• | GAAP net sales of $3.9 billion were down 16 percent; underlying sales were down 15 percent as demand declined due to COVID-19 |
• | GAAP EPS was $0.67, down 31 percent from $0.97 in the year prior; adjusted EPS, which excludes restructuring and related costs, was $0.80, exceeding midpoint of management guidance of $0.60, driven primarily by previously announced aggressive cost reduction actions, and a lower effective tax rate than expected |
• | Delivered strong operating cash flow of $842 million in the quarter, and $1.85 billion year-to-date, up $52 million or 3 percent year-to-date |
• | Delivered strong free cash flow of $738 million in the quarter, and $1.53 billion year-to-date, up $118 million or 8 percent year-to-date |
• | Initiated $94 million of restructuring actions in the quarter, totaling $231 million year-to-date, continuing strong execution on the comprehensive cost reset plan |
• | Updating full-year guidance as cost savings take effect, demand begins to stabilize, and the economy begins to reopen |
Sales Growth Guidance | EPS and Cash Flow Guidance | |||
GAAP EPS | $2.80 - $2.95 | |||
Net Sales Growth | (10%) - (9%) | Adjusted EPS | $3.20 - $3.35 | |
Automation Solutions | (10%) - (8%) | Tax Rate | ~20% | |
Commercial & Residential Solutions | (11%) - (9%) | Operating Cash Flow | ~$2.8B | |
Underlying Sales Growth | (9%) - (7.5%) | Free Cash Flow | ~$2.25B | |
Automation Solutions | (9%) - (7%) | Capital Expenditures | ~$550M | |
Commercial & Residential Solutions | (10%) - (8%) | Share Repurchases | ~$950M |
Table 1 | |||||||||
EMERSON AND SUBSIDIARIES | |||||||||
CONSOLIDATED OPERATING RESULTS | |||||||||
(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) | |||||||||
Quarter Ended June 30 | Percent | ||||||||
2019 | 2020 | Change | |||||||
Net sales | $4,684 | $3,914 | (16)% | ||||||
Costs and expenses: | |||||||||
Cost of sales | 2,683 | 2,296 | |||||||
SG&A expenses | 1,126 | 934 | |||||||
Other deductions, net | 65 | 181 | |||||||
Interest expense, net | 43 | 45 | |||||||
Earnings before income taxes | 767 | 458 | (40)% | ||||||
Income taxes | 155 | 51 | |||||||
Net earnings | 612 | 407 | |||||||
Less: Noncontrolling interests in earnings of subsidiaries | 8 | 8 | |||||||
Net earnings common stockholders | $604 | $399 | (34)% | ||||||
Diluted avg. shares outstanding | 619.0 | 600.0 | |||||||
Diluted earnings per share common share | $0.97 | $0.67 | (31)% | ||||||
Quarter Ended June 30 | |||||||||
2019 | 2020 | ||||||||
Other deductions, net | |||||||||
Amortization of intangibles | $60 | $60 | |||||||
Restructuring costs | 20 | 88 | |||||||
Other | (15 | ) | 33 | ||||||
Total | $65 | $181 |
Table 2 | |||||||||
EMERSON AND SUBSIDIARIES | |||||||||
CONSOLIDATED OPERATING RESULTS | |||||||||
(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) | |||||||||
Nine Months Ended June 30 | Percent | ||||||||
2019 | 2020 | Change | |||||||
Net sales | $13,401 | $12,227 | (9)% | ||||||
Costs and expenses: | |||||||||
Cost of sales | 7,714 | 7,100 | |||||||
SG&A expenses | 3,348 | 3,040 | |||||||
Other deductions, net | 172 | 401 | |||||||
Interest expense, net | 134 | 116 | |||||||
Earnings before income taxes | 2,033 | 1,570 | (23)% | ||||||
Income taxes | 429 | 310 | |||||||
Net earnings | 1,604 | 1,260 | |||||||
Less: Noncontrolling interests in earnings of subsidiaries | 15 | 18 | |||||||
Net earnings common stockholders | $1,589 | $1,242 | (22)% | ||||||
Diluted avg. shares outstanding | 621.6 | 608.4 | |||||||
Diluted earnings per share common share | $2.55 | $2.04 | (20)% | ||||||
