Document gE8gmn3J4eXo57R6xmanOZVee

Pricing and Volume In each of Cooper's segments, the nature of many of the products sold is such that an accurate determination of the changes in unit volume of sales is neither practical nor, m some cases, meaningful Each segment produces a family of products, within which there exist considerable variations m size, configuration and other characteristics It is Cooper's judgment that, excluding the year-to-year effects of acquisitions and divestitures, unit volume decreased in the Electrical Products segment and decreased m the Tools & Hardware segment m 2001 During the three-year period endmg in 2001, Cooper was unable to mcrease prices to fully offset cost increases m selected product offerings in both segments Cooper has been able to control costs through strategic sourcing efforts, manufacturing improvements and other actions during this period so that the inability to mcrease prices has not significantly affected profitability m the segments Effect ofInflation During each year, inflation has had a relatively mmor effect on Cooper's results of operations This is true primarily for three reasons First, m recent years, the rate of inflation m Cooper's primary markets has been fairly low Second, Cooper makes extensive use of the LIFO method of accounting for inventories The LIFO method results m current inventory costs being matched agamst current sales dollars, such that inflation affects earnings on a current basis Finally, many of the assets and liabilities mcluded in Cooper's Consolidated Balance Sheets are recorded m connection with busmess combinations that are accounted for as purchases At the tune of such acquisitions, the assets and liabilities are adjusted to fair market value and, therefore, the cumulative long-term effect of inflation is reduced Liquidity and Capital Resources Operating Working Capital Forpurposes ofthis discussion, operating working capital is defined as receivables and inventories less accounts payable Cooper's operatmg working capital decreased $19 million from $1,065 6 million m 2000 to $1,046 6 million m 2001 Operatmg working capital turnover declmed from 4 5 turns m 2000 to 4 0 turns m 2001 Excludmg the impact of recent acquisitions, operatmg working capital turnover m 2001 was 4 2 turns The decrease from 2000 primarily reflects the lower than expected revenues experienced in 2001 In 2000, operatmg working capital mcreased $149 million compared to an mcrease of $135 million m 1999 The mcrease m operatmg working capital for 2000 was due to acquisitions made durmg the year Operatmg working capital turnover for 2000 was 4 5 turns, declining from 4 6 turns m 1999, also primarily due to acquisitions In 1999, operatmg working capital mcreased $135 million A majority of the mcrease resulted from acquisitions Operatmg working capital turnover for 1999 of 4 6 turns declmed from 5 0 turns in 1998 Higher operatmg working capital levels to support consolidation and cost-reduction programs m several businesses and the impact of a new busmess system implementation at one of the electrical product businesses offset the benefits from ongoing improvement programs 19