##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarter ended September 30, 2006
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 1-31330
 Cooper Industries, Ltd.
  Bermuda
    
    98-0355628(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)600 Travis, Suite 5800
    
    Houston, Texas 77002(Address of principal executive offices)
    
    (Zip Code)
  
  
  þ o
  þ o o
 o þ




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 4. Controls and ProceduresPART II  OTHER INFORMATIONItem 1. Legal ProceedingsItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 6. ExhibitsSignaturesExhibit IndexCurrent Compensation Arrangements for Named Executive OfficersSeparation and Transition AgreementComputation of Ratios of Earnings to Fixed ChargesConsent of Bates White, LLCCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906    Table of Contents  
 PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 COOPER INDUSTRIES, LTD.
CONSOLIDATED INCOME STATEMENTS
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(in millions, where applicable)Revenues
    
    $
    1,314.6
    
    
    $
    1,210.4
    
    
    $
    3,843.3
    
    
    $
    3,544.4Cost of sales
    
    
    887.2
    
    
    
    828.1
    
    
    
    2,604.3
    
    
    
    2,430.4Selling and administrative expenses
    
    
    240.8
    
    
    
    235.9
    
    
    
    722.6
    
    
    
    696.3Operating earnings
    
    
    186.6
    
    
    
    146.4
    
    
    
    516.4
    
    
    
    417.7Interest expense, net
    
    
    14.0
    
    
    
    16.5
    
    
    
    38.5
    
    
    
    52.0Income from continuing operations before
income taxes
    
    
    172.6
    
    
    
    129.9
    
    
    
    477.9
    
    
    
    365.7Income taxes
    
    
    44.4
    
    
    
    27.9
    
    
    
    122.2
    
    
    
    78.6Income from continuing operations
    
    
    128.2
    
    
    
    102.0
    
    
    
    355.7
    
    
    
    287.1Charge related to discontinued operations,
net of income taxes
    
    
    
    
    
    
    
    
    
    
    20.3
    
    
    
    Net income
    
    $
    128.2
    
    
    $
    102.0
    
    
    $
    335.4
    
    
    $
    287.1Income per common share:Basic:Income from continuing operations
    
    $
    1.40
    
    
    $
    1.11
    
    
    $
    3.87
    
    
    $
    3.09Charge from discontinued operations
    
    
    
    
    
    
    
    
    
    
    .22
    
    
    
    Net income
    
    $
    1.40
    
    
    $
    1.11
    
    
    $
    3.65
    
    
    $
    3.09Diluted:Income from continuing operations
    
    $
    1.37
    
    
    $
    1.08
    
    
    $
    3.78
    
    
    $
    3.02Charge from discontinued operations
    
    
    
    
    
    
    
    
    
    
    .21
    
    
    
    Net income
    
    $
    1.37
    
    
    $
    1.08
    
    
    $
    3.57
    
    
    $
    3.02Cash dividends per common share
    
    $
    .37
    
    
    $
    .37
    
    
    $
    1.11
    
    
    $
    1.11
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COOPER INDUSTRIES, LTD.
CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2006
    
    
    2005(in millions)ASSETSCash and cash equivalents
    
    $
    243.9
    
    
    $
    452.8Receivables
    
    
    960.8
    
    
    
    842.4Inventories
    
    
    642.2
    
    
    
    538.7Deferred income taxes and other current assets
    
    
    262.4
    
    
    
    297.2Total current assets
    
    
    2,109.3
    
    
    
    2,131.1Property, plant and equipment, less accumulated depreciation
    
    
    662.8
    
    
    
    673.7Goodwill
    
    
    2,315.8
    
    
    
    2,084.0Deferred income taxes and other noncurrent assets
    
    
    334.4
    
    
    
    326.3Total assets
    
    $
    5,422.3
    
    
    $
    5,215.1LIABILITIES AND SHAREHOLDERS EQUITYShort-term debt
    
    $
    6.3
    
    
    $
    7.6Accounts payable
    
    
    455.3
    
    
    
    427.8Accrued liabilities
    
    
    526.9
    
    
    
    518.0Current discontinued operations liability
    
    
    207.5
    
    
    
    196.3Current maturities of long-term debt
    
    
    300.5
    
    
    
    11.4Total current liabilities
    
    
    1,496.5
    
    
    
    1,161.1Long-term debt
    
    
    703.3
    
    
    
    1,002.9Postretirement benefits other than pensions
    
    
    152.7
    
    
    
    163.0Long-term discontinued operations liability
    
    
    330.0
    
    
    
    330.0Other long-term liabilities
    
    
    392.1
    
    
    
    352.9Total liabilities
    
    
    3,074.6
    
    
    
    3,009.9Common stock, $.01 par value
    
    
    0.9
    
    
    
    0.9Capital in excess of par value
    
    
    255.4
    
    
    
    383.2Retained earnings
    
    
    2,229.8
    
    
    
    1,997.4Accumulated other nonowner changes in equity
    
    
    (138.4
    )
    
    
    (176.3
    )Total shareholders equity
    
    
    2,347.7
    
    
    
    2,205.2Total liabilities and shareholders equity
    
    $
    5,422.3
    
    
    $
    5,215.1
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COOPER INDUSTRIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months EndedSeptember 30,2006
    
    
    2005(in millions)Cash flows from operating activities:Net income
    
    $
    335.4
    
    
    $
    287.1Plus: charge related to discontinued operations
    
    
    20.3
    
    
    
    Income from continuing operations
    
    
    355.7
    
    
    
    287.1Adjustments to reconcile to net cash provided by operating activities:Depreciation and amortization
    
    
    85.0
    
    
    
    84.1Deferred income taxes
    
    
    12.6
    
    
    
    5.0Excess tax benefits from stock options and awards
    
    
    (21.4
    )
    
    
    Restructuring charge payments
    
    
    
    
    
    
    (0.4
    )Changes in assets and liabilities: (1)Receivables
    
    
    (87.8
    )
    
    
    (114.3
    )Inventories
    
    
    (81.5
    )
    
    
    (54.5
    )Accounts payable and accrued liabilities
    
    
    (0.9
    )
    
    
    8.3Other assets and liabilities, net
    
    
    113.0
    
    
    
    85.2Net cash provided by operating activities
    
    
    374.7
    
    
    
    300.5Cash flows from investing activities:Capital expenditures
    
    
    (58.1
    )
    
    
    (71.8
    )Cash paid for acquired businesses
    
    
    (279.4
    )
    
    
    (2.4
    )Proceeds from sales of property, plant and equipment and other
    
    
    18.4
    
    
    
    6.6Net cash used in investing activities
    
    
    (319.1
    )
    
