News
Emerson Achieves Record 2008 Results
- Fourth quarter sales up 11 percent to $6.7 billion
- Fourth quarter earnings per share of $0.88, up 13 percent
- 2008 operating cash flow of $3.3 billion, up 9 percent
- Quarterly dividend increased 10 percent to $0.33 per share
ST. LOUIS, November 4, 2008 – Emerson (NYSE: EMR) today
announced record net sales for fiscal 2008 of $24.8 billion, an
increase of 12 percent from the prior year. Sales for the fourth
quarter ended September 30, 2008 were $6.7 billion, an increase of
11 percent over the $6.0 billion for the same period last year.
Underlying sales in the quarter grew 7 percent, excluding 2 percent
from favorable currency exchange rates and 2 percent from
acquisitions, net of divestitures. Underlying sales in the United
States for the fourth quarter increased 1 percent. International
sales increased 13 percent in the quarter on an underlying basis
with Asia increasing 17 percent, Latin America increasing 25
percent, Middle East/Africa increasing 14 percent, and Europe
increasing 6 percent.
Sales by Geographic
Destination:
Earnings per share of $0.88 for the fourth quarter increased 13
percent over the $0.78 achieved in the prior year period. The
operating profit margin in the quarter expanded 70 basis points to
17.5 percent resulting from cost containment actions, volume
leverage and favorable business mix. The pretax earnings margin for
the fourth quarter was 14.9 percent. The Company continues to
actively manage its portfolio of businesses and completed the sale
of the European appliance motor and pump business on September 30,
2008 for $101 million.
“Emerson had an outstanding 2008 and finished the year in a very
strong financial position,” said Emerson Chairman, Chief Executive
Officer and President David N. Farr. “While the year ahead will
present significant challenges and uncertainty, we are confident
the diversity of our business portfolio, innovative technologies
and services, our balanced global position, strong balance sheet
and an incredibly talented and committed team of employees will
help us outperform in a difficult environment.”
Underlying sales growth of 7 percent for fiscal year 2008
represents the fifth consecutive year of sales within or above the
targeted underlying sales growth range of 5 to 7 percent. Reported
sales grew 12 percent, currency translation added 4 percent and
acquisitions, net of divestitures, added 1 percent. Sales outside
the United States reached a record level of 54 percent of total
sales. The operating profit margin was strong at 16.5 percent as
the Company benefited from leverage on the additional volume and
cost containment programs executed over the last five years. The
pretax earnings margin for fiscal 2008 was 14.5 percent. Earnings
per share from continuing operations increased 17 percent to $3.11
from the $2.65 achieved in fiscal 2007. Including the impact from
discontinued operations, net earnings per share in fiscal year 2008
increased 15 percent to $3.06.
“Emerson’s record performance in 2008 demonstrates again just
how well-positioned we are,” Farr said. “We have the correct
strategies in place to grow across the business platforms, to seize
the opportunities in emerging markets, to continue investment in
breakthrough technologies and to tightly manage our assets to
deliver high levels of profit margin and returns over the
long-term. This is Emerson’s winning formula for our
shareholders.”
Balance Sheet / Cash Flow
Operating cash flow was a record $3.3 billion in 2008,
representing a 9 percent increase from 2007 and 13.3 percent of
reported sales. In 2008, the Company returned 63 percent of
operating cash flow to shareholders through $940 million in
dividends and $1.1 billion in share repurchases.
Capital expenditures were $714 million in 2008, resulting in
record free cash flow (operating cash flow less capital
expenditures) for the year of $2.6 billion, an increase of 10
percent from the prior year. Free cash flow as a percent of net
earnings was 107 percent for 2008, the eighth consecutive year in
excess of 100 percent.
Increased earnings helped to drive the strong cash flow
performance. In addition, better asset management helped average
days-in-the-cash-cycle improve to 63 days from 65 days in the prior
year. Return on total capital (ROTC) increased to a record 21.8
percent in fiscal 2008, up 170 basis points from the prior year and
the seventh consecutive year of ROTC expansion.
Fiscal year 2008 was the Company’s 52nd year of increased
dividends per share. The Board of Directors yesterday voted to
increase the quarterly cash dividend by 10 percent from thirty
cents ($0.30) to thirty-three cents ($0.33) per share of common
stock. The dividend will be payable on December 10, 2008 to
shareholders of record on November 14, 2008.
“Emerson continues to be a well-managed, financially-sound
company and our strong balance sheet is a testament to that,” Farr
said. “We had a tremendous year in 2008, generating $3.3 billion in
operating cash flow and achieving a 21.8 percent return on total
capital. The Company is well positioned for more challenging times
ahead in 2009 and 2010, as we have spent $265 million in best cost
restructuring actions in the last three years, of which $70 million
was incurred in the last six months. We will continue to make smart
growth investments in our businesses and maintain our focus on
significant cash returns to shareholders.”
Fiscal 2008 Operating Highlights
Process Management delivered an exceptional year, with reported
sales increasing 17 percent to $6.7 billion. Underlying sales
growth for the year was 14 percent, which excludes a favorable
impact of 4 percent from currency translation and a negative 1
percent impact from the Brooks Instrument divestiture, net of
acquisitions. The margin for this segment expanded 90 basis points
to 19.6 percent with significant ongoing strategic investments
being made in next generation technologies and geographic
expansion. Substantial project wins were also recorded in 2008 for
Process Management’s Smart Wireless technology, and in the
important and growing Chinese nuclear power market.
Industrial Automation sales were $4.9 billion, an increase of 14
percent from the prior year and the fifth consecutive year of a
double-digit sales increase. Underlying sales increased by 7
percent, led by strength in the power generating alternator, fluid
automation and materials joining businesses. Reported sales
included a 7 percent favorable impact from currency translation.
The margin for this segment was 15.0 percent compared to 15.6
percent in the prior year. The margin was impacted by a reduction
in funds received under the U.S. Continued Dumping and Subsidy
Offset Act, $3 million in 2008 compared with $24 million in 2007
and from the significant material inflation that occurred
throughout the year.
Network Power had another strong year, with sales of $6.3
billion, an increase of 23 percent over 2007. Underlying sales
growth was 11 percent, the Embedded Computing and other
acquisitions contributed 9 percent and currency translation added 3
percent. The margin for this segment was 12.6 percent, expanding 10
basis points versus the prior year. The positive impacts from
volume leverage, cost reduction programs and new products were
mostly offset by dilution from acquisitions which impacted the
margin approximately 110 basis points.
Climate Technologies achieved sales of $3.8 billion in 2008, an
increase of 6 percent which included underlying sales growth of 3
percent and a positive currency impact of 3 percent. Strength in
Asia offset slower sales in the United States and a significant
decline in Europe. The segment margin in 2008 declined 50 basis
points as higher prices were more than offset by material
inflation, higher restructuring costs and growth investments.
Appliance and Tools sales for the year decreased 4 percent to
$3.9 billion. Underlying sales decreased 3 percent which excluded a
favorable currency impact of 1 percent and a negative 2 percent
impact from divestitures. The margin for this segment was 13.6
percent, a 50 basis point decline from 2007 driven by material
inflation and volume deleverage which was not totally offset by
price increases, and by the $31 million impairment charge related
to the appliance control business, $22 million of which was
recorded in the fourth quarter 2008. The decision has been made to
not sell the appliance control business but to create value for our
shareholders by integrating the business into the appliance motors
business. The consolidation of these businesses will allow for a 40
percent reduction of overhead and the elimination of redundant
manufacturing capacity. These actions will improve margins and
returns in this combined business.
Sales by Business
Segment:
Upcoming Investor Events
Today at 3:00 p.m. EST (2:00 p.m. CST), Emerson senior
management will discuss the fourth quarter and fiscal year results
during an investor conference call. All interested parties may
listen to the live conference call via the Internet by going to the
Investor Relations area of Emerson's website at
www.emerson.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 website. Details of
upcoming events will be posted as they occur in the Investor
Relations Calendar of Events on the corporate website.
On November 12, 2008, Mr. Farr will present at the Robert W.
Baird Industrial Conference in Chicago, Illinois. The presentation
will begin at 10:30 a.m. EST and conclude at approximately 11:00
a.m. EST. All interested parties may listen to the live webcast via
the Internet by going to the Investor Relations area of Emerson's
website at www.emerson.com/financial and completing a brief
registration form. A replay of the webcast will be available for
approximately one week at the same location on the website.
On Friday morning, February 6, 2009, Emerson senior management
will host Emerson's annual investment community update meeting in
New York City. Additional details will be available in
December.
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 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 the Form 10-K for fiscal 2008,
including audited financial statements, within the next 30
days.
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