Emerson 2013 Annual Report Download - page 49

Emerson > 2013 Annual Report 47
(11) Postretirement Plans
The Company sponsors unfunded postretirement benefit plans (primarily health care) for certain U.S. retirees and their
dependents. The components of net postretirement benefits expense for the years ended September 30 follow:
2011 2012 2013
Service cost $ 3 2 2
Interest cost 17 16 12
Net amortization (7) (11) (13)
Net postretirement expense $13 7 1
Reconciliations of the actuarial present value of accumulated postretirement benefit obligations follow:
2012 2013
Benefit obligation, beginning $392 367
Service cost 2 2
Interest cost 16 12
Actuarial (gain) loss (10) (83)
Benefits paid (17) (20)
Plan amendments (16) —
Benefit obligation, ending (recognized in balance sheet) $367 278
As of September 30, 2013 there were $169 of deferred actuarial gains in accumulated other comprehensive income,
of which approximately $21 will be amortized into earnings in 2014. The assumed discount rates used in measuring
the benefit obligations as of September 30, 2013, 2012 and 2011, were 4.00 percent, 3.25 percent and 4.25 percent,
respectively. The assumed health care cost trend rate for 2014 is 7.0 percent, declining to 5.0 percent in 2018, and for
2013 was 7.5 percent, declining to 5.0 percent in 2018. A one-percentage-point increase or decrease in the assumed
health care cost trend rate for each year would increase or decrease postretirement expense and the benefit obligation by
inconsequential amounts. The Company estimates that future health care benefit payments will be $26 in 2014, $26 in
2015, $25 in 2016, $25 in 2017, $25 in 2018 and $113 in total over the five years 2019 through 2023.
(12) Contingent Liabilities and Commitments
Emerson is a party to a number of pending legal proceedings and claims, including those involving general and product
liability and other matters, several of which claim substantial amounts of damages. The Company accrues for such
liabilities when it is probable that future costs (including legal fees and expenses) will be incurred and such costs can
be reasonably estimated. Accruals are based on developments to date; management’s estimates of the outcomes of
these matters; the Company’s experience in contesting, litigating and settling similar matters; and any related insurance
coverage. Although it is not possible to predict the ultimate outcome of these matters, the Company historically has
been successful in defending itself against claims and suits that have been brought against it, and will continue to defend
itself vigorously in all such matters. While the Company believes a material adverse impact is unlikely, given the inherent
uncertainty of litigation, a remote possibility exists that a future development could have a material adverse impact on
the Company.
The Company enters into certain indemnification agreements in the ordinary course of business in which the indemnified
party is held harmless and is reimbursed for losses incurred from claims by third parties, usually up to a prespecified limit.
In connection with divestitures of certain assets or businesses, the Company often provides indemnities to the buyer with
respect to certain matters including, as examples, environmental or unidentified tax liabilities related to periods prior to
the disposition. Because of the uncertain nature of the indemnities, the maximum liability cannot be quantified. As such,
contingent liabilities are recorded when they are both probable and reasonably estimable. Historically, payments under
indemnity arrangements have been inconsequential.
On October 22, 2012, Invensys Systems, Inc. filed a suit for patent infringement against the Company and its wholly-owned
indirect subsidiary, Micro Motion, Inc., in the Eastern District of Texas captioned Invensys Systems, Inc. v. Emerson Electric Co.
and Micro Motion, Inc., USA. The complaint alleges infringement on Invensys patents by Micro Motion’s Coriolis flowmeter
“Enhanced Core Processors.” The Invensys suit seeks unspecified damages for past infringement and an injunction
preventing the Company and Micro Motion from engaging in future infringement. It is too early in the litigation to assess
any potential financial impact. The Company and Micro Motion believe that the Invensys claims are without merit and that
they have strong defenses to the claims, and intend to aggressively defend the suit.