Emerson Reports First Quarter Fiscal 2002 Results; Free Cash Flow Increases By 25 Percent.Business Editors ST. LOUIS--(BUSINESS WIRE)--Feb. 5, 2002 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 today that for the first quarter of fiscal 2002 ended December December: see month. 31, 2001, the company achieved sales of $3.3 billion, net earnings of $255 million, earnings per share of $0.61, and 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. of $252 million. Free cash flow increased 25 percent versus the first quarter of fiscal 2001, from $127 million to $158 million, driven by improvements in working capital and lower capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. . In the first quarter of fiscal 2001, Emerson reported sales of $3.9 billion, net earnings of $357 million, earnings per share of $0.83, and operating cash flow of $277 million. Commenting on the quarter results, 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 , chief executive officer, reiterated remarks made January January: see month. 17 at the company's annual investor meeting in 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. , "The first quarter was challenging due both to weak economic conditions and the actions of key customers who reduced their inventories and production. However, we have seen evidence of stabilization Stabilization The action undertakes a country when it buys and sells its own currency to protect its exchange value. Actions registered competitive traders undertake by on the NYSE to meet the exchange requirement that 75% of their traded be stabilizing, meaning that sell orders across many of our early-cycle businesses, and are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op we will see steady improvement in business conditions as the year progresses. "Important early indicators include our consumer-based tools and appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. businesses, which have shown solid results since early December. In the electronics and telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. business, embedded Inserted into. See embedded system. power conversion products, which were an early indicator of the telecom and computing computing - computer downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. , have also been relatively stable for several weeks. "In addition, the process business has continued to perform well on top of an outstanding 2001 performance, driven by our industry-leading PlantWeb technology." Farr continued, "Our major emphasis continues to be on implementing 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). actions for cost structure improvements. We are reducing salaried headcount, closing and consolidating facilities, and discontinuing certain product areas that have not met growth and profitability expectations. At the same time, we have continued to fund important long-term Long-term 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 initiatives, including using this downturn to extend our leadership in key technologies." Business Segment Highlights Discussing the business segments, Farr said, "The process control business reported a 3 percent increase in sales, reaching $796 million. Underlying growth, excluding acquisitions, divestitures and unfavorable currency exchange, was approximately 5 percent - building on the 10 percent growth achieved in fiscal 2001. PlantWeb (www.EmersonProcess.com/PlantWeb) digital plant architecture continues to gain acceptance, with over 2,200 project wins across the oil and gas, pharmaceutical, chemical, pulp and paper, and food and beverage F&B is a common abbreviation in the United States and Commonwealth countries, including Hong Kong. F&B is typically the widely accepted abbreviation for "Food and Beverage," which is the sector/industry that specializes in the conceptualization, the making of, and delivery of foods. industries. During December, we were awarded two major contracts totaling over $25 million each, including a $32 million, multi-stage automation upgrade of the Shell Deer Park Deer Park. 1 Uninc. village (1990 pop. 28,840), Babylon town, Suffolk co., SE N.Y., a primarily residential suburb on Long Island. 2 City (1990 pop. 27,652), Harris co., SE Tex. refinery. Recognizing our technology leadership, Control magazine, in its January 2002 survey of end users, ranked Emerson Process Management the highest overall among process industry solutions providers. Emerson was voted 'Best in Class' for a total of 21 product and software rankings - including, for the first time, a number one ranking in large-scale systems. "In electronics and telecommunications, sales declined to $635 million from $1,087 million due to the continued worldwide weakness in telecom and computing equipment. We've taken aggressive actions to deal with the market downturn, and this segment remained profitable despite the sharp decline. Our recent acquisition of Avansys, China's leading power electronics company, enables many of the cost actions, and it has provided important infrastructure to strengthen our global market leadership. "Sales in the heating, ventilating ventilating Natural or mechanically induced movement of fresh air into or through an enclosed space. The hazards of poor ventilation were not clearly understood until the early 20th century. Expired air may be laden with odors, heat, gases, or dust. and air conditioning air conditioning, mechanical process for controlling the humidity, temperature, cleanliness, and circulation of air in buildings and rooms. Indoor air is conditioned and regulated to maintain the temperature-humidity ratio that is most comfortable and healthful. business decreased by approximately 12 percent as many of our key customers took aggressive actions to reduce their inventory and costs in the quarter. We believe this segment is well positioned for future growth, with relatively low channel inventory levels and several new opportunities for our Copeland Scroll compressor A scroll compressor, also known as scroll pump and scroll vacuum pump, uses two interleaved spiral-like vanes to pump or compress fluids such as liquids and gases. The vane geometry may be involute, archimedean spiral, or hybrid curves. technology. "Sales in the industrial automation business declined from $753 million to $656 million, driven by continued weakness in capital goods Capital Goods Any goods used by an organization to produce other goods. Notes: Examples of capital goods include office buildings, equipment, and machinery. See also: Capital Expenditure, Disinvestment Capital goods in both 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 Europe. During the quarter, Emerson divested the Chromalox industrial heating products division, which resulted in a pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern gain of $85 million. The impact of this gain was approximately offset by ongoing costs for the rationalization rationalization, in psychology: see defense mechanism. of operations and other items. "Sales for the appliance and tools business declined 6 percent, primarily due to weakness in the industrial sector. Demand for consumer-based products improved throughout the quarter, with In-Sink- Erator waste disposers, ClosetMaid storage solutions and several appliance components products posting moderate to strong growth. Financial Highlights "Despite the economic environment, Emerson continues to be financially strong," Farr said. "The 25 percent increase in free cash flow is indicative of the successes we are achieving in 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. and e-business productivity. The reduction of capital spending to under $100 million for the quarter was also an important driver of cash flow growth. "The company's balance sheet also remains solid. Net debt to net capital was approximately 44 percent at the end of the quarter, with interest coverage at 6.3 times." Farr added, "Solid cash generation and lower levels of acquisitions and stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. throughout the remainder of 2002 are expected to decrease our debt position." Adoption of FAS 142 During the quarter, Emerson adopted FAS 142 regarding goodwill amortization, which increases the company's reported fiscal 2002 earnings by $0.35, or approximately $0.09 per quarter. The change also immediately reduces Emerson's effective tax rate by approximately 3 percentage points, due to the non-deductible nature of goodwill. 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 SEC filings.
