................        12.8           5.5
Current maturities of long-term debt ............................       247.1          58.3
                                                                   ----------    ----------
         Total current liabilities ..............................     1,203.8       1,026.9
                                                                   ----------    ----------
Long-term debt ..................................................     2,025.7       1,272.2
Postretirement benefits other than pensions .....................       236.3         241.9
Other long-term liabilities .....................................       200.3         282.8
                                                                   ----------    ----------
         Total liabilities ......................................     3,666.1       2,823.8
                                                                   ----------    ----------
Common stock, $5.00 par value ...................................       615.0         615.0
Capital in excess of par value ..................................       675.2         679.8
Retained earnings ...............................................     1,691.0       1,514.5
Common stock held in treasury, at cost ..........................      (832.6)       (149.7)
Unearned employee stock ownership plan compensation .............       (46.9)        (66.5)
Accumulated other non-owner changes in equity ...................        64.3          90.4
                                                                   ----------    ----------
         Total shareholders' equity .............................     2,166.0       2,683.5
                                                                   ----------    ----------
         Total liabilities and shareholders' equity .............  $  5,832.1    $  5,507.3
                                                                   ==========    ==========
</TABLE>


The accompanying notes are an integral part of these statements.


                                       -3-
<PAGE>   4



                             COOPER INDUSTRIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                 Nine Months Ended
                                                                                   September 30,
                                                                                -------------------
                                                                                  1998       1997
                                                                                --------   -------- 
                                                                                   (in millions)
<S>                                                                             <C>        <C>     
Cash flows from operating activities:
    Net income ............................................................     $  291.2   $  285.7
    Less income from discontinued operations ..............................        (84.2)     (60.3)
                                                                                --------   --------
    Income from continuing operations .....................................        207.0      225.4

Adjustments to reconcile to net cash provided by operating activities:
    Depreciation and amortization .........................................        101.1       92.0
    Deferred income taxes .................................................          3.0       (4.9)
    Gain on the sale of Kirsch ............................................           --      (69.8)
    Gain on exchange of DECS ..............................................           --      (23.2)
    Nonrecurring asset write-down .........................................           --       24.2
    Changes in assets and liabilities: (1)
        Receivables .......................................................        (51.8)     (63.6)
        Inventories .......................................................        (21.0)       5.4
        Accounts payable and accrued liabilities ..........................        (48.6)     (47.3)
        Accrued income taxes ..............................................          7.6       29.4
        Other assets and liabilities, net .................................         (7.0)       5.7
                                                                                --------   --------
              Net cash provided by operating activities ...................        190.3      173.3

Cash flows from investing activities:
    Cash paid for acquired businesses .....................................       (269.3)    (140.7)
    Capital expenditures ..................................................       (102.9)     (83.1)
    Cash paid for TLG, plc common stock ...................................        (42.4)        --
    Proceeds from the disposition of business .............................           --      216.0
    Proceeds from sales of property, plant and equipment ..................          5.4        4.7
                                                                                --------   --------
              Net cash used in investing activities .......................       (409.2)      (3.1)

Cash flows from financing activities:
    Proceeds from issuances of debt .......................................      1,216.5     287.2
    Repayments of debt ....................................................       (270.9)   (263.6)
    Dividends .............................................................       (115.8)   (117.7)
    Acquisition of treasury stock .........................................       (733.2)   (141.4)
    Activity under stock plans ............................................         39.9       13.2
                                                                                --------   --------
              Net cash provided by (used in) financing activities .........        136.5     (222.3)
Cash provided by discontinued operations ..................................         72.5       52.2
Effect of exchange rate changes on cash and cash equivalents ..............         (1.2)      (1.5)
                                                                                --------   --------
Decrease in cash and cash equivalents .....................................        (11.1)      (1.4)
Cash and cash equivalents, beginning of period ............................         30.3       16.1
                                                                                --------   --------
Cash and cash equivalents, end of period ..................................     $   19.2   $   14.7
                                                                                ========   ========
</TABLE>

(1) Net of the effects of acquisitions, divestitures 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.           DISCONTINUED OPERATION - AUTOMOTIVE PRODUCTS SEGMENT

         In April 1998, Cooper Industries, Inc. ("Cooper") announced that it
engaged an investment banking firm to assist in the evaluation of options for
exiting the automotive business. On October 9, 1998, the sale of the Automotive
Products segment to Federal-Mogul Corporation was consummated with Cooper
receiving $1.9 billion in proceeds. The book value of the Automotive Products
segment assets less the liabilities assumed by the buyer plus costs related to
the transaction resulted in a small loss before income taxes. The loss before
income taxes was offset by income tax benefits derived through the sale of the
common stock of the entity holding the Automotive Products segment.

         As a consequence of treating this segment as a discontinued operation,
Cooper's results of operations and the related footnote information for all
periods presented herein and when presented elsewhere in the future will exclude
the results of the Automotive Products segment from continuing operations'
revenues and other components of income and expense. The discontinued segment
results prior to the measurement date are presented separately in a single
caption, "Income from discontinued operations, net of income taxes". Net income
remains unchanged.

         In order to facilitate an understanding of Cooper's continuing
operations, Cooper has elected to restate the Consolidated Balance Sheet as of
December 31, 1997, the Consolidated Statement of Cash Flows for the nine months
ended September 30, 1997 and all related footnote disclosures. The net assets of
discontinued operations have been segregated into a single line, "Net assets of
discontinued operations", in the Consolidated Balance Sheets. The cash flow from
the discontinued operations is summarized into a single line "Cash provided by
discontinued operations" in the Consolidated Statements of Cash Flows. No cash
or debt has been allocated to the discontinued operations.

         Operating results from discontinued operations were as follows:

<TABLE>
<CAPTION>
                                               Three Months Ended       Nine Months Ended
                                                 September 30,             September 30,
                                             ---------------------   -------------------------
                                               1998       1997(1)       1998        1997(1)
                                             ---------   ---------   -----------   -----------
                                                     (in millions, except per share data)
<S>                                          <C>         <C>         <C>           <C>        
Revenues ...............................     $   473.7   $   466.6   $   1,400.8   $   1,423.8
                                             =========   =========   ===========   ===========

Income before income taxes .............     $    43.0   $    35.6   $     139.1   $     102.3
Income taxes ...........................          17.1        14.7          54.9          42.0
                                             ---------   ---------   -----------   -----------
Income from discontinued operations ....     $    25.9   $    20.9   $      84.2   $      60.3
                                             =========   =========   ===========   ===========

Diluted income per common share
    from discontinued operations .......     $    0.22   $    0.17   $      0.71   $      0.49
                                             =========   =========   ===========   ===========
</TABLE>

(1)  The three months and nine months income from discontinued operations in
     1997 include $6 million after income taxes ($.05 per diluted share) and
     $26.9 million after income taxes ($.22 per diluted share) of nonrecurring
     charges, respectively. Income from discontinued operations does not include
     an allocation of interest expense or corporate overhead expenses.