    
    (67.6
    )Cash flows from financing activities:Proceeds from issuances of debt
    
    
    
    
    
    
    1.4Repayments of debt
    
    
    (13.3
    )
    
    
    (270.1
    )Dividends
    
    
    (103.0
    )
    
    
    (103.8
    )Subsidiary purchase of parent shares
    
    
    (261.7
    )
    
    
    (166.2
    )Excess tax benefits from stock options and awards
    
    
    21.4
    
    
    
    Activity under employee stock plans and other
    
    
    81.1
    
    
    
    54.7Net cash used in financing activities
    
    
    (275.5
    )
    
    
    (484.0
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    11.0
    
    
    
    (25.7
    )Decrease in cash and cash equivalents
    
    
    (208.9
    )
    
    
    (276.8
    )Cash and cash equivalents, beginning of period
    
    
    452.8
    
    
    
    652.8Cash and cash equivalents, end of period
    
    $
    243.9
    
    
    $
    376.0
 
 (1)
    
    Net of the effects of acquisitions and translation.  -4-




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COOPER INDUSTRIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. Accounting Policies
 Basis of Presentation
  Impact of New Accounting Standards Accounting for Uncertainty in Income Taxes ( . Accounting for Income Taxes.
 Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans
 Note 2. Stock-Based Compensation
 Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
  -5-




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Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2005(in millions, except per share amounts)Net income, as reported
    
    
    $102.0
    
    
    
    $287.1Add: Stock-based employee compensation expense
included in reported net income, net of related tax effects
    
    
    8.3
    
    
    
    18.5Deduct: Total stock-based employee compensation
expense determined under fair value based method for all
awards, net of related tax effects
    
    
    (8.0
    )
    
    
    (16.1
    )Pro-forma net income
    
    
    $102.3
    
    
    
    $289.5Earnings per share:Basic  as reported
    
    
    $1.11
    
    
    
    $3.09Basic  pro-forma
    
    
    $1.11
    
    
    
    $3.12Diluted  as reported
    
    
    $1.08
    
    
    
    $3.02Diluted  pro-forma
    
    
    $1.08
    
    
    
    $3.05
 Share-Based Payment Statement of Cash Flows
   -6-




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Stock Options
   2006
    
    2005Expected volatility
    
    
    18.0
    %
    
    
    27.7
    %Expected dividends
    
    
    1.8
    %
    
    
    2.1
    %Expected term (in years)
    
    
    4.5
    
    
    
    5.0Risk-free rate
    
    
    4.6
    %
    
    
    3.7
    %
 -7-




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WeightedWeighted-
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicExercise
    
    
    Contractual
    
    
    ValueOptions
    
    Shares
    
    
    Price
    
    
    Term
    
    
    (in millions)Outstanding at January 1, 2006
    
    
    5,428,821
    
    
    $
    48.81Granted
    
    
    805,600
    
    
    $
    82.79Exercised
    
    
    (1,759,729
    )
    
    $
    44.15Forfeited or expired
    
    
    (93,566
    )
    
    $
    67.38Outstanding at September 30, 2006
    
    
    4,381,126
    
    
    $
    56.53
    
    
    
    4.5
    
    
    $
    126.7Vested or expected to vest at
September 30, 2006
    
    
    4,329,550
    
    
    $
    56.23
    
    
    
    4.8
    
    
    $
    125.2Exercisable at September 30, 2006
    
    
    2,560,536
    
    
    $
    44.83
    
    
    
    3.7
    
    
    $
    103.9
   Performance-Based Shares and Restricted Stock Units
   -8-




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Weighted-AverageGrant-DateNonvested Performance-Based Shares
    
    Shares
    
    Fair ValueNonvested at January 1, 2006
    
    
    962,138
    
    
    $
    55.05Granted
    
    
    288,260
    
    
    $
    82.83Vested
    
    
    (288,975
    )
    
    $
    37.58Forfeited
    
    
    (73,324
    )
    
    $
    64.64Nonvested at September 30, 2006
    
    
    888,099
    
    
    $
    68.98
    Weighted-AverageGrant-DateNonvested Restricted Stock Units
    
    Shares
    
    Fair ValueNonvested at January 1, 2006
    
    
    309,400
    
    
    $
    49.97Granted
    
    
    40,800
    
    
    $
    86.61Vested
    
    
    (102,600
    )
    
    $
    41.36Forfeited
    
    
    (23,000
    )
    
    $
    48.78Nonvested at September 30, 2006
    
    
    224,600
    
    
    $
    60.68
     -9-




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Note 3. Acquisitions and Divestitures
      Cannon
    
    
    All Others
    
    
    Total(in millions)Receivables
    
    $
    6.5
    
    
    $
    8.7
    
    
    $
    15.2Inventories
    
    
    4.6
    
    
    
    12.6
    
    
    
    17.2Property, Plant and Equipment
    
    
    1.7
    
    
    
    8.5
    
    
    
    10.2Goodwill
    
    
    150.0
    
    
    
    41.0
    
    
    
    191.0Other intangible assets
    
    
    55.5
    
    
    
    33.0
    
    
    
    88.5Accounts payable
    
    
    (3.8
    )
    
    
    (1.9
    )
    
    
    (5.7
    )Other assets and liabilities, net
    
    
    (24.1
    )
    
    
    (12.9
    )
    
    
    (37.0
    )Net cash consideration
    
    $
    190.4
    
    
    $
    89.0
    
    
    $
    279.4
   -10-




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Note 4. Inventories
 September 30,
    
    
    December 31,2006
    
    
    2005(in millions)Raw materials
    
    $
    213.0
    
    
    $
    206.1Work-in-process
    
    
    171.4
    
    
    
    137.9Finished goods
    
    
    383.2
    
    
    
    303.7Perishable tooling and supplies
    
    
    14.1
    
    
    
    14.4781.7
    
    
    
    662.1Allowance for excess and obsolete inventory
    
    
    (68.5
    )
    
    
    (58.7
    )Excess of current standard costs over LIFO costs
    
    
    (71.0
    )
    
    
    (64.7
    )Net inventories
    
    $
    642.2
    
    
    $
    538.7
 Note 5. Shareholders Equity
   Note 6. Segment Information
 RevenuesThree Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(in millions)Electrical Products
    
    $
    1,127.4
    
    
    $
    1,027.5
    
    
    $
    3,291.5
    
    
    $
    3,006.4Tools
    
    
    187.2
    
    
    
    182.9
    
    
    
    551.8
    
    
    
    538.0Total revenues
    
    $
    1,314.6
    
    
    $
    1,210.4
    
    
    $
    3,843.3
    
    
    $
    3,544.4
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Operating EarningsThree Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(in millions)Electrical Products
    
