Emerson Reports Second-Quarter EPS of $0.65; $3.4 Billion In Sales; Operating Cash Flow Up 11 Percent.Business Editors ST. LOUIS--(BUSINESS WIRE)--May 2, 2002 Sales, Operating Margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: , Earnings, And Cash Flow Increase Sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen Versus First Quarter 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 second quarter ended March 31, 2002, the company achieved sales of $3.4 billion, net earnings of $275 million, and earnings per share of $0.65. 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. was $438 million, an increase of 11 percent over the second quarter of fiscal 2001, driven by strong improvements in working capital. Free cash flow increased 41 percent versus the second quarter of fiscal 2001, from $255 million to $360 million, reflecting the improved operating cash flow 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. . Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. , operating cash flow increased 2 percent, to $690 million, and free cash flow was $518 million, an increase of 36 percent over the prior year. In the second quarter of fiscal 2001, Emerson reported sales of $4.1 billion, net earnings of $359 million, earnings per share of $0.83 ($0.92 excluding goodwill amortization), and operating cash flow of $396 million. Commenting on the 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, said, "While our end markets remain well below year-ago levels, we achieved a 4 percent sequential One after the other in some consecutive order such as by name or number. improvement in quarterly sales, and order activity over the past few months is encouraging. We are seeing stable-to-increasing demand in industrial automation and electronics and telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. , segments that were hardest hit by the 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. . Backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. in the process business remains well above a year ago, and consumer housing-based sales have also remained strong. While no one can predict how the recovery will unfold unfold - inline , continuation of these trends would enable us to achieve further sequential sales improvements as the year progresses. "We also achieved a 0.8 point operating margin increase versus the first quarter, driven by higher sales volume and 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). efforts across the company. We are targeting further strong quarterly margin improvements for the remainder of the year as the results of our cost actions continue to flow through. Earnings per share increased 7 percent from the first quarter, and with the improved sales and profitability, we expect continued sequential growth throughout the year. Operating cash flow and free cash flow should also continue at high levels. "While cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. has been a key focus over the past year, we have maintained our commitment to strategic technology investments and key growth initiatives. Each of our business segments is strong, and industry data show we are outperforming key competitors. In many cases, this is because of our sustained investment in next-generation technologies that are literally changing their industries, such as PlantWeb process automation architecture and Scroll compressors 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. . This positions Emerson for strong performance as the economy improves." Business Segment Highlights Discussing the business segments, Farr said, "The process control business reported sales of $837 million, a reduction of 2 percent versus a year ago. Underlying sales, excluding the Xomox industrial valves divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). , acquisitions and currency exchange, increased 2 percent on top of a double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. core increase a year ago. "The increase in underlying sales was led by 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 solid 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). . PlantWeb
(www.EmersonProcess.com/PlantWeb) has been a key factor behind our
continued success, enabling us recently to win several large projects.
