EXHIBIT 99.1
FOR IMMEDIATE RELEASE
January 24, 2002
Contact: John Breed
(713) 209-8835
COOPER INDUSTRIES REPORTS PERFORMANCE FOR
FOURTH QUARTER AND FULL YEAR 2001
HOUSTON, TX, January 24, 2002, -- Cooper Industries, Inc. (NYSE:CBE) today
reported on several matters:
o FOURTH-QUARTER AND ANNUAL 2001 FINANCIAL RESULTS
o FOURTH-QUARTER 2001 NONRECURRING CHARGE AND TAX DEVELOPMENTS
o IMPACT OF FEDERAL-MOGUL BANKRUPTCY
o STATUS OF STRATEGIC REVIEW PROCESS
o PLANNED SHARE REPURCHASE ACTIVITY.
2001 FINANCIAL RESULTS
Cooper's fourth-quarter 2001 revenues were $989.6 million, compared with
2000 fourth-quarter revenues of $1.11 billion. Fourth-quarter operating earnings
before nonrecurring charges were $105.6 million in 2001, compared with $164.1
million for the same period in 2000.
Net income for the fourth quarter 2001 was $57.1 million before a $44.5
million nonrecurring after-tax charge related to continuing activities aimed at
streamlining operations and reducing costs, a $50 million favorable resolution
of certain income tax issues and a $30 million provision related to potential
obligations regarding the Company's Automotive Products
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COOPER INDUSTRIES, INC. PAGE 2
businesses which were sold in 1998. This compares with 2000 fourth-quarter net
income of $89.2 million. Comparable quarterly earnings per share (diluted) were
$.60 in the 2001 period and $.95 in the 2000 period.
Annual 2001 revenues for the Company were $4.21 billion, compared with
2000 revenues of $4.46 billion. Annual 2001 operating earnings before
nonrecurring charges were $475.2 million, compared with $650.2 million for 2000.
Cooper's net income for 2001 was $255.8 million before nonrecurring
charges, favorable income tax developments and the provision related to
potential obligations for discontinued operations. This compares with $357.4
million in net income for 2000. Comparable annual 2001 earnings per share were
$2.69, compared with $3.80 in 2000.
"Cooper's results continued to track global economic trends during the
year, culminating in significant market weakness in the fourth quarter which
affected demand in virtually all of Cooper's businesses," said H. John Riley,
Jr., chairman, president and chief executive officer. "Telecommunications and
electronic markets remained depressed throughout the year, and industrial
customer demand slowed considerably as the fourth quarter progressed. In this
respect, our earlier decisions to aggressively reduce costs and maximize cash
flow proved correct.
"Free cash flow for 2001 was $314 million before dividends. As a result,
the Company's debt-to-total-capitalization ratio at December 31, 2001, was 39.1
percent, down significantly from 44.4 percent at December 31, 2000.
Consequently, we are beginning 2002 with a very strong balance sheet."
Revenues for the 2001 fourth quarter for the Company's ELECTRICAL PRODUCTS
segment were $821.1 million, compared with $901.2 million for the fourth quarter
of 2000. Operating earnings for Electrical Products in the 2001 fourth quarter
were $99.2 million before nonrecurring charges, compared with $142.4 million in
the 2000 fourth quarter. Weak telecommunications and electronics markets showed
virtually no sign of improvement during the 2001 fourth quarter. Weak industrial
market demand was exacerbated by inventory-reduction programs in place in both
distribution and retail market channels. Furthermore, residential construction
markets began to weaken in the fourth quarter, adding to the impact of the
already-soft commercial and industrial construction sectors. Utility spending
remained cautious in light of the overall economic uncertainty. Demand from
European-based electrical markets reflected a
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COOPER INDUSTRIES, INC. PAGE 3
modest improvement in the fourth quarter of 2001, compared to the fourth quarter
of 2000.
Full-year 2001 revenues for the Electrical Products segment were $3.49
billion, compared with $3.66 billion in 2000. Operating earnings for 2001 were
$437.0 million before nonrecurring charges, compared with $585.0 million in
2000.
