Good day, ladies and gentlemen, thank you for standing by. Welcome to the Emerson's Fourth Quarter Fiscal 2010 Results Conference Call. [Operator Instructions] 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 turn to your host, Lynne Maxeiner Director of investor relations. Please go ahead.

Thank you. I am joined today by David Farr, Chairman and Chief Executive Officer of Emerson; and Frank Dellaquila, Senior Vice President and Chief Financial Officer. Today's call, we'll summarize Emerson's fourth quarter 2010 results. A conference call slide presentation will accompany my comments, and is available in the Investor Relations section of Emerson's corporate 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 will start with the highlights of the quarter as shown on Page 2 of the conference call slide presentation. Fourth quarter sales were up 14% to $5.8 billion with increases in all five segments. Underlying sales growth of 12% in the quarter with all geographic regions resuming growth. Gross profit margin of 39.9%, which was up 100 basis points from the prior year quarter. Strong operating profit margin of 17.4%. Earnings per share of $0.98, up 46% compared to $0.67 in the prior year quarter. This includes the positive impact of $0.23 from divested businesses. Operating cash flow was $1.27 billion and free cash flow was $1.046 billion. Our balance sheet remains strong and operational efficiency initiatives continue. Our trade working capital as a percent of sales improved to 15.5% from 16.6% in the prior year quarter. Actions taken over the past two years are paying off and we are well-positioned for accelerated growth globally. Slide 3 of the P&L. Again, sales up 14% to $5.841 billion. Underlying sales were up 12%, acquisition's added three points and currency subtracted a point. Operating profit of $1.019 billion, up 14%. The increase driven by cost reduction benefits and volume leverage. Earnings from continuing operations up 14% to $572 million. Diluted average shares of $757.4 million with 0.6 million shares repurchased…

Thank you very much, Lynne. I welcome everybody on the phone call today. I appreciate everyone joining us. I also want to thank all the people across Emerson board, especially the OCE, the business leaders and the operation presence for what I call a great job in 2010, a tremendous performance relative to operations, relative to the restructuring that's been undertaken in the last couple of years. We have continued to invest. At the same time, we restructured both internally in our growth programs. We've done acquisitions and now, we're executing along all the things that we've been working on for the last couple of years. As you know, our underlying quarter pace has been strong as we continue to expand in key emerging markets and key technologies, and our underlying sales have improved the last couple of quarters from 7% in the third quarter to 12% in this fourth quarter, and our total year was basically flat. So from my perspective, we have momentum, a pretty good momentum as we lead this year going into 2011. Our operating profit margins, our GP margins, are all set at record levels right now, and we are set to go to 40% plus GP and we are set to go to 17-plus percent operating margin. Through all the tremendous work as we restructure the company, as we made investments and as we've discontinued businesses and divested businesses. As I look at our free cash flow, we set a record level this year of $2.8 billion. And over the last two years, we have set a target to exceed over $5 billion, which we did peak at $5.4 billion over the last two years, which allowed us to do close to $4 billion of acquisitions. We paid back close to $2 billion of…

[Operator Instructions] And our first question comes from Jeff Sprague with Vertical Research Partners.

So my question is really on the balance now between profitability and growth. Clearly, you have done a lot to get the portfolio into great shape. Profitability and cash flow is obviously all essential to what Emerson's about, but do we think about trading a little bit of profitability for growth as we move forward in the slower growth environment? And I'm thinking about it kind of implicitly looking at the guidance construct that maybe suggest the incremental margins are in the 20s next year. Some of that's kind of the noise from Chloride and the like on the top line. But just give us some color on how to kind of put that in perspective.

