Document ZBOYOaLKgydpyOKRy6xbgXJX8

COOPER INDUSTRIES LTD(Form 424B2, Received 10/25/2002 13 39 31) Page 53 of 68 Shares purchased by the ESOP prior to 1994 are accounted for in accordance with Statement of Position 16-3', Accounting Practices for Certain Employee Stock Ownership Plans and Emerging Issues Task Force Issue 89-8, Expense Recognition for Employee Stock Ownership Plans Compensation expense is equal to Cooper's CO- SAV matching obligation, adjusted for the difference between the fair market value and cost of the shares committed to be allocated Compensation expense is reduced by the amount of dividends paid on unallocated ESOP shares available for future matching All shares issued to the ESOP are considered outstanding for purposes of computing earnings per share Shares purchased by the ESOP m 1994 are accounted for m accordance with Statement of Position 93-6, Employers' Accounting for Employee Stock Ownership Plans ("SOP 93-6") SOP 93-6 was effective for fiscal years beginning after December 15, 1993. Compensation expense is recognized at the fair value of the shares committed to be allocated which is equal to the amount of Cooper's CO-SAV matching obligation. Unearned employee stock ownership plan compensation is credited as shares are committed to be allocated based on the cost of the shares to the ESOP. The difference between the fair market value and cost of the shares committed to be allocated is recorded as an adjustment to capital m excess of par value Dividends paid on unallocated shares are recorded as a reduction of ESOP debt, accrued interest or accrued employee benefits Unallocated shares are not treated as outstanding m the earnings per share computation Compensation expense for the CO-SAV plan and the ESOP was $23 0 million, $20 2 million and $18 6 million m 2001, 2000 and 1999, respectively F-21 COOPER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 15: INDUSTRY SEGMENTS AND GEOGRAPHIC INFORMATION INDUSTRY SEGMENTS Cooper's operations consist of two segments Electrical Products and Tools & Hardware Markets for Cooper's products and services are worldwide, with the United States being the largest market The Electrical Products segment manufactures, markets and sells electrical and circuit protection products, including fittings, support systems, enclosures, wiring devices, plugs, receptacles, lighting fixtures, fuses, emergency lighting, fire detection systems and secunty products for use m residential, commercial and industrial construction, maintenance and repair applications The segment also manufactures, markets and sells products for use by utilities and in industry for electrical power transmission and distribution The Tools & Hardware segment manufactures, markets and sells hand tools for industrial, construction and consumer markets, automated assembly systems for industrial markets and electric and pneumatic industrial power tools for general industry, primarily automotive and aerospace manufacturers The performance of businesses are evaluated at the segment level and resources are allocated among the segments The Cooper executive responsible for each segment further allocates resources between the various division operating units that compose the segment and, m international markets, determines the integration of product lines and operations across division operating units The accounting policies of the segments are the same as those described m the summary of significant accounting policies m Note ie\ Lii /A ________U~1 _____ ______/T"> J____,,T\ -A-- 1 . c on nTr< n r<rrr