    $
    186.4
    
    
    $
    158.2
    
    
    $
    524.0
    
    
    $
    441.8Tools
    
    
    24.3
    
    
    
    15.5
    
    
    
    61.2
    
    
    
    46.0Segment operating earnings
    
    
    210.7
    
    
    
    173.7
    
    
    
    585.2
    
    
    
    487.8General Corporate expenses
    
    
    24.1
    
    
    
    27.3
    
    
    
    68.8
    
    
    
    70.1Total operating earnings
    
    
    186.6
    
    
    
    146.4
    
    
    
    516.4
    
    
    
    417.7Interest expense, net
    
    
    14.0
    
    
    
    16.5
    
    
    
    38.5
    
    
    
    52.0Income from continuing operations before
income taxes
    
    $
    172.6
    
    
    $
    129.9
    
    
    $
    477.9
    
    
    $
    365.7
 Note 7. Pension and Other Postretirement Benefits
   Pension BenefitsThree Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(in millions)Components of net periodic benefit cost:Service cost
    
    $
    4.1
    
    
    $
    4.2
    
    
    $
    12.5
    
    
    $
    12.9Interest cost
    
    
    10.4
    
    
    
    9.8
    
    
    
    31.1
    
    
    
    30.2Expected return on plan assets
    
    
    (12.2
    )
    
    
    (12.0
    )
    
    
    (36.9
    )
    
    
    (37.4
    )Amortization of prior service cost
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.4
    
    
    
    0.5Recognized actuarial loss
    
    
    2.9
    
    
    
    2.4
    
    
    
    10.1
    
    
    
    7.2Curtailment loss
    
    
    
    
    
    
    
    
    
    
    4.2
    
    
    
    Net periodic benefit cost
    
    $
    5.3
    
    
    $
    4.6
    
    
    $
    21.4
    
    
    $
    13.4
 -12-




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Other Postretirement BenefitsThree Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(in millions)Components of net periodic benefit cost:Service cost
    
    $
    
    
    
    $
    0.1
    
    
    $
    0.1
    
    
    $
    0.2Interest cost
    
    
    1.4
    
    
    
    1.7
    
    
    
    4.1
    
    
    
    5.2Amortization of prior service cost
    
    
    (0.5
    )
    
    
    
    
    
    
    (1.5
    )
    
    
    Recognized actuarial gain
    
    
    (0.7
    )
    
    
    (0.8
    )
    
    
    (2.1
    )
    
    
    (2.3
    )Curtailment gain
    
    
    
    
    
    
    
    
    
    
    (3.2
    )
    
    
    Net periodic benefit (income) cost
    
    $
    0.2
    
    
    $
    1.0
    
    
    $
    (2.6
    )
    
    $
    3.1
 Note 8. Income Taxes
    -13-




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Note 9. Net Income Per Common Share
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(in millions)Basic:Income from continuing operations
    
    $
    128.2
    
    
    $
    102.0
    
    
    $
    355.7
    
    
    $
    287.1Charge from discontinued operations
    
    
    
    
    
    
    
    
    
    
    20.3
    
    
    
    Net income applicable to common stock
    
    $
    128.2
    
    
    $
    102.0
    
    
    $
    335.4
    
    
    $
    287.1Weighted average common shares outstanding
    
    
    91.4
    
    
    
    92.3
    
    
    
    92.0
    
    
    
    92.8Diluted:Income from continuing operations
    
    $
    128.2
    
    
    $
    102.0
    
    
    $
    355.7
    
    
    $
    287.1Charge from discontinued operations
    
    
    
    
    
    
    
    
    
    
    20.3
    
    
    
    Net income applicable to common stock
    
    $
    128.2
    
    
    $
    102.0
    
    
    $
    335.4
    
    
    $
    287.1Weighted average common shares outstanding
    
    
    91.4
    
    
    
    92.3
    
    
    
    92.0
    
    
    
    92.8Incremental shares from assumed conversions:Options, performance-based stock
awards and other employee awards
    
    
    1.9
    
    
    
    2.5
    
    
    
    2.0
    
    
    
    2.4Weighted average common shares
and common share equivalents
    
    
    93.3
    
    
    
    94.8
    
    
    
    94.0
    
    
    
    95.2
  Note 10. Net Income and Other Nonowner Changes in Equity
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(in millions)Net income
    
    $
    128.2
    
    
    $
    102.0
    
    
    $
    335.4
    
    
    $
    287.1Foreign currency translation gains (losses)
    
    
    15.8
    
    
    
    (6.9
    )
    
    
    34.8
    
    
    
    (20.4
    )Change in fair value of derivatives
    
    
    3.9
    
    
    
    1.2
    
    
    
    3.1
    
    
    
    0.1Net income and other nonowner
changes in equity
    
    $
    147.9
    
    
    $
    96.3
    
    
    $
    373.3
    
    
    $
    266.8
 Note 11. Restructuring
   -14-




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Note 12. Charge Related to Discontinued Operations
    -15-




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-17-




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Note 13. Consolidating Financial Information
  -18-




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Consolidating Income Statements
Three Months Ended September 30, 2006
 Cooper
    
    
    CooperIndustries,
    
    
    US,
    
    
    
    
    
    
    Other
    
    
    ConsolidatingCooper
    
    
    LLC
    
    
    Inc.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    860.9
    
    
    $
    508.3
    
    
    $
    (54.6
    )
    
    $
    1,314.6Cost of sales
    
    
    
    
    
    
    (0.2
    )
    
    
    0.5
    
    
    
    598.5
    
    
    
    343.0
    
    
    
    (54.6
    )
    
    
    887.2Selling and administrative expenses
    
    
    2.0
    
    
    
    4.9
    
    
    
    16.8
    
    
    
    126.0
    
    
    
    91.1
    
    
    
    
    
    
    
    240.8Interest expense, net
    
    
    (0.2
    )
    
    
    11.7
    
    
    
    3.6
    
    
    
    
    
    
    
    (1.1
    )
    
    
    
    
    
    
    14.0Equity in earnings of
subsidiaries, net of tax
    
    
    159.9
    
    
    
    (136.8
    )
    
    
    98.4
    
    
    
    22.3
    
    
    
    96.2
    
    
    
    (240.0
    )
    
    
    Intercompany income (expense)
    
    
    (4.9
    )
    
    
    145.0
    
    
    
    3.0
    
    
    
    (105.5
    )
    
    
    (12.7
    )
    
    
    (24.9
    )
    
    
    Income (loss) before income taxes
    
    
    153.2
    
    
    
    (8.2
    )
    
    
    80.5
    
    
    
    53.2
    
    
    
    158.8
    
    
    
