Craig M. Rossman - Emerson Electric Co. David N. Farr - Emerson Electric Co. Frank J. Dellaquila - Emerson Electric Co..

Andrew Kaplowitz - Citigroup Global Markets, Inc. Scott R. Davis - Barclays Capital, Inc. John G. Inch - Deutsche Bank Securities, Inc. Julian Mitchell - Credit Suisse Securities Gautam Khanna - Cowen & Co. LLC Deane Dray - RBC Capital Markets LLC Jeffrey T. Sprague - Vertical Research Partners LLC Robert McCarthy - Stifel, Nicolaus & Co., Inc. Richard M.

Kwas - Wells Fargo Securities LLC Charles Stephen Tusa - JPMorgan Securities LLC Andrew Burris Obin - Bank of America Merill Lynch.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Emerson's Second Quarter Earnings 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 opened for questions. This conference is being recorded today, May 2, 2017.

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, Craig Rossman, Director of Investor Relations at Emerson. Please go ahead, sir..

Thank you, Denise. I'm joined today by David Farr, Chairman and Chief Executive Officer of Emerson; and Frank Dellaquila, Executive Vice President and Chief Financial Officer. Today's call will summarize Emerson's fiscal 2017 second quarter results. A conference call slide presentation will company my comments and is available on Emerson's website.

A replay of this conference call and slide presentation will be available on the website for the next 90 days. I will start with the second quarter summary as shown on page two of the slide presentation. Sales in the second quarter were flat on both a net and underlying basis.

The quarter results reflected a continued improvement in our served markets as evidenced by March orders which were up 4% on a consolidated trailing three-month basis. While the Automation Solutions platform remained down, power and life sciences markets remain favorable and trends in oil and glass MRO continue to strengthen.

Mid-single-digit growth in the Commercial & Residential Solutions platform benefited from favorable HVAC, refrigeration, and construction-related markets. All profitability measures increased in the second quarter primarily due to savings from restructuring actions taken in 2016. Earnings per share from continuing operations increased 2% to $0.58.

On April 28, we officially closed the acquisition of the valves and control business from Pentair. Turning to slide three. Gross profit margin of 43.6% increased 50 basis points driven primarily by cost reductions while EBIT margin was up 30 basis points.

Earnings per share included a $0.13 impact related to the discontinued operations of Network Power, Leroy-Somer, and Control Techniques. Turning to slide four. Global demand conditions were similar to the first quarter as growth in the United States, China, and Europe was offset by declines in Canada, Middle East/Africa, and Latin America.

Turning to slide five. Total segment margin was up 40 basis points primarily due to benefits from restructuring actions. Accounting methods, corporate and other, and interest expense were all lower than the prior year.

Operating cash flow from continuing operations of $601 million was down 5% while trade working capital improved 50 basis points led by improvement in DSO metrics. Turning to slide six. Automation Solutions sales decreased 3% on both a net and underlying basis as spending in process automation remained at low levels but continued to improve.

General industrial markets were more favorable resulting in growth in our industrial solutions products. Power and life sciences markets continue their positive momentum and are expected to support growth in the second half of the year.

Order rates continue to strengthen during the quarter which was evident in March orders which were up high teens on an underlying basis. MRO spending in energy-related markets continue to improve particularly in North America which was driven by shale and downstream customers.

Margin decreased 10 basis points to 15.5% primarily due to deleverage on lower volume and $12 million of higher bad debt expense related to Venezuela. We expect the second half of the fiscal year to improve with underlying sales trends turning positive driven by MRO spending and small project orders. Turning to slide seven.

Commercial & Residential Solutions sales increased 5% on both a net and underlying basis reflecting strong demand in global air conditioning and refrigeration markets and favorable conditions in construction-related markets.

North America, which was up 4%, was driven by solid growth in residential and commercial air conditioning as well as favorable demand for professional tools by oil and gas customers and do-it-yourself products from big box retailers. Sales growth of 13% in Asia was led by mid-teens growth in China air conditioning and refrigeration markets.

Margin improved 80 basis points to 23.7% primarily from leverage on higher volume and savings from prior year restructuring actions. A favorable outlook for global demand within our served markets supports our expectation for the platform to achieve mid-single-digit growth for fiscal 2017. Turning to slide eight.

Based upon our first half results and an expectation of continued improvement in second half order trends, we're raising our full year guidance as follows. Net sales are now expected to be approximately flat with underlying sales up approximately 1% excluding unfavorable currency translation.

Within the platforms, Automation Solutions net sales are expected to be down 3% to 4% with underlying sales down 2% to 3% excluding unfavorable currency translation of 1%. Commercial & Residential Solutions sales are expected to be up 5% to 6% on both a net and underlying basis.

Earnings per share are being raised to $2.55 to $2.65 from our previously guided range of $2.47 to $2.62. This guidance does not include the impact of the recently completed valves and controls acquisition. Our expectation for operating cash flow from continuing operations remains at approximately $2.5 billion. And now, I will turn it over to Mr.

David Farr..

Thank you very much. Good afternoon, everybody. First of all, I want to say that we did have a good recovery in the second quarter, and from the performance level based on what we discussed on the February conference call we did slightly beat what we'd discussed in that call.

Orders for the three-month roll were 4.5% positive in the three-month roll for the quarter. Sales were flat, slightly above where we thought they'd be.

Our GP, gross profit margin, our operating profit margin, our EBIT margins were all up and, yes, Automation Solutions margins were up underlying but we made the decision to clean up potentially future receivable issues primarily around Venezuela, and we wanted to make sure that we're perfectly clean coming out of this quarter given what's going on down in Venezuela.

So we made that choice here in the corporate world to make sure that we had no risk relative to potential receivables in Venezuela. So we made that decision and we did hurt the margin by 50 basis points relative to that. From the EPS standpoint, I said that the EPS would be most likely slightly down or, at best, flat.

We did beat slightly our EPS last year. Our free cash flow was stronger and exceeded our earnings by over 100%. So a very good quarter and we have momentum. As we look at the current order pace, and you remember the blue band that we laid out in February in our presentations, from the standpoint of that blue band we're now running above the blue band.

It doesn't mean we may not drop back down below the blue band or back in the blue band, and that was a chart that you did get – you did get that chart so don't accuse me of not giving you that chart, you did get that chart – we are now running as of this month, the current month, in the 5% to 6% level of underlying orders.

So our order pace continues to do better. We're starting to see the mix change between shorter-term cycle orders and some medium cycle orders coming in. So it will mean that obviously we're going to start building some backlog as we go forward here in the coming months.

The other thing that you'll see in the third quarter, and I want to talk very openly about the third quarter, we would expect our underlying sales in the third quarter to be up, up 4% to 5%. We'd expect our operating margins, the performance at the operating levels at the operation businesses, up for the quarter.

The big issue that we need to discuss so people don't get carried away is from the standpoint of the corporate cost this year, we had an artificially low corporate cost benefit last year by the tune of almost about $30 million from the standpoint of one-time benefits we got last year, from a Byrd Amendment benefit that we got – it's a dumping duty that we got a sudden payment from pension, from other actions.

This year, we're going to be having our corporate costs would be over, I think on the OID level, will be over $100 million. It will be higher so, therefore, we're going to lose a lot of money at the OIOD level primarily from last year's $40 million to over $100 million this year. And it's driven around a couple of areas.

It's driven by that we now are booking some of the costs from the acquisition of Pentair Valves and Control. We will not have the benefit of the Byrd Amendment this time.

We will have also the incentive comp because, other than today's stock price, the stock price has been doing pretty well, so because of the stock price rise we have a benefit of that. And with the pension accounting rules changed just last year, this year we have over $10 million of incremental makeup versus last year.

So from the corporate standpoint, we're going to lose some of the benefit from the operation running much higher. So underlying operations, we'll see sales up, profits up nicely, margins up. And we will, I'm telling you right now, we will be plus or minus flat $0.01 or $0.02, flat from last year's EPS.

Our upside and reality based on the order pace we're seeing right now resides in the fourth quarter. We did slightly better than our plan in the first quarter. We did slightly better than our plan in the second quarter.

We've always felt that we'd be kind of flat here in the third quarter, and I mean it because underlying sales will be up but the corporate costs are going to offset that.

And then the upside we see as we look at the fourth quarter, if underlying sales continue to move nicely and we continue to see that margin expansion we should see a pretty good EPS growth, earnings growth in the fourth quarter, giving that range that we talked about most likely in the $2.55 to $2.65 range, looking most likely around that $2.60 range plus or minus $2.62, $2.59.

That's where we're looking at right now with a good fourth quarter. And it's because of what we saw. We had a unique benefit last year in the third quarter around operations. But operations right now are starting to see good underlying growth in the 4% to 5% range.

Good, where I'd say operating earnings growing up in the 9% to 10%, 11% range, and we have to get through this one quarter here relative to the corporate issues which we face.

So underlying from our perspective right now, the operations are running well and I look for a strong operating quarter and then I look for a really good, strong operating quarter in the fourth quarter and a good close to finish the year.

So people may think that the numbers aren't moving as rapidly as they want to but they need to look at behind the curve, and if you see the underlying performance of the company right now it's clearly on a very good path. Our order pattern's very good and we're ahead of what we thought we'd be in February.

We're ahead of what we've said in the conference call last time. And I feel very good about where we see right now as we go into the second half of the year, as we go into the last quarter of the calendar year and from that momentum standpoint. So that's where we sit at this point in time.

The only last comment I would make around the world, as I look at the world because then someone will ask me, I see right now our North America business has continued to improve and we see good growth coming in North America now. Order pattern in North America has been very good and continues to improve.

I continue to see improvement in China and other parts of Asia. Very strong growth in that part based on the product lines and the customer base we have there. I see good momentum continuing in Western Europe. Eastern Europe and Russia has not really recovered much yet. I do not see much recovery at all and I still see negative in Middle East/Africa.

I still see concerns in Latin America. I do not see that recovery happening there at that point in time. I'm starting to see some benefit in the early stages of uptake in Canada. So most of the markets that I see right now, driven primarily by U.S., China, Asia, and Canada, and Western Europe. Those are the markets doing well at this point in time.

We'll talk a little bit about the valves and controls from the perspective of where we sit at this point in time. We've owned it now for three days. It's very good to get through. We're doing a lot of actions. It's very early to tell what we're going to see at this point in time.

As we've said back in February, we were going to have some earnings dilution and, from that standpoint, we still believe there will still be slightly earnings dilution. We only have five months now versus we're planning on a little bit more time at that point in time.

We're probably, at that point, we're probably talking about six or seven months so it's still earnings dilution. We will try to give more clarity around this as we start analyzing where they stand relative to sales, the profitability, and so forth.

So there's still slightly earnings dilution around the incremental restructuring, some amortization, and that's not different than I've said before. The one-time purchase accounting which we really are going to have to spend a lot of time on, that number is going to be less than we said before.

I think we told you the price and the backlog, and we look at the purchase accounting it's going to be around $0.25 to $0.30 per share.

It's probably most likely going to be half of that, maybe not quite half of that, but we need four or five months of work on that issue and to get that done and then we'll come back out and give you some clarity around that. From a cash flow standpoint, given it's only five months, we might have a little bit of positive free cash flow.

It's really relative around how much restructuring we can get done in the next five months, and we're just starting. So we have less cash and less earnings. So, therefore, restructuring might eat up some of the cash flow in the earnings there but hopefully we'll still have a positive free cash flow for the five months that we own the company.

Fundamentally, long-term trend hasn't changed. It's just that we owned it for less. We have less time and we've got to get our arms around it.

And as soon as I give you some more clarity or I feel I can give you more clarity around it, I will but it will be slightly dilutive in earnings per share, actual earnings with the incremental restructuring and the amortization. It will have a one-time hit because of the purchase accounting and then we'll set out the numbers as we go forward.

But still a very good fundamental deal for us. We're acting on it and hopefully the cash flow will be slightly positive for the year when it's all said and done. But nothing different there except maybe probably another $0.01 or $0.02 dilutive in the year because we have less time demands from a restructuring standpoint and a benefit standpoint.

That's where we sit. Very excited about it. If any of the valves and controls people are on the phone, we're looking forward to working with you.

It's an exciting acquisition, joining a very strong Automation Solutions business, and we look forward to working with you and with your customer base and our customer base, and really realizing both the growth synergies and some of the opportunity synergies. So really exciting opportunity for us from that perspective.

With that, I'll turn it over to the open line and let people ask questions, and feel free to make comments and any questions you want..

Thank you, sir. At this time, we will open the floor for questions and answers. And your first question will come from Andrew Kaplowitz of Citi. Please go ahead..

Good afternoon, Dave..

Good afternoon. Before I'd make a comment, I'll also make a comment that this might be Rossman's last conference call because I'm looking for a position for him in some place out there. So if you guys have any ideas, please call me. But seriously, seriously, he has running his tape and with all the new positions. I'm serious on this.

His name's in play right now so he may not be on the phone call ever again. I might be soloing it with Frank Dellaquila here. So that's a real scary thought that Frank and I are going to be doing investor relations with no one to cover for us. I forgot to make that comment. And Craig, I know he's laughing.

He doesn't know it yet but his name's in play, and it's a fun situation. So it might be the last time he'll get to talk to me about this, my friend. Okay. First question, go ahead..

Dave, we've got some opportunities for him so stay tuned..

You do? Good. Okay. He found one already..

He found one? Sure. Thanks..

Can you give us a little more color on your Automation Solutions margin? Just to clarify, you don't see any more risk in South America. But even if we exclude that impact, your margin was down sequentially with rising sequential volume. I know you talked about it at the Analyst Day, higher inflation pressure versus price.

Did you see that or any other impact...?.

No, it's not to do with that. It's nothing to do with that. It's all about – that's a currency impact from the standpoint – in the first quarter, we got a benefit.

We have long-term contracts with customers that are priced in dollars and projects and even though the business may not have a lot right now, but we still do, and the way the dollar moves and some of the pricing in these transactions, it's all function. We got a benefit and it went against us this quarter. Next quarter, it could be positive.

That's why, sequentially, they had a problem. It's nothing to do with operations, not to do with price cost. So it's nothing to do with that. It's from a currency which as this business gets too slow from time to time. So that's all it is. It all works out by end of year typically. Within 12 to 14 months, it all flushes out. That's what the issue is.

Operationally, the margins were up....

17.1%. We're at 18.6%..

Yeah. So it's a good margin for the quarter..

Dave, do you think that the margins there can still do 17% to 18%? I think that's what you talked about at the Analyst Day for 2017..

Yes.

I think, in fact, if profitability right now – so we gave right now from the standpoint – you're talking operating or EBIT margins? So you're talking EBIT margins?.

EBIT..

Yeah. So I think these businesses will beat the number. Yeah, it'll be the fourth quarter I think because there's businesses starting to tick up. They're going to have underlying growth in the third quarter. The margins come in so my fundamental belief right now is that margin will be better than we presented to you in the Analyst Meeting.

So right now in the third quarter we're looking at over a point of margin improvement in Automations and probably the fourth quarter we're looking at close to 2.5 to 3 points of margin improvement. Overall, for the year we're looking at over a point.

And so we're looking at slightly higher margin than we told you as we go forward here in the rest of this year. So they're starting to come forward. The tension will be for these guys is where they start investing and from my perspective I want to get back above a 17-plus percent EBIT margin as we finish the year in Automation Solutions.

So my impression is try to get the midpoint of 17% by the final endpoint of this year for Automation Solutions..

Got it. That's helpful..

So I would expect us to see continued improvement, sequential improvement, and year-over-year improvement in margin in the second half of the year for Automation Solutions..

Okay. That's helpful. And then, Dave, underlying sales in North America were down 2% in your second quarter but orders were up in March. I think you said mid-teens in North America led by oil and gas MRO and turnarounds. It seems like you saw a decent inflection in North American in March.

Have you seen that continue in April? And then the kind of book growth you saw in March could continue. Could you see some upside? When you look at the second half of the year I think you're guiding to modestly up organic sales in Automation Solutions. That's what's implied in your guidance anyway..

Yeah, and the answer is yes. In April, I did tell you that April was stronger orders. North America has continued on a very good pace and recovery. We're starting to see including Canada now, and so Canada has started to pick back up which is a good sign because Canada has been very negative.

I still think they'll be negative for the year but that we're actually starting to see that. The points, again, I'll repeat. The place we see the improving strength is U.S., Western Europe, China, the rest of Asia including India, and a little bit of improvement in Canada I think I've said.

But to the rest of places, Latin America, Middle East/Africa, Eastern Europe, and Russia we're not seeing improvements yet but the key core markets have all started trend line very strong and half of the data points have been continued to map along.

Hence, when I made the comment we're above that blue bar that I presented in February, we now have, I think, three months in a row that we're above that blue bar. And including April which we haven't put out, but that's where I see it right now. So the trend line is good, the mix of business is good.

But keep in mind, as I've said, in Automation Solutions, as these order pace goes into the 5%, 6%, 7%, 8%, 9%, 10% range, you're starting see more medium-term and longer-term projects get into that mix. The MRO is still going to be good, but I still have project mix such that I'm building a good foundation for 2018 at this point in time.

That's where we sit..

Thanks, Dave..

You're welcome. Have a good afternoon..

You too..

The next question will come from Scott Davis of Barclays. Please go ahead..

Hi..

You've got any opportunities for Craig Rossman at Barc, Scott?.

Hey, Craig. It's been a pleasure. I have no opportunities..

What? You don't want him to work for you, Scott?.

In fact, we're hiring. Maybe I'll come work for you..

I'll write Scott an offer now. Okay..

I'll work for Craig. I'll answer his phones.

How does that sound?.

Nice try..

His career is still on the upper trajectory. I've got a flat line here but....

Don't give me that BS..

All right. Well now that we have that going, let me bust your chops a little bit, Dave. Now that Pentair is closed, the valves business is closed, I mean, what's the playbook that's different from what the previous two owners did? I mean, neither one of them seemed to really be able to make much out of this business.

You guys have probably more customers in common than they did for sure.

But is it more of a cost issue? Is it marketing and sales? Is it all of the above? I mean, what's really, you think, the playbook that makes this work for you guys that didn't make it work for them?.

There's a couple of big differences here for us. One, we are the largest and broadest automation solutions house in the world as you all know right now from the standpoint of the systems, the flow, the measurement, and now the final control.

We are also a business that's very, very global, where we have as much presence in every region in the world be it Asia, be it in the Americas, be it in Europe, be it in the Middle East and Africa.

We are a business that actually had driven off of technology that we can pull into play into the new world somewhere on the digital work at that point in time. We're a business that actually have more mechanical and electrical leverage relative to procurement than anybody that's ever owned this business before.

We are a business that have a customer base and customer reach where they bring a different customer but we also bring a different customer and we are involved in larger projects where we can bid on big projects of $100 million and we can pull all the package along which they could not do before.

So we actually have a lot more to do both from a cost standpoint. But the most exciting part is from our customer standpoint as we now will have a broader package to offer up in the projects, both medium and large, and then also we can do all the service in the aftermarket which they really didn't have enough critical mass.

They're having a good start and I have to give credit to Randy and his team. They started this but they just didn't have the critical mass that we have.

I mean, if you look at the shift in our business and how we would able to protect our profitability in the downturn, I mean, our business went down just as hard as their business, maybe theirs is a little bit harder, but we protect our margins. Our EBIT margins in our automation business bottomed out in, what, in the 15% to 16% range.

They got down single-digit and that's because our aftermarket, what we refer to our KOB 3 business, got up to over 50% of our sales in the downturn. That's the difference. That's our game plan..

And the customers, are they generally fired up to have a more, I guess, intimate player in the space own the asset?.

Yes. They're very fired up. There's a couple of reasons. One, is the function of that we actually can support them on the total project, so they have what I refer to as one throat to choke, so they have one player to go after which is Mike Train in the automation space. And secondly, the service thing and the technology and the on-time delivery.

Those are all very important to us from the standpoint of how we manage our business, and we're much more regional. We play a regional strategy where we manufacture in the region versus more of a let's export-driven strategy. So, yeah, they're very excited about it..

Good to know. Good luck with it, Dave..

And I'm pretty excited about it, too, if you haven't figured that out..

Well good luck. If you can make it work it's going to be a home run for you because you got a good price. So good luck to you..

And if you can think of a good job for Craig, just give me a call, okay?.

I will. All right. Take care..

I'm looking hard, man. I'm trying hard. I'm out there raking the coals right now looking for him..

Our next question will come from John Inch of Deutsche Bank. Please go ahead..

Dave, Craig.

How are you?.

Hey, John..

Hey. Good afternoon..

Afternoon. So how much of the $30 million of Byrd and other things you talked about, Dave, were a compare issue for the second fiscal quarter or was that for the year? Or just a little more color there..

The third quarter was an unusual year. If you look at our historical other other income deduction at corporate costs, just look at corporate. That third quarter last year was very, very low. It was down in the $40 million range and, historically, we're more in the $60 million to $70 million range.

And now this one's going to be higher because we're bringing the valves and control in and we have some of the stock price and things like that. So it's a weird comparison. Underlying performance of the company is very, very strong, and the margins are expanding and cash are expanding as we go into it.

I have the big offset, $60 million we have to offset in the third quarter. It's a fact. I mean, I can't hold my breath and have it go away. It's there..

Okay. Maybe this is a question for Frank.

Was any of this relevant to the second quarter as we look at the numbers year-over-year?.

No. No, not really..

Just the bad debt. No, but that's pushed back at the operation level. We pushed that back in there.

That was the only – Frank?.

At corporate, there was no significant delta year-over-year in corporate in the second quarter..

This is the first time I've ever had to tell you on this. I mean, I looked at the numbers. It's the biggest one I've ever seen..

Right. Can I ask you then about the sequential margin? You gave, I thought, a pretty good answer on sequential margins in Automation Solutions. I did want to ask though, if you look at the MRO you had said last quarter MRO was picking up and that seems to be evident based on growth rates especially in the U.S. MROs got to be really rich mix.

Is there some reason that the EBIT margins, Dave, you put up in Automation Solutions weren't a little bit better in the second quarter given the follow-through of MRO and the associated rich mix or is that still more to come or what?.

Well I think that the North America sales, they hadn't really turned around yet for the whole quarter. And so we started seeing it significantly in March.

The other issue people forgot, and if you remember we had a very, very strong fourth calendar quarter or first fiscal quarter this year in Automation Solutions, and a lot of that was that pent-up demand of MRO that came through and then it did drop off a little bit. And now it's starting to come back in a more flowing basis.

So we just had a couple of months there that slowed down, and now the MRO is coming in. And the core profitability of the businesses is very good right now and I expect it to continue to be strong and sequentially get better.

So we're in a sweet spot and the orders now are being fairly consistent from the global markets with five months of pretty good North America orders and things like that. I think that it's on a run. It's a good run..

Did you say in your commentary you thought the fourth quarter of Automation Solutions was going to be up, did you say, what, 2.5 to 3 points? So that gets it close to 20%?.

Over last year, yes..

Over last year. So that's going to get it close to 20% in the fourth quarter. And that's based on all the....

It's not uncommon for us. I mean, we are a profitable company in Automation Solutions. We actually do run 20% margins..

Yeah. No, no. I just wanted to make sure I heard that right..

I mean, if you think about it the sales will be up but from the standpoint they're starting to kick in and how much additional cost we bring back in. We're going to time this. I want our profitability to get back to some good levels before we bring in too much additional cost.

A lot of pressure on us right now to put money back in in some technology and things like that. I want to get the margins going the right way for our shareholders..

Just lastly, Dave. This mid-teen order growth that you've put up in Automation Solutions, how to think about that? Because the MRO business ultimately didn't drop, say, as much as rig counts and stuff like that; it was dramatically less.

Is that sort of a normal bounce you'd see and that's kind of a growth rate that's going to peak but hold or does it get better or are you a little surprised at the mid-teens type of number you've put up recently?.

No. I think I've mentioned to people before on the road, out talking to people. I expect us to have some quarters just in 15%, 16%. I expect to have some months like that. I would expect us to see, even the rest of this fiscal year, some 10-plus, 15-plus type of orders in certain marketplaces on Automation Solutions.

I mean, if the industry's truly starting to turn back into invest both in, first, the MRO and then into the small projects, then our order pattern should build.

And, I mean, as someone asked me on the road a couple of weeks ago, I mean, I wouldn't be surprised if we don't have underlying orders from Automation Solutions north of 10% by the time we get into that three-month roll, by the time we get to September. So it's not uncommon and it's coming off a hole.

As you well know, we had a couple of quarters there, a couple of years during the up cycle last time where we were growing sales 12%, 15%. So I think it's possible..

Yes. No, thanks, Dave. Appreciate it..

Just as possible to have a negative in a month. I mean, this is a volatile space right now relative to this market turnaround. So I think the trend line is good but don't be surprised with some volatility in a month-to-month type of stuff..

Because of projects? Is that why it would go all of the sudden negative?.

Yes, yes. Projects. Yes..

Okay. Got it. Thank you..

You win a project you book a price. I mean, yes, projects..

Got it. Thank you..

You're welcome..

And the next question will come from Julian Mitchell of Credit Suisse. Please go ahead..

Hi. Good afternoon..

Good afternoon, Julian..

Maybe just a question on capital deployment. Now that V&C has closed, you did a bit more of a buyback in the March quarter than you'd done in the second half of last year. And, obviously, looking around there was a discrete automation acquisition of some size elsewhere during the last few months as well.

So I just wanted to see what your latest thoughts were on the scope for doing M&A over the balance of this year or if buybacks are more preferable near-term?.

No. We continue to aggressively bid and go after the Automation Solutions acquisitions and also Commercial & Residential. Obviously, we're not successful in one of them. The intention would be is we still would like to see if we can get $500 million, $0.5 billion of acquisitions. I'm not sure we can at this point in time.

We've talked to the board about share repurchase being in the $300 million to $500 million level, and that's where we sit right now and there's nothing changed in that. We're out working acquisitions.

The opportunities are there and the question will be around is there something that we can land in the next five to six months? If not, then we're going to probably be driving our share repurchase back into that $300 million to $500 million level.

We've only got, I think, about $100 million this year, correct? $120 million this year so we have some upside there..

Understood. Thank you. And then just my second question would be around that notion of what sort of price leverage you think you can get now that volumes have started to come back. It sounds like you think volume growth will accelerate.

How are you thinking about pricing and capacity in your industries? What your competitors are doing on price over the next sort of six months?.

I still think we're in a price cost window right now that's not good as I've said in the last couple of quarters. I think underlying material inflation, a component to inflation, is the point that's increasing. Our pricing power will solidify as we go through this the next couple of quarters.

But as I look at the first quarter we've done, I think we're probably pretty neutral, maybe slightly red. I don't know, Frank, what the final numbers were. I would expect as we've just closed this quarter out, we'll be slightly red. I would expect us to be slightly red again. This is between price cost in the third quarter.

And we're pushing pretty hard and hopefully we can close that to neutral to slightly green by the fourth quarter and clear it by the first quarter. So we're in that phase right now that we're pushing hard. Material costs are working against us, and so that price cost volume is working.

But we've gone through this phase before and I expect by the time we get out of this calendar year our price cost range will be slightly green or neutral. So we're back into the sink. We've had to offset that pressure with other cost reductions across the company..

Understood. Thank you..

You're welcome..

The next question will come from Gautam Khanna of Cowen & Company. Please go ahead..

Yes. Good afternoon..

Good afternoon..

So just a follow-up on Julian's question.

In the recent project bookings, have you seen much price erosion if you compare them to what you might've priced these at a year or two years ago? Or are these, in fact, accretive to kind of that view of price cost coming back two and three quarters from now or eventually?.

There's not a whole lot of big projects going on out there at this point. I mean, there's small and medium-sized projects and the pricing of those are in line with what we'd expected from a price cost standpoint or margin standpoint. There's nothing unusual here at this point in time.

The bigger projects will be more late 2017, most likely into 2018, and that would be a more relative time period to really discuss what we see the pricing. Right now, people are looking for speed, they're looking for trying to execute. A lot of times, their projects have already been approved. It's already been specced out and awarded.

Now they're going to dust it off. So it's a little bit early stages to see what the pricing is on the big projects..

And just switching to C&RS. Very strong growth for a couple of quarters now in China.

What's the duration of this kind of upturn we're seeing there and if you could just expand on what actually explains it?.

Relative to China, historically I never look beyond 12 months on a surge of growth because then it has a tendency then it sort of swings back. What explains it is the new technologies we have around our cooling, our air conditioning, and around our refrigeration, and some of the new products and new technologies.

And so they're trying to focus relative to the environment and trying to clean air and trying to get rid of some the coal-fired boilers and things like that. We have technology that we had worked with the Chinese government, and those projects are unfolding and we're one of the major suppliers.

There's other suppliers but we're one of the major suppliers. And the China government has a big focus on this in particularly in the Northern China spot with trying to clean up the pollution and this is going to take a couple of years. My gut tells me that we'll have a big year for 12 months this year, over a 12-month time period.

It'll die back a little bit. First of all, the comparison will be tougher but the programs are not going to die when we get into 2018. There will be just less of an impact coming off obviously a higher base. But right now, it looks like the projects will continue but the growth rates will slow but it'll still be at high levels..

Thanks a lot, guys. Good luck..

You're welcome..

The next question will come from Deane Dray of RBC. Please go ahead..

Thank you. Good afternoon, everyone..

Good afternoon, Deane..

Hey. Just for clarification on the Venezuela write-off. Dave, you made it sound like it was discretionary or maybe the timing was.

But could you just provide some color there?.

We had cleaned up some of the receivable base and asset base last year with the continued deterioration of what we saw in Venezuela, and this is before even things happened with the GM situation here. We got to assume we're not going to get anything back from these assets and we decided just to take care of it.

Receivables?.

You see, this is just reserving the receivables, the remaining receivables we had on the books down there. In Venezuela..

Yeah, that's all there is..

Got it. And then back on Automation Solutions. You don't often talk or call out especially in the same sentence power and life science markets continue to be positive.

So what are the key drivers there?.

Well the power industry is investing in upgrading from around, if you think about some of the gas industry, you think about using less coal, they're looking at some of the new technologies to allow the plants to run more efficiently with some of the changes coming out of the EPA.

I think this will continue to work nicely for us in the North American marketplace. And we're seeing continued power investments throughout Asia Pacific, and even parts of Eastern Europe are seeing some power investments.

Now, life sciences have gone through a period here where, if you follow the life science marketplace, we're seeing and have been now for over 12 months an investment period where they're bringing new drugs in, they're bringing new facilities in and there we get, obviously, the control systems.

We get some instrumentation and that's been one of the bigger project areas for us and we're doing quite well there.

Now there's smaller type of projects but they're still good projects and so we're seeing that investment both in Europe, in North America, and we're seeing a lot of investments going on in Asia, both in India, Southeast Asia, and also China as they're all trying to create their own life science pharmaceutical industry..

Got it. And then just last question from me would be we haven't heard any updates on this so I figured I would ask.

Anything from the 15% stake in Network Power that you still own?.

They've only had it for a little while. I mean, I don't think anything is going to happen there for a while. Historically, I would say it'd be a couple of years before anything happens there. I think something will happen relative to our Artisan investment before Network Power because that's been getting close to four or five years now.

So nothing there. I mean, I wouldn't expect anything out of those guys yet..

No, I was asking in terms of its contribution..

Well we don't get any contribution. We don't get any earnings or sales off of that. Earnings, no..

It's not an ownership stake..

No, it's just an upside stake..

Upside on the back end..

If they do something well with it. Yeah..

If they do well with the investment ultimately. Yeah..

Yeah..

Okay. That's helpful. Thank you..

You're welcome..

The next question will come from Jeff Sprague of Vertical Research. Please go ahead..

Thank you. Good afternoon, Dave and everyone..

Good afternoon, Jeff..

Hey. Nice to see the MRO turning..

Yes..

Dave, can you give us a little bit of color on actually how V&C performed in the quarter? I know it wasn't yours but any color on revenue...?.

No. I don't have any idea. I have no freaking idea..

Really? Okay..

No. I mean, no..

Okay..

I mean, maybe you (43:03) but no. How they performed? Look, I mean, I know where they are relative to sales. I know a little bit of the orders. I know that profitability is down but they've been in disc ops now for, what, eight months. So from my perspective, I'm looking at from May 1 on, that's where I'm caring about and we're working it hard.

So we'll talk about that. I think that the timing is going to be pretty good because I think within a couple of quarters we'll start seeing some improvement in orders and stuff like that because the marketplace is starting to turn..

And just thinking about how this rolls through your P&L here. Your guide excludes it but, obviously, we're all going to have to kind of model trying to getting this in. The dilution that you're thinking about for fiscal 2017, I would assume we see a sizable hit here into Q3.

And then, I don't know, does it end up being a little bit of accretion in Q4, getting you to the slight dilution? Or how do we just think about the staging of that?.

I think it's going to be slightly dilutive for both quarters on just pure earnings basis, excluding the one-time accounting changes which we'll have to start booking in the third quarter. So most likely, we'll have a one-time booking in the third quarter. We might have to true it up a little bit in the fourth quarter as we get more knowledge on it.

But the underlying earnings, I mean, it's going to be a little bit in the third and a little bit in the fourth..

I mean, we'll do our best to estimate the one-time purchase accounting but it'll roll through the P&L over the balance of the year and potentially a little bit into next year as well and we'll call it out. But, I mean, it's basically the backlog and the inventory that has to move through..

I mean, this is something that takes a little time and this is something we could not actually do that we had to stay away from it. And so it's really easy for us to look at earnings and look at what we have to charge from an interest cost or a charge from amortization and things like that or intangible. We can figure those things out pretty quickly.

The inventory and the backlog will take us several months. I mean, we'll take an estimate in the third quarter and we'll take another estimate in the fourth. And hopefully by the time we get at the end of the calendar year, we'll get everything trued up..

So just to be clear then, this $100 million Q3 OIOD does not include Pentair one-offs?.

No..

Correct..

Okay..

The OIOD we have in there for that piece, and we'll have some more, is basically deal costs. It's paying costs of doing this deal, legal fees, and banker fees, other things like that we've had tied to that. Now that we've closed the deal, we can run through the P&L and we'll have some more running in the fourth quarter, too.

There is nothing in there other than what we have that we, Emerson, expended in getting this deal closed. We'll bring in....

That's what I'm trying to get at..

Yeah. That's true. So that's true..

Yeah. Those bankers' fees and stuff don't repeat into next year so, I mean, just trying to think about what the real run rate is for OIOD ex the amortization step-up.

Do you have an idea?.

Yeah. I mean, we're working on it our self and we'll work on it for you, too. But the banking fees, we'll call out. I mean, we'll have some more in the fourth quarter. We'll do the same thing. But, I mean, I'm in the third quarter..

Third quarter..

Third quarter. So we'll keep you informed and they will be delta'd out obviously unless we have some other transaction going on. You won't have that impact next year..

And then just one final unrelated one for me. I don't think you're suggesting this, but we've heard from some other companies that maybe there's been some over-restructuring in some places and now there's a bit of a scramble to kind of catch a demand inflection.

Do you see anything like that in your business or any down a supplier or two, down a tier or two? Any issues?.

Nope..

No? Okay. Great..

I'm not trying to wrap around anything. Nope..

All right. We'll see you in SLA in a couple of weeks..

Yeah. Take care..

Yeah..

The next question will come from Robert McCarthy of Stifel. Please go ahead..

Hi. Good afternoon, everyone..

Good afternoon, Rob..

I guess the first question would be in terms of the information on Pentair.

Should we expect, kind of following up on Jeff's point, should we expect something pretty definitive, an EPG kind of walking through some refinements of what you've seen and how you think it's going to stage out over the next 18 months?.

I mean, by telling you the EPG I'll have weeks. So I'll give a sense for a little bit of the business, okay? And so what's going on inside the business? And right now we have a lot of work going on trying to bring the two businesses together and that's far more important than pulling together stuff to put on a chart.

Relative to the inventory, relative to the backlog, that information will take us several months, several quarters to finalize. Relative to what we see from the P&L, the sales, and the earnings, then I think we'll have a better feel. I can give you a little bit better range after three weeks. So that one we could do.

The big number which is the one-time accounting impact, we're going to take our first stab at that relative to the third fiscal quarter when we closed it, and I told you it's going to be a little bit less than I told you in the chart we gave you in February and, hopefully, we can get that down even further as we get through it.

But it's a function of what the inventory looks like, a function of backlog, and those are things that we have to get in and do all evaluations on..

Following up on Scott's earlier question about kind of big customers or channel access. I mean, the obvious point here is, perhaps, in the past the valves and controls, the final controls business has been effectively blacklisted in some countries and, obviously, you're not.

So can you talk about the opportunities on the revenue side, perhaps, in Saudi or the Middle East or Russia that are just probably more self-evident for you than Pentair?.

On the big projects we can work with, from the countries that struggled with and concerns with, you call it blacklist and I call it sometimes the customer is not quite accepting some of them, we can work that issue.

We, obviously, have great relationships and we have a very strong Middle East business, we have a very strong Eastern European and Russian business. We have manufacturing on all of those sites. From our perspective right now, we're starting to bid.

In fact, the Pentair team allowed us to bid on several large projects even before we owned them, and when we bid and won on the total package. So we're going to continue to bring them into market. They were not maybe very welcomed in or strong and our organization is very strong globally.

We have better customer relationships and we have access to the big projects because of it being driven by systems or control or whatever it is, we can go in and talk to customers. So I think that's going to be something that we can work pretty quickly over a two-year time period and get them back and engage.

