News
Emerson Reports Fiscal 2009 Results With Improving Trends in
Fourth Quarter
- Fourth quarter sales of $5.3 billion, up 4.6 percent from third
quarter 2009
- Fourth quarter earnings per share of $0.67
- 2009 Free cash flow matching 2008 level of $2.6 billion;
- Operating cash flow of $3.1 billion versus $3.3 billion in
2008
- Quarterly dividend increased to $0.335 per share
ST. LOUIS, November 3, 2009 – Emerson (NYSE: EMR) announced
sales for the fourth quarter ended September 30, 2009 of $5.3
billion, a decrease of 21 percent from the $6.7 billion for the
same period last year. Underlying sales in the quarter declined 20
percent, which excludes a 2 percent unfavorable impact from
currency exchange rates and a 1 percent positive impact from
acquisitions. Sequentially, fourth quarter sales improved 4.6
percent versus the third quarter, showing revenue stabilization for
the second consecutive quarter.
Earnings per share of $0.67 for the fourth quarter decreased 24
percent from the $0.88 achieved in the prior year period.
Rationalization expense was $62 million higher in the quarter
compared to the same period last year, and negatively impacted the
earnings per share comparison by $0.06 per share. This was
essentially offset by lower tax expense as expected in the fourth
quarter that had a positive impact of $0.07 on the earnings per
share comparison. The lower tax rate was driven by planned
restructuring of international units to utilize a net operating
loss benefit and favorable international pretax income mix.
Gross profit margin improved 110 basis points compared to the prior
year quarter, and 200 basis points over the third quarter of 2009.
Pretax earnings margin for the fourth quarter was 12.3 percent
versus 14.9 percent in the fourth quarter of 2008 and 10.7 percent
in the third quarter of 2009.
“Our fourth quarter results signify improving revenue trends as
well as the positive benefits of our aggressive structural
repositioning for greater efficiency,” said Emerson Chairman, Chief
Executive Officer and President David N. Farr. “We are well
positioned for economic recovery, but the shape and speed of the
recovery remains unknown and we expect weakness to continue in the
near-term. However, we are benefiting from our aggressive
investments in new technologies to speed new product introductions,
and in emerging markets, which now represent 32 percent of total
revenue.”
Full-Year Results
Net sales for fiscal 2009 were $20.9 billion, a decrease of 16
percent from the prior year. Underlying sales declined 13
percent, currency translation subtracted 4 percent and acquisitions
added 1 percent. Despite the lower sales and aggressive
inventory reduction, gross profit margin remained flat at 36.8
percent versus last year driven by benefits from restructuring and
cost containment efforts. The pretax earnings margin for
fiscal 2009 was 11.6 percent. Earnings per share from
continuing operations decreased 27 percent to $2.27 from the $3.11
achieved in fiscal 2008. Including the impact from
discontinued operations in fiscal 2008, net earnings per share in
fiscal year 2009 declined 26 percent.
“I am greatly encouraged by the many ways we have strengthened
Emerson,” Farr said. “We generated $2.6 billion of free cash
flow, essentially unchanged from last year, and maintained gross
profit margins despite the significant volume declines and
inventory reduction. Inventory was reduced by approximately
$500 million, we repositioned our assets for higher sales in
emerging markets, and we successfully completed $1 billion of
strategic acquisitions. Although we expect economic
conditions to remain challenging, our efforts have established
solid momentum for fiscal 2010.”
Balance Sheet / Cash Flow
In fiscal 2009, operating cash flow was $3.1 billion and capital
expenditures were $531 million, resulting in strong free cash flow
(operating cash flow less capital expenditures) of $2.6 billion,
matching fiscal 2008 levels when sales were significantly higher.
As a result, free cash flow as a percent of sales was a strong 12.2
percent. Emerson aggressively reduced working capital by $620
million in 2009, helping to drive the strong cash flow performance.
Free cash flow as a percent of net earnings was 148 percent for
2009, the ninth consecutive year in excess of 100 percent.
The company returned 56 percent of operating cash flow to
shareholders through $998 million in dividends and $718 million in
share repurchases.
Fiscal year 2009 was Emerson’s 53rd year of increased dividends
per share. The Board of Directors voted yesterday to increase
the quarterly cash dividend from thirty-three cents ($0.33) to
thirty-three and a half cents ($0.335) per share of common stock,
an increase of 1.5 percent. The new dividend will be payable
on December 10, 2009 to shareholders of record on November 13,
2009.
“Emerson took rapid steps to adjust our operations to the
changing market conditions, and our free cash flow performance and
balance sheet are testaments to this fact,” Farr said. “Even
with the significant challenges the company faced this year, we
have met the challenge by doing what we do best: innovating and
moving forward with opportunities to strengthen our business
platforms.
“For example, we recently announced an agreement and tender
offer to acquire Avocent Corporation for approximately $1.2 billion
in cash. Avocent will extend the integrated solutions that Emerson
Network Power provides for improving data center operations.
Emerson’s power and cooling technology, combined with Avocent’s
monitoring, managing and problem solving software, will allow us to
offer a more compelling solution to our data center customers’ most
pressing challenge -- energy efficiency. This is just one
more example of how we are strengthening the foundation on which to
build as the economic cycle turns positive.”
Business Segment Highlights
Process Management sales decreased 13 percent in the fourth quarter
versus the prior year quarter. This included a 13 percent
underlying sales decline, a 3 percent unfavorable impact from
currency translation and a 3 percent favorable impact from
acquisitions. The margin for this segment was 17.4 percent
versus 22.0 percent achieved in fourth quarter 2008, impacted by a
$25 million increase in restructuring expense, negative mix
(approximately 2 margin points) and volume deleverage
(approximately 2 margin points). However, we are encouraged
by a 2.6 margin point increase achieved sequentially from the third
quarter, reflecting effective cost reductions and restructuring
efforts, as well as leverage from additional volume. During
the fourth quarter, the next-generation Delta VTM process-control
system was launched, which reduces project complexity, increases
operational flexibility and lifts the PlantWebTM digital
architecture to new levels of operational performance.
For fiscal year 2009, Process Management sales were $6.2
billion, a decrease of 6 percent versus the prior year.
Underlying sales declined only 2 percent, reflecting the strong
first quarter of 2009 and following a very strong prior five-year
period. Reported sales included a 6 percent unfavorable
impact from currency translation and a 2 percent favorable impact
primarily from the Roxar acquisition.
Industrial Automation sales were down 36 percent in the fourth
quarter of 2009 compared to the fourth quarter of 2008.
Underlying sales decreased by 37 percent, the System Plast and
Trident Power acquisitions added 3 percent and currency subtracted
2 percent. The revenue decline for the quarter was at a
similar level to the decline in the third quarter, suggesting the
economic bottom is forming for this segment. Segment margin
declined to 7.7 percent, versus the prior year margin of 15.6
percent, impacted significantly by the deleverage from lower volume
(approximately 8 margin points) which includes aggressive inventory
reduction, and increased restructuring of $14 million. Margin
expanded 2.7 percentage points sequentially from the third quarter
on essentially flat sales indicating the cost reduction efforts are
providing positive impacts.
Industrial Automation sales in fiscal 2009 declined 24 percent,
with underlying sales decreasing 22 percent. Reported sales
included a 4 percent unfavorable impact from currency translation
and a favorable impact of 2 percent from the System Plast and
Trident Power acquisitions.
In the fourth quarter, Network Power reported a sales decline of
22 percent, with underlying sales down 20 percent and currency and
acquisitions subtracting 1 percent each. Margin for
this segment improved by 0.7 margin points from the prior year
quarter despite the volume decline and increased restructuring
expense of $24 million. The positive impacts from cost reduction
efforts and restructuring benefits primarily offset the volume
deleverage.
Network Power sales were $5.4 billion in fiscal 2009.
Reported sales for this segment contracted 15 percent which
included an underlying sales decrease of 11 percent, an unfavorable
3 percent impact from currency and a negative 1 percent impact from
the sales decline related to the Embedded Computing
acquisition.
Climate Technologies sales decreased 10 percent in the quarter,
moderating from higher percentage declines in the previous two
quarters. Underlying sales declined 10 percent, currency
subtracted 2 percent and acquisitions added 2 percent. By
region, the United States and Europe were down 11 percent and 20
percent respectively, but growth resumed in Asia which was up 4
percent in the quarter, aided by the China stimulus programs.
Segment margin increased 2.5 percentage points primarily driven by
cost reduction efforts and effective management of cost/price
exposures.
In fiscal 2009, Climate Technologies sales contracted 16 percent
to $3.2 billion. Underlying sales declined 15 percent,
currency translation subtracted 2 percent and acquisitions added 1
percent.
Sales in the Appliance and Tools segment decreased 22 percent in
the quarter, with consumer related product demand continuing to
show signs of stabilization. The margin for this segment was 15.4
percent, a 3.3 margin point improvement from the prior year quarter
primarily driven by cost reduction efforts and effective price/cost
management, and by the $22 million impairment charge which was
recorded in the fourth quarter 2008.
Appliance and Tools sales in fiscal 2009 declined 22 percent to
$3.0 billion, with underlying sales decreasing 21 percent and
currency translation subtracting 1 percent.
Fiscal 2010 Outlook
While 2009 has been a challenging year, Emerson is well positioned
as we enter 2010. The decisive steps that we have taken to
reposition our operations for greater efficiency, as well as our
investment in strategic acquisitions, will contribute significantly
to our growth when the economic cycle improves. Underlying
sales for fiscal 2010 are expected to be down 5 to 7 percent.
First quarter underlying sales are expected to be down 17 to 20
percent. Operating profit margin for fiscal year 2010 is
expected to be flat to slightly down.
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 other competitive and technological factors,
among others, as set forth in the Company's most recent Form 10-K
filed with the SEC. The Company expects to file its 10-K for
fiscal 2009 within the next 30 days.
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