CORRECTING and REPLACING Emerson Reports Fourth-Quarter Earnings Per Share Increase Of 12 Percent, Strong Cash Flow And Improving Business Conditions.Business Editors CORRECTION...by Emerson ST. LOUIS--(BUSINESS WIRE)--Nov. 4, 2003 In BW5433 issued Nov. 4, 2003: Eighth graph, second sentence should read: Underlying sales - excluding acquisitions, divestitures and currency effects - increased nearly 7 percent (sted: Underlying sales - excluding acquisitions, divestitures and currency effects - increased 7 percent). The corrected release reads: EMERSON REPORTS FOURTH-QUARTER EARNINGS PER SHARE INCREASE OF 12 PERCENT, STRONG CASH FLOW AND IMPROVING BUSINESS CONDITIONS; BOARD TO CONSIDER 48TH ANNUAL DIVIDEND INCREASE Emerson (NYSE NYSE See: New York Stock Exchange :EMR (ElectroMagnetic Radiation) The emanation of energy from everything in the universe. Although the EMR from electrical and electronic devices is typically measured for practical, every-day situations, every object, including humans, emanates energy. ) announced that net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for its fourth quarter ended September September: see month. 30, 2003, increased 5 percent to $3,694 million, from $3,522 million in the fourth quarter of 2002. Reported earnings per share increased 12 percent to $0.66 for the 2003 fourth quarter, from $0.59 in the prior year period. "We ended the quarter and fiscal 2003 with momentum driven by sales increases in four of five business segments for the fourth quarter and earnings increases across the company," Chief Executive David N. Farr FARR Find and Run Robot FARR Friedreich Ataxia with Retained Reflexes FARR Forward Area Alerting Radar Receiver FARR Focused Area Risk Reduction (Air Force) FARR Forward Area Refueling and Rearming said. "We strengthened the balance sheet, delivered on our objectives for gains in the global market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" , margins and cash flow, and increased capital efficiency. Emerson has focused intensely on improving competitive advantage and increasing customer value through industry-leading technology; scale advantage; global scope; solutions and services; and improved customer interfaces. This is strengthening Emerson's position in its markets and helping drive improved financial performance. "Operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. for the fourth quarter of 2003 was $840 million, a 31 percent increase over the prior-year period, and free cash flow (operating cash flow minus capital expenditures) increased 42 percent to $716 million. Strong fourth quarter performance helped average trade working capital improve from 22.8 percent of sales in the prior year to 21.2 percent of sales, and average 'days-in-the-cash-cycle' performance improved to 82 days in 2003 from 93 days in the prior year, freeing up cash for other uses." For fiscal year 2003, the company achieved sales of $14.0 billion and earnings per share of $2.59, compared with 2002 sales of $13.7 billion and earnings per share of $2.52, excluding the non-cash goodwill accounting charge related to the adoption of FAS 142 last year. Including the accounting change, for fiscal 2002 the company reported earnings per share of $0.29. Operating cash flow for fiscal year 2003 was $1.7 billion versus $1.8 billion in fiscal 2002; the lower cash flow reflects the higher pension contributions in 2003 to fund the primary pension plan. Free cash flow was in line with the prior year at $1.4 billion and exceeded earnings for the third year in a row, reflecting the company's ability to improve working capital performance and demonstrating the benefits of lean manufacturing Lean manufacturing is the production of goods using less of everything compared to mass production: less human effort, less manufacturing space, less investment in tools, and less engineering time to develop a new product. initiatives. The strong cash flow performance and further reduction in debt improved the ratio of operating cash flow to total debt from 39.9 percent a year ago to 42.0 percent for the year. "In addition to the outstanding fiscal year sales, earnings, and cash flow performance, I am pleased with the overall improvement in return on capital," Mr. Farr continued. "Return on total capital increased to 12.7 percent from 12.0 percent last year, the second yearly increase and a clear measure of the profitability improvements from restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). activities as well as fixed asset and working capital efficiency improvements. "Business activity has improved and the trends appear favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. , with underlying orders, adjusted to remove the impact of exchange rates, acquisitions and divestitures, turning positive in four of five business segments in September 2003. Emerson will continue to proceed cautiously, and plans accelerated levels of restructuring for the first half of fiscal 2004 to help generate the savings needed to offset increased pension and medical costs next year, as well as the non-recurring gains from the sale of the Dura-Line business in the third quarter of this fiscal year. "We look forward to a stronger economy in fiscal 2004 and expect increases in sales, operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: , cash flow, and earnings over fiscal year 2003. Recognizing the value of our dividend to our shareholders, management today is recommending to the board an increase in the annual dividend rate from $1.57 to $1.60 per share -- the 48th consecutive year of dividend increases." Operating