                                      -5-

<PAGE>   6



NOTE 2.           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 the audited
financial statements of the Company, 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 the Company's
accounting policies, refer to the Consolidated Financial Statements and related
notes for the year ended December 31, 1997 filed in a Form 8-K with the
Securities and Exchange Commission concurrent with this filing.

         Income per Common Share - In the fourth quarter of 1997, the Company
adopted Statement of Financial Accounting Standards No. 128, Earnings Per Share.
The new accounting standard required all prior periods' income per Common share
to be restated based on a new computational method for average shares
outstanding. Adopting the new standard had no impact on previously reported
fully diluted, currently referred to as diluted, income per Common share for the
quarter and nine months ended September 30, 1997. Adopting the new standard
increased previously reported primary, currently referred to as basic, income
per common share $.01 for the quarter and $.02 for the nine months ended
September 30, 1997. Unlike primary earnings per share, basic earnings per share
excludes the dilutive effects of common stock equivalents.

         Net Income and Other Non-Owner Changes in Equity - Effective January 1,
1998, Cooper adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("SFAS No. 130"). The adoption of this statement
had no impact on net income or shareholders' equity. SFAS No. 130 requires the
reporting of comprehensive income, which includes net income plus non-owner
changes in equity, including unrealized gains or losses on investments, the
minimum pension liability adjustment and foreign currency translation. The
components of net income and other non-owner changes in equity, net of related
taxes, were as follows:

<TABLE>
<CAPTION>
                                           Three Months Ended       Nine Months Ended
                                             September 30,           September 30,
                                          -------------------    --------------------
                                            1998       1997        1998        1997
                                          -------    --------    --------    --------
                                                         (in millions)

<S>                                       <C>        <C>         <C>         <C>     
Net income ..........................     $  93.2    $  102.5    $  291.2    $  285.7
Foreign currency translation                                                          
   gains (losses)....................          --        (3.1)       (9.4)       (5.3)
Unrealized losses on investments ....       (17.0)       (8.0)      (16.7)       (1.0)
Reclassification adjustment for                                                       
   investment gains realized
   in net income.....................          --       (14.4)         --       (14.4)
                                          -------    --------    --------    --------
Net income and other non-owner
 changes in equity...................     $  76.2    $   77.0    $  265.1    $  265.0
                                          =======    ========    ========    ========
</TABLE>


         Recently Issued Accounting Standards - In March 1998, the AICPA issued
SOP 98-1, Accounting for the Costs of Computer Software Developed for or
Obtained For Internal Use. The SOP requires companies to capitalize qualifying
computer software costs incurred during the application development stage. The
SOP is effective for fiscal years beginning after December 15, 1998 and permits
early adoption. The Company adopted the SOP in the first quarter of 1998. The
adoption had no impact on net income as the Company's policy was materially
consistent with the requirements of the SOP.


                                       -6-
<PAGE>   7



         In April 1998, the AICPA issued SOP 98-5, Accounting for the Costs of
Start-up Activities. The SOP requires that all costs of start-up activities be
expensed as incurred. The SOP is effective for fiscal years beginning after
December 15,1998 and permits early adoption. The Company adopted this standard
in the second quarter of 1998. The adoption had no impact on net income as the
Company's policies are consistent with this standard.

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Financial
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. The SFAS is
effective for fiscal years beginning after June 15, 1999 and early adoption is
permitted. The Company is currently evaluating the effects of the new standard.
The Company does not anticipate that the new standard will have an impact on net
income. However, the new standard requirement to mark to market certain of the
Company's financial instruments utilized to hedge currency and commodity price
risks will result in fluctuations in the fair value being included in
shareholders' equity, net of tax. Due to the Company's policies regarding
financial instruments, it is not likely that the adoption of the new standard
will have a material effect on the Company's Consolidated Balance Sheets.


NOTE 3.           ACQUISITIONS AND DIVESTITURES

         During the first nine months of 1998, the Company completed three
acquisitions in its Tools & Hardware segment and two small acquisitions in its
Electrical Products segment. In March 1998, the Company acquired INTOOL for a
total cost of $217.5 million. INTOOL manufactures and sells pneumatic and
electric assembly tools, precision-drilling equipment, fastening systems and
portable and fixed mounted tools used in industrial, automotive, aerospace and
energy markets and had annual revenues of approximately $117 million. The other
acquisitions included two small businesses in France and Germany that extend the
global product lines of the Company's Power Tools division and two small
Electrical Products businesses in Mexico. The acquisitions have been accounted
for as purchase transactions and the results of the acquisitions are included in
the Company's consolidated income statements from the date of acquisition.

         On September 4, 1998, the Company announced an offer by the Company to
acquire TLG, plc (Thorn Lighting Group) in a transaction valued at approximately
$535 million. On September 28, 1998, the Company announced that its offer to
acquire TLG, plc had expired and would not be extended due to a rival bid made
to acquire TLG, plc for approximately $585 million. During the third quarter of
1998, the Company acquired common stock of TLG, plc for $42.4 million. The
common stock was tendered to the rival bidder in October 1998. The Company will
realize a gain of approximately $2 million after income taxes in the fourth
quarter of 1998 from the sale of the common stock.


NOTE 4.           NONRECURRING INCOME AND EXPENSES

         On May 30, 1997, the Company completed the sale of the Kirsch window
treatment division. The sale resulted in a gain before income taxes of $69.8
million. During the third quarter of 1997, the Company exchanged a portion of
its DECS(sm)(Debt Exchangeable for Common Stock) for Wyman-Gordon Company
("Wyman-Gordon") common stock and realized a gain before income taxes of $23.2
million. During the second quarter of 1997, the Company incurred a charge of
$36.7 million for actions management committed to during the quarter after
concluding an evaluation of geographic manufacturing and distribution facilities
within the Tools & Hardware segment and information systems relating to year
2000 compliance efforts. The charge included adjustments to the carrying value
of assets of $24.2 million and accruals for continuing obligations for replaced
systems and facility consolidations of $12.5 million. The charge, discussed in
further detail below, decreased operating earnings of the Electrical Products
segment by $15.9 million, the Tools & Hardware segment by $18.7 million and
increased general corporate expenses by $2.1 million. In




                                      -7-
<PAGE>   8


the third quarter of 1997, the Company recorded a charge of $3.8 million in the
Tools & Hardware segment primarily related to severance obligations for facility
consolidations committed to in the second quarter of 1997 and announced in the
third quarter of 1997.