But we need to work on the regionalization of manufacturing that supply base so they can make sure they can deliver quickly in support of the projects we're winning..

Following up on Julian's question around M&A, clearly and maybe expanding it beyond the initial kind of fiscal 2017, but suffice it to say some of the large properties in automation, it looks like the ship has probably sailed there at least in the near-term.

But could you talk about maybe on the Commercial & Residential Solutions side? I think I was tantalized by some comments you made about maybe getting more into industrial compression and obviously there's some assets out there.

But could you talk about what could be the M&A strategy on the Commercial & Residential Solutions side in terms of what kind of properties?.

I mean, I don't think the ship's completely sailed on the Automations Solutions. I think there are opportunities out there. We're always working on projects and maybe some of the big ones that won't happen. But there are projects out there all of the time that you can work on and we're working on several right now.

The Commercial & Residential, I think that we'll continue to focus on the application, the software, and the measurement sensoring side of the business which really is core to us to deliver what we're calling the sort of the Plantweb of the Commercial & Residential area which is the industrial internet space. So there's some unique assets out there.

Nothing of what I would say are large. A large deal there could be $600 million, $700 million. But I think that we're going to continue to buy some software and sensor-based acquisitions there and continue to integrate. The business, as you well know, is doing well right now.

We're in the mix of a major global upgrade, an upgrade in investment, in the capital and delivery capabilities of that business.

We're starting to see some, as you could see from the profitability standpoint, Bob and his team are doing a good job of leveraging that new cost structure and I think we still have opportunities here for the rest of this year going into next year.

I think the opportunities are out there for us; it's just a matter of finding the right ones and then getting them on board. There'll be typically less competition in that space..

Dave, I would pack a fleece for next week. It's still cold up here. See you soon..

I'm glad to hear that.

Where's Tusa? Who's got the fleece? Is it Tusa?.

All right. The next question will come from Rich Kwas of Wells Fargo Securities. Please go ahead..

Hey. Good afternoon, Dave..

Happy afternoon, Rich..

So on....

Since you've got Wells Fargo, it's got a big position here in St.

Louis, got any opportunity for Craig?.

I'll look. I'll scout our internet page..

I'd tell you what, I'm not getting a whole lot of warmth here for Craig. I mean, there's not a lot of love here for you. I mean, I might have to (53:11). I mean, I thought Rich liked you..

I thought he did, too..

Okay. Lebron's looking for a backup shooting guard. So, I mean, or maybe not..

I thought he was looking for a beer man to hold the beer for him. I mean, I don't think I've ever seen that before in a game. I didn't believe I heard it at first. Go ahead, Rich. Fire away..

So on orders for Automation Solutions, you talked about a transition to mid-sized projects and eventually to larger projects. I know it's early, but as we think about the mix of the sales coming through, it should be pretty healthy I would imagine the rest of the fiscal year.

As we can think about 2018 from an incremental margin standpoint, would you call out anything right now that we should consider from a mix of the projects within Automation Solutions?.

Still a bit early there, Rich. I mean, as you know I watch this pretty closely and that's why I can give you sort of the background, the color into it. I'm already starting to see some of the projects that had been shelved and iced two or three years ago come back out, those medium, small projects.

So in the early stages, as you saw the orders pick back up, we're starting to see the book-to-ship in that base business pretty quick. And so my feeling right now as I see that order mix, and that change is as we've shift into order, positive growth's going to be there.

But let's say their order pattern is going to be around the 6%, 7% underlying growth rate. I think they're going to be more in the 3% to 4% real sales growth I think as they start building that backlog. But give me another couple of months to watch this.

So that's what I see right now and that tells me that then we'll go into some good medium-sized projects. The MRO is still going to be there but it's going to make up the core growth rate of, say, 2%, 3%, 4%, 5%, and then as we start getting stronger growth in Automation, that will be those medium projects.

And the bigger projects will start booking in 2018, late 2017, and we'll start getting those sales late 2018, early 2019. So it's a little early to say the mix. I expect those guys to have a pretty good margin assuming the MRO and the order book leads the year like I think it could lead the year.

We should have a pretty good margin in the first half of 2018 as we go into 2018..

Okay. That's helpful.

And then just on just a shorter-term question...?.

Keep asking the question because I'll get more visibility as I get into it. I mean, I won't get it in the next two or three weeks. But I'll tell you what, by the time I get into June I'll have a better visibility on this..

Okay. Will do..

I know you will..

And then on Commercial & Residential Solutions, just shorter-term.

Do you have a pretty easy comp this quarter? Then it gets much tougher in the September quarter? Should we kind of think of mid to high-single-digit organic growth? And then tailing off in the fourth quarter, low singles? Something like that?.

Yes. Last year's third quarter was not good. So we're going to have a very solid mid-single-digit, a higher than 5 mid-single-digit growth based on what I think is going to happen in the third quarter for the Commercial & Residential. It will then be lower for a couple of reasons in the fourth quarter.

It'll still be good, in my opinion, in the fourth quarter. One, if you look at the fourth quarter last year, they grew a little bit over 4.5%, about 4.5% underlying sales. China started picking up at that point in time and we saw some pretty good U.S.-based business.

So I would say we're going to have a very solid upper mid-single-digit growth in the third quarter and then we're going to have a solid lower than 5% growth in the fourth quarter. That's what I see right now. You're exactly right..

Okay. And then last one.

On restructuring, any change to the $25 million for this year core?.

What are we seeing, $50 million?.

$50 million..

$50 million..

That's $50 million. Okay. All right..

$25 million Pentair, Rich..

$25 million Pentair. $54 million. Okay.

You got it..

All right. Great. Thanks. See you in a few..

Yeah. See you..

The next question will be from Steve Tusa of JPMorgan. Please go ahead..

There's my sweater vest guy.

Where's my sweater vest guy here?.

Sweater vest? It's a Patagonia fleece..

See here, somebody said I had to bring a sweater vest to go someplace. I don't know where I'm going. I'm going to Boston. I mean, you're telling me is going to be cold up there. I need a sweater vest. And the only guy I know that has a sweater vest is Steve Tusa. Fleeces..

Speaking of Boston, I'm reading about some high profile, perhaps, executive opportunities up there if Craig is interested. Just reading that in The Journal, so that might be an idea..

Are they building a new headquarters up there?.