Highlights Sales in the HVAC (Heating Ventilation Air Conditioning) In the home or small office with a handful of computers, HVAC is more for human comfort than the machines. In large datacenters, a humidity-free room with a steady, cool temperature is essential for the trouble-free business increased more than 9 percent to $2.6 billion in 2003, driven by continued global penetration gains, market growth and a nearly 3 percentage point favorable impact from currency. Underlying sales - excluding acquisitions, divestitures and currency effects - increased nearly 7 percent over the prior year, reflecting strong growth in Asia and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. and moderate increases in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. commercial market. HVAC earnings before interest and taxes In financial and business accounting, earnings before interest and taxes (EBIT) is a measure of a firm's profitability that excludes interest and income tax expenses.[1] EBIT = Operating Revenue – Operating Expenses + Non-operating Income increased $53 million, or 16 percent, to $386 million, primarily due to higher sales and improved margins from restructuring and increased operating efficiencies for the compressor compressor, machine that decreases the volume of air or other gas by the application of pressure. Compressor types range from the simple hand pump and the piston-equipped compressor used to inflate tires to machines that use a rotating, bladed element to achieve and heating controls businesses in 2003. This was a breakthrough year for Emerson Climate Technologies as it capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. on its strength as the premier provider of integrated solutions for compressor technology, sensors
Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth dynamics as higher efficiency regulations worldwide demand Emerson's leading solutions. Process Control sales of $3.4 billion in 2003 were comparable with the prior year. Reported sales include an almost 5 percentage point favorable impact from currency, partially offset by a nearly 3 percentage point negative impact from the Daniel Daniel, book of the Bible Daniel, book of the Bible. It combines "court" tales, perhaps originating from the 6th cent. B.C., and a series of apocalyptic visions arising from the time of the Maccabean emergency (167–164 B.C. Valve valve, device for controlling the flow of fluids (liquids and gases). Valves vary in construction and size depending upon their function. Some are classified according to their method of operation or design, e.g. and Intellution divestitures. Excluding acquisitions, divestitures and currency, underlying sales declined 2 percent due to weakness in the United States and Latin America, partially offset by moderate growth in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and
solid growth in Asia. Earnings were $388 million in 2003, compared to
$387 million in the prior year, reflecting increased sales and
profitability in the systems, solutions and measurement businesses,
offset by weakness in the valve businesses and $9 million in higher
costs for the rationalization rationalization, in psychology: see defense mechanism. of operations during the year.During the year, Emerson Process Management expanded its global presence in the process automation market with its superior systems, services, and solutions offerings. Project activity was strong throughout the year, particularly in China where significant investment is occurring in electric power, petrochemicals, oil and gas, and refining refining, any of various processes for separating impurities from crude or semifinished materials. It includes the finer processes of metallurgy, the fractional distillation of petroleum into its commercial products, and the purifying of cane, beet, and maple sugar to support growing local demand. During the fourth quarter of fiscal 2003, Emerson Process Management won a $10 million contract from Shaanxi Shaanxi (shän`shē`) or Shensi (shĕn`sē`) [west of the mountain passes], province (1994 est. pop. 34,010,000), c.76,000 sq mi (196,840 sq km), N central China. Xi'an is the capital. HanCheng Hancheng may refer to the following:
instrumentation In technology, the development and use of precise measuring, analysis, and control equipment. and control systems for the first 600-megawatt power plant in the Northwest China Shaanxi Province. The cornerstone cornerstone Ceremonial building block, dated or otherwise inscribed, usually placed in an outer wall of a building to commemorate its dedication. Often the stone is hollowed out to contain newspapers, photographs, or other documents reflecting current customs, with a view to of this project is installation of Emerson's PlantWeb(R) digital plant architecture and the Ovation(R) information and control system that will help increase generating efficiency and reduce maintenance costs. Sales in the Industrial Automation business increased 4 percent to $2.6 billion in 2003, reflecting a 7 percentage point favorable impact from currency, partially offset by a negative 1 percentage point impact from divestitures. An almost 2 percent decline in underlying sales reflects weakness in industrial activity in the United States, partially offset by modest international sales growth, led by strength in Asia and growth in Europe. Most end markets have begun to stabilize stabilize See peg. which, along with the benefits from restructuring, helped drive double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. earnings growth in the segment. Margin