Attached files
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| 8-K - EMERSON ELECTRIC CO | v209518_8k.htm |
Media Contact: Mark
Polzin (314) 982-1758
EMERSON
REPORTS FIRST QUARTER 2011 RESULTS
|
·
|
Sales
increased 15 percent to $5.5 billion
|
|
·
|
EPS
from continuing operations increased 15 percent to
$0.63
|
|
·
|
Expected
full year earnings per share of $3.15 to
$3.30
|
ST.
LOUIS, February 1, 2011 – Emerson (NYSE: EMR) today announced that net sales for
the first quarter ended December 31, 2010, were $5.5 billion, an increase of 15
percent from the prior year quarter. Underlying sales increased 11 percent in
the quarter, which excludes a 5 percent impact from acquisitions and a 1 percent
unfavorable impact from currency exchange rates. Underlying sales
growth was balanced globally, with the U.S. increasing 10 percent and
international sales increasing 11 percent.
Earnings
from continuing operations for the first quarter were $0.63 per share,
increasing 15 percent compared with $0.55 in the same period last
year. Including discontinued operations, net earnings per share
increased 13 percent. Operating profit margin improved to 15.4
percent from 15.2 percent in the prior year period. This improvement
was driven by volume leverage and benefits from restructuring and cost
repositioning efforts, partially offset by higher material costs as commodity
prices continued to increase. An additional headwind this
quarter was $18 million from the triennial stock option award and resulting
expense. Pretax margin was 12.9 percent compared with 12.0 percent in
the prior year period. The tax rate was 31.2 percent in the quarter
compared with 25.6 percent in the same period last year. The lower
tax rate in the first quarter last year resulted from a tax benefit from the
restructuring of a foreign subsidiary.
“Emerson
performed well in the first quarter as economies around the world continued to
recover,” said Chairman and Chief Executive Officer David N. Farr. “During
the past two years, we focused on improving and repositioning our operations to
benefit during what we believe will be a slower global economic
recovery. We are
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Two
seeing the value of that hard work. The foundation of
Emerson is very strong, which creates enormous potential for the long
term.”
Balance Sheet / Cash
Flow
Operating
cash flow was $322 million in the first quarter of 2011, compared with $687
million in the prior year period, principally due to an increase in working
capital to support growth as the global economy continues to
recover. Trade working capital as a percent of sales showed
improvement, declining to 17.7 percent from 18.0 percent in the prior year
quarter.
“While we
had a slower start to cash flow for the year, we expect to achieve our operating
cash flow target of $3.3 to $3.5 billion and our free cash flow target of $2.7
to $2.9 billion for 2011,” Farr said. “Strong cash flow and a healthy
balance sheet are essential as we invest in opportunities to strengthen our
business platforms, pursue technology leadership, globalize assets and drive
business efficiency. We will continue to be disciplined as we assess
and act on investment opportunities that will consistently deliver value to our
shareholders.”
Business Segment
Highlights
Process Management sales
continued to gain momentum, up 12 percent in the quarter. Underlying
sales increased 13 percent and unfavorable currency subtracted
1 percent. Market-leading technologies and a strong global
footprint helped solidify large project wins, including Process Management’s
selection as main automation contractor on Petrobras’ Comperj project, which is
Brazil’s largest refining and petrochemical complex. Segment margin
was 18.8 percent, increasing 3.2 points from 15.6 percent in the prior year
quarter, driven by volume leverage and cost reductions.
Industrial Automation reported
a strong quarter of sales and earnings performance. Sales increased
23 percent, which included a 24 percent increase in underlying sales, a negative
2 percent currency impact and a positive 1 percent impact from
acquisitions. Sales were strong globally, as capital goods investment
continued to show improvement. Segment margin increased 4.2 points to
15.3 percent reflecting
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benefits from volume leverage, reduced restructuring and cost
reductions. Substantial material inflation was only partially offset
by pricing increases.
Network Power sales increased
21 percent in the quarter. Underlying sales grew 6 percent and the
Avocent and Chloride acquisitions added 15 percent. Growth remained
solid in the U.S. and Europe, which increased 9 percent and 6 percent,
respectively. Sales in Asia were up 3 percent against a more
difficult prior year comparison that included the benefit of strong stimulus
programs in China. Segment margin declined 4.0 points to 10.9
percent, driven by increased amortization from the Chloride and Avocent
acquisitions of $25 million (1.5 points), other Chloride acquisition costs of
$15 million (1 point), negative price, material inflation and expediting costs
for materials. The other Chloride acquisition costs will be essentially
eliminated by the second half of fiscal 2011. In addition, positive
pricing programs are being implemented to offset rising costs. These
actions should allow the margin to increase to higher levels in the second half
of the fiscal year. Emerson has made significant investments in key
acquisitions in this segment, developing next-generation data center
infrastructure management technologies, and solidifying the global footprint of
this business. While these investments have had a negative impact on
margins in the short term, they are creating the foundation for strong,
profitable growth in this next cycle, which is just beginning.
