http://www.morningstar.com/earnings/44865902-emerson-electric-co-emr-q4-2012.aspx

Emerson Electric Co. EMR
Q4 2012 Earnings Call Transcript

Transcript Call Date 11/06/2012

Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to Emerson's Investor Conference Call. During today's presentation by Emerson management, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. This conference is being recorded today, November 6, 2012.

Emerson's commentary and responses to your questions may contain forward-looking statements, including the Company's outlook for the remainder of the year. Information on factors that could cause actual results to vary materially from those discussed today is available at Emerson's most recent Annual Report on Form 10-K as filed with the SEC.

I would now like to turn the conference over to our host Patrick Fitzgerald, Director of Investor Relations at Emerson. Go ahead, sir.

Patrick Fitzgerald - Assistant Treasurer and Director of IR: Thank you, Joel. I am joined today by David Farr, Chairman and Chief Executive Officer of Emerson; Frank Dellaquila, Executive Vice President and Chief Financial Officer.

Today's call will summarize Emerson's fourth quarter and fiscal year 2012 results. A conference call slide presentation will accompany my comments and is available on Emerson's website at emerson.com. A replay of this conference call and slide presentation will be available on the website after the call for the next three months.

I'll start with the highlights of the quarter as shown on Page 2 of the conference call slide presentation. Fourth quarter sales increased 2% to $6.7 billion, with underlying sales growing 5%. Robust growth in Process Management was driven by energy investments and recovery of sales deferred from the Thailand flooding in which we have now fully recovered.

Record gross profit margin of 41% in the quarter expanded 140 basis points from the prior year, and operating profit margin of 20.4% increased 130 basis points. Earnings per share of $0.39 reflects the impact of $0.72 goodwill impairment charge related to businesses impacted by telecommunications and information technology industry weakness. Excluding the impairment charge, earnings per share of $1.11 increased 7% from prior year.

Yesterday Emerson's Board of Directors increased the first quarter 2013 dividend by 3%. After down sales and margin in the first half of 2012, our businesses executed well to deliver a strong second half amid weakening global economy.

Next slide, P&L summary; again net sales grew 2% and underlying sales increased 5%. Recovery of sales deferred by Thailand flooding helped drive strong volume leverage and 130 basis points of operating profit margin expansion. Net earnings of $282 million, includes the $528 million after-tax goodwill impairment charge, which was $592 million before tax. We repurchased 5.6 million shares in the quarter, for $269 million. Recorded EPS declined 61% and excluding the impairment increased 7%.

Next slide, underlying sales by geography; in the fourth quarter underlying sales in the U.S. grew 2%, Europe was flat, Asia increased 8% with China flat, Latin America grew 18%, Canada grew 10% and the Middle East and Africa grew 19%. Total underlying sales increased 5%, currency translation deducted 3% for net sales growth of 2%. Full year 2012 underlying sales grew 3%, currency translation deducted 2% for net sales growth of 1%.

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