improvements in the fluid control valves Control valves are valves used within industrial plants and elsewhere to control operating conditions such as temperature, pressure, flow, and liquid level by fully or partially opening or closing in response to signals received from controllers that compare a "setpoint" to a , variable-speed drives and materials joining businesses, as well as $13 million lower rationalization costs, led to an 11 percent increase in earnings to $330 million in 2003 from $297 million in 2002. The Electronics and Telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. business reported sales of $2.3 billion in 2003, down 6 percent from 2002. Underlying sales, excluding a 2 percentage point impact from divestitures and a 3 percentage point favorable impact from currency, fell 7 percent, reflecting significant declines in most major geographic regions, except Asia and Latin America which turned positive in the fourth quarter. The significant restructuring efforts in this business are paying off and continuing to help drive margins higher. Despite lower sales volume, earnings increased $49 million, or 41 percent, to $168 million in 2003, primarily driven by the precision cooling and power systems business and $25 million lower rationalization costs in the current year. Emerson Network Power provides a full spectrum of reliable power solutions to telecommunications networks A telecommunications network is a of telecommunications links and nodes arranged so that messages may be passed from one part of the network to another over multiple links and through various nodes. , data centers, and health care and industrial facilities worldwide, and recently introduced backup power An additional power source that can be used in the event of power failure. See UPS and backup.  A Half Minute of Backup This roomful of lead acid batteries stands ready to drain itself entirely in less than a minute. technology for homeowners and small businesses. This business has strengthened its position through the year with a continued focus on restructuring initiatives, engineering and technology investments, and international expansion and is well positioned for the future. The Appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. and Tools business sales were $3.5 billion in 2003, compared to $3.4 billion in the prior year. Sales reflect a 3 percent decline in underlying sales, which was offset by a 2 percentage point favorable impact from currency and an almost 1 percentage point impact from acquisitions. Earnings increased 5 percent to $479 million from $456 million in 2002, primarily driven by the disposer dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. , residential storage and plumbing plumbing, piping systems inside buildings for water supply and sewage. The Romans had a highly developed plumbing system; water was brought to Rome by aqueducts and distributed to homes in lead pipes—hence the name plumbing from the Latin word plumbum tools businesses and $13 million lower costs for rationalization compared to the prior year, partially offset by weakness in the motors business. Residential storage products sales continued to show strength, driven by new product offerings, innovative Web-enabled design and support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services , and favorable market conditions. The motors and appliance component business sales declined moderately, while the construction and tools business sales declined slightly, partially resulting from Emerson's exit from the manufacturing of power woodworking tools. Emerson made the strategic business decision to discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: the manufacture of bench top and stationary Stationary can mean:
tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. Home Depot's long-term product requirements and has experienced tremendous success with the initial introduction of new products under the RIDGID brand. Upcoming Investor Events On Tuesday Tuesday: see week. , November November: see month. 4, 2003 at 2 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. (1 p.m. CST CST abbr. 1. Central Standard Time 2. convulsive shock treatment CST Central Standard Time Noun 1. ), Emerson senior management will discuss the quarterly and annual results during an investor conference call. All interested parties may listen to the live conference call via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the by going to the Investor Relations Investor relations The process by which the corporation communicates with its investors. area of Emerson's Web site at www.gotoemerson.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 Web site. Details of upcoming events will be posted as they occur in the Investor Relations Calendar of Events on the corporate Web site. On Thursday Thursday: see week. morning, January January: see month. 22, 2004, Emerson senior management will host Emerson's annual investment community update meeting. The meeting will be at the Hotel Inter-Continental in midtown mid·town n. A central portion of a city, between uptown and downtown. midtown Noun US & Canad the centre of a town New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. . Additional details will be available in December December: see month. . Forward-Looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and Cautionary Statements Statements in this release that are not strictly historical may be "forward-looking" statements, which involve risks and uncertainties. These 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed with the SEC.
TABLE 1
EMERSON AND SUBSIDIARIES
CONSOLIDATED OPERATING RESULTS
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
Quarter Ended September 30, Percent
2002 2003 Change
Net sales $3,522 $3,694 4.9%
Less: Costs and expenses
Cost of sales 2,290 2,400
SG&A expenses 729 753
Other deductions, net 67 79
Interest expense, net 53 56
Earnings from continuing operations
before income taxes 383 406 5.9%
Income taxes 126 130
Earnings from continuing operations 257 276 7.8%
Net gain (loss) from discontinued
operations (8) -
Net earnings $249 $276 11.2%
Diluted earnings per common share:
Earnings from continuing operations $0.61 $0.66 8.2%
Discontinued operations (0.02) -
Diluted earnings per common share $0.59 $0.66 11.9%
Quarter Ended September 30,
2002 2003
Other deductions, net
Gains from divestitures $(7) $-
Impairment - -
Rationalization of operations 41 41
Amortization of intangibles 7 5
Other 26 33
Total $67 $79
Note: Prior period Dura-Line results have been reclassified to
discontinued operations.
TABLE 2
EMERSON AND SUBSIDIARIES
CONSOLIDATED OPERATING RESULTS
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
Year Ended September 30, Percent
2002 2003 Change
Net sales $13,748 $13,958 1.5%
Less: Costs and expenses
Cost of sales 8,939 9,060
SG&A expenses 2,904 2,935
Other deductions, net 82 318
Interest expense, net 233 231
Earnings from continuing operations
before income taxes 1,590 1,414 (11.1%)
Income taxes 514 401
Earnings from continuing operations 1,076 1,013 (5.8%)
Net gain (loss) from discontinued
operations (16) 76
Earnings before cumulative effect
of change in accounting principle 1,060 1,089
Cumulative effect of change in
accounting principle, net of tax (938) -
Net earnings $122 $1,089
Diluted earnings per common share:
Earnings from continuing operations $2.56 $2.41 (5.9%)
Discontinued operations (0.04) 0.18
Cumulative effect of change in
accounting principle (2.23) -
Diluted earnings per common share $0.29 $2.59
Year Ended September 30,
2002 2003
Other deductions, net
Gains from divestitures $(231) $(24)
Impairment - 54
Rationalization of operations 190 141
Amortization of intangibles 26 17
Other 97 130
Total $82 $318
Note: The current and prior period Dura-Line results have been
reclassified to discontinued operations, including gain on sale.
TABLE 3
EMERSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
September 30,
2002 2003
Assets
Cash and equivalents $381 $696
Receivables, net 2,513 2,650
Inventories 1,624 1,558
Other current assets 443 596
Total current assets 4,961 5,500
Property, plant & equipment, net 3,116 2,962
Goodwill 4,910 4,942
Other 1,558 1,790
$14,545 $15,194
Liabilities and Stockholders' Equity
Short-term borrowings and current
maturities of long-term debt $1,560 $391
Accounts payable 1,268 1,397
Accrued expenses 1,448 1,513
Income taxes 124 116
Total current liabilities 4,400 3,417
Long-term debt 2,990 3,733
Other liabilities 1,414 1,584
Stockholders' equity 5,741 6,460
$14,545 $15,194
TABLE 4
EMERSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN MILLIONS)
Year Ended September 30,
2002 2003
Operating Activities
Net earnings $122 $1,089
Cumulative effect of change in
accounting principle 938 -
Depreciation and amortization 541 534
Changes in operating working capital 432 266
Pension funding (169) (308)
Gains from divestitures and other (46) 150
Net cash provided by operating activities 1,818 1,731
Investing Activities
Capital expenditures (384) (337)
Purchases of businesses, net of cash
and equivalents acquired (754) (6)
Divestitures of businesses and other, net 257 39
Net cash used in investing activities (881) (304)
Financing Activities
Net decrease in short-term borrowings (975) (1,232)
Proceeds from long-term debt 751 746
Principal payments on long-term debt (38) (17)
Treasury stock, net (20) 11
Dividends paid (652) (661)
Net cash used in financing activities (934) (1,153)
Effect of exchange rate changes on cash
