Emerson Reports Strong Second-Quarter 2006 Results.ST. LOUIS -- 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. ): --Sales increased 15 percent to $4.9 billion --Earnings per share increased 27 percent to $1.05 --Operating cash flow increased 24 percent to $549 million --Full year 2006 earnings per share target raised to $4.25 to $4.35 Emerson (NYSE: EMR) announced 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 the second quarter ended March 31, 2006 were $4.9 billion, an increase of 15 percent over the $4.2 billion reported in the prior year. Net earnings for the second quarter increased 25 percent to $434 million, or $1.05 per share. This represents a 27 percent increase in earnings per share from the $0.83 earned in the same period last year. For the six months ended March 31, 2006 sales were $9.4 billion, a 15 percent increase from the same period last year. This helped to generate earnings per share of $2.01 for the first six months of 2006, a 31 percent increase from the prior year. The Company achieved underlying sales growth of 14 percent in the quarter, excluding the impact of unfavorable exchange rates (2 percent) and growth from acquisitions (3 percent). This exceptional sales growth demonstrates the superior growth profile of Emerson's businesses, with sales growth in all five business segments and double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. increases from four of the five segments, as shown below:
Quarter Ended
March 31,
(dollars in millions) 2005 2006 % Change
------- ------- ---------
Sales:
Process Management $1,009 $1,143 13%
Industrial Automation 799 931 17%
Network Power 765 1,004 31%
Climate Technologies 775 852 10%
Appliance and Tools 1,011 1,072 6%
------- -------
4,359 5,002
Eliminations (132) (150)
------- -------
Net Sales $4,227 $4,852 15%
======= =======
"Emerson's second quarter performance is a continuation continuation - continuation passing style of the very strong results achieved over the last year and is due to our continued focus on the eight strategic initiatives that are driving exceptional organic growth," said 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 , chairman, chief executive officer and president. "Global economic conditions continue to provide a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. background for Emerson's businesses. Our solid strategic position across the markets we serve and the dedication of thousands of employees all over the world helped make these great results possible," Farr said. "Our second quarter operating profit margin Operating profit margin The ratio of operating profit to net sales. improved to 15.0 percent from 14.4 percent in the prior period. Margins improved in four of the five business segments, largely as a result of leverage on the volume increases and benefits from prior 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, which were partially offset by higher pension costs. Pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern margins improved to 12.9 percent from 11.8 percent in the prior period. Emerson's procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. organization is sharply focused on containing the inflationary in·fla·tion·ar·y adj. Of, associated with, or tending to cause inflation: inflationary prices; inflationary policies. Adj. 1. pressures on key commodities, namely steel, copper, and aluminum. This continues to be a challenge and requires that we initiate INITIATE. A right which is incomplete. By the birth of a child, the husband becomes tenant by the curtesy initiate, but his estate is not consummate until the death of the wife. 2 Bouv. Inst. n. 1725. selective price increases in order to help offset material increases." Segment Highlights --The strength of the Process Management offering is shown by the continued strong order growth, which we have converted into strong sales performance over the last 18 months. During the second quarter, Process Management was awarded a contract 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. to provide automated au·to·mate v. au·to·mat·ed, au·to·mat·ing, au·to·mates v.tr. 1. To convert to automatic operation: automate a factory. 2. control systems for three BP refinery upgrades and also entered a seven-year agreement with Suncor to automate To turn a set of manual steps into an operation that goes by itself. See automation. its North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. facilities. --Industrial Automation experienced very strong growth in the quarter, with favorable dynamics in all major geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. regions, especially the United States and 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). . Robust activity in the oil,