I'm not sure what you're talking about. I think it might be a good idea for Craig. Anyway....

I kid you. I mean, I've heard there's a lot of headquarters being built up in that region up there. Tusa, that's a great idea. Note to self..

Yeah, me too. I'll keep that in mind. So on the climate side for next year, you made a kind of an ominous comment in the press release about investing now against those high margins.

I mean, can you grow margins next year at climate? And then when we think about the revenue comps on the back of China, can growth there be more than low single digits on the top line? I'm just trying to kind of understand the profile because it is been a bit of an unusual year with very strong China and high margins and you made a comment about kind of investing those away.

So maybe just a little bit of color on how that kind of progresses in the next year..

I did not make the comment that we're investing those away. As you know, I still think we have margin ability to get this to 25% as we work the press (58:48) issues.

I mean, the comment I want to throw in there is that as you know this industry, and you know this industry pretty well, Steve, there are some major changes coming in here, refrigerants and some efficiency standards relative to both in North America and in Europe that we need to make sure that we stay ahead of our customer base.

And so we're making sure those investments are happening. You can't miss a quarter or two in that. I'm not talking about lowering our profitability margins. I just want to make sure that people, as they see the last couple of quarters or the last couple of years, they've seen pretty good margin improvement there.

I just want to make sure that they realize that we're going to still have margin improvements in this business in the next couple of years but I've got to make sure we're also investing on this transition that's going to unfold in 2018, 2019, and 2020.

We need to make sure that we take advantage of that and pick up some incremental business, incremental share, in that marketplace. That's our game plan..

Okay. That makes sense. And then just from an overall company perspective, it's good to see the Zorro jumping over the blue line there.

Going forward is this kind of...?.

He definitely barely made it over the blue line and he doesn't have a whole lot of hop-back. He's now the oldest King Charles Spaniel at 15 years in St. Louis. So he's doing well but, boy, I tell you what don't ask him to go up the steps anymore..

That's almost as long as you've been CEO, Dave.

Fifteen years, right? Sixteen years?.

Yes..

So just on the order of trajectory here, anything moving around in the next couple of months? Can this mid-single digit you talked about in April continue to kind of migrate up into the high single digits over the next couple of months? Or is there some comps? You know just the comps and stuff like that?.

Steve, it's going to be Automation Solutions. As you well know, in the Commercial & Residential, the one wildcard we have here is heat in north in the U.S. It was a bad year last year, so comparisons will be pretty easy but there's an element of risk in that area.

I think the underlying housing, the underlying basic core spending, Commercial & Residential is good around the world. So that's the one wildcard. I still think that they're going to have pretty good orders in the mid-single digits. The Automation Solutions will be the driver.

I mean, as I've said, we put the blue band out and, obviously, we've now had three months above that blue band. I think we'll continue to move on, go through the mid-single digits, probably get into 6%, 7%, 8%, but it's going to be driven by Automation Solutions.

And so right now, as I look at North America, I look at Asia which is starting to recover, as I look at some of these marketplaces, I would not be surprised, as I've said earlier, that Automation Solutions orders are not 10-plus percent in the fourth quarter on a cumulative basis.

That will pull all of these up unless there's a huge drop off of Commercial & Residential. We also start, as you well know, comparison in more challenging numbers in Commercial & Residential in that fourth quarter. But the trend line's pretty strong right now and if I look at the global GFI numbers, they're improving and have been improving.

So the cycle's going right for us right now..

Yeah. Seems that way. Thanks a lot..

And, Steve, thank you very much. And I hope you know I'm just kidding you on the sweater vest. I just like to pick on somebody and since you happen to be on the phone I had to pick on you..

That's fine. Better me than Scott. He's a little more sensitive to than I am so that's okay..

I know. You have hair, he doesn't..

I have grayed hair..

I didn't say that. See you later..

To correct you. Thanks..

The next question will be from Andrew Obin of Bank of America Merrill Lynch. Please go ahead..

Hi. Yes. Good afternoon..

Good afternoon. Good afternoon..

So a question just going back to Automation. On the Middle East, we are getting quite a mixed message from a lot of your competitors and people in the value chain about what's happening there.

So because your numbers were down but can you just talk about your geographical mix within Middle East and what areas in the Middle East are dragging the numbers down and which are actually strong?.

I mean, right now Saudi, from an order standpoint, is the best of the best. I think the rest of the marketplace is pretty weak..

Wow..

From Africa. So, I mean, we're very much project business-driven there. So I would say right now Saudi has the best light for us. Kuwait is doing well. That's another one that's doing well. But those are the two that we see right now. So from our business standpoint, there's not a lot of big activity going on.

It's primarily MRO, small stuff, and the business is basically – They think they're going to go with flat; I think they're going to be down for the year. So that's what I see at this point in time..

Got you.

And as the Middle East comes back, do you anticipate any problems with collections in terms of hit to working capital as you grow that business or is it just...?.

No. Our Middle Eastern customers have always paid us. They pay us on time. Our business, our products are kind of instrumental to running the plants. And so if they can't turn the plant on because they didn't pay me, sometimes it's a problem for them..

And just a different question. ABB bought B&R and we just got back from Hanover. And a lot of focus all of the sudden, industrial controls capability is very important to being this gateway to getting the data on the cloud.

And I know I've asked this question before, but given how the cloud is evolving has it changed your view on the need to have more presence on the industrial side? And I know this question has been asked before, but it does seem that IoT is evolving in this direction..

The Europeans are driving it. It's being driven very hard by the Siemens (1:04:56) ABB in a big way. We have continued to expand on the hybrid and on the discrete side. So we'll continue to do that. I mean, that's why I show the charts. We show the charts that we move across that way. And we'll continue to buy.

That was a very nice acquisition from New York. And so from that perspective, I understand where they're going from it and it's the same strategy we have ourselves..

Terrific. Thanks a lot..

You're welcome..

So I'd like to wrap it up. I want to thank everybody for your time today. Appreciate the questions and, hopefully, I didn't upset too many people with having fun with them a little bit. But I am serious. Craig, as we're looking at Craig moving on to his next assignment and it will be inside Emerson, it will be something important.

And then Frank and I will probably be covering for him because he did not do a good job at developing a successor which is something I'm really upset about but we'll take care of that in his bonus. But with that, I thank everybody and look forward to seeing everybody down at EPG.

And I'll make sure I take a sweater when I go to Boston later this month. Thank you very much. Bye..

Thank you, sir. Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines..