Cooper Industries plc (CBE)

Q4 2011 Earnings Call

January 24, 2012 12:00 pm ET


Kirk S. Hachigian - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Kyle McClure - Director of Treasury and Investor Relations

David A. Barta - Chief Financial Officer and Senior Vice President


Carter B. Shoop - KeyBanc Capital Markets Inc., Research Division

Jeffrey Sprague

Joshua C. Pokrzywinski - MKM Partners LLC, Research Division

Nigel Coe - Morgan Stanley, Research Division

Nigel Coe - Deutsche Bank AG, Research Division

Scott R. Davis - Barclays Capital, Research Division

Christopher Glynn - Oppenheimer & Co. Inc., Research Division

Richard M. Kwas - Wells Fargo Securities, LLC, Research Division

Terry Darling - Goldman Sachs Group Inc., Research Division

Deane M. Dray - Citigroup Inc, Research Division



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Good day, ladies and gentlemen and welcome to the Fourth Quarter 2011 Cooper Industries Earnings Conference Call. My name is Toni, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Kyle McClure, Director of Treasury and Investor Relations. Please proceed, sir.

Kyle McClure

Thanks, Toni, and good morning, everyone. Welcome to the Q4 2011 Cooper Industries earnings call. With me today is Kirk Hachigian, Chairman and Chief Executive Officer; and Dave Barta, Senior Vice President and Chief Financial Officer.

We have posted a presentation on our website that we will refer to throughout this call. If you'd like to view this presentation, please go to the Investors section of our website at

As a reminder, comments made during this call may include forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, many of which are outside the control of the company, and therefore, actual results may differ materially from those anticipated by Cooper. A discussion of these factors may be found in the company's annual report on Form 10-K and other recent SEC filings.

In addition, comments made here may include non-GAAP financial measures. To the extent they have been anticipated, reconciliations of those measures to the most directly comparable GAAP measures are included in the press release.

Now, let me turn the call over to Kirk.

Kirk S. Hachigian

Thanks, Kyle. I'm happy to report this morning that we reported our best quarterly and full-year earnings in our 178-year history. And again, given the global uncertainty, this is no small feat. We've communicated to the investors over the years that we're 100% focused now and one of the best global industries in the world with significant long-term growth trends. We've worked hard over the years to refine our business model and to enhance our competitiveness, reacting faster to changing market conditions and to accelerate our growth through innovation, globalization and a relentless focus on the customer. We also have 26,000 of the world's most honest and dedicated employees, many of whom have served this company for 30, 40, and some even over 50 years. It's very rewarding to work with such a team and a company of such great heritage and history. We'd like to welcome also the newly acquired companies in 2011, there's 7 of them, and also I'd like to recognize Grant Gawronski who came to Cooper in 2002 after 18 years with GE and has run Cooper Operations International, Europe and is currently the President of Cooper Crouse-Hinds and Ivo Jurek, who joined us in 2007 after 10 years with International Rectifier and is presently the President of Cooper Bussmann. Both gentlemen have recently been promoted to group executives and have made significant contributions to the company over the years, and will play a much broader role in globalization, innovation and M&A as we move ahead.

If you turn to Page 2 of our handout, Dave and I will now give you some details on the quarter, the full-year and update you on our 2012 outlook. For the quarter, revenues were up 9%, core up 4.7% and that's on top of last year's core growth of 14%. Energy & Safety Solutions was up 10% with a core up 7%, again on top of the 15% core growth last year. Electrical Products Group was up 8% with a core up 2%, and that's on top of 13% core growth last year. So very, very good growth numbers on top of some tough comps. Our fourth quarter earnings was $1 a share of 18% and,, again, first time in our history in any quarter we've ever earned $1 a share.

Our consolidated operating margins were 14.6% up 30 basis points. Energy & Safety Solutions up margins were 16% down 80 basis points from last year and Electrical Products Group margins were 13.3%, down 50 basis points from last year and we'll share some more details on some of those issues facing the margins shortly.

Our tools equity income was almost $22 million or $0.12 per share ahead of our $19 million estimate, a nice performance there. And our full-year cash flow was $200, excuse me, $702 million, our 11th consecutive year where free cash flow has been greater than net. So for the full-year core up 10%, EPS up 21% and cash 12% of sales, really a terrific year.

If you turn to Page 3 of our handout, as we've said in the past, we'll maintain our guidance, our practice of full-year guidance with quarterly updates. Understanding that the global volatility and uncertainty makes this increasingly more difficult, we believe this practice enhances our visibility or your visibility in our businesses and builds investor confidence. On Page 3, this is a page directly out of the fourth quarter 2010 conference call we had last January, and as you can see, a lot to bumping and grinding but for the full year turned out to be not too far of where we have guided the full year. In fact, a little bit better. Our core was up 9.9% versus an estimate of 6% to 9% and our EPS up $0.07 higher than the high-end of our range.

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