Since the beginning of the year, Emerson Process Management has won more
than $180 million in major projects. The vast majority of the revenue
for these will be realized later in 2002 and in 2003, providing positive
momentum into these periods."Sales in the electronics and telecommunications business were $591 million for the quarter, a decline of 7 percent from the first quarter and 42 percent from a year ago. We have taken aggressive restructuring actions to respond to the weakened weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. market environment,
allowing us to maintain positive earnings at lower volume levels. This
business should realize strong profitability improvement as demand
returns."During the quarter, Emerson divested its ENI solid-state sol·id-state adj. Based on or consisting chiefly or exclusively of semiconducting materials, components, and related devices. solid-state Adjective power supplies business in exchange for 12 million shares of MKS (Mortice Kern Systems Inc., Waterloo, Ontario, www.mks.com) A software company that specializes in programming tools and utilities for a variety of platforms. For example, its RCS system for Windows, OS/2 and Unix is a version control software package. Instruments, resulting in a pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern gain of $93 million. The impact of this gain was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. offset by ongoing costs for the rationalization rationalization, in psychology: see defense mechanism. of operations and other items. "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. sales decreased by 6 percent to $641 million, driven by lower commercial and industrial capital spending. In this business, we have excellent visibility into residential inventory levels, which continue at record low levels at customers and distributors. Second-half sales will be driven by inventory replenishment replenishment the addition of an appropriate quantity of properly prepared solution containing the correct concentration of chemicals to the developer solutions used in radiography. and summer weather, which are expected to provide solid growth. "Sales in the industrial automation segment declined from $760 million to $600 million in the second quarter of fiscal 2002, reflecting continued weakness in the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. and U.S. industrial 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 markets, divestitures, and unfavorable currency exchange. "Sales for the appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. and tools business declined 6 percent to $847 million, due primarily to softness in commercial and industrial motors and tools. Sales in appliance components again improved, driven by strong housing growth. Consumer housing-related businesses have continued to show strength, with ClosetMaid storage solutions achieving a double-digit sales increase for the quarter." Financial Highlights Farr continued, "Our focus on working capital efficiency and cash flow continues to generate results, and our balance sheet is strong. Inventory and accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying decreased by $461 million and $348 million, respectively, from a year ago, lowering working capital and increasing available cash. Net debt to net capital was 43 percent at the end of the quarter, and interest coverage was at 6.9 times for the six months ended March 31, 2002. We expect to further reduce debt this year, with solid cash generation and lower levels of acquisition." Earlier this year 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 reduces Emerson's effective tax rate by approximately 2.5 percentage points. As the company has indicated, in conjunction with the adoption of FAS 142, Emerson expects to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. in fiscal 2002 a non-cash accounting charge of approximately 5 percent of total assets. Statements in this release that are not strictly historical may be "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. " 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 March 31, Percent
2001 2002 Change
Net sales $4,103.3 $3,420.8 (16.6%)
Less: Costs and expenses
Cost of sales 2,652.5 2,232.1
SG&A expenses 790.0 724.3
Interest expense 79.3 61.8
Other deductions (income), net 36.1 (2.0)
Income before income taxes 545.4 404.6 (25.8%)
Income taxes 186.7 129.9
Net earnings $ 358.7 $ 274.7 (23.4%)
Basic earnings per common share $0.84 $0.65 (22.6%)
Diluted earnings per common share $0.83 $0.65 (21.7%)
Six Months Ended March 31, Percent
2001 2002 Change
Net sales $8,022.8 $6,715.6 (16.3%)
Less: Costs and expenses