         The nonrecurring items resulted in a net gain of $21.0 million after
income taxes in the second quarter of 1997 ($.17 per diluted share), a net gain
of $12.0 million after income taxes in the third quarter of 1997 ($.10 per
diluted share) and a net gain after income taxes for the nine months ended
September 30, 1997 of $33.0 million ($.27 per diluted share).

         The Company began a consolidation of international manufacturing and
distribution in the Tools & Hardware segment in the second quarter of 1997.
Adjustments to the carrying value of assets and accruals, detailed above, were
recorded for projects committed to by management. Severance and certain other
costs are not expensed until the affected employees are notified even though
management has committed to the projects. At September 30, 1998, remaining cash
expenditures and anticipated additional charges related to these projects are
insignificant.

         The Company also completed, during the second quarter of 1997, its
initial analysis of the impact of existing system capabilities to function at
the turn of the century. Three of the Company's seven divisions are implementing
new enterprise systems with the remaining four divisions modifying or replacing
existing software. Where possible, businesses have abandoned home-grown or
highly customized applications with purchased, year 2000 compliant replacements
or upgrades. In some situations, operations abandoned existing software and
migrated to consolidated hardware and software that is year 2000 compliant. The
Company recorded a $27.2 million charge in the second quarter of 1997 related to
the adjustment in the carrying value of abandoned hardware and software. While
depreciation is reduced by the effect of the write-down, depreciation of new
systems, as well as expenses related to revising current software to be year
2000 compliant and implementation of new systems, are likely to exceed the
reduction in depreciation in most future periods.

NOTE 5.           INVENTORIES

<TABLE>
<CAPTION>
                                                       September 30,      December 31,
                                                           1998              1997
                                                       -------------      ------------
                                                                (in millions)
                                                                             
<S>                                                      <C>                <C>     
Raw materials ......................................     $  196.3           $  192.5
Work-in-process ....................................        128.6              119.2
Finished goods .....................................        269.1              246.8
Perishable tooling and supplies ....................         18.1               18.6
                                                         --------           --------
                                                            612.1              577.1
Excess of current standard cost over LIFO costs ....        (90.1)             (92.3)
                                                         --------           --------
           Net inventories .........................     $  522.0           $  484.8
                                                         ========           ========
</TABLE>


NOTE 6.           LONG-TERM DEBT

         On October 9, 1998, the Company completed the sale of its automotive
business to Federal-Mogul Corporation and received $1.9 billion in proceeds. The
Company used approximately $1.4 billion of the proceeds to reduce debt and
invested approximately $.5 billion in short-term investments.



                                      -8-
<PAGE>   9



         During the nine months ended September 30, 1998, the Company issued
$250 million of five-year medium term notes at an average interest rate of 6.1%
under an existing shelf registration statement. At September 30, 1998, all notes
registered under the shelf registration statement had been issued. The issuance
of additional notes will require the filing of a new registration statement.

         In December 1995, the Company issued DECS(sm) (Debt Exchangeable for
Common Stock). At maturity, the DECS are mandatorily exchangeable into shares of
Wyman-Gordon common stock or, at the Company's option, into cash in lieu of
shares. The DECS are a hedge of the Company's investment in Wyman-Gordon common
stock and will result in the Company realizing a minimum after-tax gain of $85
million upon redemption of the remaining DECS. This unrealized gain, plus any
net appreciation of the investment in Wyman-Gordon common stock offset by the
appreciation attributable to the DECS, is included in shareholders' equity as an
unrealized gain on investments in marketable equity securities, net of tax.
During the first nine months of 1998, the market value of the Wyman-Gordon
common stock exchangeable into the DECS declined. Accordingly, at September 30,
1998, the carrying value of the DECS equals the original issuance value of $189
million. The Company intends to transfer the Wyman-Gordon common stock late in
the fourth quarter of 1998 to redeem the remaining outstanding DECS.


NOTE 7.           COMMON AND PREFERRED STOCK

         During the first nine months of 1998, the Company repurchased
14,131,100 shares of its Common stock at a cost of $733.2 million. The Company
reissued 1,038,392 treasury shares during 1998 primarily in connection with the
exercise of employee stock options and the Company's dividend reinvestment
program. On November 3, 1998, the Company's Board of Directors authorized the
purchase of up to $500 million in Common stock.




                                      -9-
<PAGE>   10


NOTE 8.           NET INCOME PER COMMON SHARE

Basic and diluted net income per Common share are computed based on the
following information:

<TABLE>
<CAPTION>
                                                      Three Months Ended    Nine Months Ended
                                                         September 30,         September 30,
                                                      -------------------   -------------------
                                                        1998       1997       1998       1997
                                                      --------   --------   --------   --------
                                                                     (in millions)

<S>                                                   <C>        <C>        <C>        <C>     
BASIC:

Net income ......................................     $   93.2   $  102.5   $  291.2   $  285.7
                                                      ========   ========   ========   ========

Weighted average Common shares
    Outstanding .................................        113.5      121.0      117.2      116.6
                                                      ========   ========   ========   ========

DILUTED:

Net income ......................................     $   93.2   $  102.5   $  291.2   $  285.7

Interest expense related to the
    7.05% Convertible Subordinated
    Debentures, net of tax ......................           --         --         --        5.8
                                                      --------   --------   --------   --------

Net income and effect of assumed 
    Conversions..................................     $   93.2   $  102.5   $  291.2   $  291.5
                                                      ========   ========   ========   ========

Weighted average Common shares
    Outstanding .................................        113.5      121.0      117.2      116.6

Incremental shares from assumed conversions:

    Options, performance-based stock
        awards and other employee awards ........          1.2        1.5        1.6        1.4

    Additional shares assuming
        conversion of the 7.05% Convertible
        Subordinated Debentures .................           --         --         --        5.7
                                                      --------   --------   --------   --------

Weighted average Common shares and
    Common share equivalents ....................        114.7      122.5      118.8      123.7
                                                      ========   ========   ========   ========
</TABLE>



                                      -10-
<PAGE>   11



NOTE 9.             INDUSTRY SEGMENT REVENUES

<TABLE>
<CAPTION>
                             Three Months Ended      Nine Months Ended
                                 September 30,         September 30,
                             -------------------   -----------------------
                               1998       1997        1998        1997
                             --------   --------   ----------   ----------
                                             (in millions)
<S>                          <C>        <C>        <C>          <C>       
Electrical Products ....     $  724.0   $  646.4   $  2,153.9   $  1,919.8
Tools & Hardware .......        200.0      183.9        615.4        559.7
                             --------   --------   ----------   ----------
      Subtotal .........        924.0      830.3      2,769.3      2,479.5
Kirsch .................         --         --           --           97.4
                             --------   --------   ----------   ----------
      Total ............     $  924.0   $  830.3   $  2,769.3   $  2,576.9
                             ========   ========   ==========   ==========
</TABLE>


