Emerson 2014 Annual Report Download - page 32

2014 Emerson > 28
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LEGAL MATTERS
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 damages of
$182 million and an injunction preventing the Company
and Micro Motion from engaging in future infringement.
The Company has filed a petition seeking a ruling that
the Invensys patents are invalid. 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.
Two subsidiaries of the Company have unrelated
judgments against them totaling $50 million which,
based on their merits, are expected to be overturned. At
September 30, 2014, there were no known contingent
liabilities (including guarantees, pending litigation,
taxes and other claims) that management believes
will be material in relation to the Company’s financial
statements, nor were there any material commitments
outside the normal course of business.
NEW ACCOUNTING PRONOUNCEMENTS
In April 2014, the Financial Accounting Standards
Board (FASB) issued updates to ASC 205, Presentation
of Financial Statements, and ASC 360, Property, Plant
and Equipment, regarding the reporting of discontinued
operations. These updates raised the threshold for
reporting discontinued operations to a strategic
business shift having a major effect on an entity’s
operations and financial results. The updates also added
disclosures for disposals of business units qualifying for
discontinued presentation, and for some dispositions
that do not qualify as discontinued operations but are
still considered individually significant components
of the entity. The revised standard is effective for
the Company in the first quarter of fiscal 2016. Early
adoption is permitted.
In May 2014, the FASB amended ASC 606, Revenue from
Contracts with Customers, to update and consolidate
revenue recognition guidance from multiple sources
into a single, comprehensive standard to be applied for
all contracts with customers. The fundamental principle
of the revised standard is to recognize revenue based
on the transfer of goods and services to customers at
an amount that the Company expects to be entitled to
in exchange for those goods and services. Also required
are additional disclosures regarding the nature, extent,
timing and uncertainty of revenues and associated cash
flows. The new standard is effective for the Company
in the first quarter of fiscal 2018, and may be adopted
on either a prospective or retrospective basis. Early
adoption is prohibited. The Company is in the process
of evaluating the impact of the revised standard on its
financial statements and determining its method
of adoption.
FISCAL 2015 OUTLOOK
Recent global macroeconomic trends have been mixed
but gradually improving, with solid momentum in
the NAFTA region and China balanced by increasing
uncertainty in Europe and some emerging markets.
Based on current conditions, underlying sales growth
for 2015 is expected between 4 and 5 percent, slightly
better than 2014, with unfavorable currency translation
and the potential power transmission divestiture
deducting 2 percent each. Reported sales are expected
to change 0 to 1 percent. Profitability is expected to
continue to improve modestly.