Yes, I think that's a very good question, Jeff. What's going through our mind right now at the OCE level and the board level is that, we clearly are looking at our lower growth environment, particularly 2011 as there's a global stimulus that's pulled back, and people will have to seek the underlying growth. We have made the decision to increase our -- what I would call our incremental investment, both for people and technology. As I look at the company today and we drove the company, we could drive -- we probably could get to an 18% operating margin pretty quickly. I feel that would be a mistake. I fundamentally believe that I would like to see us make investments right now, in particular, in some of the emerging markets where the growth opportunities are there for us. And if we get ahead of this game plan, given the strength of our financials, I would look expect our flow-through profitability this year to be more in the 25% to 30% range. We've been running ahead of that, but I think it's important right now that we invest at this point in time to try to figure out how to not have a 5%, 5.5% underlying growth rate going forward for the next five years to make it more like 7% or 7.5%. And I believe we have identified through our programs this year with our strategy sets us unique opportunities. And that's why the OCEs decide to put the $40 million on the table and get on with it. We've already started investing the money. So I think we are well-positioned to do that, and if we get the growth, our profitability obviously will continue to grow with it and I think we'll do pretty well. So that is exactly what's going on. You're right on the mark there.

And how do you feel about price costs in 2011? Did you finish up here in the green? Are you getting some price?

Yes, we finished up green, slightly green this year. We see material inflation as a negative right now, it's pulling back. I think right now, what we see the year, it's going to be plus or minus 0.25%. We've had a couple of very good years relative to price costs relationship. There's a lot of commodities moving around sort of extraneous right now. We have component shortages still. I feel that we'll be very close to being zero, but if I was going to put a markdown right now, I'd say it could be plus 0.25% to minus 0.25%. sort of in that range right there, but pretty close to that zero level. But clearly, something that we're working on very carefully right now. Because there is definitely inflation coming at us. And as the U.S. government continues to do its quantitative easing, that will create even more inflation and in particular, on the emerging markets which is really our key growth area.

If I could just sneak one more in, IA looks great obviously on a year-over-year basis, but sequentially, it was off the charts, too. And I was just wondering if something in particular really kicked in the gear there in the quarter.

A couple of things happened there. Jean Paul and his operation guys really got hit hard as you well know, and they took a lot of restructuring head on early on in 2008 and 2009. The volume has started coming back for them, Jeff, and they are really leveraging. And I give a lot of credit to Jean Paul and his team because this is a very European-based company. And they took these cost structures right on and that's what you're seeing. So I mean, there's nothing funner games going on, there's nothing unique, it's just pure solid execution and Jean Paul came to me for some growth investments and we are giving him the people he wants to invest in for his emerging markets because of pure execution. They've done a great job.

[Operator Instructions] And our next question comes from the line of Steven Winoker with Sanford Bernstein.

Just trying to get a little bit better handle on the whole price costing and you've talked about with Jeff just now. Particularly in Industrial Automation, where you actually saw it go the other way. And given where margins already are, where do you see the biggest risk across the business units there, and what are you doing on price specifically? I know Charlie & Co. have done a lot of effort into that. Are you seeing continued traction in your ability to get price regardless of the material side?

The answer is yes. We are continuing to have positive traction relative to price. And the biggest issue we see right now, we have some underlying commodities that are taken off. Steel is back down which is good news, but copper is now running close to $4. We have electronic component issue going on from our perspective. So I think there's a lot of moving parts going on. I mean as I look at it right now, I think we're going to end up with slightly positive price this year, and a slightly negative net material inflation, and we're going to end up probably pretty close to zero. But the commodities are the biggest issue right now for us. From our standpoint, the labor and those cost structures, we are in very good shape and the productivity programs are there, hence, we're investing in capital right now to offset that type of cost. But my issue right now, is we're starting to see some price cost issues or cost issues on commodities and certain electronic components, and certain other components which are a little bit short of supply. So we are all able to get price, Charlie's programs have really helped us, but in this tactical mode right now, we're going to have to get a little bit of positive price, but we have not seen an accelerator get out of control. But I'm very nervous about that issue because of all the quantitative easing that's going on in the United States and other parts of the world. But I think it's under control right now. I feel pretty good about it.

And what are your comments around investments for next year, which are mostly, it sounds like expense, R&D base, labor base, how about on the capital side, how are you thinking about that? I know those have already been in place for a while.

Our capital spending is going to be close to $600 million. You notice that our capital spending did accelerate in the fourth quarter and the reason for that is, we were able to accelerate some of the new product initiatives and we clearly wanted to start getting ahead of some of our emerging market investments, so we had to make some investments there. I would expect us to spend $600 million, plus or minus $20 million next year again. And it's already underway and it's going to be primarily in, what I would say, capital investments for productivity. So be it equipment, drive-up productivity, and also, we are making some capacity investments in emerging markets. And we'll be making those investments and anticipating around our new product areas and particularly around our emerging markets at this point in time, and that's where the investments are going.

Any particular business units there that you'd highlight?

No, I don't think -- nothing in particular. There's nothing out of whack from that standpoint. I don't have any -- there's not a big compressor on that expanse. There's not a big process expansion. Steve, you're going to see pretty normal capital by each of the businesses and just like the restructuring, restructuring has gone through its way, there's nothing extraordinary going on in there either. So it's going to be pretty normal.

Just Q1 color, any thoughts around Q1?

Not really. I mean at this point in time, it will be the easiest comparisons relative to our growth. What we do have, as Lynne mentioned Chloride, we still have some underlying costs we have to amortize. You said around $30 million in the first quarter. And from that perspective, that's going to come through. We have the close out of our performance share based this quarter. We're paying that off. And so I think it's going to be a good quarter, but it will be a toughest quarter for us, I think to deliver from the standpoint of a lot of moving parts still going on, but still good momentum as I go in the quarter, but nothing really other than that. I don't manage quarter-to-quarter. We sort of manage as a year now as you know that, Steve.

Our next question comes from Terry Darling with Goldman Sachs.

I'm wondering, first, on a bigger picture item, if you might comment on what you're seeing in the U.S., shorter cycle businesses. I think a lot of folks were surprised by the strength in the ISM and I guess I'm wondering your views on the U.S. in general, but specifically, under your shorter cycle businesses, do you think that some folks are trying to get ahead of price increases that might be coming because of this raw material dynamic? And did you see the kind of acceleration through October that the ISM suggest that others saw?

No, we did not. From my perspective, the short cycle business in the U.S. is going to be very challenging, where we're seeing the investments going on are the capital related. Where people like us had really backed up capital spending. So we're seeing that type of investment coming in from a standpoint of productivity or capacity, issues where people had scaled aback. They don't want to bring -- hire people at this point in time because they're a little bit uncertain what type of growth they're going to be looking at in 2011. Well I am very cautious and nervous about the short-cycle businesses in the U.S. from my perspective, our divestiture that applies more and controls is pretty has good timing wise, because I think that business had a nice little pickup and I think it's going to struggle next year. But from my perspective right now, I don't see much growth in the U.S. in the short cycle stuff. I see a pretty good growth next year in our industrial capital related businesses, and I believe we'll have a good year both in the U.S. and in Europe as those companies invest, again, coming out of this recoveries, coming out of the recovery it takes hold.

I'm wondering kind of a guidance question, the interest expense and other deduction item of $670 million to $700 million, can you take us through kind of the changes in the pieces within that number that you're thinking about for '11 versus 10?

Can we come back to you and we'll talk to you in the phone? Let Frank look at that for a second and talk about it, and then we'll come back on you. Stay on the phone, we'll answer that question. Let's give Frank a second to dig through that.

May be then just quickly, the $40 million of incremental emerging market investment real quick, should we think of that as a one timer in 2011 or should we think of that as ongoing? And any color in terms of where you maybe overweighting that investment by division?

For instance, I think the $40 million will hit us this year, I think we'll probably continue part of that next year. My fundamental belief is, we'll see the growth and will cover this as we move into 2012. I believe the OCE will say let's keep part of the goal and help them as they get into 2012, but I expect that the divisions will get the growth in the business and we'll get the growth, we'll be able to cover this incrementally as we go into 2012. but I most likely wouldn't be surprised if I invest $40 million this year, by going investment of $15 million or $20 million next year on top of that. We'll have room to do that. Primarily the big dollars and the biggest areas you could imagine where they're going to be, they're obviously in process, industrial automation and network caller are the three big areas. Every business is getting it, but this will run through the corporate P&L, the corporate line, but it's primarily where I see in the strategic areas where we have unique technologies and we want to get ahead of the power curve and we want to really push forward right now as the market, I think the window is open and the people that take aggressive actions right now, will succeed in the next 12 to 18 months and I want to be one of them. We'll answer the question. Frank, we'll work that up and will look at it, I'll come back to you before we go off the call.

Our next question comes from Scott Davis with Morgan Stanley.

So couple of things, first on process, a couple of great quarters in a row, and in many ways, the business has come back a lot faster than probably most of us thought it would. while it's certainly different than past cycles for sure. When you look at to 2011 a little bit, I would assume that there is some mixed shift to more project-related business or do you still think it's going to be more the day by day kind of higher-margin business that you've had the last couple of quarters?

What we're seeing right now is the orders have expanded. We are starting to see medium, large and larger projects booking, Scott. And so it's actually starting to shift. What we're going to see early on in the first half of this year I think will be more of the productivity, the MRO as people are investing and improving the plants at this point in time. The smaller projects the incremental capacity which are smaller projects, they're starting to hit right now. As we leave and move to the second half of 2011 and move out towards 2012, you're going to start seeing the larger projects start hitting us at the sales line. The orders should accelerate this year because of the larger projects which are now being bid on and I think we'll continue to go forward. But they won't really hit our sales level until late 2011, early 2012. Right now, it's going to be medium, small, small capacities and MROs type stuff. So our profitability, what we're focusing on right now is, I would expect this -- our underlying profitability in the Process business to improve next year, and we are going to have accelerated investments in process both internally and in the money I put on the table here. Because I'm setting up for the growth in 2012 and 2013 in that business. As you know, it's a very profitable business for us. Did that help you?

Yes, that helps a lot. A lot of it is just timing, right? Just trying to figure out when the big stuff come in.

We're not that smart, Scott. I was wrong in the cycle and these guys have done a very good job here. And I thought that the MRO investment would've come early, now it came later. So it's a tough call, it's timing, but we're back, we're strong.

Now I want to comeback to the earlier question on industrial automation because the incremental margins of this quarter were just so phenomenal and I can see this being kind of difficult for those of us in the side of the world to model out in 2011, as it relates to kind of incremental's, plus your Hermetic Motors. I'm kind of begging for modeling help here, how do we think about incremental margins in 2011 in this business or how do we at least think about modeling a with hermetic or without hermetic? What's the new normal I guess is the question?

Hermetic is not going to have a huge impact relative to the -- you think about the size of the whole IA area. the Hermetic will have a little impact. But in reality, what you're seeing right now is this business and I'm trying to think -- can you help me where it peaked at say, 2008? What's that margin peak at IA? Can you guys tell me? I think, we're going to go back and we're going to go buy the peak in 2008...

The peak was 15.6%.

You're going to see this business, come up I think going to be coming up, invest 17%, 18% range. Again, I want to give credit to Jean Paul. Jean Paul and his operating team really somewhat significant cost restructuring went underway. And so they peaked at, say, 16%. I really believe these guys are going to be going in the 17%, 18% range here, as we move into 2011. I don't know, 16% -- but it's not going to get that high next year. So I think you're going to see continuing to go towards that. But the model number you should be thinking at for this business is 17% and 18%. Two or three years to get there, but that mentally, I think Jean Paul has made some fundamental changes to the cost structure, Hermetic Motors does help a little bit, but that's not going to drive the 17%, 18%. What Jean Paul and the operational team did. And a little volume and significant restructuring in these guys hit it, and boy, they hit it well.

Our next question comes from the line of Deane Dray with Citi Investment Research.

One of the pleasant surprises this quarter was Europe, and it wasn't that long ago, there was a lot of hammering going along whether Greece is going to create a domino effect, and here, you put up 15% core revenue growth. So just take us through the mix geographically and then the outlook for 2011.

We've talked about this, Deane, and I think you've been here when we're talking about Europe. I think Europe went through a period here where from the standpoint of under invested, and then when the euro got weak, you saw Germany take off and you see some of the investment profiles both coming out of Europe into Africa and the Middle East. We're starting to see that benefit right now. We knew it was coming and I believe we're going to have a very good year. I wouldn't be surprised if Europe doesn't outgrow the U.S. next year. I make crazy comments like this all the time, in my business, and Emerson's business, I wouldn't be surprised if Europe does not outgrow the U.S. next year. It's because Europe is working very hard in industrial side to restructure. They are actually ahead of the U.S. for that perspective. you think about the government standpoint and therefore, you're going to start -- I think you're going to see something that growth coming out of Europe into the emerging markets, and we benefit from that. From the process world, the industrial automation world and the Network Power world. So I feel that we're going to have pretty good underlying growth for Europe next year because of what the countries have done and then what our business has done, and the unique businesses we're in. So that's what's going to happen. I think it was a pleasant surprise, and I feel pretty good that, like I said, I think Europe could actually outperform the U.S. next year in underlying growth.

And then just over in Network Power, one of the numbers that jumps out is the 33% increase in backlog. How much of that is organic? So was there a contribution from Avocent and Chloride?

I'm assuming some of the backlog is Chloride in there.

For Chloride, I believe it is for your full backlog.

I couldn't tell you some of it, but the business is starting to pick back up. I would expect the Network Power business in particular, to start picking back up on the labor Chloride side in early 2011, the calendar year 2011. The early stages, the backlog right now are more of on the Embedded Power and computing area where the growth has been strong, the component shortages has been a big issue for us, that backlog is built there. But overall, the momentum has shifted and Network Power both in JGalmocker [ph] side and as yet Phoenix [ph] side, and Chloride coming in, helps us, but that's not a huge backlog business. but it's definitely, we see a momentum shifting there which is very good.

Our next question comes from the line of Shannon O'Callaghan, with Nomura.

Question on Network Power, first of all. Good margins there on the quarter, can you give us an update on the Chloride integration and how we should think about Network Power profitability kind of through the quarters of '11 as you bring that in on a full term basis?

The integration of Chloride has gone extremely well, and from my perspective, there's not going to be a whole lot of restructuring in that business this year, because we're right now working from the standpoint of trying to understand what we can do and not do. And I think from our standpoint, we're looking at a period that restructuring would be more in 2012, 2013. I would expect the profitability of this segment would start to improve, quarter by quarter by quarter as the underlying business improves. So I would expect this business to continue to improve profitability wise, as I think I've talked about it, I think that in total, the Network Power business is moving towards that 15%, 16% level. And I think that these guys are going to make progress each quarter this year as we go forward here. And I look at the Network Power business, I think they're going to have a very good 2011 as they move into that 15-plus percent which we've never hit. And so we're not going to quite get there, but it's still going to be a nice improvement as we go forward here.

I mean sequentially in to 1Q, as you bring it in full term, and you expected them to decline a little bit sequentially from where you were in 4Q?

Sequentially, they're going to decline and then we should start seeing improvements as we go forward through the year. The Chloride impact obviously is the full year, and Chloride is a lower margin, and we have obviously amortization going on there, I forgot about that. So it's going to take us a while to get back up to the 15%. But I think this segment is going to be at 15% segment again, and we're probably more like in the -- we're going to be approaching that by the end of the fiscal year. So we should be approaching 15%, and we go down and we start working our way back up. But these guys are doing the right things, and then we're going to do restructuring more in Chloride and Network Power in 2012. So that's where I sit right now for that business.

And then so just on some of the Resi businesses, the inventory correction, HVAC and then the storage business kind of weak, how do you see those playing out as we move to the fiscal year?

As I said earlier, the Consumer businesses right now are really going to struggle in 2011. The consumer is still stressed, they're going through deleveraging, the job market is still going to be very challenging for them right now. And so I think that the Residential Consumer business for our AC business is not going to be all that strong next year. We have the issue that there were some incentives put in place to help, so I think that will be a challenge for them. I do not think the Tools and Storage business will see much growth next year. Discretionary spending is not all exciting relative to the consumer at this point in time. So yes, I'm looking at moderate growth, low single-digit type of growth of that space. Our capital guys are going to see us -- are going to be the improvement. And what we're investing there in the Tools and Storage area is basically some of the emerging market growth that we need to start investing in for them. But that's not going to be a big driver of growth, it's not going to hurt us, it's not going to help us, and I would expect that profitability to be up a little bit next year.

Our next question comes from the line of Julian Mitchell with Credit Suisse.

Frank is now ready to answer that question. Terry asked the question, So Julian, just stay put for one second. Frank, why don't you go ahead and answer the question.

I believe the question was, on the last chart, the interest expense and other deductions, the $630 million this year and the range we gave of $670 million to $700 million, basically we expect a modest decline in interest expense as we work off some of the acquisition debt, a decline as well in restructuring in the order of $15 million or $20 million. And then we've got about $80 million to $100 million going the other way, which is essentially the result of the acquisitions namely Chloride, higher amortization and then some of the one-time items like revaluation of backlog and things of that nature. So that gets us to range of about $670 million to $700 million.

In terms of the organic growth outlook, the 7% to 10% range for the year ahead, just when I look at your 12% that you did in the quarter just finished, it sounds like your quite positive on Europe for the year ahead. The growth rates to Asia and Latin America put up in the low teens, don't seem crazy versus the GDP growth expectations there. So I just wondered which region, is it really all in the U.S. where your think you're going to see a slowdown over the next sort of nine months versus the 9% underlying growth you had in Q4?

Yes, I think Middle East is not going to come back -- it's going to be kind of slow. I think U.S. will still grow, but I'm concerned about what level we're seeing in growth. I think a lot of our customers right now are looking to invest outside the United States. Clearly, if we have continued momentum in orders, Julian, it would be clear that maybe we have more upside in our underlying sales growth. But from my perspective right now, we've had strong orders, I am also very concerned about what's going to happen in the U.S. and I could be wrong relative to Europe, but I feel that it behooves us right now to obviously push internally but also be very cautious at what we can do with underlying growth. I mean statistically, if you look at it right now, and look what we're coming out of it, it should be a strong double-digit number. It should be more than 10% as you point out. But I want to see us get some months and a quarter or two behind us before we say, okay, let's make that 10% or 12%. I mean, there are things that could go wrong. I mean, there people that as you well know, said the 2011 is going to be a lot stronger than 2010. Well, a lot too right now is saying 2011 is going to be weaker than 2010. so I want to be very cautious. We have positioned ourselves and things are looking good, and we could be stronger, but I also want to be very cautious to behooves may be cautious from that standpoint so that you don't get ahead of me.

In terms of the cost growth, I mean you mentioned, obviously some CapEx moving up. In terms of things like headcount or R&D or specific, say, sales force expansion programs in different reasons, can you give any more color on that.

Our investment, for instance, in the $40 million part order, we will be hiring 1,000 people. And these will be high-end sales people, marketing people, technology people, and they'll be going around the world from that perspective. That's just focusing on technology and sales and marketing. And from my perspective, our hiring, we are increasing our headcount at this point in time, and particularly, outside the United States, and particularly outside Western Europe, and so the investments you're going to see from a capital standpoint, and a technology investment are all increasing. As a ratio, if you look at our capital spending, I think we'll be somewhere between 2.5% and 2.6% next year. So we're going to be very tight. There's nothing that I need to make a major investment. If I look at our technology investment, we're probably within a 10th of what we did this year. A lot of it is in emerging markets, there's a lower cost type of structure. So there's nothing crazy, but it's going to be a 10th higher here, a 10th higher here, 2/10 higher here. It's all about investing and we have the margin room because we actually did a lot of aggressive restructuring and it gives us the capability of doing that. And so that's where we are right now.

Our next question comes from Nigel Coe with Deutsche Bank.

Obviously, obviously, you're going to provide a lot more color in the segment's forecast in February next year, but I wondered would you give us a little bit more color in terms of how you expect the five segments would play out versus that 7% to 10% range next year? Any color in terms of how the five segments will play out in terms of that range?

I'm not going to give you the specific numbers right now, but clearly, if you look at Industrial Automation, if you look at Process, if you look at Network Power, those three segments right there will be the strong growers. Climate Technology will have the issue relative to the North America business, which is a huge grower this year and now they have to overcome that. And so from my perspective, Climate Technologies growth can be Europe, Latin America and Asia Pacific, and that one will be down for, I believe, this year versus last year. And the drivers are definitely going to be industrial, Network Power and Process. I think they'll all end up, being in my opinion, double 10% plus in Process, Network Power and Industrial Automation before the year is out, and the Climate and Tools will be low to medium single digit type of growth rates.

And clearly, the order of rates, the process imply double digit growth, do you assume, given that happens, assume it's 1Q?