NOTE 10.            SUMMARY OF NONCASH INVESTING AND FINANCING  ACTIVITIES

The following noncash transactions have been excluded from the Consolidated
Statements of Cash Flows:

<TABLE>
<CAPTION>
                                                                            Nine Months Ended
                                                                               September 30,
                                                                           --------------------
                                                                             1998        1997
                                                                           --------    --------
                                                                               (in millions)

<S>                                                                        <C>         <C>     
Assets acquired and liabilities assumed or incurred from 
  the acquisition of businesses:
        Fair value of assets acquired ................................     $  302.2    $  152.4
        Cash used to acquire businesses ..............................       (269.3)     (140.7)
                                                                           --------    --------
              Liabilities assumed or incurred ........................     $   32.9    $   11.7
                                                                           ========    ========

Conversion of 7.05% Convertible Subordinated Debentures
    for Cooper Common stock ..........................................     $     --    $  610.0

Exchange of DECS for Wyman-Gordon common stock .......................     $     --    $   33.8
</TABLE>


                                      -11-

<PAGE>   12


ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS

DISCONTINUED OPERATIONS:

         In April 1998, Cooper Industries, Inc. ("Cooper") announced that it
engaged an investment banking firm to assist in the evaluation of options for
exiting the automotive business. On October 9, 1998, the sale of the Automotive
Products segment to Federal-Mogul Corporation was consummated with Cooper
receiving $1.9 billion in proceeds. The book value of the Automotive Products
segment assets less the liabilities assumed by the buyer plus costs related to
the transaction resulted in a small loss before income taxes. The loss before
income taxes was offset by income tax benefits derived through the sale of the
common stock of the entity holding the Automotive Products segment.

         Operating results from discontinued operations were as follows:

<TABLE>
<CAPTION>
                                              Three Months Ended     Nine Months Ended
                                                 September 30,         September 30,
                                             --------------------   ---------------------
                                               1998      1997(1)      1998       1997(1)
                                             --------   ---------   ---------   ---------
                                                 (in millions, except per share data)
<S>                                          <C>        <C>         <C>         <C>      
Revenues................................     $  473.7   $   466.6   $ 1,400.8   $ 1,423.8
                                             ========   =========   =========   =========
Income before income taxes..............     $   43.0   $    35.6   $   139.1   $   102.3
Income taxes ...........................         17.1        14.7        54.9        42.0
                                             --------   ---------   ---------   ---------
Income from discontinued operations ....     $   25.9   $    20.9   $    84.2   $    60.3
                                             ========   =========   =========   =========
Diluted income per common share              
    from discontinued operations........     $   0.22   $    0.17   $    0.71   $    0.49
                                             ========   =========   =========   =========
</TABLE>

(1)  The three months and nine months income from discontinued operations in
     1997 include $6 million after income taxes ($.05 per diluted share) and
     $26.9 million after income taxes ($.22 per diluted share) of nonrecurring
     charges, respectively. Income from discontinued operations does not include
     an allocation of interest expense or corporate overhead expenses.


         The discontinued Automotive Products segment revenues for the third
quarter of 1998 increased 2% from the prior year period. Higher steering and
suspension and worldwide original equipment sales were offset by weak domestic
aftermarket demand for ignition, brake and wiper products and European
aftermarket ignition products. Also, revenues were affected by the bankruptcy of
a large customer in the first quarter of 1998. The customer was converted to a
cash basis beginning in the first quarter of 1998, significantly reducing sales
volume to this customer compared to the third quarter of 1997.

         For the first nine months of 1998, the discontinued Automotive Products
segment revenues decreased 2% from the prior year period. Increased sales to
worldwide original equipment manufacturers and improved steering and suspension
sales were more than offset by weak domestic aftermarket demand in most product
lines. The net impact of the exchange of Auto's temperature control business for
the brake business of Standard Motor Products resulted in lower revenues during
the period as a result of disruption in the marketplace during the transition.
Also, revenues were affected by the bankruptcy of a large customer significantly
reducing sales volume to this customer compared to 1997.

         Excluding 1997 nonrecurring charges, income before income taxes for the
three months and nine months ended September 30, 1998 decreased approximately 5%
compared to the same periods last year. The impact of an unfavorable mix of
relatively less sales to the higher-margin aftermarket contributed to the



                                      -12-
<PAGE>   13


decrease in earnings. Also earnings were unfavorably affected by the bankruptcy
of a large customer in the first quarter and an increase in the allowance for
doubtful accounts related to the customer.

         Excluding $6.0 million of nonrecurring charges in 1997, income from
discontinued operations, net of tax, for the third quarter of $25.9 million was
4% below the prior year. Diluted share earnings for discontinued operations for
the third quarter of $.22 was equal to the prior year, excluding $.05 per share
of nonrecurring charges in 1997.

         Excluding nonrecurring charges of $26.9 million in 1997 for the first
nine months, income from discontinued operations, net of tax, decreased 3%
compared to the prior year period. Diluted share earnings from discontinued
operations for the first nine months of 1998 of $.71 equaled the prior year
share earnings, excluding $.22 per share of nonrecurring charges in the first
nine months of 1997.

         The discussion that follows has been written to place primary emphasis
on the results of Cooper's continuing operations.

RESULTS OF CONTINUING OPERATIONS:

THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1997

         Comparison of the results of continuing operations for the three months
ended September 30, 1998 with the three months ended September 30, 1997 requires
the consideration of the following items:

     o     During the third quarter of 1998, the Company substantially completed
           a $500 million stock repurchase program that had been authorized in
           August 1998. The purchases of Company Common stock under this
           authorization were in anticipation of receiving the proceeds from the
           disposition of the Automotive Products segment. The Company has
           purchased $733.2 million of its Common stock during 1998. The Common
           stock repurchases significantly increased the Company's debt level
           and related interest expense during the quarter. While net income is
           impacted by the increased interest expense, average shares were also
           reduced, which negated the impact on earnings per share.

     o     The third quarter 1997 results from continuing operations include a
           gain on the exchange of a portion of the Company's DECS of $23.2
           million before income taxes. The 1997 third quarter results from
           continuing operations also include a charge of $3.8 million before
           income taxes primarily related to actions management committed to in
           the second quarter of 1997 that could not be accrued until a later
           date. The aggregate of these two items increased continuing income
           before income taxes by $19.4 million, continuing income by $12.0
           million and diluted earnings per share by $.10 for the three months
           ended September 30, 1997.

     o     In addition to the gain and charge discussed above, the 1997 results
           of discontinued operations include nonrecurring charges totaling $6.0
           million after income taxes or $.05 per diluted share. As a result,
           the 1997 net income includes $6.0 million related to nonrecurring
           items and diluted earnings per share includes $.05 related to
           nonrecurring items.