EMERSON AND SUBSIDIARIES
CONSOLIDATED OPERATING RESULTS
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
Quarter Ended December 31, Percent
2001 2000 Change
Net sales $3,294.8 $3,919.5 (15.9%)
Less: Costs and expenses
Cost of sales 2,124.7 2,531.5 -
SG&A expenses 747.9 774.0 -
Interest expense 70.1 83.6 -
Other (income) deductions, net (16.1) (13.7) -
Income before income taxes 368.2 544.1 (32.3%)
Income taxes 113.5 186.7 -
Net earnings $ 254.7 $ 357.4 (28.7%)
Basic earnings per common share $0.61 $0.84 (27.4%)
Diluted earnings per common share $0.61 $0.83 (26.5%)
EMERSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
December 31,
2001 2000
Assets
Cash and equivalents $ 467.4 $ 359.7
Receivables, net 2,447.9 2,742.9
Inventories 1,877.7 2,217.6
Other current assets 465.8 465.5
Total current assets 5,258.8 5,785.7
Property, plant & equipment, net 3,203.6 3,263.2
Goodwill 5,757.2 5,300.2
Other 1,278.5 1,164.8
$15,498.1 $15,513.9
Liabilities and Stockholders' Equity
Short-term borrowings and current
maturities of long-term debt $ 2,684.9 $ 2,447.1
Accounts payable 986.5 1,185.2
Accrued expenses 1,374.7 1,397.6
Income taxes 160.0 371.5
Total current liabilities 5,206.1 5,401.4
Long-term debt 2,746.9 2,278.7
Other liabilities 1,303.5 1,269.4
Stockholders' equity 6,241.6 6,564.4
$15,498.1 $15,513.9
EMERSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
Quarter Ended December 31,
2001 2000
Operating Activities
Net earnings $ 254.7 $ 357.4
Depreciation and amortization 130.7 171.4
Changes in operating working capital (71.2) (199.5)
Gains on divestitures and other (62.6) (52.2)
Net cash provided by operating
activities 251.6 277.1
Investing Activities
Capital expenditures (93.7) (150.3)
Purchases of businesses, net of
cash and equivalents acquired (712.5) (55.3)
Divestitures of businesses and
other, net 152.5 52.2
Net cash used in investing
activities (653.7) (153.4)
Financing Activities
Net increase in short-term
borrowings 197.4 86.2
Proceeds from long-term debt 501.1 44.8
Principal payments on long-term debt (5.7) (11.4)
Dividends paid (162.8) (164.0)
Treasury stock, net (18.0) 3.1
Net cash provided by (used in)
financing activities 512.0 (41.3)
Effect of exchange rate changes on cash
and equivalents 1.8 (3.5)
Increase (decrease) in cash and
equivalents 111.7 78.9
Beginning cash and equivalents 355.7 280.8
Ending cash and equivalents $ 467.4 $ 359.7
EMERSON AND SUBSIDIARIES
SEGMENT SALES AND PROFITS
(DOLLARS IN MILLIONS)
Quarter Ended December 31,
2001 2000
Sales
Process Control $ 796.4 $ 774.4
Industrial Automation 656.4 752.7
Electronics and Telecommunications 634.5 1,086.6
Heating, Ventilating and Air
Conditioning 458.5 519.7
Appliance and Tools 831.1 880.5
3,376.9 4,013.9
Eliminations (82.1) (94.4)
Total Emerson $3,294.8 $3,919.5
Quarter Ended December 31,
2001 2000
Earnings
Process Control $ 84.9 $ 66.9
Industrial Automation 84.6 107.0
Electronics and Telecommunications 32.6 147.6
Heating, Ventilating and Air
Conditioning 58.6 74.7
Appliance and Tools 103.0 135.6
363.7 531.8
Differences in accounting methods 38.9 48.1
Interest income, corporate and other 35.7 47.8
Interest expense (70.1) (83.6)
Income before income taxes $ 368.2 $ 544.1
In connection with the adoption of FAS 142, fiscal 2002 segment earnings exclude goodwill amortization. Fiscal 2001 segment earnings include goodwill amortization as follows (in millions): Process Control $14; Industrial Automation $6; Electronics and Telecommunications $14; Heating, Ventilating and Air Conditioning $3; and Appliance and Tools $4. SOURCE: Emerson |
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