Climate Technologies sales
grew by 3 percent in the quarter with international sales leading the
growth. Underlying sales increased 4 percent and currency subtracted
1 percent. Sales grew 12 percent internationally, while sales
declined in the U.S. by 3 percent. The U.S. residential air conditioning
business declined due to tougher prior year comparisons that were positively
impacted by the industry build-ahead of equipment prior to the R-410A
refrigerant conversion. Refrigeration sales remained strong
globally. Margin improved 0.7 points to 15.2 percent, reflecting
benefits from cost reductions and mix. Volatility in material prices
had a negative impact on margin that was only partially offset by pricing
actions.
Tools and Storage sales
increased 3 percent in the quarter, reflecting a 3 percent increase in
underlying sales. Strength in the professional tools business was
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partially offset by weakness in consumer storage as residential markets
remain weak. Segment margin improved 2.1 points to
20.8 percent. We do not expect to see a very strong recovery in
U.S. consumer discretionary spending.
Fiscal 2011
Outlook
Continued
global economic recovery, solid order trends and execution of our global
restructuring plans during the past two years position Emerson for a strong year
in 2011.
Emerson
expects full-year fiscal 2011 earnings per share in the range of $3.15 to $3.30,
with earnings per share from continuing operations growth of 21 to 27 percent, a
strong improvement over the solid 15 percent increase in fiscal 2010, the start
of Emerson’s recovery. Reported sales are expected to be
approximately $24 to $24.5 billion, an increase of 14 to 17 percent compared
with fiscal year 2010 sales of $21.0 billion. Underlying sales are
expected to grow 10 to 13 percent. Operating profit margin and pretax
margin are expected to be in the range of 17.4 to 17.7 percent and 14.8 to 15.1
percent, respectively. Operating cash flow is expected to be $3.3 to
$3.5 billion with free cash flow (operating cash flow less capital
expenditures) of $2.7 to $2.9 billion.
Upcoming Investor
Events
Today at 2:00 p.m. EST
(1:00 p.m. CST), Emerson senior management will discuss the first quarter
results during an investor conference call. All interested parties
may listen to the live conference call via the Internet by going to the Investor
Relations area of Emerson's website at www.Emerson.com/financial
and completing a brief registration form. A replay of the conference
call will be available for the next three months at the same location on the
website.
On
February 3 and 4, 2011, Emerson senior management will host the company’s annual
investor conference in St. Louis at Emerson’s global
headquarters. The presentation by Mr. Farr on Thursday, February 3,
will be webcast starting at 4:15 p.m. EST and is expected to conclude at
approximately 6:00 p.m. EST. Those
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interested may listen to the webcast via the Internet by going to the
Investor Relations area of Emerson's website at www.Emerson.com/financial and
completing a brief registration form. A replay of the webcast will be available
for approximately one week at the same location on the website. Slide
presentations by Emerson senior management, including those presented on Friday,
February 4, will be posted on the company website for viewing at the beginning
of each day’s sessions.
Details
of upcoming events will be posted as they occur on the Events Calendar in the
Investor Relations section of the website.
Forward-Looking and
Cautionary Statements
Statements
in this release that are not strictly historical may be “forward-looking”
statements, which involve risks and uncertainties, and Emerson undertakes no
obligation to update any such statements to reflect later
developments. These risks and uncertainties include economic and
currency conditions, market demand, pricing, and
competitive and technological factors, among others, as set forth in the
company's most recent Form 10-K filed with the SEC.