    (264.9
    )
    
    
    172.6Income tax expense (benefit)
    
    
    
    
    
    
    (7.7
    )
    
    
    (15.9
    )
    
    
    11.7
    
    
    
    56.3
    
    
    
    
    
    
    
    44.4Net income (loss)
    
    $
    153.2
    
    
    $
    (0.5
    )
    
    $
    96.4
    
    
    $
    41.5
    
    
    $
    102.5
    
    
    $
    (264.9
    )
    
    $
    128.2
 Three Months Ended September 30, 2005
 Cooper
    
    
    CooperIndustries,
    
    
    US,
    
    
    
    
    
    
    Other
    
    
    ConsolidatingCooper
    
    
    LLC
    
    
    Inc.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    820.2
    
    
    $
    430.2
    
    
    $
    (40.0
    )
    
    $
    1,210.4Cost of sales
    
    
    
    
    
    
    (0.2
    )
    
    
    (0.1
    )
    
    
    573.5
    
    
    
    294.9
    
    
    
    (40.0
    )
    
    
    828.1Selling and administrative expenses
    
    
    2.0
    
    
    
    4.1
    
    
    
    21.6
    
    
    
    124.7
    
    
    
    83.5
    
    
    
    
    
    
    
    235.9Interest expense, net
    
    
    (0.1
    )
    
    
    13.7
    
    
    
    (1.2
    )
    
    
    
    
    
    
    4.1
    
    
    
    
    
    
    
    16.5Equity in earnings of
subsidiaries, net of tax
    
    
    122.4
    
    
    
    9.3
    
    
    
    94.6
    
    
    
    (90.8
    )
    
    
    66.9
    
    
    
    (202.4
    )
    
    
    Intercompany income (expense)
    
    
    (1.8
    )
    
    
    (10.3
    )
    
    
    (32.3
    )
    
    
    (88.4
    )
    
    
    149.5
    
    
    
    (16.7
    )
    
    
    Income (loss) before income taxes
    
    
    118.7
    
    
    
    (18.6
    )
    
    
    42.0
    
    
    
    (57.2
    )
    
    
    264.1
    
    
    
    (219.1
    )
    
    
    129.9Income tax expense (benefit)
    
    
    
    
    
    
    (10.3
    )
    
    
    (24.8
    )
    
    
    10.3
    
    
    
    52.7
    
    
    
    
    
    
    
    27.9Net income (loss)
    
    $
    118.7
    
    
    $
    (8.3
    )
    
    $
    66.8
    
    
    $
    (67.5
    )
    
    $
    211.4
    
    
    $
    (219.1
    )
    
    $
    102.0
 -19-




---



##### Table of Contents



Consolidating Income Statements
Nine Months Ended September 30, 2006
 Cooper
    
    
    CooperIndustries,
    
    
    US,
    
    
    
    
    
    
    Other
    
    
    ConsolidatingCooper
    
    
    LLC
    
    
    Inc.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,529.1
    
    
    $
    1,486.5
    
    
    $
    (172.3
    )
    
    $
    3,843.3Cost of sales
    
    
    
    
    
    
    (0.6
    )
    
    
    0.5
    
    
    
    1,767.3
    
    
    
    1,009.4
    
    
    
    (172.3
    )
    
    
    2,604.3Selling and administrative expenses
    
    
    7.5
    
    
    
    12.6
    
    
    
    48.4
    
    
    
    385.8
    
    
    
    268.3
    
    
    
    
    
    
    
    722.6Interest expense, net
    
    
    (0.5
    )
    
    
    33.5
    
    
    
    8.9
    
    
    
    
    
    
    
    (3.4
    )
    
    
    
    
    
    
    38.5Equity in earnings of
subsidiaries, net of tax
    
    
    428.2
    
    
    
    (118.3
    )
    
    
    247.7
    
    
    
    69.5
    
    
    
    246.6
    
    
    
    (873.7
    )
    
    
    Intercompany income (expense)
    
    
    (12.2
    )
    
    
    138.0
    
    
    
    10.8
    
    
    
    (318.3
    )
    
    
    255.2
    
    
    
    (73.5
    )
    
    
    Income (loss) from continuing
operations before income taxes
    
    
    409.0
    
    
    
    (25.8
    )
    
    
    200.7
    
    
    
    127.2
    
    
    
    714.0
    
    
    
    (947.2
    )
    
    
    477.9Income tax expense (benefit)
    
    
    
    
    
    
    (21.5
    )
    
    
    (46.0
    )
    
    
    23.6
    
    
    
    166.1
    
    
    
    
    
    
    
    122.2Income from continuing operations
    
    
    409.0
    
    
    
    (4.3
    )
    
    
    246.7
    
    
    
    103.6
    
    
    
    547.9
    
    
    
    (947.2
    )
    
    
    355.7Charge related to discontinued
operations, net of tax
    
    
    
    
    
    
    20.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20.3Net income (loss)
    
    $
    409.0
    
    
    $
    (24.6
    )
    
    $
    246.7
    
    
    $
    103.6
    
    
    $
    547.9
    
    
    $
    (947.2
    )
    
    $
    335.4
 Nine Months Ended September 30, 2005
 Cooper
    
    
    CooperIndustries,
    
    
    US,
    
    
    
    
    
    
    Other
    
    
    ConsolidatingCooper
    
    
    LLC
    
    
    Inc.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,382.8
    
    
    $
    1,262.2
    
    
    $
    (100.6
    )
    
    $
    3,544.4Cost of sales
    
    
    0.2
    
    
    
    
    
    
    
    1.3
    
    
    
    1,684.4
    
    
    
    845.1
    
    
    
    (100.6
    )
    
    
    2,430.4Selling and administrative expenses
    
    
    6.7
    
    
    
    7.9
    
    
    
    53.4
    
    
    
    376.1
    
    
    
    252.2
    
    
    
    
    
    
    
    696.3Interest expense, net
    
    
    (1.0
    )
    
    
    40.6
    
    
    
    (2.9
    )
    
    
    
    
    
    
    15.3
    
    
    
    
    
    
    
    52.0Equity in earnings of
subsidiaries, net of tax
    
    
    360.4
    
    
    
    59.0
    
    
    
    256.4
    
    
    
    69.9
    
    
    
    196.3
    
    
    
    (942.0
    )
    
    
    Intercompany income (expense)
    
    
    (4.3
    )
    
    
    (37.1
    )
    
    
    (77.7
    )
    
    
    (209.2
    )
    
    
    391.5
    
    
    
    (63.2
    )
    
    
    Income (loss) before income taxes
    
    
    350.2
    
    
    
    (26.6
    )
    
    
    126.9
    
    
    