         Net income for the third quarter of 1998 was $93.2 million compared
with net income of $102.5 million in 1997 (which included net nonrecurring gains
of $6.0 million as discussed above). Third quarter diluted share earnings
decreased 4% to $.81 from $.84 in 1997 (which included net nonrecurring gains of
$.05 per share as discussed above).

         Continuing income decreased 18% to $67.3 million on revenues of $924
million compared to 1997 continuing income of $81.6 million, including $12.0 of
net nonrecurring gains, on revenues of $830 million. Diluted share earnings from
continuing operations decreased 12% to $.59 from $.67 in 1997. Excluding net
nonrecurring gains of $.10 per share from the 1997 third quarter, continuing
diluted share earnings increased 4% to $.59 from $.57.



                                      -13-
<PAGE>   14


REVENUES:

         Revenues for the third quarter of 1998 increased 11% compared to the
third quarter of 1997. After excluding the effects of acquisitions, revenues
were 1% above the third quarter of last year. During the third quarter of 1998,
the strengthening of the U.S. dollar against most foreign currencies decreased
reported revenues less than the Company has experienced in several previous
quarters. The Company estimates that the impact was less than 1/2%.

         Revenues in the Electrical Products segment increased 12% from the
third quarter of 1997. Excluding acquisitions, revenues were 3% ahead of 1997.
Revenue growth from circuit protection and lighting products and new product
introductions was offset by soft demand for hazardous duty electrical
construction materials and power equipment products other than transformers.
These businesses were adversely affected by the absence of large project orders,
weak demand from utilities for products other than transformers, the economic
conditions in Asia and increased competitive pressure in certain domestic
product lines.

         Tools & Hardware segment revenues increased 9% compared to the third
quarter of 1997. Adjusted for recent acquisitions, revenues were 9% below last
year. Strong shipments of assembly equipment in international markets and sales
of new products were offset by weakness in demand from the aerospace, industrial
and electronics markets. In addition, revenues were impacted by lower exports
due to the strong U.S. dollar (which reduced reported revenues for the segment
by an estimated 1%) and weak economic conditions in Brazil. The implementation
of new integrated business systems also negatively impacted shipments during the
quarter.

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES:

         Income from continuing operations before income taxes decreased 19% to
$105.2 million for the third quarter of 1998 compared to $129.8 million for the
same period of 1997. Excluding net nonrecurring gains of $19.4 million in the
third quarter of last year, 1998 income from continuing operations before income
taxes decreased 5%. Increases in segment operating earnings were more than
offset by the increase in interest expense. Cost of sales, as a percentage of
revenues, increased five tenths of a point from the comparable 1997 quarter. An
unfavorable mix of power equipment products and competitive conditions for
certain electrical product lines accounted for the increase. Selling and
administrative expenses, as a percentage of sales, were lower than the prior
year period by three tenths of a point. This decrease in selling and
administrative expenses as a percentage of revenues for 1998 was due primarily
to the benefit of company-wide cost improvement actions. Interest expense
increased $15.4 million over the same period of last year due to additional debt
incurred to fund Common stock repurchases and acquisitions, including the
expenditure of a majority of a $500 million authorized Common stock repurchase
in anticipation of receiving the proceeds from the divestiture of the Automotive
businesses.

         Operating earnings of the Electrical Products segment increased over
the third quarter of 1997. Excluding acquisitions, operating earnings were flat
compared to last year. Increased sales of circuit protection and lighting
products were offset by lower sales and margins of power equipment and hazardous
duty electrical construction materials due to unfavorable product mix and
competitive pricing pressures.

         Excluding 1997 nonrecurring charges, the Tools & Hardware segment's
third quarter operating earnings increased over the prior year. Without the
impact of acquisitions, earnings declined year-to-year primarily the result of
reduced sales to domestic industrial markets, unfavorable product line mix and
higher manufacturing costs related to disruptions from implementing new business
systems.



                                      -14-
<PAGE>   15


INCOME TAXES:

         The continuing effective tax rate for the third quarter was 36.0%
compared to 37.1% for the same period of 1997. The rate reduction from 37.1% to
36.0% resulted from the Company's continuing tax planning efforts.

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1997

         Comparison of the results of continuing operations for the nine months
ended September 30, 1998 with the nine months ended September 30, 1997 requires
the consideration of the following items:

     o     During the third quarter of 1998, the Company substantially completed
           a $500 million stock repurchase program that had been authorized in
           August 1998. The purchases of Company Common stock under this
           authorization were in anticipation of receiving the proceeds from the
           disposition of the Automotive Products segment. The Company has
           purchased $733.2 million of its Common stock during 1998. The common
           stock repurchases significantly increased the Company's debt level
           and related interest expense during the quarter. While net income is
           impacted by the increased interest expense, average shares were also
           reduced, which negated the impact on earnings per share.

     o     The results from continuing operations for the nine months ended
           September 30, 1997 include a gain on the exchange of a portion of the
           Company's DECS of $23.2 million before income taxes and a gain of
           $69.8 million before income taxes from the disposition of the
           Company's Kirsch window treatment business. The 1997 nine month
           results from continuing operations also include charges of $40.5
           million before income taxes primarily related to actions management
           committed to during the second and third quarters of 1997 (See Note 4
           of Notes to Consolidated Financial Statements). The aggregate of
           these items increased continuing income before income taxes by $52.5
           million, continuing income by $33.0 million and diluted earnings per
           share by $.27 for the nine months ended September 30, 1997.

     o     In addition to the gain and charges discussed above, the results of
           discontinued operations included nonrecurring charges of $26.9
           million after income taxes or $.22 per diluted share. As a result,
           the 1997 net income includes a total of $6.1 million related to 
           nonrecurring items and diluted earnings per share includes $.05 
           related to nonrecurring items.

         Net income for the first nine months of 1998 increased 2% to $291.2
million compared with net income of $285.7 million in 1997 (which included net
nonrecurring gains of $6.1 million as discussed above). Diluted share earnings
increased 4% to $2.45 from $2.36 in 1997 (which included net nonrecurring gains
of $.05 as discussed above).

