Cooper Industries
advertisement
Material in this presentation includes certain forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements regarding revenue growth plans, cost reduction programs and manufacturing rationalization plans, productivity improvements, the implementation of an enterprise business system and any statements regarding future revenues, costs and expenses, earnings, margins, cash flows, shares outstanding, debt levels and capital expenditures. Actual results could differ materially from anticipated results. Important factors which may affect actual results include, but are not limited to, market and economic conditions, political developments, industry competition, the ability to execute and realize the expected benefits from the revenue growth plans and cost reduction programs, the magnitude of any disruptions from manufacturing rationalizations and the implementation of the enterprise business system, mergers and acquisitions and their integration, the resolution of potential liabilities and insurance recoveries resulting from on-going Pneumo-Abex related asbestos claims, changes in financial markets, the timing and amount of share repurchases by the Company, and changes in legislation and regulations including changes in tax law, tax treaties or tax regulations. A discussion of these factors may be found in the Company’s Annual Report on Form 10-K and other SEC filings. A reconciliation of any non-GAAP financial measure included in this presentation to the most directly comparable GAAP measure can be accessed on the Investor Center section of the Cooper Industries website, www.cooperindustries.com, under the heading “Management Presentations.” This is a copyrighted presentation of Cooper Industries, Ltd. and is intended for the exclusive use of the participating audience. No other use of this presentation may be made without the express written consent of Cooper Industries. 2 Cooper Industries 2009 Outlook Meeting New York City February 19, 2009 2009 Outlook 2007 Outlook $6.5B ¾Cooper Crouse-Hinds ¾Cooper Bussmann Cooper Power Systems 2008 Outlook ¾Globalization (China/ Cooper Lighting Middle East) ¾Notification Platform ¾Cooper Crouse-Hinds/ Cooper Crouse-Hinds MTL Three Key End-Markets Or About 60% Of Total Cooper Revenue Reviewed Today 4 Today’s Agenda and Participants Cooper Today Kirk Hachigian, Chairman and CEO Growth Strategy Tom O’Grady, SVP of Corp. Dev. Cooper Lighting Neil Schrimsher, President Cooper Power Systems Mike Stoessl, President Cooper Crouse-Hinds Curt Andersson, President 2009 Outlook Terry Klebe, SVP and CFO Summary Kirk Hachigian, Chairman and CEO 5 Making History In 2008 ¾ Record Financial Performance: – Revenue $6.5B – EPS $3.59 – Free Cash Flow $761M ¾ Linking The Past With The Future: – Employee Morale – Global Brand Awareness – Customer Loyalty Record Results While Building On A Legacy Of Innovation, Service & Expertise 6 Market Conditions ¾ Global Financial Crisis ¾ Housing Prices/Stock Market ~$11T Loss ¾ Commodity Prices: Peak To Valley In 6 Months ¾ U.S. Savings Rate +12% to -3% In 25 Years ¾ Unemployment 7%+ ¾ States/Municipalities/Universities Budget Crisis ¾ Massive Deleveraging – Falling Industrial Demand Severe Economic Issues Impacting Global Economies 7 Lending ¾ Libor Spreads Coming Down Spending Some Bright Spots Emerging ¾ Lower Gas/Oil Prices Pump $525B Back Into The Economy ¾ Mortgage Rates Below 5% for 30-Year Loans (More Affordable) ¾ Commercial/Business Credit Coming Back ¾ $790B Stimulus Plan Passed But A Recovery Unlikely In 2009 8 Resizing Cooper ¾ 8-10% Salary Headcount Reductions ¾ Salary Freezes / Additional Furloughs ¾ 20% Reductions In Discretionary Spending ¾ Accelerate Lean, Value Engineering And In-Sourcing ¾ Additional Facility Consolidations Under Review ¾ Accelerate “Inventory Burn” To Get To Lower Commodity Prices Sooner ¾ Eliminate Complexity Focus On Reducing Overall Cost Structure While Maintaining Strong Cash Flow 9 10-Year Revenue Growth History ($ In Billions) 15.2% 13.9% 9.9% 6.9% 6.0% 10.5% 9.6% 6.0% 8.2% 7.5% 2.6% 7.4% 4.8% 3.2% -5.6% -5.9% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 $3.7 $4.5 $3.9 $4.2 $4.0 $4.1 $4.5 $4.7 $5.2 Core $5.9 $6.5 10-Year CAGR: 6.0% … Last 5-Year CAGR: 10% 10 10-Year Earnings Per Share History* $3.59 $3.14 $2.58 $1.62 1998 $1.76 $2.06 $1.90 $1.79 $1.34 $1.30 $1.42 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 10-Year CAGR: 8.3% … Last 5-Year CAGR: 19% * Diluted, From Continuing Operations and Adjusted for Split, Excluding Unusual Items 11 10-Year Free Cash Flow To Income History* ($ In Millions) 2.0 1.5 1.0 0.5 0.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 $196 $247 $344 $314 $428 $384 $383 $490 $535 $682 $761 10-Year Free Cash Flow CAGR: 14.5% * Income from Continuing Operations 12 Return On Invested Capital 14.3% 14.7% 13.5% 10.8% 9.7% 8.2% 2003 2004 2005 2006 2007 2008 Disciplined Capital Management Driving Returns 13 Cooper Capital Structure Amount $275 M 325 M 300 M 300 M Rate 5.50% 3.55% 5.56% 5.75% Due Date Nov 2009 Nov 2012* Apr 2015 Jul 2017 1,200 M 33 M (281) M Long-Term Debt Short-Term & Misc. Long-Term Debt Cash & Short-Term Investments $952 M Net Debt (FCF $761M In 2008) Stayed Conservative When Times Were Good * Swapped to Euro Debt – 5.25% note rate at date of issuance 14 Evolution Of Change CULTURE/ VALUES –One “Cooper” Mentality” –Accountability/Pay for Performance –Miami, CEC, Int’l. Conf. Calls –Customer Centric PROCESSES LINKED BY EBS PEOPLE –Strategy/Budgets –Cooper Initiatives –MVP/NPI/W&C/Lean/VA/VE –Talent Academy –New MD&P Process –Cooper “U” Building A Leadership Team, Business Process And Culture/Values To Drive Long-Term Exceptional Performance 15 Values & Principles Culture & Values Principles ¾ Integrity ¾ Passion For The Customer ¾ People & Leadership ¾ Innovation Is Our Lifeblood ¾ Accountability ¾ Leveraging Technologies ¾ Speed & Adaptability ¾ Excel At Globalization ¾ Execution ¾ Continuous Improvement Mindset In Everything We Do One Team, One Purpose, One Vision, One Strategy 16 Cooper Portfolio B-Line $450+/- million Bussmann $550+/- million Crouse-Hinds $1,150+/- million #1 North America #1 Worldwide #1 Worldwide Lighting $1,350+/- million Power Systems $1,400+/- million Safety $600+/- million #3 North America #1 North America #3 Europe Wiring Devices $250+/- million Tools $750+/- million #3 North America #3 Worldwide (Power Tools) World-Class Collection Of Businesses…88% Electrical Based on FY2008 values 17 Other Re si. Portfolio In Solid Shape Tools Int’l. Industrial Commercial Electrical Products U.S. Utility 88% Electrical 37% International 61% Industrial/Utility Large, Global, Healthy End-Markets Growing At 3% Long-Term Based on FY2008 values 18 More Attractive End-Market Exposure 2003 Other 2% Industrial 29% Utility 18% Other 5% Resi 9% Resi 18% Int’l. Industrial 40% Commercial 33% Commercial U.S. 25% Utility 21% Utility + Industrial = 47% Commercial + Resi = 51% Revenue: 2008 $4.1B Utility + Industrial = 61% Commercial + Resi = 34% $6.5B Expanding Industrial And Utility Exposure 19 Long-Term Global Trends Energy Demand / Utility Grid Global Infrastructure Conservation / “Green” / Energy Efficiency & Reliability Safety / Protection / Mass Notification Cooper Uniquely Positioned To Key Global Trends 20 Sustainable Growth Strategy Market Growth 3% + Initiatives 2% + Acquisitions 5% Customer Loyalty Established Brands, Leading Market Positions…Common Marketing Model End-Market Growth Innovation Acquisitions Large, Global, Healthy & Diverse End-Markets Introduce New Products With Focus On Technology Solutions Disciplined Strategy… Build Key Platforms, Increase Technology, Accelerate Globalization Globalization International Opportunity Offers Substantial Upside 21 Cooper’s Business Initiatives Customer Loyalty Ease of Doing Business / Quality / Delivery Innovation Leveraging Technology To Drive Customer Value Globalization Competing And Winning Everywhere In The World Talent Development Acquire, Assess, Develop, Deploy Operational Excellence Driving Continuous Improvement – Order To Cash Business Initiatives Core To Long-Term Success In Up And Down Markets 22 Enterprise Business System Unity Includes All Revenue Individual Business Unit Systems 9 Higher Costs 9 No Consistency 9 High Risk 9 Highly Customized 9 Reduced Complexity 9 Lower Total Cost 9 Less Risk 9 Competitive Unity Starts 9 Greater Consistency 9 Costs Go Up 9 Lost Productivity 9 “Pain With No Unity Includes Advantage 90% of Revenue 9 Leveraging Common Reporting 9 Data Integrity & Consistency 9 Drives Benefits In Every Initiative/ Every Function Gain” 2002 2004 2006 2008 2010 EBS Provides Core Backbone To Overall Process Capability 23 Operational Focus Cooper Strategic Imperative Optimize OptimizeGlobal Global Footprint Footprint Fully FullyIntegrate Integrate Global GlobalStrategic Strategic Sourcing Sourcing Ongoing Ongoing Productivity ProductivityFrom From Lean And Value Lean And Value Engineering Engineering Area Of Focus ¾ Direct/Indirect Material ¾ Labor Cost ¾ Scrap Cost ¾ Yield Upside ¾ Re-Work Cost Out Benefit ¾ Material Cost ¾ Material Efficiency ¾ Reduced Labor Content ¾ Overtime Reduction ¾ Improved First Pass Yield Realizing Benefits From Cost Out Process And Structure Changes 24 Operational Focus Cooper Strategic Imperative Optimize OptimizeGlobal Global Footprint Footprint Fully FullyIntegrate Integrate Global GlobalStrategic Strategic Sourcing Sourcing Ongoing Ongoing Productivity ProductivityFrom From Lean And Value Lean And Value Engineering Engineering Closed 27 Area Of factories, 58% Mfg Headcount in LCCFocus ¾ Direct/Indirect 38% of COGS from Material LCC ¾ Labor Cost ¾ Scrap Cost ¾ Yield Upside ¾ Re-Work Proven track record of ~3% annual productivity Cost Out Benefit ¾ Material Cost ¾ Material Efficiency ¾ Reduced Labor Content ¾ Overtime Reduction ¾ Improved First Pass Yield Realizing Benefits From Cost Out Process And Structure Changes 25 Costs Evolution – Facilities Revenue / Sq Footage 2001 to 2008 % 44 ¾ Revenue +55%, Square Footage +8% + ¾ 48 Fewer Facilities ¾ New Mfg Sites Located in Low-Cost Countries 2001 2008 Optimization Of Facilities Has Improved Fixed Cost Position 26 Costs Evolution – Labor Revenue / Employee + 2001 to 2008 ¾ Revenue +55%, Total Headcount +2% % 1 5 ¾ 59% of Employees Outside U.S. ¾ EBS/Lean/MVP Driving Benefits 2001 2008 Significantly More Productive Work Force 27 Capital Expenditures ($ In Millions) $175 $137 $115 $100 $103 $116 $97 $74 % of Sales $85 2000 2001 2002 2003 2004 2005 2006 2007 2008 3.9% 2.7% 1.9% 2.5% 2.3% 2.1% 1.6% 2.0% 2.1% Less Capital Intensive Business Model… While Funding Strategic Growth 28 Manufacturing Evolution Then Now ¾ Internally Focused / Poor Service Levels ¾ Customer Focused ¾ Command & Control Management ¾ Safety – Top 10% ¾ Safety At Industry Standard ¾ In-Source to Leverage Core Competencies ¾ Opportunistic Outsourcing & Plant Rationalization ¾ Employees are Energized & Engaged ¾ Attacking Material Costs – VA/VE ¾ Heavy Focus on Price With Suppliers ¾ Common Metrics – Balanced Scorecard, Plants & Suppliers ¾ Build Inventory to Keep Plants Running ¾ Lean Driving Improvements - Typical Results: ¾ Dimly Lit Plants, Poor Housekeeping − 50% in Quality & Lead Time − 30% in Safety & Productivity − 25% in Service & Inventory ¾ Well Lit, Energy Efficient Lighting Attacking Fundamental Change At The Factory Floor 29 Operations Summary ¾ Shifted To A More Centralized Business Model – Standard Tools, Processes & Controls ¾ Core Productivity Program Generating Significant Benefits – Customer Service, Cash Flow ¾ Upside With Lean, Value Engineering & Reduced Complexity ¾ Manufacturing Footprint Much More Competitive Than 2001 / 2002 Prepared For The Downturn … But More Work To Do On Lean, VA/VE, Complexity 30 Talent Highlights Talent Acquisition • University Relations • Recruiter Strategy • Networking Talent Assessment & Development • Assessment & Potential • Robust MD&P • Development Programs • Learning Curriculum • Cooper University • Performance Mgmt. & Compensation Talent Deployment • Succession Planning • Career Paths Pay For Performance Building A “Talent Academy” 31 Cooper Industries 2009 Outlook Meeting Cooper Growth Strategy Tom O’Grady, Sr. VP Business Development Sustainable Growth Strategy Market Growth 3% + Initiatives 2% + Acquisitions 5% Customer Loyalty Established Brands, Leading Market Positions…Common Marketing Model End-Market Growth Innovation Acquisitions Large, Global, Healthy & Diverse End-Markets Introduce New Products With Focus On Technology Solutions Disciplined Strategy… Build Key Platforms, Increase Technology, Accelerate Globalization Globalization International Opportunity Offers Substantial Upside 33 Sustainable Core Growth Core Growth 7.5% 7.4% ¾ Diversified Exposure to Long-Term Growth Areas: 8.2% – Energy Demand – Utility Grid – International Infrastructure Build-Out – Energy Efficiency 4.8% – Safety & Notification 3.2% ¾ Initiatives Gaining Momentum – Globalization – Customer Loyalty – Innovation ¾ Developing Growth Platforms Through Acquisition 2004 2005 2006 2007 2008 Has Averaged ~6% Core Growth Over Last 5 Years 34 Sustainable Growth Strategy Market Growth 3% + Initiatives 2% + Acquisitions 5% Customer Loyalty Established Brands, Leading Market Positions…Common Marketing Model End-Market Growth Innovation Acquisitions Large, Global, Healthy & Diverse End-Markets Introduce New Products With Focus On Technology Solutions Disciplined Strategy… Build Key Platforms, Increase Technology, Accelerate Globalization Globalization International Opportunity Offers Substantial Upside 35 Customer Loyalty Technology Center Industry Leading Training and Education Center Brand Management Driving Growth & Loyalty Through Powerful Brand Experiences Vertical Markets Integrated, Cross Division Solutions Value-Based Pricing Integrated Approach to Strategic Pricing Decisions Category Management Adding Value Through Data Driven Services Loyalty Initiatives Provide Single Point of Contact and Online Tools (C3) Building Upon A Legacy Of Innovation, Service & Expertise 36 Technology Center Facility Overview – Gulf Coast Located 35,000 Square Foot State-of-the-Art Facility – Training and Demonstration Center – Focus On Refineries, Waste Water Treatment, Substation – Utility Grid – Cross Divisional Training and Selling Capabilities Unique Investment In Education & Training 37 Vertical Marketing Products Enabling Tools/Technology Solutions – Project/Opportunity Tracking – Relationship Management – Market Intelligence Repository – Tool Kits & Training Programs – Vertical Marketing Collateral – Design Automation Modeling – Bundled Product Offering Increase & Expand Project Visibility 38 Sustainable Growth Strategy Market Growth 3% + Initiatives 2% + Acquisitions 5% Customer Loyalty Established Brands, Leading Market Positions….Common Marketing Model End-Market Growth Innovation Acquisitions Large, Global, Healthy & Diverse End-Markets Introduce New Products With Focus On Technology Solutions Disciplined Strategy… Build Key Platforms, Increase Technology, Accelerate Globalization Globalization International Opportunity Offers Substantial Upside 39 Innovation - Product Vitality New Product % of Sales 20% 15% 7% 2003 2008 2-3 Year Target New Product Leadership Drives Organic Growth And Margin Expansion 40 Innovation - Development LED Harsh Environment Instrumentation TO FROM Utility Automation Technology & Innovation Driven By Acquisitions And Internal Development 41 Global Development End-Markets Capacitor Bank Chongqing Green Garden Bridge Olympic Swimming Centre GPS Personal Navigation Solutions Capacitor Switchgear Combo Light Flood Light Power Inductor Global Infrastructure Investments Driving Growth In Key Local Markets 42 LED & RF Wireless RF / Wireless Outage Advisor Wireless Wide – Area Notification Wireless Sensor Networks Transportation Radio Control Industrial WiFi Wireless Tool Tether Power Systems Safety Bussmann & Crouse-Hinds Bussmann Bussmann, Crouse & Power Sys. Tools LED LED Exit Sign LED Healthcare LED Vapor Tight Utility Light EVLED LED Down-Light LED Outdoor Lighting, Safety & Crouse-Hinds Lighting Crouse-Hinds Crouse-Hinds Lighting & Safety Lighting Higher Specification – Higher Technology – Greater Global Growth Opportunities 43 Alternative Energy 1 Wind 1 Nacelle 2 3 2 Tower 3 Transformer Significant Opportunity Across Cooper Businesses To Drive Growth 44 Alternative Energy Solar 3 Combiner String Combiner 4 DC Disconnect Array Combiner 5 AC Disconnect Transformer Innovation Initiatives Across Divisions Have Positioned Cooper To Grow In Key High Growth End-Markets 45 Sustainable Growth Strategy Market Growth 3% + Initiatives 2% + Acquisitions 5% Customer Loyalty Established Brands, Leading Market Positions….Common Marketing Model End-Market Growth Innovation Acquisitions Large, Global, Healthy & Diverse End-Markets Introduce New Products With Focus On Technology Solutions Disciplined Strategy… Build Key Platforms, Increase Technology, Accelerate Globalization Globalization International Opportunity Offers Substantial Upside 46 Global Growth Y/Y Growth Rate +17% +22% +5% +11% $1.2B 2003 Country Mgr Int’l Acq. / JV 3 0 $1.3B +16% $2.4B $2.0B $1.6B $1.4B 2004 2005 2006 1 1 1 2 3 1 2007 1 7 2008 1 = 4 = Significant Change In Global Exposure…37% of Sales In 2008 Outside the U.S. 10 15 47 Global Opportunity Under Penetrated Good Penetration E. Eur / Russia Low W. Europe High Middle East Low Mexico High Asia Pacific Low Lat. America Low India Low Growing Global Presence… Still Under Penetrated In Key Growth Geographies 48 International Investments Bussmann Cooper Eastern Europe Manufacturing Proposed Site Western China Mfg. & Engineering Center - Xian Wiring Devices Wiring Device Manufacturing Guangdong Cooper Middle East Manufacturing Site Saudi Arabia Lighting Manufacturing Partner Buyout ChangAn Committed To Growth & Competitiveness… Continue Making High Return/Strategic Investments 49 Growth Summary ¾ Multiple Customer Focused Initiatives Drive Share – Create Growth Opportunities For Cooper And Our Customers ¾ Innovation Initiatives Drive Growth And Transform The Portfolio – Key Sectors Such As LED, Alternative Energy And Smart Grid ¾ Globalization Model Diversifies Opportunities And Drives Growth – Under Penetration In Key Geographies Still Provides Opportunities To Grow In Difficult Economic Situations Initiatives Gaining Momentum And Driving Sustainable, Long-Term Growth In Key Global Markets 50 Sustainable Growth Strategy Market Growth 3% + Initiatives 2% + Acquisitions 5% Customer Loyalty Established Brands, Leading Market Positions….Common Marketing Model End-Market Growth Innovation Acquisitions Large, Global, Healthy & Diverse End-Markets Introduce New Products With Focus On Technology Solutions Disciplined Strategy… Build Key Platforms, Increase Technology, Accelerate Globalization Globalization International Opportunity Offers Substantial Upside 51 Platforms B-Line Crouse-Hinds Bussmann Wire Management Lighting Commercial & Industrial Explosion-Proof Electrical Support Products Consumer Electronic Enclosures Airport Lighting Transportation Power Systems Reliability Products Emergency Lighting Architectural Wiring Devices Tools Fire & Security Transformers Line Installation & Protection Safety Specialty Connectors Commercial Products Commercial Lighting Joining Tools Hand Tools Chain Products Industrial Power Tools Electrical Distribution Consumer Glands/ Boxes Energy Automation Assembly Systems Consumables Platforms For Organic And Acquired Growth 52 Acquisition Priorities Bussmann Transportation Bussmann Electrical Bussmann Electronics Crouse-Hinds Connectivity Crouse-Hinds Instrumentation Crouse-Hinds Industrial EX Power Systems Global Products Power Systems Automation Lighting Controls Lighting LED Cooper Safety Fire/Mass Notif. Cooper Safety Emerg. Lighting Highest Impact, Largest Market Opportunities; Focus Primarily On Industrial / Utility 53 2004 - 2008 M&A Activity Summary > 1,000 targets identified in over 50 countries 80+ Deals Presented > $12B in Revenue 25 Closed Deals Screening ¾ Closed 25 deals across all 8 divisions ¾ 13 international deals in 6 countries Diligence ¾ Executed on 10 strategic growth platforms ¾ Strengthened the Core Execution ¾ Specification / Technology Driven Businesses ¾ Enhanced Our Global Footprint Executing A Consistent And Disciplined Strategy 54 Access To New Markets Platform Market Size Acquisitions Platform Market Size Acquisitions Utility Automation $1.9B Cannon Cybectec Cyme Lighting Controls $2.7B Novitas Polaron PCI Notification $2.0B MEDC Wheelock Madahcom Roam Secure LED $1.5B RSA io Lighting Clarity Specialty Connectors $6.0B WPI G&H CCH Industrial EX $1.5B Hyundai MTL Bussmann Transportation $2.9B Sure Power Omnex Bussmann Electrical $6.6B Xian Bussmann Electronics $3.3B Save Fuse CPS Global Standards B-Line Support Sys. $1.3B GS Metals Joining Tools $.3B Transtech Airport Lighting $18.0B $2.2B Nature Filtronic Platforms Provide Access To $50B+ Of Higher Growth, More Profitable, Less Cyclical, More Global Markets 55 Acquired Growth Strategy Cooper Acquisition Sales Growth 6.8% ¾ Disciplined Three-Tiered Strategy Focused on: – Platforms – Technology / Specification – Globalization ¾ Strengthen the “Core” 3.7% ¾ Target Strong Companies: – Strong balance sheet 1.6% – Talented management 0.5% 2005 2006 2007 2008 ¾ Aggressive Review And Management To Ensure Synergies And Returns Executing A Disciplined Strategy 56 Growth Summary ¾ Customer Focus And Data Driven Strategies Around Loyalty Driving Profitable Growth ¾ Investments in Key Technologies Driving Growth in Global – Higher Specification – Higher Technology Markets ¾ Continuous Investments in Global Infrastructure Driving Strategy Growth – Still Under-Penetration in Key Growth Geographies ¾ Acquisition / Platform Strategy Providing Access to $50B+ Higher Growth, More Profitable, Less Cyclical Global Markets Initiatives Core To Long-Term Success In Up And Down Markets 57 Cooper Stimulus Bill Opportunity ~$787B ~$311B ~$62B Fed. Bldg Efficiency Infrastructure Tax Relief Energy and Water Mil/Medical Facilities Transport. Grid, Renewables, Efficiency Airports State Funding Labor Health & Education School Construction & Modern. s m s te s nd n i y an r S g -H e g e s ty m it n n n e s i e i s ol f r u h L w s i o a o g T S B W Po Bu Li Cr 99 99 9 9+99 9 99 + 9 999 999+ 99 99 9+9 9 9 99 + Broad Portfolio Exposed To Stimulus Package 58 Cooper Industries 2009 Outlook Meeting Cooper Lighting Neil Schrimsher, President Cooper Lighting Business Portfolio Leadership Brands… Commercial & Industrial Residential Utility International Broad Portfolio Of Industry Leading Products & Brands 60 Cooper Lighting Overview Solid Revenue Growth S Mid in igi D gle ow r G t Customer Loyalty ¾ Delivering Solutions to Channel Participants & End User Markets th Innovation ¾ Diversified Product Portfolio ¾ Accelerating Technology Investments ¾ New Product Vitality over 25% Globalization 2005 2006 2007 2008 ¾ Specification with Higher End Architectural Products and Controls Initiatives Enabling Solid Core Growth 61 Cooper Lighting End-Markets Commercial & Industrial ¾ Healthcare & Education Remain Attractive ¾ Energy – Accelerating Results In New & Existing Installations ¾ Product Breadth - Full Project Participation Residential ¾ HALO #1 Recessed Brand ¾ Energy & Standards Driving Demand Industrial Industrial Residential Residential Commercial R oa dw ay Roadway Roadway / Highway ¾ New Products & Technology ¾ DOT Infrastructure Broad Market Exposure, Reaching Attractive Long-Term Markets 62 Cooper Lighting Key Economic Indicators Near-Term Trend Long-Term Trend ¾ Arch. Billing Index ¾ McGraw Hill / Reed Construction ¾ Non-Resi Construction Arch. Billing Index, >50 = increasing activity Construction Starts Sources: AIA Sources: Reed Construction / McGraw Hill / Global Insight Very Difficult 2009 Market Conditions 63 Long-Term Global Trends Energy Demand / Utility Grid Global Infrastructure Conservation / “Green” / Energy Efficiency & Reliability Safety / Protection / Mass Notification Cooper Uniquely Positioned To Key Global Trends 64 Business Priorities Attack Variation & Eliminate Waste 1. Lean MVP ¾ Driving Productivity & Continuous Improvement 2. Energy Efficiency ¾ Well Positioned With Products & Services Focus on Cooper Growth Segments 3. Innovation – Technology ¾ Controls ¾ LED Conservation / “Green” / Energy Efficiency & Reliability Executing On Fundamentals & Making Significant Investments 65 Lean Continuous Improvement … ¾ Standard Work Realized Benefits 9 Freed up 300k sq ft of Mfg Space ¾ Value Streams 9 Working Capital Improvements – 150bps ¾ Visual Management 9 Service Enhancements ¾ Engagement & Accountability 9 Productivity Gains – $30M Benefit Value Engineering … Fluorescent FluorescentRedesign: Redesign: 2x 2xComponent ComponentPart PartReduction Reduction Material and Labor Savings Material and Labor Savings Efficiency Improvements Efficiency Improvements Retrofit Market Opportunities Retrofit Market Opportunities Implementation Benchmarking & Tracking ¾ 24 Product Programs ¾ $20M Opportunity Resource VA/VE Projects Target Setting ¾ 8 Major Product Redesigns Underway Outdoor OutdoorRedesign: Redesign: Workshop & Idea Generation Material/Process/Labor Material/Process/LaborSavings Savings Over 30% Product Rationalization Over 30% Product Rationalization Enabling EnablingIncremental IncrementalSales Sales Continuing To Drive Competitiveness And Generate FCF 66 Business Priorities Attack Variation & Eliminate Waste 1. Lean MVP ¾ Driving Productivity & Continuous Improvement 2. Energy Efficiency ¾ Well Positioned With Products & Services Focus on Cooper Growth Segments 3. Innovation – Technology ¾ Controls ¾ LED Conservation / “Green” / Energy Efficiency & Reliability Executing On Fundamentals & Making Significant Investments 67 Energy Efficiency Inefficient Lighting Systems are Common… …Lighting & Controls Provide Best ROI 49% 47% 31% Lighting Controls All Other Source: DOE Increasing Energy Demand and Prices… US Electricity Demand …Create Opportunity for Cooper Lighting ¾ Energy codes driving new lighting products (IECC ~ 1 watt per sq. foot) ¾ 5x Green Building Demand – including all government buildings to be LEED certified ¾ Annual retrofit market opportunity with conversion rates: • 1% Commercial / 5% Industrial ~ $1B Source: Edison Electric Institute • 2% Commercial / 10% Industrial ~ $2B Energy Generates Results In All Economic Cycles 68 Energy Strategy Occupancy Sensors Product Breadth Control Systems Linear / Highbay Focused Channel Efforts End Users Recessed / LED Contractors & ESCOs Bank of America Results • First High-Rise to Receive LEED Platinum Certification Lighting Control Distribution Svc/Programs Specifiers Animal Supply Warehouse • $53,000 in Annual Utility Cost Savings • Payback Period Less Than 1.2 years Leveraging Products & Channel Position For Results 69 Business Priorities Attack Variation & Eliminate Waste 1. Lean MVP ¾ Driving Productivity & Continuous Improvement 2. Energy Efficiency ¾ Well Positioned With Products & Services Focus on Cooper Growth Segments 3. Innovation – Technology ¾ Controls ¾ LED Conservation / “Green” / Energy Efficiency & Reliability Executing On Fundamentals & Making Significant Investments 70 Lighting Controls Products/Services End-Markets ¾ Lighting Controls ¾ Occupancy Sensors ¾ High Bay Lighting Controls ¾ Lighting Dimming Systems ¾ Energy Management Solutions Complementary to existing energy efficient lighting products C&I Education Healthcare Government Controls end markets reached through existing sales channels Products & Systems Providing Cost Effective Solutions For Performance And Energy Savings 71 Platform Development – Lighting Controls $12B $2.7B Lighting Controls Architectural Dimming Theatrical Dimming EMS Wallbox Dimming Global BMS Market C&I Lighting Controls Vision Building A $100M Controls Platform 72 Business Priorities Attack Variation & Eliminate Waste 1. Lean MVP ¾ Driving Productivity & Continuous Improvement 2. Energy Efficiency ¾ Well Positioned With Products & Services Focus on Cooper Growth Segments 3. Innovation – Technology ¾ Controls ¾ LED Conservation / “Green” / Energy Efficiency & Reliability Executing On Fundamentals & Making Significant Investments 73 LED Dynamics 160 White LED Components $90 $80 Efficiency 120 $70 100 $60 80 $50 60 $40 $30 40 $20 Cost 20 Cost ($/kilolumen) Efficacy (lumens/watt) 140 ¾ Rapidly Improving Efficiency ¾ Significant Cost Reductions ¾ Long Life - Up to 50x Traditional Lamps $10 $0 0 2007 2012 2017 Source: DOE Report “Energy Savings Potential of SSL in General Illumination Applications (High CRI)– Dec 2006” LED 2% Attractive LED Fundamentals… $100 C&I Fixture Market by Source LED 11% Other HID CFL Inc / Hal All Other 89% Fluor. 2008 … Improve Adoption Rates & Sustainability Results ¾ Attractive General Illumination Paybacks • Recessed Downlights < 2 yrs ¾ 33% Potential Reduction in US Lighting Energy Usage by 2027 • ~ Forty 1000MW Power Plants 2012 Est. Technology – Focus Shifting To Application (Luminaires) 74 LED Growth Opportunity Application Recessed Downlight Street & Area Lighting 828 Million Units US Installed Base (Units) CFL 17% INC 83% 131 Million Units HPS 39% Metal Halide 27% INC 10% MV 13% Value …vs Incandescent: ¾ Up to 75% less energy ¾ Long LED Life Eliminates >40 Incandescent Replacements @ 1% LED Penetration Source - DOE Reports: “Energy Savings Potential of SSL in General Illumination Applications – Dec 2006”, “Energy Savings Estimates of LED’s in Niche lighting Applications – Oct 2008” …vs Metal Halide: ¾ 30-60% less energy ¾ Long LED Life Eliminates >7 Metal Halide Replacements $310MM $110MM Market Opportunity FLU 6% New Construction New Construction Retrofit Retrofit Significant Growth Potential For Cooper 75 LED Growth Plans Building Best-in-Class Capabilities… Technology Technology ¾ Experienced, Dedicated LED Teams ¾ Significant R&D Investment - IP, Performance Focus Products Products Supply Supply Chain Chain Commercialization Commercialization ¾ Market Driven Product Roadmaps ¾ Capacity & Capability for Speed to Market ¾ Leverage Expertise, Brands, Channel ¾ Disciplined, 6σ Development Process ¾ Leverage Mfg Infrastructure, MVP ¾ Drive Specification With Scale ¾ Developing Strategic Supply Chain Well Positioned With Capability & Capacity – Accelerating Investments 76 Stimulus Plan Breakdown Infrastructure & Construction ~$787B ~$66B Energy Efficiency Education Transportation Infrastructure Other Health Care Federal Construction & Renovation Individual Aid Taxes Total Stimulus Package $4B+ Education Construction / Retrofits Construction & Energy Efficiency Lighting & Controls Stimulus Package Presents Huge Opportunity For Lighting 77 Cooper Lighting Summary ¾ Challenging Market Conditions – Facing Reality ¾ Driving Cost, Cash & Continuous Improvement ¾ Energy & Sustainability – Delivering Energy Efficient Lighting Solutions & Generating Results ¾ Innovation – Investing & Building Growth Platforms with Technology & Specification Capability Executing On Fundamentals And Investing For Leadership Results 78 Cooper Industries 2009 Outlook Meeting Cooper Power Systems Mike Stoessl, President Cooper Power Systems Business Portfolio Automation & Communication Solutions Fastest Growing AMR PLC Provider #1 DR Technology Provider Reliability & Power Quality #1 in Overhead Switchgear #1 in Capacitors #1 in Voltage Regulators Connection & Components #1 in HV Fuses #2 in Surge Arresters #2 Molded Rubber Accessories Transformers #3 Distribution Transformers Broad Portfolio Of North American Industry Leading Products 80 Cooper Power Systems Business Overview Market Size: ~$50B Sales: ~$1.4B Customer Profile Geographic Mix: ~27% International Sales Growth ble u o D 2005 Leading Brands wt h o r it G g i D 2006 2007 2008 Global Growth With Strong Presence And Brand 81 Cooper Power Systems End-Markets US Reliability & Automation US Connection & Restoration ¾ Solutions To Improve Reliability, Power, Quality, Efficiency And Productivity ¾ Power Delivery Solutions For Utilities US Reliability & Automation International US Connection & Restoration Commercial & Industrial Commercial & Industrial International ¾ Mexico, China, Saudi Arabia / UAE, Central America, Australia ¾ Wind & Other Renewable Energy, Water / Wastewater, Oil & Gas, Military, Hospitals & Universities Broad Market Exposure…Reaching Attractive Long-Term End Segments 82 Cooper Power Systems Economic Indicators Short-Term Leading Indicators Long-Term Leading Indicators Trend ¾ Housing starts ¾ Non-Residential construction ¾ Credit markets ¾ Infrastructure/stimulus spending Building permits, mn. units, SAAR Source: Census Bureau Trend ¾ ¾ ¾ ¾ ¾ ¾ Electricity demand Global economic development Demand for reliability Aging grid, retirements SmartGrid investments Legislative trends towards reliable, efficient, renewable, domestic power sources Global CO2 Emissions Outlook Source: World Energy Outlook 2008 (OECD/IEA ) 2.5 2.0 1.5 1.0 0.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 83 Business Priorities ¾ Manage Transformers Through the “Trough” – Value Engineering Deck Worth 500bp – Lean Driving Delivery, Quality, Inventory to Best-in-class ¾ Globalization – Capacity Expansions for Capacitors and Switchgear – 9 New Product Releases in China Alone – Acquisition Pipeline in Developing Countries ¾ Investments in Automation and Solutions – – – – 20+ New Solution Offerings 15% Increase in Personnel Added Asia Controls Center Cyme Acquisition ¾ Investments in Commercial and Industrial Markets – Tailored Product Solutions for C&I Verticals – Dedicated Application Engineering for End-users, Consultants – 15% Growth Through Cooper Connection Distributors Mix Shift Continues; Well-Positioned For Stimulus Package And Long-Term Trends 84 Stimulus Bill Opportunity ~$311B Energy and Water ~$51B ~$23B Energy Smart Grid Water Energy Deliverable & Renewables Direct Benefit to CPS: ¾ Smart grid demonstration projects ¾ Smart grid matching grant Transport. Labor Health & Education Indirect Benefit to CPS: ¾ Loan guarantees ¾ Improved renewables financing ¾ Renewables R&D ¾ WAPA ¾ BPA Mil/Medical Power Systems Exposed To ~$23B Of Proposed Stimulus Spend 85 Stimulus Priorities Priorities Outcome CPS Solutions Smart Grid ¾ Funding to support SmartGrid projects ¾ ¾ ¾ ¾ Sensors Communications Software Apparatus Renewables ¾ Renewable Portfolio Standards (RPS) in 28 states ¾ Tax credits ¾ Financing programs ¾ ¾ ¾ ¾ Transformers Connectors Capacitors Protection Climate Change ¾ Cap-and-trade implementation ¾ Focus on efficiency ¾ EMS Switchgear ¾ FR3 dielectric fluid ¾ Demand Response Government Projects ¾ Spending in C&I verticals ¾ Wastewater ¾ Healthcare ¾ Military and government ¾ All products Numerous Legislative Priorities Support Growth Prospects 86 Long-Term Global Trends Energy Demand / Utility Grid Conservation / “Green” / Energy Efficiency & Reliability Global Infrastructure Safety / Protection / Mass Notification Cooper Uniquely Positioned To Key Global Trends 87 Wind Drivers ¾ Renewable Portfolio Standards Power Systems Well Positioned ¾ Production Tax Credits ¾ Consulting ¾ Pressure on Carbon Emissions – Application engineering and design software for collector systems ¾ Collecting System Installed Wind Capacity in US GigaWatts 36.6 CAGR 29.6% – Medium voltage (35kV) connectors – High efficiency transformers ¾ Correcting/Protecting 16.8 – Capacitor power factor correction – Fuses – Surge protection 2007 2010E Aggressively Pursuing The Wind Market Sources: JP Morgan, AWEA, Company estimates 88 Energy Efficiency And Sustainability Power Systems Well Positioned Drivers ¾ 6-10% losses in the grid distribution system ¾ Increasing demand is stressing the grid ¾ Legislation of Energy Efficiency programs ¾ Products made from environmentally friendly materials ¾ Low loss lightning arresters 30,000 ¾ High efficiency transformers 1.0 mil ¾ Capacitor power correction 2.3 mil ¾ FR3® vegetablebased transformer oil 47,500 ¾ SF6-free Switchgear Power Systems Products Reduce Carbon Footprint And Improve Overall Grid Efficiency 89 Power Systems SmartGrid Solutions ¾ ¾ ¾ ¾ ¾ ¾ ¾ Smart Thermostats/Switches OutageAdvisor™ Sensors VARAdvisor™ Sensors Switchgear Controls Voltage Regulator Controls Relays Meters Communications & Integration ¾ ¾ ¾ Power Line Carrier Wireless Substation Gateways Analysis (Software) ¾ ¾ ¾ Yukon Software Platform Cybectec Substation Integration Cyme Analysis Software Execute (Apparatus) ¾ ¾ ¾ ¾ ¾ Switchgear Capacitor Banks Voltage Regulators Protection Devices Load Switches Sensors Products And Solutions Enable SmartGrid Applications 90 Automated Meter Reading – Power Line Carrier Superior PLC Technology Representative Customers • Integrated AMR/DR/DA software platform • Only PLC vendor with true AMI functionality – 5/15/30/60 minute interval data – Voltage profile data – Outage data logs – Time of Use capability – Net metering • Speed and Bandwidth - 5x faster than competition Best-in-Class Power Line Carrier Technology 91 Communications - Wireless AMI Repeater AMI Powerline Repeater Fast, low cost, flexible deployment of wireless AMI repeaters ¾ Wireless AMI repeater integrated into proven utility sensor ¾ Optimal repeater placement – not dependent on power supply availability ¾ Installs in under 20 minutes with no wiring required Combining Communications Capability With Power Systems Expertise 92 Power Systems Software Solutions CPS Software Platforms Engineering Software and Studies ¾ Power flow and fault level calculations ¾ Voltage/VAR optimization ¾ Harmonics ¾ Flicker mitigation ¾ Distributed generation integration ¾ Reliability and outage analysis ¾ Protection coordination Developing Next-Generation SmartGrid Solutions By Combining Power System Engineering With Automation Technology 93 Normal SmartGrid Solutions: Feeder Reconfiguration ¾ 3 separate circuits Substn 1 Substn 2 Substn 3 Fault Substn 1 ¾ Open switches separate feeders ¾ Closed switches allow power to flow ¾ Power Outage Substn 2 “Healed” Substn 3 Substn 1 Substn 2 ¾ Automatically connect circuit 1 and 2 ¾ Power is restored to customers Substn 3 Grid “Self-Heals” By Automatically Reconfiguring Feeders 94 Smart Sensors – Demand Response Superior DR Technology ¾Flexibility – Technologies, hardware and communication Recent Key Wins Baltimore Gas Electric – 450 MW at rollout ¾Superior software – Web portal enabling consumer choice, large installed base (200+) ¾Technology support – Legacy, current, and future technologies including 2 way AMI/zigbee Pacific Gas & Electric – 300 MW by 2010 “Cooper's solution presented the right combination of product quality and technical innovation backed by service and support to meet PG&E's business needs” - PG&E Manager Over 6.5 GW Of Residential, Small C&I And Generators Managed By Cooper Power Systems DR Technology 95 Power Systems Division Summary ¾ Near-Term Market Headwinds ¾ Positive Long-Term Trends, Enhanced by Global Stimulus Programs – Electricity Demand – Global Economic Development – Demand for Reliability – Aging Grid – SmartGrid Investments – Legislative Trends Towards Reliable, Efficient, Domestic Power Sources ¾ Broad Product Portfolio to Distribute Clean, Reliable, Quality Power to Customers Around the Globe Positioned To Weather The Near-Term Storm And Capitalize On Positive Long-Term Trends 96 Cooper Industries 2009 Outlook Meeting Cooper Crouse-Hinds Curt Andersson, President Cooper Crouse-Hinds Business Portfolio Hazardous & Industrial ¾ Electrical products for harsh and hazardous applications ¾ Industries: oil & gas, pharmaceutical, food processing, power, mining Instrumentation (MTL) ¾ Instrumentation for protection of industrial data networks Interconnect ¾ Highly engineered interconnect solutions for marine, military, and aerospace Commercial ¾ Electrical products for nonresidential construction, including custom engineered solutions Airfield Lighting ¾ Lighting, power, and control systems for airfield lighting Broad Portfolio Of Industry Leading Products 98 Cooper Crouse-Hinds Business Overview Customer Profile Market Size: ~$15 billion Sales: ~$1.15 billion Geographic Mix: ~55% International Sales Growth Leading Brands ow r G igit D ble u o D th ¾ Crouse-Hinds ¾ MTL ¾ CEAG ¾ Nortem ¾ G&H 2005 2006 2007 2008 Double-Digit Growth, Attractive Adjacencies 99 Cooper Crouse-Hinds End-Markets Industrial Energy ¾ ¾ ¾ ¾ ¾ ¾ Oil & Gas Exploration, Processing, Distribution ¾ Process Industries ¾ Mining ¾ Power Generation ¾ Alternative Energy Heavy Manufacturing Food & Beverage Pharmaceutical Water / Wastewater Transportation Infrastructure ENERGY INDUSTRIAL MIL / AERO COMMERCIAL Mil / Aero ¾ Defense Programs ¾ Commercial Aviation & Space ¾ Subsea Commercial ¾ Commercial and Institutional Construction Broad Market Exposure…Reaching Attractive Long-Term Market Segments 100 Crouse-Hinds Key Economic Indicators ST Trend LT Trend Opportunities ¾Exploration (E&P) Offshore growth, Asia/LA ¾Downstream demand IOC, ME and MRO growth ¾Military spending Multi-year programs ¾Industrial capex Stimulus, green investments Global E&P Capex ($ billions) Global Energy Consumption (QBTU) $450 800 700 $400 $350 600 500 $300 $250 Lower but still $400B! $200 $150 $100 400 300 200 100 0 $50 $0 2005 2006 2007 2008 2009 2010 2005 Liquids 2010 Natural Gas 2015 Coal 2020 Nuclear 2025 2030 Renewables Challenging Short-Term, Attractive Long-Term Outlook Source: Energy Information Administration, team estimates 101 Market Dynamics Upstream cost per barrel ($) OPPORTUNITY New reserves in higher cost locations (deep sea) will require significantly more capital for exploration and production. Source of liquid fuel OPPORTUNITY 100% 99% 98% 97% 96% 95% 94% 93% 92% 91% 90% 2005 2010 Conventional Heavy 2015 Bitumen CTL 2020 GTL Long-term replacement of traditional oil with bitumen (tar sands), CTL, GTL (shale), and biofuels, all requiring significantly higher infrastructure for lifting, processing, and transporting Bio Attractive Long-Term Global Markets Source: Energy Information Administration, team estimates 102 Business Priorities ¾ Managing Productivity Aggressively While Supporting Growth ¾ Commercial Investments in Growing (Energy) Economies: South America, Asia, Middle East ¾ Innovation: Energy and Labor Savings, Safety, Custom Military Applications, Wireless and Diagnostics ¾ Growth in Attractive Adjacent Markets: Mining, Alternative Energy and Subsea Targeting High Growth End-Markets And Geographies; Well Positioned For Market Recovery 103 Long-Term Global Trends Energy Demand / Utility Grid Global Infrastructure Conservation / “Green” / Energy Efficiency & Reliability Safety / Protection / Mass Notification Cooper Uniquely Positioned To Key Global Trends 104 Energy Demand / Safety PORTFOLIO OPPORTUNITY ¾ Market Size : ~$5 Billion ¾ Market Growth: ~5-10%/yr Long-term ¾ CCH Sales: ~$500M ¾ Hazardous and Off-shore Electrical Equipment ¾ Hazardous Instrumentation ¾ Subsea Interconnect APPLICATIONS DRIVERS ¾ Exploration, mining, unconventional gas (e.g. shale) ¾ Long-term global demand and reserve depletion driving capex ¾ Refining, downstream processing ¾ ¾ Transportation, distribution (LNG terminals, pipelines) Safety standards increasing globally, across many industries ¾ Electrical generation (coal, nuclear, gas, biofuels) Aging plants require increased inspections and MRO ¾ Governments using petro-chem to drive economic recovery ¾ Only Provider With Global Coverage And Global Standards 105 Energy Demand / Safety: Deep Sea Corrosion-resistant OPPORTUNITY ¾ Market Size : ~$1 Billion ¾ Market Growth: ~5-10% ¾ CCH Sales: ~$50 Million Subsea Interconnect Drilling Rig Power Offshore fleet additions by type 5-10% CAGR 80% 70% Petrobras: Plans for over 50 new drill rigs, most deepwater, through 2017 60% 50% Jackup 40% Deepwater 30% 20% 10% 0% 2008 2009 2010 2011 Strong Growth for Offshore Rigs, Shifting to Deepwater Source: New York Times, ODS-Petrodata, Baker Hughes, team analysis 106 Global Infrastructure OPPORTUNITY ¾ Market Size : ~$2+ Billion ¾ Market Growth: ~5+% ¾ CCH Sales: ~$100M ¾ ¾ ¾ ¾ ¾ APPLICATIONS ¾ Water, wastewater ¾ Aviation / Airports ¾ Secure industrial networks ¾ Municipal transit ¾ Port improvements ¾ Bridge reconstruction ¾ Food processing PORTFOLIO Corrosion-safe electrical equipment Airfield lighting and control systems Industrial wireless and firewalls Portable and backup power Heavy duty interconnect DRIVERS ¾ Developing country growth, Improving standard of living ¾ Global fiscal stimulus (e.g. China transportation spending) ¾ Aging US infrastructure (water treatment, pipelines, bridges, tunnels) ¾ Capacity and security (US ports) Wide Heavy-Duty Portfolio, Strong Channel Coverage 107 Global Infrastructure: Monitoring OPPORTUNITY ¾ Market Size : ~$1 Billion ¾ Market Growth: ~5-10% ¾ CCH Sales: ~$25 Million Portfolio Wireless monitoring and control Signals and alarms Example: Pump monitoring Industrial network security and firewall Process alarms, displays, and monitoring World-Class Portfolio of Monitoring Tools for Industrial Applications 108 Cooper Crouse-Hinds Summary ¾ Strongest Market Position With Global Commercial Reach, Complete Standards Coverage, Innovative Product Line ¾ Focused On Customer Service And Value Creation To Gain Share Of Global Energy And Infrastructure Investments ¾ Investing In Global Infrastructure, Talent And Technology To Position For Economic Recovery Well Positioned For Downturn, Preparing for Recovery 109 Cooper Industries 2009 Outlook Meeting Terry Klebe, SVP and CFO 2008 Financial Highlights Full Year 2008 2008 2007 $0.45 $3.59 $3.73 $0.21 $0.13 $3.51 $0.14 $3.14 Excluding Unusual Items Restructuring / Impairment Discrete Tax Items GAAP Excluding Unusual Items Belden Income / Other Discrete Tax Items GAAP Excluding Unusual Items, EPS Increased 14% to $3.59 111 Macro Economic Environment in 2008 First 9 Months Last 3 Months ¾ Strong industrial markets, especially energy ¾ Utility market growth ¾ Strength in emerging markets ¾ Western Europe GDP growth ¾ Material, transportation and energy inflation ¾ Residential market ¾ Commercial construction Overall A Net Favorable Global Economic Environment Through September Then … 112 Record 2008 Performance Revenues: + 10% Y/Y *Operating Income: + 9% Y/Y 7,000 1,000 6,000 CAGR 5,000 10% 800 4,000 600 3,000 400 R CAG 17% 2,000 200 1,000 0 0 2004 2005 2006 2007 2008 2004 *Recurring Income: + 8% Y/Y 700 4.0 600 CAG R 500 17 % 2006 2007 2008 *Earnings Per Share: + 14% Y/Y 3.0 400 2005 R CAG 19% 2.0 300 200 1.0 100 0 0.0 2004 2005 2006 2007 * From continuing operations before unusual items 2008 2004 2005 2006 2007 2008 113 2008 Revenue Performance Electrical Products $6.5B $5.8B $5.1B ++ 13% 13% $5.9B ++ 10% 10% FX Acq. FX Acq. .5% .3% 7.8% Core 4.6% 6.8% Core 3.2% 2007 2008 Tools $0.79B $0.77B -- 4% 4% FX 2007 2008 2007 2.1% Acq. .4% Core -6.2% 2008 Electrical Products Solid Core Growth Supplemented By Acquisitions….Tools Segment Hit Hard In Q4 114 2008 Revenue Growth Geographic Region (Core 1.8%) + 7% U.S. + Canada Customer Channel (Core 1.9%) + 21% + 13% ROW (ex Eur) + 14% Electrical Distribution (Core 9.6%) + 8% - 10% Retail W. Europe Utility + 13% Direct / OEM + 6% Non-Electr. Distribution (ex Utility) Continued Market Penetration In Developing Markets 115 2008 Operating Income* Cooper Industries: + 9% Electrical Products: + 10% $930M $853M $930M $848M 16.2% 14.3% 16.6% 14.4% 2007 2008 Tools: - 14% $94M 11.8% 2007 2008 $81M 10.6% Operating Income Return on Revenues 2007 2008 Record Operating Income…Weak Leverage In Q4 As Factory Production Curtailed * Excluding unusual items 116 Capital Utilization Improvement 7.0 Inventory Turns 70 Receivable DSO 6.0 65 5.0 60 4.0 3.0 55 2002 6.0 2003 2004 2005 2006 2007 2002 2008 OWC Turns $150 5.0 2003 2004 2005 2006 2007 2008 Capital Expenditures ($millions) $100 4.0 $50 3.0 $0 2.0 2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 Depreciation 2005 2006 2007 2008 Capital Spending 117 Operating Working Capital % Revenues Corporate Average Cooper Divisions Solid Improvements In 2008…Significant Opportunities Still Exist 118 Free Cash Flow To Recurring Income* 2.5 2.0 1.5 1.0 0.5 0.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Eight Consecutive Years Of >1x Conversion * Income from Continuing Operations excluding unusual items 119 Long-Term Debt ($ Millions) Amount $275 325 300 300 Rate 5.50% 3.55% 5.56% 5.75% Due Date Nov 2009 Nov 2012* Apr 2015 Jul 2017 1,200 33 (281) Long-Term Debt Short-Term & Misc. Long-Term Debt Cash & Short-Term Investments $952 Net Debt ($940 at December 31, 2007) Balance Sheet Becomes A Strategic Asset * Swapped to Euro Debt - 5.25% note rate at date of issuance 120 Net-Debt To Total Capitalization* 45% 38.8% 36.2% 35% 29.3% 26.8% 26.1% 25% 20.5% 19.1% * 24.8% 15% 2001 2002 2003 2004 2005 2006 2007 2008 Maintained Conservative Capital Structure With $2.3 Billion Returned To Shareholders And $1 Billion For Acquisitions Over Last 5 Years * Net Debt: Total Debt less Cash and Investments 121 Return on Invested Capital 14.3% 14.7% 13.5% 10.8% 9.7% 8.2% 2003 2004 2005 2006 2007 2008 Disciplined Capital Management Drove Returns 122 2008 Restructuring ¾ Fourth Quarter Restructuring Charge and Impairment of $45 million ¾ Headcount Reduced by over 2,200 Employees (7% of workforce) ¾ Annualized Savings of Over $60 million in 2009 ¾ Facility Rationalizations In Progress ¾ Incremental Contingency Plans Developed Anticipated An Economic Slowdown But The Rapid Decline Unprecedented; Proactive And Poised For Future Market Volatility 123 2008 Summary ¾ Record Revenues ¾ Record Earnings ¾ Record Free Cash Flow ¾ Continued Investment in Cooper Initiatives Drove Results ¾ Maintained Conservative Capital Structure ¾ Positioned Cooper for the Future 2008 Was Another Record Year 124 Cooper Industries 2009 Outlook Meeting Terry Klebe, SVP and CFO 2009 Outlook End-Markets 2008 Revenues Other 5% Industrial 40% Resi 9% Commercial 25% Utility 21% 2009 Revenue Forecast Other 5% Industrial 41% Resi 9% Commercial 24% Utility 21% Diversified End-Market Exposure… Strong Penetration In International Markets 126 2009 Forecast: Industrial Market 2008 Revenue $2.6 Billion Canada 5% Latin Amer. 8% Asia Pac. 9% U.S. 53% Europe, M.E., Africa (EMEA) 25% ¾ Industrial Production – Global mature markets decline – Developing markets slower growth ¾ Factory Utilization – Capacity utilization below 70% ¾ Capital Spending – Declining with slower demand and continued credit market issues – Energy efficiency spend continues ¾ Energy – Worldwide infrastructure projects delayed and cancelled but activity at higher level than rest of industrial Cooper Revenue Declines 8% to 13% On Slowing Global Demand 127 2009 Forecast: Commercial Market Canada Latin 6% Amer. 4% Asia Pac. 3% U.S. 63% EMEA 24% ¾ Energy efficiency / LED adoption continues but at a reduced level ¾ Middle East and developing country flat to negative growth ¾ U.S. and Europe commercial construction activities severely impacted by dysfunctional credit markets and recession ¾ Retail construction depressed levels with economic recession ¾ Economic stimulus package opportunities, schools and energy efficiency / green Cooper Revenue Declines 12% to 17% On Commercial Construction Recession 128 2009 Forecast: Utility Market ¾ Demand management and automation continue growing Canada 3% Latin Amer. 11% U.S. 73% Asia Pac. 10% EMEA 3% ¾ Reliability and efficiency slow but continued investment ¾ Utilities curtailing capital spend and maintenance projects due to tight credit markets ¾ Aging grid continues to need upgrade with long-term outlook positive ¾ Stimulus package opportunities… Smart Grid and T&D investments Cooper Revenue Declines 7% to 13% On Utility Credit Availability And Declining Commercial, Industrial And Residential 129 2009 Forecast: Residential / Retail Market ¾ Remodeling and renovation not declining at same rate as residential construction decline Canada 15% EMEA 4% ¾ Housing starts continue decline through most of 2009 ¾ Inventory of unsold / foreclosed homes continues at high level U.S. 63% ¾ Consumer confidence remains weak Cooper Revenue Declines 14% to 19% On Continued Market Deterioration 130 End-Markets: Today vs. Past Other 2% Industrial 29% Utility 18% 2008 2003 Other 5% Resi 18% Industrial 40% Resi 9% Commercial 25% Commercial 33% Utility + Industrial = 47% Commercial + Resi = 51% Utility 21% Utility + Industrial = 61% Commercial + Resi = 34% Expanding Industrial And Utility Exposure 131 Economy and Markets Potential Scenarios Downside Case ¾ U.S. and Europe home prices continue to fall precipitously ¾ Job losses drive unemployment over 10% and continues to worsen as 2010 approaches in U.S. and Europe ¾ U.S. and Europe consumer continues to retrench ¾ Dysfunctional credit markets worsen ¾ Oil prices rapidly escalate to previous highs ¾ Stimulus packages around the globe do little to reverse a downward spiral ¾ Global recession escalates… turns into a depression 132 Economy and Markets Potential Scenarios Upside Case ¾ U.S. and Europe government action and stimulus package spurs growth in second half ¾ U.S. and Europe consumer confidence bottoms ¾ Housing shows signs of recovery ¾ Financial market liquidity comes back ¾ Oil Prices at $50 to $70 BBL ¾ Stock markets around the world recover 133 Economy and Markets Potential Scenarios Base Case ¾ U.S. and Europe economic growth by Q4 ¾ Credit markets continue to improve as year progresses ¾ U.S. housing market bottoms out by year end ¾ U.S. commercial market bottoms out by year end ¾ U.S. and Europe consumer spending increases in second half of year ¾ Equity markets improve as year progresses ¾ U.S. dollar begins to weaken Expect Extreme Volatility In Markets 134 Events in 4th Quarter 2008 ¾ Credit Freezes, Production Curtailed, Capital Spend Curtailed, Inventory Destocking, Projects Delayed / Cancelled ¾ Cooper’s 2008 Q.3 Core Growth ↑7%; 2008 Q.4 Core Growth ↓3% ¾ Commodity Cost Inflation Reversed Course 3Q to 4Q 2008, e.g., Hedges Fair Market Value -$1 Million to -$34 Million ¾ Volatile Currency Exchange Rates; Rapid U.S. Dollar Appreciation Unprecedented Rapid Retrenchment Impacting Every Geography, Every Market 135 Major Items Impacting 2009 Forecast ¾ High Cost Material Contracts / Hedges Burn Off ¾ Inventory Destocking in First Half of Year / Factory Absorption ¾ Pricing / Material Economics – MRO / flow business price relatively flat – Maintain margins on heavy material content products ¾ $60 Million in Benefit from 2008 Restructuring ¾ Pension Expense Increase of $.07 Per Share ¾ Diluted Shares Decline to ~169 Million First Half Of Of Year Year Significant Significant Pressure Pressure From Inventory Destocking And Higher Costs From Dollar Appreciation And Commodity Costs 136 Major Items Impacting 2009 Forecast ¾ Overall Markets ¾ Currency Translation ¾ Restructuring Benefits ¾ Pension Cost ¾ Interest Cost ¾ Share Count ¾ Income Tax Rate ¾ Strategic Initiatives Revenue E.P.S. ––– –– ––– –– ++ – +/– + ++ + Significant Volatility Heading Into 2009 137 2009 Restructuring ¾Further Headcount Adjustments Likely ¾Facility Rationalization – In-Sourcing – Product Line Moves – Further Contingency Plans In Progress Further Actions Likely To Occur In 2009 138 2009 Revenue Growth Forecast Revenues -10% to -15% - Electrical Products -9% to -14% - Tools -18% to -23% Global End Market Uncertainty = Broad Guidance Range 139 2009 Forecast Revenue Growth General Corporate Expense Interest Expense, Net -10% to -15% < $81 Million +/- Income Tax Rate 22% to 24% Diluted Shares < 170 million Earnings per Share* Free Cash Flow * From continuing operations $2.45 to $2.80 -22% to -32% > 1x Continuing Income 140 Capital Utilization Improvement 7.0 Inventory Turns 70 6.0 Receivable DSO 65 5.0 60 4.0 55 3.0 2003 7.0 2004 2005 2006 2007 2003 2008 2009E OWC Turns $150 6.0 2004 2005 2006 2007 2008 2009E Capital Expenditures ($millions) $100 5.0 4.0 $50 3.0 2.0 $0 2003 2004 2005 2006 2007 2008 2009E 2003 2004 2005 Depreciation 2006 2007 2008 2009E Capital Spending 141 Free Cash Flow to Continuing Income 2.0 1.2 1.4 1.1 1.3 1.1 1.2 1.2 >1.0 20 09 E 20 08 20 07 20 06 20 05 20 04 20 03 20 02 20 01 1.0 Expect Free Cash Flow In Excess Of Continuing Income For 9th Year In A Row 142 Cash Deployment Model ¾Reinvest in the Core ~ $110 - $120M ¾Competitive Dividend ~ $165M ¾Repurchase “Creep” ~ $ 30M $195M of Free Cash Flow Utilization Balanced Approach To Cash Management w/ Adequate Cash Today To Pay-Off Long-Term Debt Maturity Of $275M 143 Outlook 1Q‘09 1Q’08 Revenues Electrical Tools $1.55B 1.36B .18B Earnings per Share $.81 V% 1Q’09 $1.31 to $1.39B -10% to -15% -8% to -12% -28% to -33% $.45 to $.65 -20% to -44% Orders And Revenues Very Volatile With A Slow Start To The Quarter 144 Financial Summary ¾ Economic and Market Uncertainty…Negative Revenue Growth ¾ Earnings Per Share Full Year $2.45 to $2.80 ¾ Free Cash Flow >1x Continuing Income – Targeting Over $500 million in FCF – Ninth Consecutive Year ¾ Balance Sheet Used for Internal Investments, Dividends, Selective Acquisitions and Stock Buybacks Continued Focus On Cost Out And Cash Generation 145 Cooper Industries 2009 Outlook Meeting Kirk Hachigian, Chairman and CEO Summary Disciplined, Conservative Culture ¾ No Extended Credit/Terms To Any Customers ¾ All Long-Term Debt – No Commercial Paper! ¾ Avoided Large/Transformational Acquisitions At High Multiples ¾ Accelerated Pace Of 2008 Buy-Back As Stock Price Fell Disciplined & Conservative Culture Preserves Strategic Options 147 Evolution Of Change ¾ Spent $100M And Five Years Installing A Single Enterprise System ¾ Strengthened Our Portfolio To Sustain Higher Core Growth: – 61% Industrial/Utility – Built Strategic Growth Platforms To Penetrate New Markets – Expanded Internationally ¾ Improved Customer Loyalty, Advanced New Product Development and Built An Industrial Training Center ¾ Lowered Our Fixed Cost Structure – LCC Sourcing − Value Engineering – Lean/Productivity − In-Sourcing ¾ Assembled World-class Leadership Team ¾ Strengthened Our Balance Sheet And Doubled Our Free Cash Flow … Returning More Cash To Our Owners Our People, Processes And Culture/Values Drive Long-Term Performance 148 Cooper In 2006 ¾ Revenue − $5.2B (↓ 20% From 2008) ¾ Margins: – Electrical – Tools 14-16% 10-11% ¾ Free Cash Flow (After Cap Ex) − $500M ¾ EPS − $2.58* Well Positioned Heading Out Of The Storm…With An Attractive Dividend * 2006 Share count 187.6M vs. ~169M shares today 149 Capital Allocation Debt Prepared To Pay $275M November Note Due With Cash On Hand Dividend $165M 2009 (Today’s Yield ~4%) – Safe! Small Bolt-On Acqs. Stock Buy-Back Continue Existing Strategy Cheap/Low Risk/No Market Premium (13M Share Authorization) Balanced Approach To Maximize Shareholder Value 150 Capital Allocation $116 $85 $336 $280 $103 $49 $131 $137 Capex $297 Acq $170 Div $154 $97 $7 $138 $137 $203 $211 $264 FY04 FY05 FY06 $517 $344 FY07 Share Buyback FY08 $2.3B Cash Returned To Shareholders In Last Five Years 151 Summary ¾ Portfolio In Terrific Shape…Diverse/Global/ Profitable (Averaged 6% Core Growth In The Last 5 Years) ¾ Strategy/Initiatives/Processes In Place – 20% EPS Growth In The Last 5 Years ¾ Balance Sheet Is Strong – Focused On Generating Strong Cash Flow In 2009 ¾ Leadership Team Poised And Still Funding Growth – Talent – Loyalty – Innovation – Globalization Focus On Fundamentals…Will Exit Downturn Better Positioned 152 Cooper Industries 2009 Outlook Meeting Questions & Answers