(tables
attached)
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Six
TABLE 1
EMERSON
AND SUBSIDIARIES
CONSOLIDATED
OPERATING RESULTS
(AMOUNTS
IN MILLIONS EXCEPT PER SHARE, UNAUDITED)
|
Quarter Ended December 31,
|
Percent
|
|||||||||||
|
2009
|
2010
|
Change
|
||||||||||
|
Net
sales
|
$ | 4,828 | $ | 5,535 | 15 | % | ||||||
|
Less:
Costs and expenses
|
||||||||||||
|
Cost
of sales
|
2,960 | 3,372 | ||||||||||
|
SG&A
expenses
|
1,134 | 1,311 | ||||||||||
|
Other
deductions, net
|
92 | 78 | ||||||||||
|
Interest
expense, net
|
65 | 61 | ||||||||||
|
Earnings
from continuing operations before income taxes
|
577 | 713 | 24 | % | ||||||||
|
Income
taxes
|
148 | 222 | ||||||||||
|
Earnings
from continuing operations
|
429 | 491 | 14 | % | ||||||||
|
Discontinued
operations, net of tax
|
8 | - | ||||||||||
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Net
earnings
|
437 | 491 | 12 | % | ||||||||
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Less:
Noncontrolling interests in earnings of subsidiaries
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12 | 11 | ||||||||||
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Net
earnings common stockholders
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$ | 425 | $ | 480 | 13 | % | ||||||
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Earnings
common stockholders:
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||||||||||||
|
Earnings
from continuing operations
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$ | 417 | $ | 480 | ||||||||
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Discontinued
operations, net of tax
|
8 | - | ||||||||||
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Net
earnings common stockholders
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$ | 425 | $ | 480 | ||||||||
|
Diluted
earnings per share common stockholders:
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||||||||||||
|
Earnings
from continuing operations
|
$ | 0.55 | $ | 0.63 | 15 | % | ||||||
|
Discontinued
operations
|
0.01 | - | ||||||||||
|
Diluted
earnings per common share
|
$ | 0.56 | $ | 0.63 | 13 | % | ||||||
|
Diluted
average shares outstanding
|
755.5 | 758.1 | ||||||||||
|
Quarter Ended December 31,
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||||||||||||
|
2009
|
2010
|
|||||||||||
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Other
deductions, net
|
||||||||||||
|
Amortization
of intangibles
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$ | 35 | $ | 67 | ||||||||
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Rationalization
of operations
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38 | 17 | ||||||||||
|
Other,
net
|
23 | (3 | ) | |||||||||
|
Gains
|
(4 | ) | (3 | ) | ||||||||
|
Total
|
$ | 92 | $ | 78 | ||||||||
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Seven
TABLE 2
EMERSON
AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(DOLLARS
IN MILLIONS, UNAUDITED)
|
December 31,
|
||||||||
|
2009
|
2010
|
|||||||
|
Assets
|
||||||||
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Cash
and equivalents
|
$ | 1,840 | $ | 1,493 | ||||
|
Receivables,
net
|
3,650 | 3,956 | ||||||
|
Inventories
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1,956 | 2,207 | ||||||
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Other
current assets
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617 | 649 | ||||||
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Total current assets
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8,063 | 8,305 | ||||||
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Property,
plant & equipment, net
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3,475 | 3,255 | ||||||
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Goodwill
|
7,647 | 8,666 | ||||||
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Other
intangible assets
|
1,455 | 2,096 | ||||||
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Other
|
849 | 381 | ||||||
| $ | 21,489 | $ | 22,703 | |||||
|
Liabilities
and Equity
|
||||||||
|
Short-term
borrowings and current maturities
of long-term debt
|
$ | 1,240 | $ | 800 | ||||
|
Accounts
payable
|
1,991 | 2,243 | ||||||
|
Accrued
expenses
|
2,474 | 2,447 | ||||||
|
Income
taxes
|
100 | 110 | ||||||
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Total
current liabilities
|
5,805 | 5,600 | ||||||
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Long-term
debt
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4,558 | 4,352 | ||||||
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Other
liabilities
|
2,188 | 2,428 | ||||||
|
Equity
|
8,938 | 10,323 | ||||||
| $ | 21,489 | $ | 22,703 | |||||
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Eight
TABLE 3
EMERSON
AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(DOLLARS
IN MILLIONS, UNAUDITED)
|
Quarter Ended December 31,
|
||||||||
|
2009
|
2010
|
|||||||
|
Operating
Activities
|
||||||||
|
Net
earnings
|
$ | 437 | $ | 491 | ||||
|
Depreciation
and amortization
|
196 | 219 | ||||||
|
Changes
in operating working capital
|
15 | (430 | ) | |||||
|
Other
|
39 | 42 | ||||||
|
Net
cash provided by operating activities
|
687 | 322 | ||||||
|
Investing
Activities
|
||||||||
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Capital
expenditures
|
(89 | ) | (82 | ) | ||||
|
Purchases
of businesses, net of cash and
|
||||||||
|
equivalents
acquired
|
(1,301 | ) | (39 | ) | ||||
|
Other
|
38 | (16 | ) | |||||
|
Net
cash used in investing activities
|
(1,352 | ) | (137 | ) | ||||
|
Financing
Activities
|
||||||||
|
Net
increase in short-term borrowings
|
662 | 116 | ||||||
|
Proceeds
from long-term debt
|
596 | 1 | ||||||
|
Principal
payments on long-term debt
|
(36 | ) | (31 | ) | ||||
|
Dividends
paid
|
(251 | ) | (261 | ) | ||||
|
Purchases
of treasury stock
|
- | (51 | ) | |||||
|
Other
|
(15 | ) | (55 | ) | ||||
|
Net
cash provided by (used in) financing activities
|
956 | (281 | ) | |||||
|
Effect
of exchange rate changes on cash and equivalents
|
(11 | ) | (3 | ) | ||||
|
Increase
(decrease) in cash and equivalents
|
280 | (99 | ) | |||||
|
Beginning
cash and equivalents
|
1,560 | 1,592 | ||||||
|
Ending
cash and equivalents
|
$ | 1,840 | $ | 1,493 | ||||
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Nine
TABLE 4
EMERSON
AND SUBSIDIARIES
SEGMENT
SALES AND EARNINGS
(DOLLARS
IN MILLIONS, UNAUDITED)
|
Quarter Ended December 31,
|
||||||||
|
2009
|
2010
|
|||||||
|
Sales
|
||||||||
|
Process
Management
|
$ | 1,382 | $ | 1,542 | ||||
|
Industrial
Automation
|
986 | 1,210 | ||||||
|
Network
Power
|
1,381 | 1,669 | ||||||
|
Climate
Technologies
|
784 | 810 | ||||||
|
Tools
and Storage
|
434 | 446 | ||||||
| 4,967 | 5,677 | |||||||
|
Eliminations
|
(139 | ) | (142 | ) | ||||
|
Net
Sales
|
$ | 4,828 | $ | 5,535 | ||||
|
Quarter Ended December 31,
|
||||||||
|
2009
|
2010
|
|||||||
|
Earnings
|
||||||||
|
Process
Management
|
$ | 216 | $ | 290 | ||||
|
Industrial
Automation
|
109 | 185 | ||||||
|
Network
Power
|
206 | 182 | ||||||
|
Climate
Technologies
|
114 | 123 | ||||||
|
Tools
and Storage
|
81 | 93 | ||||||
| 726 | 873 | |||||||
|
Differences
in accounting methods
|
44 | 53 | ||||||
|
Corporate
and other (1)
|
(128 | ) | (152 | ) | ||||
|
Interest
expense, net
|
(65 | ) | (61 | ) | ||||
|
Earnings
from continuing operations before
income taxes
|
$ | 577 | $ | 713 | ||||
|
Quarter Ended December 31,
|
||||||||
|
2009
|
2010
|
|||||||
|
Rationalization
of operations
|
||||||||
|
Process
Management
|
$ | 7 | $ | 2 | ||||
|
Industrial
Automation
|
18 | 5 | ||||||
|
Network
Power
|
7 | 5 | ||||||
|
Climate
Technologies
|
3 | 4 | ||||||
|
Tools
and Storage
|
3 | 1 | ||||||
|
Total
Emerson
|
$ | 38 | $ | 17 | ||||
(1)
Corporate and other expense in Q1FY11 includes an increase of $18M
related to stock option expense.
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Ten
TABLE 5
Reconciliations of Non-GAAP
Financial Measures
The
following reconciles Non-GAAP measures with the most directly comparable GAAP
measure
(dollars
in millions):
|
Forecast
FY2011 Net Sales
|
|
|
Underlying
Sales (Non-GAAP)
|
~
+10% to +13%
|
|
Acq./Div./Currency
|
~ +4
pts
|
|
Net
Sales
|
~
+14% to +17%
|
|
Forecast
FY2011 Operating Profit
|
|
|
Operating
Profit (Non-GAAP)
|
~$4,195
– 4,350
|
|
Operating
Profit Margin % (Non-GAAP)
|
17.4%
- 17.7%
|
|
Interest
Expense and Other Deductions, Net
|
~($650)
|
|
Pretax
Earnings
|
~
$3,555 – 3,700
|
|
Pretax
Earnings Margin %
|
14.8%
- 15.1%
|
|
Forecast FY2011 Cash Flow
(dollars in billions)
|
|
|
Operating
Cash Flow
|
~$3.3 -
$3.5
|
|
Capital
Expenditures
|
~ ($0.6)
|
|
Free
Cash Flow (Non-GAAP)
|
~$2.7
- $2.9
|
|
Operating
Profit
|
Q1 FY10
|
Q1 FY11
|
||||||
|
Operating
Profit (Non-GAAP)
|
$ | 734 | $ | 852 | ||||
|
Operating
Profit Margin % (Non-GAAP)
|
15.2 | % | 15.4 | % | ||||
|
Other
Deductions, Net
|
92 | 78 | ||||||
|
Interest
Expense, Net
|
65 | 61 | ||||||
|
Pretax
Earnings
|
$ | 577 | $ | 713 | ||||
|
Pretax
Earnings Margin %
|
12.0 | % | 12.9 | % | ||||
###