         Continuing income decreased 8% to $207.0 million on revenues of $2.77
billion compared with 1997 continuing net income of $225.4 million, including
net nonrecurring gains of $33.0 million, on revenues of $2.58 billion. Diluted
share earnings from continuing operations decreased 7% to $1.74 from $1.87 for
the first nine months of 1997. Excluding net nonrecurring gains of $.27 per
share recorded during the first nine months of 1997, continuing diluted share
earnings increased 9% to $1.74 from $1.60 for the same period of last year.

REVENUES:

         Revenues for the first nine months of 1998 increased 8% (increased 12%
excluding Kirsch revenues in 1997) compared to the first nine months of 1997.
After excluding the effects of acquisitions and divestitures, revenues increased
1% from the same period of last year. Overall, the Company estimates that the
strengthening of the U.S. dollar against most foreign currencies decreased
reported revenues by approximately 1% from the first nine months of 1997.



                                      -15-
<PAGE>   16



         Revenues in the Electrical Products segment increased 12% from the
first nine months of 1997. Excluding the impact of acquisitions, revenues
increased 3% over the same period of last year. The increase was driven by
strong sales of circuit protection and lighting products. Sales of newly
introduced products across all of the businesses contributed to the growth in
revenues. Partially offsetting this impact were shortfalls in hazardous duty
construction materials and power equipment other than transformers due to the
absence of large project orders, weak demand from utilities for products other
than transformers and the continuing economic crisis in Asia.

         Tools & Hardware segment revenues increased 10% compared to the same
period of 1997. Adjusted for recent acquisitions, revenues decreased 4% from
last year. Softening demand in industrial, electronics and aerospace markets,
lower exports due to the strong U.S. dollar and weak economic conditions in
Brazil resulted in the decline. Absent the impact of acquisitions and
unfavorable currency effects, Tools & Hardware revenues declined less than 2%
when compared to the prior year.

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES:

         Income from continuing operations before income taxes for the first
nine months of 1998 decreased 10% to $323.4 million compared to $358.6 million
for the same period of 1997. Excluding net nonrecurring gains of $52.5 million
recorded in the first nine months of 1997, continuing income before income taxes
increased 6% over the prior year. Increases in segment operating earnings were
partially offset by an increase in interest expense. Cost of sales, as a
percentage of revenues, was unchanged from the prior year. Selling and
administrative expenses, as a percentage of revenues, declined five tenths of a
point from the 1997 level. Excluding Kirsch in 1997, which had relatively higher
selling and administrative expenses, selling and administrative expenses
declined one tenth of a point. The decrease in selling and administrative
expenses as a percentage of sales was due to ongoing efforts to control costs
across the businesses. Interest expense increased $17.2 million from the same
period of last year as additional debt incurred to fund acquisitions and stock
repurchases more than offset the impact of the conversion during 1997 of $610
million of the Company's 7.05% Convertible Subordinated Debentures to Cooper
Common stock.

         Excluding 1997 nonrecurring charges, operating earnings of the
Electrical Products segment reflected an increase compared to the first nine
months of 1997 both before and after the impact of acquisitions. Excluding
acquisitions and 1997 nonrecurring charges, the improvement in earnings was
driven by increased shipments of circuit protection and lighting products,
partially offset by slightly lower sales of hazardous duty electrical
construction materials and power equipment other than transformers and
unfavorable product mix.

         Excluding Kirsch and 1997 nonrecurring gains and charges, the Tools &
Hardware segment's operating earnings for the first nine months of 1998
reflected a significant increase over the same prior year period. Without the
impact of acquisitions, earnings were slightly above last year driven by
improved operating efficiencies.

INCOME TAXES:

         The continuing effective tax rate for the first nine months was 36.0%
compared to 37.1% for the same period of 1997. The rate reduction from 37.1% to
36.0% resulted from the Company's continuing tax planning efforts.

EARNINGS OUTLOOK:

         The following sets forth Cooper's general business outlook for 1998,
based on current expectations, and updates the Company's earnings outlook set
forth in the Company's Form 10-Q for the quarter ended June 30, 1998 to reflect
the softening demand in certain industrial markets and the divestiture of the
Automotive Products segment on October 9, 1998. The statements are forward
looking and actual results may differ materially. The following comparative
figures for 1998 include the effects of acquisitions made


                                      -16-
<PAGE>   17



during 1997 and 1998, exclude 1997 nonrecurring items and reflect the Automotive
Products segment, which was sold October 9, 1998, as a discontinued operation.
Also, the Kirsch division is excluded from the Tools & Hardware segment.

         Both the Electrical Products and Tools & Hardware segment revenues are
each expected to increase by approximately ten to fifteen percent with
Electrical Products at the lower end of the range. The Company expects operating
earnings for the Electrical Products segment to increase approximately five
percent. Operating earnings for the Tools & Hardware segment are expected to
increase approximately fifteen percent.

         The Company does not anticipate that the lower interest expense and
lower average shares in the fourth quarter of 1998, resulting from the repayment
of debt and the purchase of the Company's Common stock with the proceeds from
the divestiture, will replace the earnings of the discontinued Automotive
Products segment in the fourth quarter of 1998. In the fourth quarter of 1997,
the discontinued operations earned $.20 per diluted common share.

         The above statements are forward looking, and actual results may differ
materially. The above statements are based on a number of assumptions, risks and
uncertainties. The primary economic assumptions include, without limitation, (1)
modest growth in the domestic economy; (2) a modest improvement in European
markets; (3) no further deterioration in the Far East markets or U.S. industrial
markets; (4) a modest increase in construction spending worldwide; (5) no
significant change in raw material costs; and (6) no significant adverse changes
in the relationship of the currencies of Western European countries to the U.S.
dollar. 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 the Company's periodic filings with the Securities and Exchange
Commission.

LIQUIDITY AND CAPITAL RESOURCES:

         On October 9, 1998, the Company completed the sale of its automotive
business to Federal-Mogul Corporation and received $1.9 billion in proceeds. The
Company used approximately $1.4 billion of the proceeds to reduce debt and
approximately $.5 billion was invested in short-term investments.

         The Company's operating working capital (defined as receivables and
inventories less accounts payable) increased $153 million during the first nine
months of 1998 compared to an increase of $85 million in the first nine months
of 1997. Operating working capital turnover for the year-to-date of 4.9 turns
equaled the turnover in 1997 for the same period. Operating working capital,
excluding acquisitions, increased primarily due to an increase in accounts
receivable driven by a slowdown in domestic customer payouts and the timing of
accounts payable disbursements.