Fourth-quarter 2001 revenues for the TOOLS & HARDWARE segment were $168.5
million, compared with $205.8 million in the prior-year period, as a result of
across-the-board weakness in industrial, electronic and automotive markets.
Fourth-quarter operating earnings for the Tools & Hardware segment were $14.1
million for 2001, compared with $30.3 million for the same period in 2000.
Full-year Tools & Hardware revenues were $724.0 million in 2001, compared
with $800.7 million for the prior year. Annual operating earnings for the Tools
& Hardware segment were $68.6 million in 2001, compared with $97.7 million in
2000.
"Cooper's performance in 2001 reflected a highly disciplined approach to
cost reduction and allocation of capital, which favorably impacted cash flows
and debt levels, despite reduced revenues caused by a significantly deteriorated
economy," said Riley. "During the year, we continued to implement important core
sales growth and production cost management initiatives. These have helped our
performance in 2001, and more importantly, will further enhance customer service
and lower global procurement and manufacturing costs going forward."
FOURTH QUARTER 2001 NONRECURRING CHARGE
Additionally, in the fourth quarter of 2001, Cooper took a nonrecurring
after-tax charge of $44.5 million, or $.47 per share. This charge consisted of a
provision for costs for restructuring activities, including further workforce
reduction provisions related to the Company's ongoing effort to consolidate and
align production capacity with customer demand; the write-off of assets related
to the rationalization and repositioning of previously acquired businesses;
adjustment of the values of certain software, hardware and other technology
investments; and the costs to date associated with the Company's review of
strategic alternatives. Approximately one-half of the total charge will require
future cash payments.
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COOPER INDUSTRIES, INC. PAGE 4
RECENT FAVORABLE TAX DEVELOPMENTS
Recent third-party court decisions have validated the Company's tax return
treatment of similar transactions which previously had been contested by the
Internal Revenue Service and thus required a provision for reserves. In light of
the most recent of these court decisions rendered in December 2001, the Company
concluded that reserves related to these transactions were no longer required.
As a result, a $50 million, or $.53 per share, tax benefit was recorded in the
2001 fourth quarter.
IMPACT OF FEDERAL-MOGUL BANKRUPTCY
Cooper recently completed a thorough analysis of the Company's potential
exposure for asbestos liabilities related to certain Automotive Products
businesses which were sold to Federal-Mogul Corporation in 1998. In conjunction
with the sale, Federal-Mogul indemnified Cooper for certain liabilities,
including liabilities related to the Abex product line. In October 2001,
Federal-Mogul and a number of its affiliates filed for federal bankruptcy
protection. Federal-Mogul has indicated to Cooper that it may not honor the
indemnification obligations included in the 1998 sale agreements.
Based on the Company's analysis of its potential exposure resulting from
Federal-Mogul's bankruptcy, which was completed with the assistance of several
independent advisors, the Company concluded that an additional fourth-quarter
2001 discontinued-operations provision of $30 million after-tax, or $.32 per
share, was appropriate to reflect the potential net financial impact of these
issues. As a result, Cooper believes there will be no diminution of future
earnings arising from this matter. This conclusion is based on a review of the
Abex claims history, the contractual indemnities, availability of existing
insurance and other facts determined to date.
Cooper is preserving its rights as a creditor for Federal-Mogul's breach
of its indemnification obligations to Cooper and its rights against all
Federal-Mogul subsidiaries. Cooper intends to seek a resolution of the
indemnification issues and the future handling of the Abex-related claims within
the Federal-Mogul bankruptcy proceeding.
Additional information on this matter can be found in a Form 8-K which the
Company filed today with the Securities and Exchange Commission.
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COOPER INDUSTRIES, INC. PAGE 5
STATUS OF STRATEGIC REVIEW PROCESS
On August 8, 2001, Cooper's Board of Directors authorized management to
explore all strategic alternatives aimed at maximizing shareholder value. Cooper
is continuing to work with all parties who have expressed an interest in
acquiring all or parts of the Company by providing each of them with due
diligence information necessary to bring this process to a conclusion. As the
Company has previously noted, there can be no assurance that the exploration of
strategic alternatives will result in any agreement or transaction.
"Cooper is a valuable global franchise with strong financial and business
platforms offering tremendous capability of generating strong earnings and cash
flow growth in a variety of ways," said Riley. "Cooper's management and Board of
Directors remain committed to enhancing shareholder value. We intend to continue
to act responsibly to address the interests of our shareholders."
PLANNED SHARE REPURCHASE ACTIVITY
During the first quarter of 2000, Cooper's Board of Directors authorized
the Company to repurchase up to five million shares of common stock in open
market or privately negotiated transactions subject to the applicable New York
Stock Exchange and Securities and Exchange Commission rules. Currently, there
are 4.2 million shares available for repurchase under this authorization.
"Based on the Company's continued strong cash flow and the expected
further strengthening of its balance sheet in 2002, Cooper intends to pursue its
share repurchase program during the course of the year," said Riley. "Cooper has
always considered stock repurchases to be an important component of value
delivery, and the Company believes that current market circumstances make this a
very favorable investment opportunity for our shareholders."
CONCLUSION
"During 2001, the Company faced a tumultuous economic environment while
devoting considerable resources toward completing a strategic alternatives
review process and assessing potential obligations related to the Federal-Mogul
bankruptcy filing," said Riley. "Despite all of this, Cooper continued to
generate superior cash flow while progressing to implement several important
growth initiatives.
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COOPER INDUSTRIES, INC. PAGE 6
"These are very difficult and unusual times in the markets we serve,"
continued Riley. "While we welcome interest-rate cuts and other government
actions to improve the economy, we don't anticipate seeing any significant
improvement in the global markets we serve anytime soon.
"Having said that, the decisive actions we took in 2001 have enhanced our
already formidable competitive position," continued Riley. "Cooper's franchise,
financial fundamentals and product depth are unequaled in the North American
marketplace. We are confident that, over time, these assets will generate
attractive returns for our shareholders."
Cooper Industries, with 2001 revenues of $4.2 billion, is a worldwide
manufacturer of electrical products, tools and hardware. Additional information
about Cooper is available on the Company's Internet site:
www.cooperindustries.com.
Comparisons of 2001 and 2000 fourth-quarter and full-year results appear
on the following pages.
Cooper will hold a conference call today at 12:00 p.m. (Eastern) to
provide shareholders and other interested parties an overview of the Company's
2001 financial performance. Those interested in hearing the conference call may
listen via telephone by dialing (646) 862-1060, or over the Internet through the
Investor Center section of the Company's Internet site. No confirmation code or
pass code will be needed for the live briefing by telephone. A replay will be
available by telephone until 5:00 p.m. EST on January 30, 2002, and over the
Internet until February 6, 2002. The telephone number to access the replay is
(800) 633-8284, and the access code number is 20183767.
Statements in this news release are forward-looking under the Private
Securities Litigation Reform Act of 1995. These statements are subject to
various risks and uncertainties, many of which are outside the control of the
Company, including, but not limited to: 1) competitive pressures and future
global economic conditions; 2) the rate at which benefits are realized from
cost-reduction programs recently completed, currently under way or to be
initiated in the near future; 3) Federal-Mogul's decision with respect to
rejection of the 1998 sale
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COOPER INDUSTRIES, INC. PAGE 7
agreements, the disposition of Abex-related claims in Federal-Mogul's plan of
reorganization, the number of future Abex claims, the amount of insurance
recoveries and Cooper's rights as a creditor in Federal-Mogul's bankruptcy
proceeding; 4) the possibility that the exploration of strategic alternatives
may not result in any agreement or transaction; and 5) the timing and amount of
share repurchases by the Company.
Further information regarding these and other risk factors is set forth in
Cooper's filings with the Securities and Exchange Commission, including Cooper's
Annual Report on Form 10-K.
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CONSOLIDATED RESULTS OF OPERATIONS
Quarter Ended December 31,
--------------------------
2001 2000
--------- ---------
(in millions where applicable)
Revenues $ 989.6 $ 1,107.0
Cost of sales 699.8 749.0
Selling and administrative expenses 168.9 178.9
Goodwill amortization 15.3 15.0
--------- ---------
Operating earnings before nonrecurring charges 105.6 164.1
Nonrecurring charges 74.1 --
Interest expense 18.4 26.8
--------- ---------
Continuing Income Before Income Taxes 13.1 137.3
Income tax expense (benefit) (49.5) 48.1
--------- ---------
Continuing Income 62.6 89.2
Discontinued operations, net of tax (30.0) --
--------- ---------
Net Income $ 32.6 $ 89.2
========= =========
Net Income Per Common Share:
Basic
Continuing Operations $ .67 $ .95
Discontinued Operations (.32) --
--------- ---------
Net Income $ .35 $ .95
========= =========
Diluted
Continuing Operations $ .66 $ .95
Discontinued Operations (.32) --
--------- ---------
Net Income $ .34 $ .95
========= =========
Shares Utilized in Computation
of Income Per Common Share:
Basic 94.0 MILLION 93.6 million
Diluted 94.7 MILLION 94.2 million
PERCENTAGE OF REVENUES
Quarter Ended December 31,
--------------------------
2001 2000
--------- ---------
Revenues 100.0% 100.0%
Cost of sales 70.7% 67.7%
Selling and administrative expenses 17.1% 16.2%
Operating earnings before nonrecurring charges 10.7% 14.8%
Continuing Income Before Income Taxes 1.3% 12.4%
Continuing Income 6.3% 8.1%
(Additional information on next page)
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CONSOLIDATED RESULTS OF OPERATIONS (CONTINUED)
ADDITIONAL INFORMATION FOR THE QUARTER ENDED DECEMBER 31
SEGMENT INFORMATION
Quarter Ended December 31,
--------------------------
2001 2000
-------- --------
(in millions)
Revenues:
Electrical Products $ 821.1 $ 901.2
Tools & Hardware 168.5 205.8
-------- --------
Total $ 989.6 $1,107.0
======== ========
Segment Operating Earnings
Without Nonrecurring Charges:
Electrical Products $ 99.2 $ 142.4
Tools & Hardware 14.1 30.3
-------- --------
Total 113.3 172.7
Segment Nonrecurring Charges:
Electrical Products 24.0 --
Tools & Hardware -- --
-------- --------
Total 24.0 --
-------- --------
Segment Operating Earnings
With Nonrecurring Charges:
Electrical Products 75.2 142.4
Tools & Hardware 14.1 30.3
-------- --------
Total segment operating earnings 89.3 172.7
General Corporate nonrecurring charges 50.1 --
General Corporate expense 7.7 8.6
Interest expense 18.4 26.8
-------- --------
Continuing income
before income taxes $ 13.1 $ 137.3
======== ========
Quarter Ended December 31,
--------------------------
2001 2000
-------- --------
Return on Sales: (1) (2)
Electrical Products 12.1% 15.8%
Tools & Hardware 8.4% 14.7%
Total Segments 11.4% 15.6%
(Additional information on next page)
(1) Before Nonrecurring Charges.
(2) Adjusting for recent acquisitions, return on sales for the quarter in 2001
was 12.1% for Electrical Products and 8.4% for Tools & Hardware. Return on
sales in 2001 for the total of the segments was 11.5%.
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CONSOLIDATED RESULTS OF OPERATIONS (CONTINUED)
ADDITIONAL INFORMATION FOR THE QUARTER ENDED DECEMBER 31
Net Income Per
Net Income Diluted Common Share
------------------ --------------------
2001 2000 2001 2000
------ ------ ------ ------
(in millions where applicable)
Continuing operations before $ 57.1 $ 89.2 $ .60 $ .95
nonrecurring charges and
tax adjustment
Nonrecurring charges (44.5) -- (.47) --
Tax reserve adjustment 50.0 -- .53 --
------ ------ ------ ------
62.6 89.2 .66 .95
Discontinued operations (30.0) -- (.32) --
------ ------ ------ ------
Net Income $ 32.6 $ 89.2 $ .34 $ .95
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CONSOLIDATED RESULTS OF OPERATIONS
Twelve Months Ended
December 31,
-------------------------
2001 2000
--------- ---------
(in millions where applicable)
Revenues $ 4,209.5 $ 4,459.9
Cost of sales 2,943.9 3,018.3
Selling and administrative expenses 729.7 732.9
Goodwill amortization 60.7 58.5
--------- ---------
Operating earnings before nonrecurring charges 475.2 650.2
Nonrecurring charges 74.1 --
Interest expense 84.7 100.3
--------- ---------
Continuing Income Before Income Taxes 316.4 549.9
Income taxes 55.1 192.5
--------- ---------
Continuing Income 261.3 357.4
Discontinued operations, net of tax (30.0) --
--------- ---------
Net Income $ 231.3 $ 357.4
========= =========
Net Income Per Common Share:
Basic
Continuing Operations $ 2.78 $ 3.82
Discontinued Operations (.32) --
--------- ---------
Net Income $ 2.46 $ 3.82
========= =========
Diluted
Continuing Operations $ 2.75 $ 3.80
Discontinued Operations (.31) --
--------- ---------
Net Income $ 2.44 $ 3.80
========= =========
Shares Utilized in Computation
of Income Per Common Share:
Basic 94.0 MILLION 93.5 million
Diluted 94.9 MILLION 94.1 million
PERCENTAGE OF REVENUES
Twelve Months Ended
December 31,
-------------------------
2001 2000
--------- ---------
Revenues 100.0% 100.0%
Cost of sales 69.9% 67.7%
Selling and administrative expenses 17.3% 16.4%
Operating earnings before nonrecurring charges 11.3% 14.6%
Continuing Income Before Income Taxes 7.5% 12.3%
Continuing Income 6.2% 8.0%
(Additional information on next page)
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CONSOLIDATED RESULTS OF OPERATIONS (CONTINUED)
ADDITIONAL INFORMATION FOR THE TWELVE MONTHS ENDED DECEMBER 31
SEGMENT INFORMATION
Twelve Months Ended
December 31,
------------------------
2001 2000
-------- --------
(in millions)
Revenues:
Electrical Products $3,485.5 $3,659.2
Tools & Hardware 724.0 800.7
-------- --------
Total $4,209.5 $4,459.9
======== ========
Segment Operating Earnings
Without Nonrecurring Charges:
Electrical Products $ 437.0 $ 585.0
Tools & Hardware 68.6 97.7
-------- --------
Total 505.6 682.7
Segment Nonrecurring Charges:
Electrical Products 24.0 --
Tools & Hardware -- --
-------- --------
Total 24.0 --
-------- --------
Segment Operating Earnings
With Nonrecurring Charges:
Electrical Products 413.0 585.0
Tools & Hardware 68.6 97.7
-------- --------
Total segment operating earnings 481.6 682.7
General Corporate nonrecurring charges 50.1 --
General Corporate expense 30.4 32.5
Interest expense 84.7 100.3
-------- --------
Continuing income
before income taxes $ 316.4 $ 549.9
======== ========
Twelve Months Ended
December 31,
------------------------
2001 2000
-------- --------
Return on Sales: (1) (2)
Electrical Products 12.5% 16.0%
Tools & Hardware 9.5% 12.2%
Total Segments 12.0% 15.3%
(Additional information on next page)
(1) Before Nonrecurring Charges.
(2) Adjusting for recent acquisitions, return on sales for 2001 was 12.9% for
Electrical Products and 9.5% for Tools & Hardware. Return on sales in 2001
for the total of the segments was 12.3%.
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CONSOLIDATED RESULTS OF OPERATIONS (CONTINUED)
ADDITIONAL INFORMATION FOR THE TWELVE MONTHS ENDED DECEMBER 31
Net Income Per
Net Income Diluted Common Share
------------------ --------------------
2001 2000 2001 2000
------ ------ ------ ------
(in millions where applicable)
Continuing operations before $ 255.8 $ 357.4 $ 2.69 $ 3.80
nonrecurring charges and
tax adjustment
Nonrecurring charges (44.5) -- (.47) --
Tax reserve adjustment 50.0 -- .53 --
------- ------- ------- -------
261.3 357.4 2.75 3.80
Discontinued operations (30.0) -- (.31) --
------- ------- ------- -------
Net Income $ 231.3 $ 357.4 $ 2.44 $ 3.80
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