No, I think it goes back to the conversation that I had. I can't remember if it was Deane Dray or Scott Davis asking me on the process. I think it was Scott. We're starting to book right now, Nigel, our some of the medium-sized projects, which we'll now start executing to later this year or early next year. So I think you're going to see the underlying improvement maybe high single digits, maybe it sneaks over to 10%, but you're going to see this build as the year goes on. But still, given the restructuring and the mix of business, it should be a very good business segment for us this year as you can imagine.

You obviously gave a pretax margin range, but not a post tax margin range. Is there any variability in the tax line this year that...

I think the tax rate is going to be around 30%. We have nothing extraordinary. Obviously, the pressure is upward based on what's going on around the world right now. And hopefully, with the right election, and the right focus on restructuring corporate tax rates, we pay a lot of taxes, as you all know. I hope we'll get a more balanced tax rate for us going forward. But we're going to be paying around 30% for the year.

Our next question comes from the line of Rich Kwas with Wells Fargo Securities.

Electronics components, you talked about that as a problem earlier in the year. It's still there other companies talked about it. Do you see any relief in sight here?

No, not yet. We still have some issues with IG BTs. We have some issues in some of the components coming out of Japan. The capacity has taken longer to come on board and I don't think the yields have gone well, so we are still seeing some shortages and that's not a good sign that will obviously create a cost issue for me as we try to have to pay premiums to get those things. I thought with this, we'd be really stabilizing by now and actually see an improvement. My gut now tells me based on what I'm hearing from my people, it probably early 2011, the calendar of 2011, before we see some stability there, Rich. And that not, that is not a good thing. I think those suppliers did not do a good job getting ready for this. If I talk to me customers this way, Mike Keith, global top 10 customers, they'd be on my door in about two nanoseconds, where you camped out. I guarantee it.

On process, just a housekeeping question. Fourth quarter margins declined from third quarter. You usually see a sequential uptick. Anything going on there? I know Q3 was very strong, so was it just the comp in Q3 that was very strong or was there a mix issue in the quarter?

No we had a big pickup in currency mix in the third quarter and through the currency transaction that helped us close it was $19 million, $20 million that helped us. We knew this was going to come and so it just flow through as the dollar, the European currencies moving around that helped us in the third quarter. So that really helped that margin. The 20%, I think we have 20% in the fourth quarter?

In the fourth quarter, it was like 19.1%.

19.1%. There was nothing extraordinary. You're right, sequentially, they would normally improve but because that currency impact in the third quarter, there's nothing funny or weird going on there. It's just sometimes these currency of things hit you or something like that, nothing unusual.

Our final question comes from Steve Tusa with JPMorgan. C. Stephen Tusa - JP Morgan Chase & Co: A question on Climate for me. Your fiscal year has a lot of stuff going on given you would have seen the benefit from the R-22, channel loading at the end of last year. So I'm just curious, what was your Resi business and what for the year, what was your U.S. Resi business? Where did that finish from a growth perspective?

Our U.S. Resi business for the year because, we have a very strong replacement market, I would say we're up 10%, 12% in the U.S. A freak thing about what's going on there, was a very good year for us and obviously I think we're going to be facing a much more challenging U.S. business as we go into 2011. There's a lot of things going on. As you well know, you noticed this industry extremely while there's been a shift going on. Obviously, the incentives have disappeared from the government standpoint and I think you're going to see this fourth quarter here, in this calendar quarter is going to be tough, as our customers look at maybe doing some inventory reduction, which will hurt us. I think as we get into the calendar year 2011, we can see some growth returning. But I think it's going to be very challenging for us on the residential side, after a very good year this year. C. Stephen Tusa - JP Morgan Chase & Co: So you did see those replacement compressors grow pretty fast. So people are actually not just letting their assistants sit there, or buying window units or fans or going with the air conditioning?

No. And I think we're going to have some pretty good replacement business again in the first part of the year, but I think the underlying, the housing market is not good, the upgrades in the housing is not good right now. I think there is some buildups. so I'm expecting, what I would say, some pretty tough comps for us, as we move into the first part of 2011 for the Climate guys. But on the positive side, we're seeing the Refrigeration business, the non-res business, the Container business and the Global businesses are doing much better. So the residential side struggled, but we're seeing the other side improve. So it would be an interesting year. I think the climate guys could be surprising to me. I said they'd be low medium underlying growth rates for the year, they could surprise me because of the other businesses coming back. But the residential is tough. C. Stephen Tusa - JP Morgan Chase & Co: Did your guys tell you anything about the demand disruption from the [indiscernible] high price systems? I mean, if those systems came down dramatically in cost, do you think that would help drive people to go back to replacing more the systems as opposed to just buying a compressor? Obviously, since they're replacing a compressor, there in a cost issue versus what they were going used to do which is just to replace.

Yes, there's no doubt about it. We do talk about it. It's not something I'm going to publicly talk about, but there's no doubt about it. I think the biggest issue to me and I've been involved in this business quite long, is the size. I think the astronomical size of the new units is a big problem. The technology they use as they made them bigger, and I can tell you right now, many people cannot fit them into the house outside, they just don't have the space. They need to figure out how to get the efficiency without making them bigger. Our compressor is not bigger, as we move efficiency. But for some reason, as the air-conditioning guys made these things so much larger, you've seen them Steve, they're massive. C. Stephen Tusa - JP Morgan Chase & Co: If we went back to R-22, do you think that would be an impact? And then second of all, how are you thinking about price increases next year to compressor customers?

For many people on the phone, I don't understand what you're talking about going back to R-22. I personally, I don't see it will have an impact on us per se, the units will be sold. But I hope the government does not go back to R-22. We've made the decision to go forward with relative to energy efficiency and the change in the refrigerant and I think going back is a big mistake at this point in time. That's my opinion and as a person, I don't think that on the pricing standpoint, it's all commodity-driven right now. If the price of copper or the price of aluminum, the prices of those commodities continue to increase, we're going to have to pass some increases on. We're working with our customers. We know we have this issue relative to the already the costs going higher, because of efficiencies. The governments passed these efficiency standards. As you know, we have one coming again in 2015, which we really don't need, but they're going to pass another one. And the OEMs right now are struggling with this issue from our standpoint and that's why we're investing in electronics area to try to figure out how to get these efficiencies without making these units larger and more costly. C. Stephen Tusa - JP Morgan Chase & Co: Has this consensus look about right for the first quarter, usually you give us some sort of color on the first quarter?

I haven't really looked at it. I really have not looked at consensus, Steve, to be honest. Typically, who knows what's going on in there? I mean I think it will be an interesting quarter from this standpoint. It should be an easier comp at the top line. But I have other things flowing through there. So we'll try to give some more color and then what we might do is look at our next order release, and I'll try to look at that, Steve, and put some import in that, okay? C. Stephen Tusa - JP Morgan Chase & Co: Why did you guys released orders last month and earlier this month?

There's two reasons. First of all, I've been doing this, why do we release them the same time we have them. So it's two, and two, I did want to get them away from all the changes that we had going on relative to the divestitures, and the acquisitions. So I wanted to get it clean and get that information out ahead of that. Because I knew there will be a lot of discussion relative to the restatements and I want to get it separated. And there's no reason why I can't put the orders out before I put the P&L out. And so we'll go back and do that from now on. There's no reason I don't why I did it historically, other than it's always done that way and that's not a good reason. I just want to make you guys work twice, that's all.

And I will turn the call back to management for any closing remarks.

Thank you very much. Again, I want to thank all of the people across Emerson for working so hard over the last 18 months. Your effort has really paid off. We have a great finish to 2010. I feel very strong about where we sit relative to 2011. I feel very good about the investments we're making, the position of the company as we globalized the business and, I look at what we've accomplished. And from my perspective, we are extremely strong and the foundation is strong, and look forward to exciting 2011. Also I want to thank everyone for being on the call today, I look forward to seeing everybody as the year progresses and we'll see people here in St. Louis in February. And I promise there will be no snow. I wouldn't bet on it but I promise. Take care, everybody. Thanks.

Ladies and gentlemen, that concludes the Emerson Fourth Quarter Fiscal 2010 Results Conference Call. If you'd like to listen to a replay of today's conference, please dial 1(800)-406-7325 or (303)590-3030 and entering the access code 4370601. ACT would like to thank you for your participation, and you may now disconnect.