gas, mining, and metals markets drove growth in the alternator alternator: see generator. alternator Source of direct electric current in modern vehicles for ignition, lights, fans, and other uses. The electric power is generated by an alternator mechanically coupled to the engine, with a rotor field coil , electrical distribution, and mechanical power transmission businesses. --Network Power had another exceptional quarter as the leverage of a 31 percent increase in sales to the computing computing - computer and telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. markets boosted operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. . The segment is positioned for further growth, and recent acquisitions of Knurr AG and Artesyn Technologies strengthen its position. --The final conversion during the quarter to the new 13-SEER air-conditioning air-conditioning Control of temperature, humidity, purity, and motion of air in an enclosed space, independent of outside conditions. In a self-contained air-conditioning unit, air is heated in a boiler unit or cooled by being blown across a refrigerant-filled coil and then standard boosted U.S. sales for Climate Technologies. Sales in Europe also increased, but the benefits of higher sales volumes were more than offset by higher commodity costs and increased restructuring expenses. --Appliance and Tools had solid sales and margin performance in the quarter. The tools and storage business delivered strong growth driven largely by demand in the non-residential construction markets. The segment margin benefited from prior cost reduction efforts and leverage on the increased sales. Balance Sheet / Cash Flow 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 $549 million in the second quarter of 2006, an increase of 24 percent from the second quarter of 2005. The increase was driven by the earnings growth in the quarter and continued execution on working capital improvement programs. Emerson continues to manage the demands for working capital during this period of strong sales growth. The success of these programs is evidenced by the ratio of trade working capital to sales, which dropped to 18.6 percent in the current quarter compared to 20.2 percent in the same period last year. 2006 Outlook The strong order growth and financial performance for the first half of the year has strengthened the outlook for the full year. Emerson now expects consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: sales growth in the range of 12 percent to 15 percent, driven by strong underlying sales growth (excluding foreign currency translation and acquisitions), which is now expected to be in the range of 10 percent to 12 percent. Based on this higher level of sales we now expect earnings per share in the range of $4.25 to $4.35, an increase over our prior EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. guidance range of $4.10 to $4.30. This updated outlook includes the sales and earnings per share impact of acquiring Artesyn Technologies, which is expected to add sales of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $200 million and be dilutive to earnings per share by $0.02 to $0.03 as we integrate Artesyn with our existing embedded Inserted into. See embedded system. power business. Additionally, we expect operating cash flow for the full year of approximately $2.5 billion. Upcoming Investor Events On Tuesday Tuesday: see week. , May 2, 2006, at 2:00 p.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT (1:00 p.m. CDT CDT abbr. Central Daylight Time CDT Central Daylight Time CDT n abbr (US) (= Central Daylight Time) → hora de verano del centro; (BRIT ), Emerson senior management will discuss the second-quarter fiscal 2006 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. 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, and Emerson undertakes no obligation to update any such statement to reflect later developments. 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 Percent
March 31,
----------------
2005 2006 Change
-------------------------
Net sales $4,227 $4,852 15%
Less: Costs and expenses
Cost of sales 2,725 3,118
SG&A expenses 893 1,005
Other deductions, net 59 54
Interest expense, net 52 50
----------------
Earnings before income taxes 498 625 26%
Income taxes 150 191
----------------
Net earnings $348 $434 25%
================
Diluted avg. shares outstanding (millions) 420.9 414.5
Diluted earnings per common share $0.83 $1.05 27%
================
----------------------------------------------------------------------
Quarter Ended
March 31,
----------------
2005 2006
----------------
Other deductions, net
Rationalization of operations $28 $22
Amortization of intangibles 7 10
Other 24 28
Gains - (6)
----------------
Total $59 $54
================
TABLE 2
----------------------------------------------------------------------
EMERSON AND SUBSIDIARIES
CONSOLIDATED OPERATING RESULTS
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
Six Months Ended Percent
March 31,
----------------
2005 2006 Change
-------------------------
Net sales $8,197 $9,400 15%
Less: Costs and expenses
Cost of sales 5,283 6,073
SG&A expenses 1,765 1,955
Other deductions, net 111 77
Interest expense, net 106 100
----------------
Earnings before income taxes 932 1,195 28%
Income taxes 287 362
----------------
Net earnings $645 $833 29%
================
Diluted avg. shares outstanding (millions) 421.4 414.0
Diluted earnings per common share $1.53 $2.01 31%
================
----------------------------------------------------------------------
Six Months Ended
March 31,
----------------
2005 2006
----------------
Other deductions, net
Rationalization of operations $57 $34
Amortization of intangibles 13 19
Other 67 54
Gains (26) (30)
----------------
Total $111 $77
================
TABLE 3
----------------------------------------------------------------------
EMERSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
March 31,
-------------------------
2005 2006
------------ ------------
Assets
Cash and equivalents $1,606 $604
Receivables, net 3,155 3,404
Inventories 1,907 2,063
Other current assets 478 560
------------ ------------
Total current assets 7,146 6,631
Property, plant & equipment, net 2,976 2,990
Goodwill 5,406 5,636
Other 1,735 1,952
------------ ------------
$17,263 $17,209
============ ============
Liabilities and Stockholders' Equity
Short-term borrowings and current
maturities of long-term debt $1,569 $412
Accounts payable 1,653 1,867
Accrued expenses 1,736 1,705
Income taxes 149 279
------------ ------------
Total current liabilities 5,107 4,263
Long-term debt 2,881 3,132
Other liabilities 1,664 1,867
Stockholders' equity 7,611 7,947
------------ ------------
$17,263 $17,209
============ ============
TABLE 4
----------------------------------------------------------------------
EMERSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
Six Months Ended
March 31,
-------------------------
2005 2006
------------- -----------
Operating Activities
Net earnings $645 $833
Depreciation and amortization 276 294
Changes in operating working capital (284) (376)
Other 65 117
------------- -----------
Net cash provided by operating
activities 702 868
------------- -----------
Investing Activities
Capital expenditures (232) (214)
Purchases of businesses, net of cash &
equivalents acquired (97) (269)
Other (16) 13
------------- -----------
Net cash used in investing activities (345) (470)
------------- -----------
Financing Activities
Net increase (decrease) in short-term
borrowings 414 (311)
Proceeds from long-term debt 1 5
Principal payments on long-term debt (17) (257)
Dividends paid (349) (367)
Purchases of treasury stock (227) (111)
Other 15 15
------------- -----------
Net cash used in financing activities (163) (1,026)
------------- -----------
Effect of exchange rate changes on cash and
equivalents 66 (1)
------------- -----------
Increase (decrease) in cash and equivalents 260 (629)
Beginning cash and equivalents 1,346 1,233
------------- -----------
Ending cash and equivalents $1,606 $604
============= ===========
TABLE 5
----------------------------------------------------------------------
EMERSON AND SUBSIDIARIES
SEGMENT SALES AND EARNINGS
(DOLLARS IN MILLIONS)
Quarter Ended March 31,
-------------------------
2005 2006
------------ ------------
Sales
Process Management $1,009 $1,143
Industrial Automation 799 931
Network Power 765 1,004
Climate Technologies 775 852
Appliance and Tools 1,011 1,072
------------ ------------
4,359 5,002
Eliminations (132) (150)
------------ ------------
Total Emerson $4,227 $4,852
============ ============
Quarter Ended March 31,
-------------------------
2005 2006
------------ ------------
Earnings
Process Management $154 $190
Industrial Automation 106 131
Network Power 77 119
Climate Technologies 121 125
Appliance and Tools 134 151
------------ ------------
592 716
Differences in accounting methods 35 42
Corporate and other (77) (83)
Interest expense, net (52) (50)
------------ ------------
Earnings before income taxes $498 $625
============ ============
Quarter Ended March 31,
-------------------------
2005 2006
------------ ------------
Rationalization of operations
Process Management $4 $1
Industrial Automation 4 3
Network Power 10 3
Climate Technologies 3 8
Appliance and Tools 6 7
Corporate 1 -
------------ ------------
Total Emerson $28 $22
============ ============
TABLE 6
----------------------------------------------------------------------
EMERSON AND SUBSIDIARIES
SEGMENT SALES AND EARNINGS
(DOLLARS IN MILLIONS)
Six Months Ended
March 31,
-------------------------
2005 2006
------------ ------------
Sales
Process Management $1,971 $2,240
Industrial Automation 1,595 1,791
Network Power 1,538 1,943
Climate Technologies 1,379 1,600
Appliance and Tools 1,949 2,112
------------ ------------
8,432 9,686
Eliminations (235) (286)
------------ ------------
Total Emerson $8,197 $9,400
============ ============
Six Months Ended
March 31,
-------------------------
2005 2006
------------ ------------
Earnings
Process Management $284 $366
Industrial Automation 226 274
Network Power 144 227
Climate Technologies 207 227
Appliance and Tools 253 271
------------ ------------
1,114 1,365
Differences in accounting methods 68 82
Corporate and other (144) (152)
Interest expense, net (106) (100)
------------ ------------
Earnings before income taxes $932 $1,195
============ ============
Six Months Ended
March 31,
-------------------------
2005 2006
------------ ------------
Rationalization of operations
Process Management $9 $3
Industrial Automation 8 5
Network Power 22 6
Climate Technologies 5 9
Appliance and Tools 12 11
Corporate 1 -
------------ ------------
Total Emerson $57 $34
============ ============
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
2005 2006 Change
-----------------------------
Second-Quarter Operating Profit
Net Sales $4,227 $4,852 15%
Cost of Sales 2,725 3,118
SG&A Expenses 893 1,005
--------------------
Operating Profit (Non-GAAP) 609 729 20%
OP % (Non-GAAP) 14.4% 15.0%
Other Deductions, Net 59 54
Interest Expense, Net 52 50
--------------------
Pretax Earnings $498 $625 26%
Pretax Earnings % 11.8% 12.9%
Expected
------------
Fiscal 2006
------------
Net Sales
Underlying Sales (Non-GAAP) 10 - 12%
Fgn. Currency Translation / Acquisitions 2 - 3 pts
------------
Net Sales 12 - 15%
All amounts above are GAAP financial measures except as noted.
|
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion