Document 5LgwmMxEqKjGydn64RDoM4J2J

elOvk Page 19 of 84 Table of Contents asbestos exposure and diseases in various industries, existing insurance coverage including the insurance recovered by Pneumo-Abex Corporation and Federal-Mogul for pre-bankruptcy claims and the contractual indemnities Assumptions were made regarding future claim filings and indemnity payments, and, based on advisor's data, the expected population of persons exposed to asbestos in particular industries All of this data was used to determine a reasonable expectation of future claims, indemnity payments and insurance coverage As discussed in Note 16 of the Notes to the Consolidated Financial Statements, throughout 2003, Cooper worked towards resolution of the indemnification issues and future handling of the Abex-related claims within the Federal-Mogul bankruptcy proceedings This included negotiations with representatives of Federal-Mogul, its bankruptcy committees and the future claimants ("Representatives") regarding participation in FederalMogul's proposed 524(g) asbestos trust Cooper's fourth-quarter 2001 analysis of the contingent liability exposure assumed that the liabilities would be settled within the Federal-Mogul bankruptcy proceedings This analysis assumed that the Representatives would reach similar conclusions regarding the potential future liabilities and insurance recoveries as Cooper did based on the Bates White, LLC analysis Based on the status of the negotiations in 2004, Cooper concluded that it was probable that Federal-Mogul will reject the 1998 Agreement Cooper also concluded that the Representatives would require any negotiated settlement through the Federal-Mogul bankruptcy to be at the high end of the Bates White, LLC liability analysis and with substantially lower insurance recovery assumptions and higher administrative costs While Cooper believes that the insurance has significant additional value, extensive litigation with the insurance carriers may be required to receive recoveries and there is risk that court decisions could reduce the value of the recoveries Additionally, the assumptions on liability payments could prove inaccurate over time If Cooper is unable to reach a settlement with the Representatives and the 1998 Agreement is rejected, Cooper would be required to reflect an accrual for the total estimated liability and a receivable for the probable insurance recoveries Generally accepted accounting principles provide relatively conservative requirements for the recording of insurance recoveries and a substantial portion of the potential insurance recoveries would not be reflected as receivables until future events occur During late February and early March 2004, Cooper reassessed the accrual required based on the then current status of the negotiations with the Representatives and the liability and insurance receivable that would be required to be recorded if this matter is not settled within the Federal-Mogul bankruptcy Cooper concluded that resolution within the Federal-Mogul proposed 524(g) asbestos trust would likely be within the range of the liabilities, net of insurance recoveries, that Cooper would accrue if this matter were not settled within the Federal-Mogul bankruptcy Accordingly, Cooper recorded a $126 0 million after-tax discontinued operations charge in the fourth quarter of 2003 Cooper has continued discussions with the Representatives At this time, the exact manner in which this issue will be resolved is not known The accrual for potential liabilities related to the Automotive Products sale and the Federal-Mogul bankruptcy was $225 1 million at December 31, 2004 and $252 5 million at December 31, 2003 Results of Operations Revenues Electrical Products Tools & Hardware Total Revenues Year Ended December 31, 2004 2003 2002 (in millions) $3,722 2 $3,358 4 $3,324 9 740 7 703 0 635 6 $4,462 9 $4,061 4 $3,960 5 15 http //www sec gov/Archives/edgar/data/1141982/000095012905001490/h22660el0vk htm 2/6/2006