    183.0
    
    
    
    737.4
    
    
    
    (1,005.2
    )
    
    
    365.7Income tax expense (benefit)
    
    
    
    
    
    
    (31.8
    )
    
    
    (69.3
    )
    
    
    38.7
    
    
    
    141.0
    
    
    
    
    
    
    
    78.6Net income
    
    $
    350.2
    
    
    $
    5.2
    
    
    $
    196.2
    
    
    $
    144.3
    
    
    $
    596.4
    
    
    $
    (1,005.2
    )
    
    $
    287.1
 -20-




---



##### Table of Contents



Consolidating Balance Sheets
September 30, 2006
 Cooper
    
    
    CooperIndustries,
    
    
    US,
    
    
    
    
    
    
    Other
    
    
    ConsolidatingCooper
    
    
    LLC
    
    
    Inc.
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCash and cash equivalents
    
    $
    0.8
    
    
    $
    
    
    
    $
    61.5
    
    
    $
    (2.3
    )
    
    $
    183.9
    
    
    $
    
    
    
    $
    243.9Receivables
    
    
    
    
    
    
    
    
    
    
    5.5
    
    
    
    529.1
    
    
    
    426.2
    
    
    
    
    
    
    
    960.8Inventories
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    357.9
    
    
    
    284.3
    
    
    
    
    
    
    
    642.2Deferred income taxes and other current
assets
    
    
    
    
    
    
    141.2
    
    
    
    39.6
    
    
    
    47.5
    
    
    
    34.1
    
    
    
    
    
    
    
    262.4Total current assets
    
    
    0.8
    
    
    
    141.2
    
    
    
    106.6
    
    
    
    932.2
    
    
    
    928.5
    
    
    
    
    
    
    
    2,109.3Property, plant and equipment, less
accumulated depreciation
    
    
    
    
    
    
    
    
    
    
    45.5
    
    
    
    321.7
    
    
    
    295.6
    
    
    
    
    
    
    
    662.8Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,023.9
    
    
    
    1,291.9
    
    
    
    
    
    
    
    2,315.8Investment in subsidiaries
    
    
    3,382.7
    
    
    
    569.9
    
    
    
    4,002.7
    
    
    
    1,194.8
    
    
    
    1,151.1
    
    
    
    (10,301.2
    )
    
    
    Investment in parent
    
    
    
    
    
    
    
    
    
    
    2,808.8
    
    
    
    
    
    
    
    312.7
    
    
    
    (3,121.5
    )
    
    
    Intercompany accounts receivable
    
    
    675.5
    
    
    
    797.8
    
    
    
    
    
    
    
    1,075.6
    
    
    
    631.7
    
    
    
    (3,180.6
    )
    
    
    Intercompany notes receivable
    
    
    83.9
    
    
    
    24.3
    
    
    
    741.5
    
    
    
    8.4
    
    
    
    3,970.1
    
    
    
    (4,828.2
    )
    
    
    Deferred income taxes and other
noncurrent assets
    
    
    
    
    
    
    53.5
    
    
    
    24.5
    
    
    
    88.3
    
    
    
    168.1
    
    
    
    
    
    
    
    334.4Total assets
    
    $
    4,142.9
    
    
    $
    1,586.7
    
    
    $
    7,729.6
    
    
    $
    4,644.9
    
    
    $
    8,749.7
    
    
    $
    (21,431.5
    )
    
    $
    5,422.3Short-term debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6.3
    
    
    $
    
    
    
    $
    6.3Accounts payable
    
    
    34.0
    
    
    
    11.4
    
    
    
    9.6
    
    
    
    220.6
    
    
    
    179.7
    
    
    
    
    
    
    
    455.3Accrued liabilities
    
    
    4.9
    
    
    
    39.2
    
    
    
    108.9
    
    
    
    221.1
    
    
    
    152.8
    
    
    
    
    
    
    
    526.9Current discontinued operations liability
    
    
    
    
    
    
    207.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    207.5Current maturities of long-term debt
    
    
    
    
    
    
    300.0
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    300.5Total current liabilities
    
    
    38.9
    
    
    
    558.1
    
    
    
    118.5
    
    
    
    441.7
    
    
    
    339.3
    
    
    
    
    
    
    
    1,496.5Long-term debt
    
    
    
    
    
    
    370.7
    
    
    
    323.9
    
    
    
    8.1
    
    
    
    0.6
    
    
    
    
    
    
    
    703.3Intercompany accounts payable
    
    
    
    
    
    
    
    
    
    
    3,180.6
    
    
    
    
    
    
    
    
    
    
    
    (3,180.6
    )
    
    
    Intercompany notes payable
    
    
    478.2
    
    
    
    322.3
    
    
    
    1,870.0
    
    
    
    1,705.8
    
    
    
    451.9
    
    
    
    (4,828.2
    )
    
    
    Long-term discontinued operations
liability
    
    
    
    
    
    
    330.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    330.0Other long-term liabilities
    
    
    
    
    
    
    (13.4
    )
    
    
    197.1
    
    
    
    212.8
    
    
    
    148.3
    
    
    
    
    
    
    
    544.8Total liabilities
    
    
    517.1
    
    
    
    1,567.7
    
    
    
    5,690.1
    
    
    
    2,368.4
    
    
    
    940.1
    
    
    
    (8,008.8
    )
    
    
    3,074.6Class A common stock
    
    
    1.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    0.9Class B common stock
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.5
    )
    
    
    Subsidiary common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    470.6
    
    
    
    (470.6
    )
    
    
    Capital in excess of par value
    
    
    3,366.6
    
    
    
    
    
    
    
    50.9
    
    
    
    1,393.5
    
    
    
    5,168.1
    
    
    
    (9,723.7
    )
    
    
    255.4Retained earnings
    
    
    263.9
    
    
    
    129.5
    
    
    
    2,138.0
    
    
    
    868.6
    
    
    
    2,281.2
    
    
    
    (3,451.4
    )
    
    
    2,229.8Accumulated other non- owner changes in
equity
    
    
    (6.2
    )
    
    
    (110.5
    )
    
    
    (149.4
    )
    
    
    14.4
    
    
    
    (110.3
    )
    
    
    223.6
    
    
    
    (138.4
    )Total shareholders equity
    
    
    3,625.8
    
    
    
    19.0
    
    
    
    2,039.5
    
    
    
    2,276.5
    
    
    
    7,809.6
    
    
    
    (13,422.7
    )
    
    
    2,347.7Total liabilities and shareholders equity
    
    $
    4,142.9
    
    
    $
    1,586.7
    
    
    $
    7,729.6
    
    
    $
    4,644.9
    
    
    $
    8,749.7
    
    
    $
    (21,431.5
    )
    