Nine Months Ended June 30 | |||||||||
2019 | 2020 | ||||||||
Other deductions, net | |||||||||
Amortization of intangibles | $177 | $178 | |||||||
Restructuring costs | 40 | 216 | |||||||
Special advisory fees | — | 13 | |||||||
Other | (45 | ) | (6 | ) | |||||
Total | $172 | $401 |
Table 3 | |||||||
EMERSON AND SUBSIDIARIES | |||||||
CONSOLIDATED BALANCE SHEETS | |||||||
(DOLLARS IN MILLIONS, UNAUDITED) | |||||||
Quarter Ended June 30 | |||||||
2019 | 2020 | ||||||
Assets | |||||||
Cash and equivalents | $1,603 | $2,450 | |||||
Receivables, net | 2,901 | 2,512 | |||||
Inventories | 2,061 | 2,102 | |||||
Other current assets | 785 | 815 | |||||
Total current assets | 7,350 | 7,879 | |||||
Property, plant & equipment, net | 3,614 | 3,565 | |||||
Goodwill | 6,544 | 6,624 | |||||
Other intangible assets | 2,691 | 2,488 | |||||
Other | 1,118 | 1,174 | |||||
Total assets | $21,317 | $21,730 | |||||
Liabilities and equity | |||||||
Short-term borrowings and current | |||||||
maturities of long-term debt | $1,877 | $1,725 | |||||
Accounts payable | 1,785 | 1,426 | |||||
Accrued expenses | 2,556 | 2,834 | |||||
Total current liabilities | 6,218 | 5,985 | |||||
Long-term debt | 4,336 | 5,500 | |||||
Other liabilities | 1,959 | 2,367 | |||||
Total equity | 8,804 | 7,878 | |||||
Total liabilities and equity | $21,317 | $21,730 |
Table 4 | ||||||
EMERSON AND SUBSIDIARIES | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
(DOLLARS IN MILLIONS, UNAUDITED) | ||||||
Nine Months Ended June 30 | ||||||
2019 | 2020 | |||||
Operating activities | ||||||
Net earnings | $1,604 | $1,260 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||
Depreciation and amortization | 609 | 631 | ||||
Stock compensation | 83 | 69 | ||||
Pension expense | (1 | ) | 50 | |||
Changes in operating working capital | (352 | ) | (86 | ) | ||
Other, net | (141 | ) | (70 | ) | ||
Cash provided by operating activities | 1,802 | 1,854 | ||||
Investing activities | ||||||
Capital expenditures | (395 | ) | (329 | ) | ||
Purchases of businesses, net of cash and equivalents acquired | (385 | ) | (114 | ) | ||
Divestitures of businesses | 10 | — | ||||
Other, net | (91 | ) | (65 | ) | ||
Cash used in investing activities | (861 | ) | (508 | ) | ||
Financing activities | ||||||
Net increase in short-term borrowings | 427 | 269 | ||||
Proceeds from short-term borrowings greater than three months | — | 546 | ||||
Payments of short-term borrowings greater than three months | — | (340 | ) | |||
Proceeds from long-term debt | 1,691 | 1,488 | ||||
Payments of long-term debt | (655 | ) | (502 | ) | ||
Dividends paid | (909 | ) | (910 | ) | ||
Purchases of common stock | (1,000 | ) | (942 | ) | ||
Other, net | 21 | 28 | ||||
Cash used in financing activities | (425 | ) | (363 | ) | ||
Effect of exchange rate changes on cash and equivalents | (6 | ) | (27 | ) | ||
Increase in cash and equivalents | 510 | 956 | ||||
Beginning cash and equivalents | 1,093 | 1,494 | ||||
Ending cash and equivalents | $1,603 | $2,450 | ||||
Table 5 | |||||||
EMERSON AND SUBSIDIARIES | |||||||
SEGMENT SALES AND EARNINGS | |||||||
(DOLLARS IN MILLIONS, UNAUDITED) | |||||||
Quarter Ended June 30 | |||||||
2019 | 2020 | ||||||
Sales | |||||||
Automation Solutions | $3,025 | $2,589 | |||||
Climate Technologies | 1,199 | 970 | |||||
Tools & Home Products | 463 | 357 | |||||
Commercial & Residential Solutions | 1,662 | 1,327 | |||||
Eliminations | (3 | ) | (2 | ) | |||
Net sales | $4,684 | $3,914 | |||||
Earnings | |||||||
Automation Solutions | $477 | $311 | |||||
Climate Technologies | 278 | 195 | |||||
Tools & Home Products | 93 | 58 | |||||
Commercial & Residential Solutions | 371 | 253 | |||||
Stock compensation | (31 | ) | (51 | ) | |||
Unallocated pension and postretirement costs | 27 | 12 | |||||
Corporate and other | (34 | ) | (22 | ) | |||
Interest expense, net | (43 | ) | (45 | ) | |||
Earnings before income taxes | $767 | $458 | |||||
Restructuring costs | |||||||
Automation Solutions | $15 | $76 | |||||
Climate Technologies | 4 | 5 | |||||
Tools & Home Products | 1 | 4 | |||||
Commercial & Residential Solutions | 5 | 9 | |||||
Corporate | — | 3 | |||||
Total | $20 | $88 | |||||
The table above does not include $6 of costs related to restructuring actions that were reported in cost of sales in the third quarter of fiscal 2020. | |||||||
Depreciation and Amortization | |||||||
Automation Solutions | $133 | $137 | |||||
Climate Technologies | 42 | 44 | |||||
Tools & Home Products | 18 | 20 | |||||
Commercial & Residential Solutions | 60 | 64 | |||||
Corporate and other | 10 | 8 | |||||
Total | $203 | $209 |
Table 6 | |||||||
EMERSON AND SUBSIDIARIES | |||||||
SEGMENT SALES AND EARNINGS | |||||||
(DOLLARS IN MILLIONS, UNAUDITED) | |||||||
Nine Months Ended June 30 | |||||||
2019 | 2020 | ||||||
Sales | |||||||
Automation Solutions | $8,834 | $8,150 | |||||
Climate Technologies | 3,171 | 2,869 | |||||
Tools & Home Products | 1,390 | 1,219 | |||||
Commercial & Residential Solutions | 4,561 | 4,088 | |||||
Eliminations | 6 | (11 | ) | ||||
Net sales | $13,401 | $12,227 | |||||
Earnings | |||||||
Automation Solutions | $1,328 | $1,012 | |||||
Climate Technologies | 650 | 563 | |||||
Tools & Home Products | 286 | 233 | |||||
Commercial & Residential Solutions | 936 | 796 | |||||
Stock compensation | (83 | ) | (69 | ) | |||
Unallocated pension and postretirement costs | 81 | 37 | |||||
Corporate and other | (95 | ) | (90 | ) | |||
Interest expense, net | (134 | ) | (116 | ) | |||
Earnings before income taxes | $2,033 | $1,570 | |||||
Restructuring costs | |||||||
Automation Solutions | $26 | $182 | |||||
Climate Technologies | 8 | 14 | |||||
Tools & Home Products | 5 | 12 | |||||
Commercial & Residential Solutions | 13 | 26 | |||||
Corporate | 1 | 8 | |||||
Total | $40 | $216 | |||||
The table above does not include $15 of costs related to restructuring actions that were reported in cost of sales for the nine months ended June 30, 2020. | |||||||
Depreciation and Amortization | |||||||
Automation Solutions | $393 | $414 | |||||
Climate Technologies | 132 | 133 | |||||
Tools & Home Products | 54 | 58 | |||||
Commercial & Residential Solutions | 186 | 191 | |||||
Corporate and other | 30 | 26 | |||||
Total | $609 | $631 |
Reconciliations of Non-GAAP Financial Measures & Other | Table 7 | |||||||||||||||||||
Reconciliations of Non-GAAP measures (denoted by *) with the most directly comparable GAAP measure (dollars in millions, except per share amounts): | ||||||||||||||||||||
Q3 2020 Underlying Sales Change | Auto Solns | Comm & Res Solns | Emerson | |||||||||||||||||
Reported (GAAP) | (14 | )% | (20 | )% | (16 | )% | ||||||||||||||
(Favorable) / Unfavorable FX | 1 | % | 1 | % | 1 | % | ||||||||||||||
Acquisitions / Divestitures | — | % | — | % | — | % | ||||||||||||||
Underlying* | (13 | )% | (19 | )% | (15 | )% | ||||||||||||||
FY 2020E Underlying Sales Change | Auto Solns | Comm & Res Solns | Emerson | |||||||||||||||||
Reported (GAAP) | (10)% - (8)% | (11)% - (9)% | (10)% - (9)% | |||||||||||||||||
(Favorable) / Unfavorable FX | ~ 1% | ~ 1% | 1% - 1.5% | |||||||||||||||||