and equivalents 22 41
Increase in cash and equivalents 25 315
Beginning cash and equivalents 356 381
Ending cash and equivalents $381 $696
TABLE 5
EMERSON AND SUBSIDIARIES
SEGMENT SALES AND EARNINGS
(DOLLARS IN MILLIONS)
Quarter Ended September 30,
2002 2003
Sales
Process Control $912 $953
Industrial Automation 624 671
Electronics and Telecommunications 625 619
Heating, Ventilating, and Air Conditioning 597 676
Appliance and Tools 861 862
3,619 3,781
Discontinued operations (16) -
Eliminations (81) (87)
Continuing operations $3,522 $3,694
Quarter Ended September 30,
2002 2003
Earnings
Process Control $110 $130
Industrial Automation 73 82
Electronics and Telecommunications 38 70
Heating, Ventilating, and Air Conditioning 69 101
Appliance and Tools 105 125
395 508
Discontinued operations 12 -
Differences in accounting methods 38 31
Corporate and other (9) (77)
Interest expense, net (53) (56)
Earnings from continuing operations
before income taxes $383 $406
Quarter Ended September 30,
2002 2003
Rationalization of operations
Process Control $7 $11
Industrial Automation 8 6
Electronics and Telecommunications 25 7
Heating, Ventilating, and Air Conditioning 12 3
Appliance and Tools 19 8
Corporate (22) 6
Discontinued operations (8) -
Total Emerson $41 $41
Note: The electronics and telecommunications segment sales and
earnings for the prior period include results of discontinued
operations.
TABLE 6
EMERSON AND SUBSIDIARIES
SEGMENT SALES AND EARNINGS
(DOLLARS IN MILLIONS)
Year Ended September 30,
2002 2003
Sales
Process Control $3,396 $3,394
Industrial Automation 2,500 2,600
Electronics and Telecommunications 2,465 2,316
Heating, Ventilating, and Air Conditioning 2,389 2,614
Appliance and Tools 3,437 3,453
14,187 14,377
Discontinued operations (76) (41)
Eliminations (363) (378)
Continuing operations $13,748 $13,958
Year Ended September 30,
2002 2003
Earnings
Process Control $387 $388
Industrial Automation 297 330
Electronics and Telecommunications 119 168
Heating, Ventilating, and Air Conditioning 333 386
Appliance and Tools 456 479
1,592 1,751
Discontinued operations 25 12
Differences in accounting methods 149 127
Corporate and other 57 (245)
Interest expense, net (233) (231)
Earnings from continuing operations
before income taxes $1,590 $1,414
Year Ended September 30,
2002 2003
Rationalization of operations
Process Control $27 $36
Industrial Automation 33 20
Electronics and Telecommunications 71 39
Heating, Ventilating, and Air Conditioning 26 20
Appliance and Tools 49 36
Corporate 1 (2)
Discontinued operations (17) (8)
Total Emerson $190 $141
Note: The electronics and telecommunications segment sales and
earnings include results of discontinued operations.
TABLE 7
Reconciliations of Non-GAAP Financial Measures
The following reconciles each non-GAAP measure with the most directly
comparable GAAP measure (dollars in millions):
Percent
2002 2003 Change
Fourth Quarter Cash Flow
Operating Cash Flow $640 $840 31.4%
Capital Expenditures 133 124
Free Cash Flow (Non-GAAP) $507 $716 41.6%
Fiscal 2003 Cash Flow
Operating Cash Flow $1,818 $1,731 (4.8%)
Capital Expenditures 384 337
Free Cash Flow (Non-GAAP) $1,434 $1,394 (2.7%)
All amounts above are GAAP financial measures except as noted.
TABLE 8
Restated to Exclude Discontinued Operations
FY 2003 Other (income) deductions,
net: 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Gains from divestitures $(15) $- $(9) $-
Impairment - - 54 -
Rationalization of operations 27 30 43 41
Amortization of intangibles 5 3 4 5
Other 28 34 35 33
Total $45 $67 $127 $79
FY 2003 Rationalization 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Process Control $5 $7 $13 $11
Industrial Automation 5 4 5 6
Electronics and Telecommunications 7 18 7 7
HVAC 4 7 6 3
Appliance and Tools 6 6 16 8
Corporate 2 (6) (4) 6
Discontinued operations (2) (6) - -
Total Emerson $27 $30 $43 $41
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