    $
    5,422.3
 -21-




---



##### Table of Contents



Consolidating Balance Sheets
December 31, 2005
 Cooper
    
    
    CooperIndustries,
    
    
    US,
    
    
    
    
    
    
    Other
    
    
    ConsolidatingCooper
    
    
    LLC
    
    
    Inc
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCash and cash equivalents
    
    $
    64.1
    
    
    $
    
    
    
    $
    144.4
    
    
    $
    (3.5
    )
    
    $
    247.8
    
    
    $
    
    
    
    $
    452.8Receivables
    
    
    0.1
    
    
    
    
    
    
    
    8.6
    
    
    
    469.7
    
    
    
    364.0
    
    
    
    
    
    
    
    842.4Inventories
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    327.1
    
    
    
    211.6
    
    
    
    
    
    
    
    538.7Deferred income taxes and other current
assets
    
    
    1.2
    
    
    
    130.7
    
    
    
    94.0
    
    
    
    48.8
    
    
    
    22.5
    
    
    
    
    
    
    
    297.2Total current assets
    
    
    65.4
    
    
    
    130.7
    
    
    
    247.0
    
    
    
    842.1
    
    
    
    845.9
    
    
    
    
    
    
    
    2,131.1Property, plant and equipment, less
accumulated depreciation
    
    
    
    
    
    
    
    
    
    
    41.0
    
    
    
    339.5
    
    
    
    293.2
    
    
    
    
    
    
    
    673.7Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,018.3
    
    
    
    1,065.7
    
    
    
    
    
    
    
    2,084.0Investment in subsidiaries
    
    
    2,887.9
    
    
    
    759.5
    
    
    
    3,579.4
    
    
    
    917.6
    
    
    
    899.1
    
    
    
    (9,043.5
    )
    
    
    Investment in parent
    
    
    
    
    
    
    
    
    
    
    2,547.1
    
    
    
    
    
    
    
    312.7
    
    
    
    (2,859.8
    )
    
    
    Intercompany accounts receivable
    
    
    588.4
    
    
    
    550.5
    
    
    
    
    
    
    
    1,367.3
    
    
    
    589.9
    
    
    
    (3,096.1
    )
    
    
    Intercompany notes receivable
    
    
    43.9
    
    
    
    23.5
    
    
    
    651.1
    
    
    
    0.8
    
    
    
    3,683.4
    
    
    
    (4,402.7
    )
    
    
    Deferred income taxes and other
noncurrent assets
    
    
    
    
    
    
    223.5
    
    
    
    48.7
    
    
    
    (43.2
    )
    
    
    97.3
    
    
    
    
    
    
    
    326.3Total assets
    
    $
    3,585.6
    
    
    $
    1,687.7
    
    
    $
    7,114.3
    
    
    $
    4,442.4
    
    
    $
    7,787.2
    
    
    $
    (19,402.1
    )
    
    $
    5,215.1Short-term debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    7.6
    
    
    $
    
    
    
    $
    7.6Accounts payable
    
    
    34.1
    
    
    
    14.0
    
    
    
    8.0
    
    
    
    214.7
    
    
    
    157.0
    
    
    
    
    
    
    
    427.8Accrued liabilities
    
    
    3.9
    
    
    
    28.9
    
    
    
    107.5
    
    
    
    238.8
    
    
    
    138.9
    
    
    
    
    
    
    
    518.0Current discontinued operations liability
    
    
    
    
    
    
    196.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196.3Current maturities of long-term debt
    
    
    
    
    
    
    11.0
    
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    11.4Total current liabilities
    
    
    38.0
    
    
    
    250.2
    
    
    
    115.5
    
    
    
    453.5
    
    
    
    303.9
    
    
    
    
    
    
    
    1,161.1Long-term debt
    
    
    
    
    
    
    670.0
    
    
    
    323.7
    
    
    
    8.0
    
    
    
    1.2
    
    
    
    
    
    
    
    1,002.9Intercompany accounts payable
    
    
    
    
    
    
    
    
    
    
    3,096.1
    
    
    
    
    
    
    
    
    
    
    
    (3,096.1
    )
    
    
    Intercompany notes payable
    
    
    326.0
    
    
    
    258.7
    
    
    
    1,652.8
    
    
    
    1,708.0
    
    
    
    457.2
    
    
    
    (4,402.7
    )
    
    
    Long-term discontinued operations
liability
    
    
    
    
    
    
    330.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    330.0Other long-term liabilities
    
    
    
    
    
    
    131.4
    
    
    
    191.2
    
    
    
    77.0
    
    
    
    116.3
    
    
    
    
    
    
    
    515.9Total liabilities
    
    
    364.0
    
    
    
    1,640.3
    
    
    
    5,379.3
    
    
    
    2,246.5
    
    
    
    878.6
    
    
    
    (7,498.8
    )
    
    
    3,009.9Class A common stock
    
    
    1.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    0.9Class B common stock
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.5
    )
    
    
    Subsidiary common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    272.9
    
    
    
    (272.9
    )
    
    
    Capital in excess of par value
    
    
    3,232.7
    
    
    
    
    
    
    
    29.4
    
    
    
    1,388.6
    
    
    
    5,082.3
    
    
    
    (9,349.8
    )
    
    
    383.2Retained earnings
    
    
    31.5
    
    
    
    162.4
    
    
    
    1,892.3
    
    
    
    832.5
    
    
    
    1,733.2
    
    
    
    (2,654.5
    )
    
    
    1,997.4Accumulated other non- owner changes in
equity
    
    
    (44.1
    )
    
    
    (115.0
    )
    
    
    (186.7
    )
    
    
    (25.2
    )
    
    
    (179.8
    )
    
    
    374.5
    
    
    
    (176.3
    )Total shareholders equity
    
    
    3,221.6
    
    
    
    47.4
    
    
    
    1,735.0
    
    
    
    2,195.9
    
    
    
    6,908.6
    
    
    
    (11,903.3
    )
    
    
    2,205.2Total liabilities and shareholders equity
    
    $
    3,585.6
    
    
    $
    1,687.7
    
    
    $
    7,114.3
    
    
    $
    4,442.4
    
    
    $
    7,787.2
    
    
    $
    (19,402.1
    )
    
    $
    5,215.1
 -22-




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##### Table of Contents



Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2006
 Cooper
    
    
    CooperIndustries,
    
    
    US,
    
    
    
    
    
    
    Other
    
    
    ConsolidatingCooper
    
    
    LLC
    
    
    Inc
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalNet cash provided by (used in)
operating activities
    
    $
    (15.8
    )
    
    $
    (20.8
    )
    
    $
    45.7
    
    
    $
    (23.4
    )
    
    $
    389.0
    
    
    $
    
    
    
    $
    374.7Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    
    
    
    
    (10.5
    )
    
    
    (24.6
    )
    
    
    (23.0
    )
    
    
    
    
    
    
    (58.1
    )Cash paid for acquired businesses
    
    
    
    
    
    
    
    
    
    
    (42.4
    )
    
    
    (230.8
    )
    
    
    (6.2
    )
    
    
    
    
    
    
    (279.4
    )Investment in affiliates
    
    
    (12.3
    )
    
    
    
    
    
    
    (36.0
    )
    
    
    
    
    
    
    
    
    
    
    48.3
    
    
    
    Loans to affiliates
    
    
    (102.0
    )
    
    
    
    
    
    
    (36.9
    )
    
    
    
    
    
    
    (384.4
    )
    
    
    523.3
    
    
    
    Repayments of loans from affiliates
    
    
    64.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101.2
    
    
    
    (165.2
    )
    
    
    Dividends from affiliates
    
    
    5.0
    
    
    
    
    
    
    
    68.6
    
    
    
    
    
    
    
    5.9
    
    
    
    (79.5
    )
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.8
    
    
    
    17.6
    
    
    
    
    
    
    
    18.4Net cash used in investing activities
    
    
    (45.3
    )
    
    
    
    
    
    
    (57.2
    )
    
    
    (254.6
    )
    
    
    (288.9
    )
    
    
    326.9
    
    
    
    (319.1
    )Cash flows from financing activities:Repayments of debt
    
    
    
    
    
    
    (11.0
    )
    
    
    
    
    
    
    
    
    
    
    (2.3
    )
    
    
    
    
    
    
    (13.3
    )Borrowings from affiliates
    
    
    197.2
    
    
    
    36.8
    
    
    
    289.2
    
    
    
    
    
    
    
    0.1
    
    
    
    (523.3
    )
    
    
    Repayments of loans to affiliates
    
    
    (47.3
    )
    
    
    
    
    
    
    (73.6
    )
    
    
    (2.4
    )
    
    
    (41.9
    )
    
    
    165.2
    
    
    
    Other intercompany financing activities
    
    
    9.5
    
    
    
    (5.0
    )
    
    
    (112.9
    )
    
    
    281.6
    
    
    
    (173.2
    )
    
    
    
    
    
    
    Dividends
    
    
    (103.0
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103.0
    )Dividends paid to affiliates
    
    
    (73.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6.0
    )
    
    
    79.5
    
    
    
    Subsidiary purchase of parent shares
    
    
    14.9
    
    
    
    
    
    
    
    (276.6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (261.7
    )Issuance of stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48.3
    
    
    
    (48.3
    )
    
    
    Excess tax benefits from stock options
and awards
    
    
    
    
    
    
    
    
    
    
    21.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21.4Employee stock plan activity and other
    
    
    
    
    
    
    
    
    
    
    81.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81.1Net cash provided by (used in)
financing activities
    
    
    (2.2
    )
    
    
    20.8
    
    
    
    (71.4
    )
    
    
    279.2
    
    
    
    (175.0
    )
    
    
    (326.9
    )
    
    
    (275.5
    )Effect of exchange rate changes on cash
and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11.0
    
    
    
    
    
    
    
    11.0Increase (decrease) in cash and cash
equivalents
    
    
    (63.3
    )
    
    
    
    
    
    
    (82.9
    )
    
    
    1.2
    
    
    
    (63.9
    )
    
    
    
    
    
    
    (208.9
    )Cash and cash equivalents, beginning of
period
    
    
    64.1
    
    
    
    
    
    
    
    144.4
    
    
    
    (3.5
    )
    
    
    247.8
    
    
    
    
    
    
    
    452.8Cash and cash equivalents, end of period
    
    $
    0.8
    
    
    $
    
    
    
    $
    61.5
    
    
    $
    (2.3
    )
    
    $
    183.9
    
    
    $
    
    
    
    $
    243.9
 -23-




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##### Table of Contents



Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2005
 Cooper
    
    
    CooperIndustries,
    
    
    US,
    
    
    
    
    
    
    Other
    
    
    ConsolidatingCooper
    
    
    LLC
    
    
    Inc
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalNet cash provided by (used in)
operating activities
    
    $
    (4.9
    )
    
    $
    (114.0
    )
    
    $
    0.5
    
    
    $
    20.0
    
    
    $
    398.9
    
    
    $
    
    
    
    $
    300.5Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    
    
    
    
    (11.0
    )
    
    
    (30.4
    )
    
    
    (30.4
    )
    
    
    
    
    
    
    (71.8
    )Cash paid for acquired businesses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.4
    )
    
    
    
    
    
    
    (2.4
    )Investment in affiliates
    
    
    (11.1
    )
    
    
    (9.8
    )
    
    
    (30.3
    )
    
    
    (3.4
    )
    
    
    
    
    
    
    54.6
    
    
    
    Loans to affiliates
    
    
    (46.0
    )
    
    
    (14.1
    )
    
    
    (72.2
    )
    
    
    (0.7
    )
    
    
    (137.1
    )
    
    
    270.1
    
    
    
    Repayments of loans from affiliates
    
    
    25.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25.6
    )
    
    
    Dividends from affiliates
    
    
    
    
    
    
    0.9
    
    
    
    67.7
    
    
    
    31.8
    
    
    
    3.1
    
    
    
    (103.5
    )
    
    
    Other
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    0.5
    
    
    
    4.6
    
    
    
    
    
    
    
    6.6Net cash used in investing activities
    
    
    (31.5
    )
    
    
    (21.5
    )
    
    
    (45.8
    )
    
    
    (2.2
    )
    
    
    (162.2
    )
    
    
    195.6
    
    
    
    (67.6
    )Cash flows from financing activities:Proceeds from issuances of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    1.4Repayments of debt
    
    
    
    
    
    
    (152.0
    )
    
    
    
    
    
    
    
    
    
    
    (118.1
    )
    
    
    
    
    
    
    (270.1
    )Borrowings from affiliates
    
    
    137.1
    
    
    
    7.9
    
    
    
    
    
    
    
    3.5
    
    
    
    121.6
    
    
    
    (270.1
    )
    
    
    Repayments of loans to affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25.6
    )
    
    
    25.6
    
    
    
    Other intercompany financing activities
    
    
    (16.7
    )
    
    
    279.5
    
    
    
    (100.5
    )
    
    
    (19.9
    )
    
    
    (142.4
    )
    
    
    
    
    
    
    Dividends
    
    
    (103.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103.8
    )Dividends paid to affiliates
    