         Cash flows from operating activities in the first nine months of 1998
totaled $190 million as cash generated from earnings was sufficient to offset
increases in operating working capital. These funds, along with a net increase
in debt of $946 million, cash received from the exercise of stock options of $40
million, and cash provided by discontinued operations of $73 million, were used
to fund acquisitions of $269 million, an investment in Thorn, plc (Thorn
Lighting Group) common stock of $42 million, capital expenditures of $103
million, dividends of $116 million and purchases of the Company's Common stock
of $733 million. During the first nine months of 1997, cash flows from operating
activities totaled $173 million. The cash flows from operating activities,
proceeds from the sale of Kirsch of $216 million, $24 million of additional
debt, cash received from the exercise of stock options of $13 million, and $52
million of cash provided by discontinued operations, provided funding for
acquisitions of $141 million, capital expenditures of $83 million, dividends of
$118 million and stock repurchases of $141 million during the first nine months
of 1997.


                                      -17-
<PAGE>   18


         In connection with acquisitions accounted for as purchases, the Company
records, to the extent appropriate, accruals for the costs of closing duplicate
facilities, severing redundant personnel and integrating the acquired businesses
into existing Company 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 nine
months ended September 30, 1998 and September 30, 1997 was $10.4 million and
$5.9 million, respectively. There were no significant additions to these
accruals during the first nine months of 1998.

         During the nine months ended September 30, 1998, the Company issued
$250 million of five-year medium-term notes at an average interest rate of 6.1%
under an existing shelf registration statement. At September 30, 1998, all notes
registered under the shelf registration statement had been issued. The issuance
of additional notes will require the filing of a new registration statement.

         The Company is reshaping its capital structure to offset the
discontinued Automotive Products segment's contribution to earnings per share
and to maintain a strong balance sheet that provides capacity for future growth.
The Company has targeted a 35% to 45% debt-to-capitalization ratio, with excess
cash being utilized to fund acquisitions or to purchase shares of the Company's
Common stock. At September 30, 1998, the Company's debt-to-total capitalization
ratio was 52.2% compared to 32.9% at September 30, 1997. Excluding the DECS,
which are mandatorily exchangeable into shares of Wyman-Gordon common stock or,
at the Company's option, into cash in lieu of shares, the Company's
debt-to-total capitalization ratio was 50.2% at September 30, 1998 compared to
27.1% at September 30, 1997. On October 9, 1998, the Company received $1.9
billion in proceeds from the disposition of the Automotive Products segment and
repaid approximately $1.4 billion of debt reducing the debt-to-capitalization to
the lower end of the targeted range. On November 3, 1998, the Company's Board of
Directors authorized the purchase of up to $500 million in Common stock. The
Company anticipates, through Common stock repurchases and acquisitions, to be
within the targeted range by December 31, 1998.

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>
                                September 30,
                             -------------------
                               1998       1997
                             --------   --------
                                (in millions)
<S>                          <C>        <C>     
Electrical Products ....     $  287.0   $  273.7
Tools & Hardware .......         83.9       71.0
                             --------   --------
                             $  370.9   $  344.7
                             ========   ========
</TABLE>


YEAR 2000:

         The Year 2000 problem arises because many information systems and
devices containing embedded technology use two digits rather than four digits to
identify a year. Calculations in date-sensitive systems using two digits could
result in system failures and errors that disrupt normal business operations as
the year 2000 approaches.

         Early in 1997, the Company conducted an assessment of year 2000
compliance of all of its major information technology systems, non-information
technology systems with date-sensitive software and embedded microprocessors and
products the Company manufactured or sold to customers. The Company developed
detailed plans to resolve all major issues by the end of 1998. As of September
30, 1998, the



                                      -18-
<PAGE>   19



Company estimates that it is over 75% complete with its efforts to remediate
current systems or implement new systems that are year 2000 compliant. By
December 31, 1998, the Company estimates that it will be 90% to 95% complete in
this effort with the majority of the remaining effort related to migrating
recently acquired businesses onto year 2000 compliant systems.

         The Company expects that only three of its seven divisions will be
involved in any significant compliance efforts in 1999. The projects that will
continue into 1999 include completing lower priority information technology
systems projects and replacing systems in recently acquired business units.
Efforts in 1999 will become less focused on systems projects and more focused on
identifying areas of additional business risk and developing contingency plans
where appropriate.

         The Company has substantially completed its efforts to detect and
correct noncompliant embedded technology. The Company's assessment of the
products it has delivered to customers is substantially complete.

         The Company has initiated formal communications with its key suppliers
and service providers to determine the potential risk to the Company's
operations if these third parties fail to solve year 2000 issues. Four of the
Company's divisions have completed their assessment of suppliers and service
providers. Three divisions have not yet completed their assessment of suppliers
and service providers, but expect to do so by the end of 1998. If the Company
determines that there is a risk to its operations because a key third party may
not be year 2000 compliant, it expects to develop contingency plans to address
this risk by the end of the first quarter of 1999. The extent of this risk
cannot be determined with any degree of certainty due to the number of small
suppliers and service providers used by the Company and the reliance of all
operations on basic utility service providers.

         The Company has not significantly increased its total annual capital
expenditures over historical levels as a result of the year 2000 compliance
efforts, although like most companies, its investment in information technology
has become a larger percentage of annual capital expenditures. The Company
estimates that it will have total capital expenditures related to year 2000
compliance of approximately $75 million, and that it has incurred and will
continue to incur into mid-1999 approximately $1 to $2 million each quarter in
expense related to year 2000 efforts. The Company has incurred approximately 75%
of the capital expenditures as of September 30, 1998. The majority of these
expenditures relate to new systems installations. Although the timing of new
systems installations was influenced by the year 2000 problem, the Company would
have installed these systems in any event. The above costs for year 2000
compliance efforts do not include costs relating to the Company's Automotive
Products segment, which was sold to Federal-Mogul Corporation on October 9, 1998
and is treated as a discontinued operation in the consolidated financial
statements.

         The likely worst case scenario of the year 2000 problem for the Company
is that the Company will not complete the information technology systems
projects that are scheduled through 1999 on time because of a severe shortage of
qualified information systems personnel, both internally and externally. The
Company recognizes that completion of these projects could also be affected for
other reasons that are unknown to the Company at this time. The Company believes
that it is unlikely that such projects would be delayed beyond a point in time
where the Company would suffer material adverse effects from noncompliance. For
this reason, the Company has not developed a contingency plan for this risk. In
the unlikely event that the remaining information technology systems projects
are not completed before significant problems are encountered, the Company's
results of operations could be adversely affected. The Company has not
determined whether such adverse effect would be material.

         In addition to the internal risks specific to the Company and the risks
posed by third parties that the company deals with directly, there are a number
of other year 2000 risks and uncertainties that could affect the Company. These
risks include utility and communication failures and governmental, economic and
market responses to the year 2000 problem. While the Company continues to
believe that these year 2000



                                      -19-
<PAGE>   20


matters will not have a material adverse impact on its results of operations,
liquidity or financial condition, the ultimate impact on the Company of the year
2000 problem remains uncertain.

         The Company's year 2000 project capital expenditures, estimated
percentage of completion and estimated completion dates are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the availability of certain resources, third-party
modification plans and other factors. There can be no guarantee that these
estimates will be achieved and actual results could differ materially from those
anticipated.

EURO CONVERSION:

         On January 1, 1999, the euro will become the common currency of eleven
of the fifteen member states of the European Union. After the introduction of
the euro, the national currencies will remain legal tender in the participating
countries until mid-year 2002. During the dual currency phase, businesses must
be capable of conducting commercial transactions in either the euro or the
national currency. After the dual currency phase, all businesses in
participating countries must conduct all transactions in the euro and must
convert their financial records and reports to be euro based. The euro
introduction may affect cross-border competition by creating cross-border price
transparency, beginning with the dual currency phase on January 1, 1999.

         The Company estimates that less than 10% of its 1998 revenues will come
from countries that will adopt the euro. The Company expects that the impact of
the dual currency phase will not be material to its results of operations. The
Company has assessed its information technology systems and believes that on or
before January 1, 1999 they will be capable of meeting the dual currency phase
requirements. The Company is assessing the risk to its business of the final
phase of the euro conversion which begins during 2002, and currently is unable
to determine whether the final phase of the euro conversion will have a material
effect on the Company's operations. The costs of the euro dual currency phase
are included with the year 2000 capital expenditures and expenses and are not
significant.



                                      -20-
<PAGE>   21
                          PART II - OTHER INFORMATION


Item 1.           Legal Proceedings

                  On November 13, 1996, AlliedSignal Inc. instituted an action
                  in the United States District Court, District of Delaware,
                  against the Company's wholly-owned subsidiary Cooper
                  Automotive, Inc. (now named Cooper Automotive Products, Inc.)
                  ("Cooper Automotive") alleging infringement of a process for
                  the manufacture of platinum tipped spark plug center
                  electrodes. On June 11, 1998, the trial jury found Cooper
                  Automotive liable for patent infringement and awarded
                  AlliedSignal $39,210,409 in damages. Before the judge entered
                  a verdict, AlliedSignal and Cooper Automotive entered into a
                  settlement agreement resolving the dispute on a mutually
                  acceptable basis involving the grant of a license to Cooper
                  Automotive. The settlement did not have a material adverse
                  effect on the Company's financial position or results of
                  operations. As noted in the Company's Form 8-K filed on
                  October 9, 1998, the Company has completed the sale of its
                  automotive products business (including the sale of Cooper
                  Automotive) to Federal-Mogul.

Item 6.           Exhibits and Reports on Form 8-K

                  (a)      Exhibits

                           10.      Material Contracts

                                    (i)     Purchase and Sale Agreement between
                                            Cooper Industries, Inc. and
                                            Federal-Mogul Corporation dated
                                            August 17, 1998.

                                    (ii)    Form of Management Continuity
                                            Agreement dated August 4, 1998,
                                            between Cooper Industries, Inc. and
                                            key management personnel which
                                            applies if there is a change in
                                            control of the Company.

                                    (iii)   Cooper Industries, Inc. Supplemental
                                            Excess Defined Benefit Plan (August
                                            1, 1998 Restatement).

                                    (iv)    Cooper Industries Inc. Supplemental
                                            Excess Defined Contribution Plan
                                            (August 1, 1998 Restatement).

                           27.1     Financial Data Schedule

                           27.2     Restated Financial Data Schedules for the
                                    years ended December 31, 1997, 1996 and
                                    1995.

                           27.3     Restated Financial Data Schedules for the
                                    year-to-date periods ended June 30, 1998,
                                    March 31, 1998 and September 30, 1997.

                           27.4     Restated Financial Data Schedules for the 
                                    year-to-date periods ended June 30, 1997 and
                                    March 31, 1997.

                  (b)      Reports on Form 8-K

                           The Company filed a report on Form 8-K dated July 23,
                           1998, setting forth the Company's results of
                           operations for the second quarter of 1998.

                           The Company filed a report on Form 8-K dated August
                           18, 1998, which included a copy of a press release
                           announcing that the Company had signed an agreement
                           to sell its automotive business to Federal-Mogul
                           Corporation for approximately $1.9 billion.



                                      -21-
<PAGE>   22



                           The Company filed a report on Form 8-K dated
                           September 4, 1998, which included a copy of a press
                           release announcing that the Company and TLG plc
                           (Thorn Lighting Group) had jointly announced an
                           agreed offer by the Company to acquire Thorn in a
                           transaction valued at approximately $535 million.

                           The Company filed a report on Form 8-K dated
                           September 28, 1998, which included a copy of a press
                           release announcing that its offer to acquire TLG plc
                           (Thorn Lighting Group) for approximately $535 million
                           has expired and will not be extended because of an
                           offer by a rival bidder to acquire TLG plc for
                           approximately $585 million.



                                      -22-
<PAGE>   23


                                   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:    November 13, 1998                 /s/ D. Bradley McWilliams
-------------------------------------      ---------------------------------
                                           D. Bradley McWilliams
                                           Senior Vice President and
                                           Chief Financial Officer


Date:    November 13, 1998                 /s/ Terry A. Klebe
-------------------------------------      ---------------------------------
                                           Terry A. Klebe
                                           Vice President and Controller
                                           and Chief Accounting Officer




                                      23
<PAGE>   24
                                  Exhibit Index


Exhibit No.

         10.      Material Contracts

                  (i)      Purchase and Sale Agreement between Cooper
                           Industries, Inc. and Federal-Mogul Corporation dated
                           August 17, 1998.

                  (ii)     Form of Management Continuity Agreement dated August
                           4, 1998, between Cooper Industries, Inc. and key
                           management personnel which applies if there is a
                           change in control of the Company.

                  (iii)    Cooper Industries, Inc. Supplemental Excess Defined
                           Benefit Plan (August 1, 1998 Restatement).

                  (iv)     Cooper Industries, Inc. Supplemental Excess Defined
                           Contribution Plan (August 1, 1998 Restatement).


         27.1     Financial Data Schedule

         27.2     Restated Financial Data Schedules for the years ended December
                  31, 1997, 1996 and 1995.

         27.3     Restated Financial Data Schedules for the year-to-date periods
                  ended June 30, 1998, March 31, 1998, September 30, 1997.

         27.4     Restated Financial Data Schedules for the year-to-date 
                  periods ended June 30, 1997 and March 31, 1997.