Acquisitions / Divestitures | ~ -% | ~ -% | ~ -% | |||||||||||||||||
Underlying* | (9)% - (7)% | (10)% - (8)% | (9)% - (7.5)% | |||||||||||||||||
Earnings Per Share | Q3 FY20E | Q3 FY20 | ||||||||||||||||||
Earnings per share (GAAP) | $0.43 - $0.51 | $ | 0.67 | |||||||||||||||||
Restructuring and related charges | ~ 0.13 | 0.13 | ||||||||||||||||||
Adjusted earnings per share* | $0.56 - $0.64 | $ | 0.80 | |||||||||||||||||
Earnings Per Share | FY2020E Prior Guidance | FY2020E | ||||||||||||||||||
Earnings per share (GAAP) | $2.62 - $2.82 | $2.80 - $2.95 | ||||||||||||||||||
Restructuring and related charges | ~ 0.38 | ~ 0.40 | ||||||||||||||||||
Adjusted earnings per share* | $3.00 - $3.20 | $3.20 - $3.35 | ||||||||||||||||||
EBIT Margin | Q3 FY19 | Q3 FY20 | Change | |||||||||||||||||
Pretax margin (GAAP) | 16.4 | % | 11.7 | % | (470) bps | |||||||||||||||
Interest expense, net | 0.9 | % | 1.2 | % | 30 bps | |||||||||||||||
Earnings before interest and taxes margin* | 17.3 | % | 12.9 | % | (440) bps | |||||||||||||||
Restructuring and related charges | 0.4 | % | 2.4 | % | 200 bps | |||||||||||||||
Adjusted earnings before interest and taxes margin* | 17.7 | % | 15.3 | % | (240) bps | |||||||||||||||
Automation Solutions Segment EBIT Margin | Q3 FY19 | Q3 FY20 | Change | |||||||||||||||||
Automation Solutions Segment EBIT margin (GAAP) | 15.7 | % | 12.0 | % | (370) bps | |||||||||||||||
Restructuring charges impact | 0.6 | % | 3.1 | % | 250 bps | |||||||||||||||
Automation Solutions Adjusted Segment EBIT margin* | 16.3 | % | 15.1 | % | (120) bps | |||||||||||||||
Depreciation / amortization | 4.4 | % | 5.3 | % | 90 bps | |||||||||||||||
Automation Solutions Adjusted Segment EBITDA margin* | 20.7 | % | 20.4 | % | (30) bps | |||||||||||||||
- more - |
Commercial & Residential EBIT Margin | Q3 FY19 | Q3 FY20 | Change | ||||||||||||||||
Commercial & Residential EBIT margin (GAAP) | 22.4 | % | 19.1 | % | (330) bps | ||||||||||||||
Restructuring charges impact | 0.3 | % | 0.9 | % | 60 bps | ||||||||||||||
Commercial & Residential Adjusted EBIT margin* | 22.7 | % | 20.0 | % | (270) bps | ||||||||||||||
Depreciation / amortization | 3.6 | % | 4.7 | % | 110 bps | ||||||||||||||
Commercial & Residential Adjusted EBITDA margin* | 26.3 | % | 24.7 | % | (160) bps | ||||||||||||||
Q3 Cash Flow | Q3 FY19 | Q3 FY20 | Change | % Change | |||||||||||||||
Operating cash flow (GAAP) | $ | 946 | $ | 842 | $ | (104 | ) | (11 | )% | ||||||||||
Capital expenditures | (121 | ) | (104 | ) | 17 | — | % | ||||||||||||
Free cash flow* | $ | 825 | $ | 738 | $ | (87 | ) | (11 | )% | ||||||||||
Q3 Year-To-Date Cash Flow | FY 2019 | FY 2020 | Change | % Change | |||||||||||||||
Operating cash flow (GAAP) | $ | 1,802 | $ | 1,854 | $ | 52 | 3 | % | |||||||||||
Capital expenditures | (395 | ) | (329 | ) | 66 | 5 | % | ||||||||||||
Free cash flow* | $ | 1,407 | $ | 1,525 | $ | 118 | 8 | % | |||||||||||
FY 2020E Cash Flow | FY 2020E | ||||||||||||||||||
Operating cash flow (GAAP) | ~ $2,800 | ||||||||||||||||||
Capital expenditures | ~ (550) | ||||||||||||||||||
Free cash flow* | ~ $2,250 | ||||||||||||||||||
Cash Flow to Net Earnings Conversion | Q3 FY20 | ||||||||||||||||||
Operating cash flow to net earnings (GAAP) | 207 | % | |||||||||||||||||
Capital expenditures | (26 | )% | |||||||||||||||||
Free cash flow to net earnings* | 181 | % | |||||||||||||||||
Note: Underlying sales and orders exclude the impact of acquisitions, divestitures and currency translation. | |||||||||||||||||||
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