Document oDYg4eRZrZ67Nrygn2R5Drqq7

elOvk Page 22 of 84 Table of Contents $24 0 million, respectively Excluding the restructuring charges in both years, the increase in Electrical Products segment earnings was primarily due to the improvement in margins as a result of cost reduction and productivity actions targeting manufacturing costs The favorable impact of these actions was partially offset by increased insurance, pension and employee benefit expenses and investments in sales and marketing initiatives Tools & Hardware segment operating earnings were $39 4 million for 2003, compared to $14 6 million for 2002 Return on revenues was 5 6% in 2003, compared to 2 3% in 2002 Included in Tools & Hardware segment earnings for 2003 was a net $0 4 million favorable adjustment reflecting the reversal of excess 2002 restructuring charges partially offset by 2003 restructuring charges Tools & Hardware segment earnings for 2002 included restructuring charges of $12 7 million Absent the impact of restructuring charges in both years, the increase in Tools & Hardware segment earnings largely reflects the increase in revenues and the impact of Cooper's cost control and manufacturing rationalization efforts, partially offset by unfavorable product mix and higher insurance, pension and employee benefit expenses Restructuring During the fourth quarter of 2003, Cooper recorded net restructuring charges of $16 9 million, or $13 6 million after taxes ($ 14 per diluted common share) This represented costs associated with restructuring projects undertaken in 2003 of $18 4 million, partially offset by a $1 5 million adjustment of estimates for restructuring projects initiated in 2002 The most significant action included in the charges was an announcement of the closing of Cooper Wiring Devices' manufacturing operations in New York City This action will include the withdrawal from a multiple-employer pension plan Cooper recorded a $12 5 million obligation as an estimate of Cooper's portion of unfunded benefit obligations of the plan The remaining $5 9 million charge primarily represents severance for announced employment reductions at several locations The 2003 net impact of the charges was $16 4 million on the Electrical Products segment, $(0 4) million on the Tools & Hardware segment and $0 9 million related to General Corporate As of December 31, 2004 and 2003, Cooper had paid $4 9 million and $2 7 million, respectively, for these actions, all of which was for severance costs A total of 114 salaried and 150 hourly personnel were eliminated as a result of these actions A total of 106 personnel were terminated as of December 31, 2003 and the remainder terminated in 2004 The majority of the remaining severance obligation was paid in the first half of 2004 The multiple-employer pension obligation is expected to be paid over 15 years, beginning in 2005 Cooper estimates the annual savings from the personnel reductions was approximately $6 million, (net of the anticipated additional employees added in lower-cost regions) with most of the savings beginning in the first quarter of 2004 The savings from the withdrawal from the multiple-employer pension plan are approximately $1 million per year and are expected to begin in 2006 The majority of the eliminated costs previously were reflected as cost of sales In 2001, Cooper accrued $35 million reflecting the contractual amount due to financial advisors associated with Cooper's strategic alternatives review Cooper paid $5 million to the advisors in the 2001 fourth quarter and $15 7 million during 2002, leaving a balance of $14 3 million payable upon the occurrence of certain events During the second quarter of 2003, the terms of the agreements with the financial advisors expired with the contingent events that required payment not occurring Accordingly, the accrual was reversed and reflected as a $14 3 million negative restructuring charge ($8 6 million, net of taxes) on the consolidated income statement Restructuring activity for 2003 totaled $2 6 million consisting of the fourth quarter net restructuring charge of $16 9 million, less the $14 3 million negative restructuring charge During the fourth quarter of 2002, Cooper committed to (1) the closure of ten manufacturing facilities, (2) further employment reductions to appropriately size Cooper's workforce to market conditions, and (3) the write-off of assets related to production rationalization activities These actions were taken as a 18 Bn http //www sec gov/Archives/edgar/data/1141982/000095012905001490/h22660e 10vk.htm 2/6/2006