    
    (46.4
    )
    
    
    
    
    
    
    
    
    
    
    (12.8
    )
    
    
    (44.3
    )
    
    
    103.5
    
    
    
    Subsidiary purchase of parent shares
    
    
    11.2
    
    
    
    
    
    
    
    (78.0
    )
    
    
    
    
    
    
    (99.4
    )
    
    
    
    
    
    
    (166.2
    )Issuance of stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54.6
    
    
    
    (54.6
    )
    
    
    Employee stock plan activity and other
    
    
    
    
    
    
    
    
    
    
    54.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54.7Net cash provided by (used in)
financing activities
    
    
    (18.6
    )
    
    
    135.4
    
    
    
    (123.8
    )
    
    
    (29.2
    )
    
    
    (252.2
    )
    
    
    (195.6
    )
    
    
    (484.0
    )Effect of exchange rate changes on cash
and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25.7
    )
    
    
    
    
    
    
    (25.7
    )Decrease in cash and cash equivalents
    
    
    (55.0
    )
    
    
    (0.1
    )
    
    
    (169.1
    )
    
    
    (11.4
    )
    
    
    (41.2
    )
    
    
    
    
    
    
    (276.8
    )Cash and cash equivalents, beginning of
period
    
    
    111.5
    
    
    
    
    
    
    
    246.0
    
    
    
    1.2
    
    
    
    294.1
    
    
    
    
    
    
    
    652.8Cash and cash equivalents, end of period
    
    $
    56.5
    
    
    $
    (0.1
    )
    
    $
    76.9
    
    
    $
    (10.2
    )
    
    $
    252.9
    
    
    $
    
    
    
    $
    376.0
 -24-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Results of Operations
 Three Months Ended September 30, 2006 Compared With Three Months Ended September 30, 2005
  Revenues:
    Costs and Expenses:
    -25-




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
 Operating Earnings:
    Income Taxes:
  Nine Months Ended September 30, 2006 Compared With Nine Months Ended September 30, 2005
  -26-




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Revenues:
    Costs and Expenses:
       -27-




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
 Operating Earnings:
    Restructuring:
    -28-




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Income Taxes:
  Charge Related to Discontinued Operations:
  Liquidity and Capital Resources
 Liquidity
       -29-




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Capital Resources:
      Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
  Backlog
  September 30,2006
    
    
    2005(in millions)Electrical Products
    
    $
    593.4
    
    
    $
    397.7Tools
    
    
    75.5
    
    
    
    64.0$
    668.9
    
    
    $
    461.7
 Recently Issued Accounting Standards
  -30-




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##### Table of Contents



Private Securities Litigation Reform Act Safe Harbor Statement
  
 Item 4. Controls and Procedures
   
 PART II  OTHER INFORMATION
 
   -31-




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-32-




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-33-




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-34-




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Purchases of Equity Securities
 Total Number of Shares
    
    Maximum Number ofTotal Number of
    
    Average Price
    
    Purchased as Part of
    
    Shares that May Yet BeShares
    
    Paid per
    
    Publicly Announced Plans
    
    Purchased Under thePeriod
    
    Purchased
    
    Share
    
    or Programs(1)
    
    Plans or Programs(1)As of 6/30/06
    
    
    
    
    
    
    
    4,524,4507/01/06  7/31/06
    
    371,200
    
    $88.35
    
    371,200
    
    4,153,2508/01/06  8/31/06
    
    196,300
    
    $85.37
    
    196,300
    
    3,956,9509/01/06  9/30/06
    
    325,700
    
    $82.05
    
    325,700
    
    3,631,250Total
    
    893,200
    
    $85.40
    
    893,200
 
 (1)
    
    On November 2, 2004, Coopers Board of Directors authorized the repurchase of
up to five million shares of Coopers Class A common stock. Cooper has also announced that
the Board authorized the repurchase of shares issued from time to time under its equity
compensation plans, matched savings plan and dividend reinvestment plan in order to offset the
dilution that results from issuing shares under these plans. For 2006, Coopers current
estimate is that 2.6 million shares will be issued under equity compensation plans, which is
reflected in the above table. 
   
   
  10.1
    
    Current Compensation Arrangements for Named Executive Officers.10.2
    
    Separation and Transition Agreement dated September 1, 2006 between Cooper Industries, Ltd.
and David R. Sheil.10.3
    
    Term Sheet Pneumo Abex Settlement Plan A and Plan B dated as of July 6, 2006 among Cooper
Industries, Ltd.; Cooper Industries, LLC; Federal-Mogul Corporation; Federal-Mogul Products,
Inc.; the Future Claimants Representative for Federal-Mogul Corporation and Federal-Mogul
Products, Inc.; the Official Committee of Asbestos Claimants for Federal-Mogul Corporation and
Federal-Mogul Products, Inc.; Pneumo Abex LLC; and PCT International Holdings, Inc.
(incorporated by reference to Coopers Current Reports on Form 8-K filed July 7, 2006 and July
21, 2006).12.
    
    Computation of Ratios of Earnings to Fixed Charges for the Calendar Years 2001 through 2005
and the Nine Months Ended September 30, 2006 and 2005.23.
    
    Consent of Bates White, LLC.31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 -35-




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##### Table of Contents



Cooper Industries, Ltd.(Registrant)Date: November 7, 2006
    
    /s/ Terry A. KlebeTerry A. KlebeSenior Vice President and
Chief Financial OfficerDate: November 7, 2006
    
    /s/ Jeffrey B. LevosJeffrey B. LevosVice President, Finance and
Chief Accounting Officer -36-




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##### Table of Contents



10.1
    
    Current Compensation Arrangements for Named Executive Officers.10.2
    
    Separation and Transition Agreement dated September 1, 2006 between Cooper Industries, Ltd.
and David R. Sheil.10.3
    
    Term Sheet Pneumo Abex Settlement Plan A and Plan B dated as of July 6, 2006 among Cooper
Industries, Ltd.; Cooper Industries, LLC; Federal-Mogul Corporation; Federal-Mogul Products,
Inc.; the Future Claimants Representative for Federal-Mogul Corporation and Federal-Mogul
Products, Inc.; the Official Committee of Asbestos Claimants for Federal-Mogul Corporation and
Federal-Mogul Products, Inc.; Pneumo Abex LLC; and PCT International Holdings, Inc.
(incorporated by reference to Coopers Current Reports on Form 8-K filed July 7, 2006 and July
21, 2006).12.
    
    Computation of Ratios of Earnings to Fixed Charges for the Calendar Years 2001 through 2005
and the Nine Months Ended September 30, 2006 and 2005.23.
    
    Consent of Bates White, LLC.31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.