Cost of sales 5,184.0 4,356.8
SG&A expenses 1,564.0 1,472.2
Interest expense 162.9 131.9
Other deductions (income), net 22.4 (18.1)
Income before income taxes 1,089.5 772.8 (29.1%)
Income taxes 373.4 243.4
Net earnings $ 716.1 $ 529.4 (26.1%)
Basic earnings per common share $1.68 $1.26 (25.0%)
Diluted earnings per common share $1.66 $1.26 (24.1%)
EMERSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
March 31,
2001 2002
Assets
Cash and equivalents $ 403.6 $ 448.1
Receivables, net 2,879.5 2,531.4
Inventories 2,211.8 1,750.6
Other current assets 454.4 467.5
Total current assets 5,949.3 5,197.6
Property, plant & equipment, net 3,302.6 3,124.7
Goodwill 5,325.4 5,729.4
Other 1,160.0 1,482.1
--------- ---------
$15,737.3 $15,533.8
Liabilities and Stockholders' Equity
Short-term borrowings and current
maturities of long-term debt $ 2,521.4 $ 2,513.7
Accounts payable 1,263.9 1,032.0
Accrued expenses 1,462.6 1,363.1
Income taxes 260.4 185.4
Total current liabilities 5,508.3 5,094.2
Long-term debt 2,279.2 2,738.4
Other liabilities 1,269.3 1,329.6
Stockholders' equity 6,680.5 6,371.6
--------- ---------
$15,737.3 $15,533.8
EMERSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
Six Months Ended March 31,
2001 2002
Operating Activities
Net earnings $ 716.1 $ 529.4
Depreciation and amortization 352.2 268.9
Changes in operating working capital (287.8) (6.9)
Gains on divestitures and other (107.0) (101.4)
Net cash provided by operating
activities 673.5 690.0
Investing Activities
Capital expenditures (291.2) (172.0)
Purchases of businesses, net of cash
and equivalents acquired (139.0) (718.3)
Divestitures of businesses and
other, net 42.3 133.0
Net cash used in investing
activities (387.9) (757.3)
Financing Activities
Net increase in short-term borrowings 183.0 5.9
Proceeds from long-term debt 40.1 500.9
Principal payments on long-term debt (21.9) (9.7)
Dividends paid (328.1) (325.9)
Net purchases of treasury stock (37.2) (6.7)
Net cash (used in) provided by
financing activities (164.1) 164.5
Effect of exchange rate changes on
cash and equivalents 1.3 (4.8)
Increase in cash and equivalents 122.8 92.4
Beginning cash and equivalents 280.8 355.7
Ending cash and equivalents $ 403.6 $ 448.1
EMERSON AND SUBSIDIARIES
SEGMENT SALES AND PROFITS
(DOLLARS IN MILLIONS)
Quarter Ended March 31,
2001 2002
Sales
Process Control $ 849.9 $ 836.5
Industrial Automation 760.4 600.4
Electronics and Telecommunications 1,025.2 590.9
Heating, Ventilating and Air
Conditioning 683.1 640.7
Appliance and Tools 900.3 847.1
------- -------
4,218.9 3,515.6
Eliminations (115.6) (94.8)
Total Emerson $4,103.3 $3,420.8
Quarter Ended March 31,
2001 2002
Earnings
Process Control $ 81.2 $ 94.9
Industrial Automation 106.2 67.8
Electronics and Telecommunications 131.2 18.2
Heating, Ventilating and Air
Conditioning 106.4 95.1
Appliance and Tools 132.2 116.3
----- -----
557.2 392.3
Differences in accounting methods 49.6 33.3
Interest, corporate and other 17.9 40.8
Interest expense (79.3) (61.8)
Income before income taxes $ 545.4 $ 404.6
In connection with the adoption of FAS 142, fiscal 2002 segment
earnings exclude goodwill amortization. Second quarter of fiscal 2001
segment earnings include goodwill amortization as follows (in
millions): Process Control $14; Industrial Automation $7; Electronics
and Telecommunications $13; Heating, Ventilating and Air Conditioning
$4; and Appliance and Tools $4.
EMERSON AND SUBSIDIARIES
SEGMENT SALES AND PROFITS
(DOLLARS IN MILLIONS)
Six Months Ended March 31,
2001 2002
Sales
Process Control $1,624.3 $1,632.9
Industrial Automation 1,513.1 1,256.8
Electronics and Telecommunications 2,111.8 1,225.4
Heating, Ventilating and Air
Conditioning 1,202.8 1,099.2
Appliance and Tools 1,780.8 1,678.2
------- -------
8,232.8 6,892.5
Eliminations (210.0) (176.9)
Total Emerson $8,022.8 $6,715.6
Six Months Ended March 31,
2001 2002
Earnings
Process Control $ 148.1 $ 179.8
Industrial Automation 213.2 152.4
Electronics and Telecommunications 278.8 50.8
Heating, Ventilating and Air
Conditioning 181.1 153.7
Appliance and Tools 267.8 219.3
------- ------
1,089.0 756.0
Differences in accounting methods 97.7 72.2
Interest, corporate and other 65.7 76.5
Interest expense (162.9) (131.9)
Income before income taxes $1,089.5 $772.8
In connection with the adoption of FAS 142, fiscal 2002 segment
earnings exclude goodwill amortization. First six months of fiscal
2001 segment earnings include goodwill amortization as follows (in
millions): Process Control $28; Industrial Automation $13; Electronics
and Telecommunications $27; Heating, Ventilating and Air Conditioning
$7; and Appliance and Tools $8.
SOURCE: Emerson |
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