• | Fourth quarter GAAP net sales of $4.6 billion were down 8 percent; underlying sales were down 9 percent, in-line with management guidance. Full year GAAP net sales of $16.8 billion were down 9 percent; underlying sales were down 8 percent, also in-line with management guidance. |
• | Fourth quarter GAAP EPS was $1.20, up 3 percent from the year prior; adjusted EPS, which excludes restructuring and certain tax benefits, was $1.10, down 4 percent. Full year GAAP EPS was $3.24, down 13 percent from the year prior, and ahead of guidance of $2.80 to $2.95; adjusted EPS was $3.46, down 6 percent, and ahead of guidance of $3.20 to $3.35. |
• | Delivered strong operating cash flow of $1.23 billion in the quarter, up 2 percent, and $3.08 billion for the year, up 3 percent. |
• | Delivered strong free cash flow of $1.02 billion in the quarter, up 2 percent, and $2.55 billion for the year, up 6 percent. |
• | Initiated $73 million of restructuring and related actions in the quarter, totaling $304 million for the year, continuing aggressive execution of the comprehensive cost reset program to return to record adjusted EBIT margins. |
• | Completed 64 consecutive years of increased dividends per share and plan to announce a 2 cent increase for 2021, after today's Board of Directors meeting. |
2021 Guidance | |||
Net Sales Growth | 1% - 4% | Operating Cash Flow | ~$3.1B |
Automation Solutions | (1%) - 2% | Capital Spend | ~$600M |
Commercial & Residential Solutions | 5% - 8% | Free Cash Flow | ~$2.5B |
Underlying Sales Growth | (1%) - 2% | Dividend | ~$1.2B |
Automation Solutions | (4%) - (1%) | Share Repurchase | |
Commercial & Residential Solutions | 4% - 7% | / M&A (excl. OSI)1 | $500M - $1.0B |
GAAP EPS | $3.11 +/- $.05 | Tax Rate | ~22.5% |
Adjusted EPS | $3.45 +/- $.05 | Restructuring Actions | ~$200M+ |
Table 1 | |||||||||
EMERSON AND SUBSIDIARIES | |||||||||
CONSOLIDATED OPERATING RESULTS | |||||||||
(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) | |||||||||
Quarter Ended Sept 30 | Percent | ||||||||
2019 | 2020 | Change | |||||||
Net sales | $4,971 | $4,558 | (8)% | ||||||
Costs and expenses: | |||||||||
Cost of sales | 2,843 | 2,676 | |||||||
SG&A expenses | 1,109 | 946 | |||||||
Other deductions, net | 153 | 131 | |||||||
Interest expense, net | 40 | 40 | |||||||
Earnings before income taxes | 826 | 765 | (7)% | ||||||
Income taxes | 102 | 35 | |||||||
Net earnings | 724 | 730 | |||||||
Less: Noncontrolling interests in earnings of subsidiaries | 7 | 7 | |||||||
Net earnings common stockholders | $717 | $723 | 1% | ||||||
Diluted avg. shares outstanding | 617.5 | 601.1 | |||||||
Diluted earnings per share common share | $1.16 | $1.20 | 3% | ||||||
Quarter Ended Sept 30 | |||||||||
2019 | 2020 | ||||||||
Other deductions, net | |||||||||
Amortization of intangibles | $61 | $61 | |||||||
Restructuring costs | 55 | 68 | |||||||
Other | 37 | 2 | |||||||
Total | $153 | $131 |
Table 2 | |||||||||
EMERSON AND SUBSIDIARIES | |||||||||
CONSOLIDATED OPERATING RESULTS | |||||||||
(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) | |||||||||
Years Ended Sept 30 | Percent | ||||||||
2019 | 2020 | Change | |||||||
Net sales | $18,372 | $16,785 | (9)% | ||||||
Costs and expenses: | |||||||||
Cost of sales | 10,557 | 9,776 | |||||||
SG&A expenses | 4,457 | 3,986 | |||||||
Other deductions, net | 325 | 532 | |||||||
Interest expense, net | 174 | 156 | |||||||
Earnings before income taxes | 2,859 | 2,335 | (18)% | ||||||
Income taxes | 531 | 345 | |||||||
Net earnings | 2,328 | 1,990 | |||||||
Less: Noncontrolling interests in earnings of subsidiaries | 22 | 25 | |||||||
Net earnings common stockholders | $2,306 | $1,965 | (15)% | ||||||
Diluted avg. shares outstanding | 620.6 | 606.6 | |||||||
Diluted earnings per share common share | $3.71 | $3.24 | (13)% | ||||||
Years Ended Sept 30 | |||||||||
2019 | 2020 | ||||||||
Other deductions, net | |||||||||
Amortization of intangibles | $238 | $239 | |||||||
Restructuring costs | 95 | 284 | |||||||
Special advisory fees | — | 13 | |||||||
Other | (8 | ) | (4 | ) | |||||
Total | $325 | $532 |
Table 3 | |||||||
EMERSON AND SUBSIDIARIES | |||||||
CONSOLIDATED BALANCE SHEETS | |||||||
(DOLLARS IN MILLIONS, UNAUDITED) | |||||||
Years ended Sept 30 | |||||||
2019 | 2020 | ||||||
Assets | |||||||
Cash and equivalents | $1,494 | $3,315 | |||||
Receivables, net | 2,985 | 2,802 | |||||
Inventories | 1,880 | 1,928 | |||||
Other current assets | 780 | 761 | |||||
Total current assets | 7,139 | 8,806 | |||||
Property, plant & equipment, net | 3,642 | 3,688 | |||||
Goodwill | 6,536 | 6,734 | |||||
Other intangible assets | 2,615 | 2,468 | |||||
Other | 565 | 1,186 | |||||
Total assets | $20,497 | $22,882 | |||||
Liabilities and equity | |||||||
Short-term borrowings and current | |||||||
maturities of long-term debt | $1,444 | $1,160 | |||||
Accounts payable | 1,874 | 1,715 | |||||
Accrued expenses | 2,658 | 2,910 | |||||
Total current liabilities | 5,976 | 5,785 | |||||
Long-term debt | 4,277 | 6,326 | |||||
Other liabilities | 1,971 | 2,324 | |||||
Total equity | 8,273 | 8,447 | |||||
Total liabilities and equity | $20,497 | $22,882 |
Table 4 | ||||||
EMERSON AND SUBSIDIARIES | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
(DOLLARS IN MILLIONS, UNAUDITED) | ||||||
Years Ended Sept 30 | ||||||
2019 | 2020 | |||||
Operating activities | ||||||
Net earnings | $2,328 | $1,990 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||
Depreciation and amortization | 822 | 854 | ||||
Stock compensation | 120 | 110 | ||||
Pension expense | 2 | 67 | ||||
Pension funding | (60 | ) | (66 | ) | ||
Changes in operating working capital | (150 | ) | 148 | |||
Other, net | (56 | ) | (20 | ) | ||
Cash provided by operating activities | 3,006 | 3,083 | ||||
Investing activities | ||||||
Capital expenditures | (594 | ) | (538 | ) | ||
Purchases of businesses, net of cash and equivalents acquired | (469 | ) | (126 | ) | ||
Divestitures of businesses | 14 | — | ||||
Other, net | (125 | ) | (76 | ) | ||
Cash used in investing activities | (1,174 | ) | (740 | ) | ||
Financing activities | ||||||
Net increase in short-term borrowings | (6 | ) | (90 | ) | ||
Proceeds from short-term borrowings greater than three months | — | 1,043 | ||||
Payments of short-term borrowings greater than three months | — | (1,043 | ) | |||
Proceeds from long-term debt | 1,691 | 2,233 | ||||
Payments of long-term debt | (656 | ) | (503 | ) | ||
Dividends paid | (1,209 | ) | (1,209 | ) | ||
Purchases of common stock | (1,250 | ) | (942 | ) | ||
Other, net | 39 | 2 | ||||
Cash used in financing activities | (1,391 | ) | (509 | ) | ||
Effect of exchange rate changes on cash and equivalents | (40 | ) | (13 | ) | ||
Increase in cash and equivalents | 401 | 1,821 | ||||
Beginning cash and equivalents | 1,093 | 1,494 | ||||
Ending cash and equivalents | $1,494 | $3,315 | ||||
Table 5 | |||||||
EMERSON AND SUBSIDIARIES | |||||||
SEGMENT SALES AND EARNINGS | |||||||
(DOLLARS IN MILLIONS, UNAUDITED) | |||||||
Quarter Ended Sept 30 | |||||||
2019 | 2020 | ||||||
Sales | |||||||
Automation Solutions | $3,368 | $3,005 | |||||
Climate Technologies | 1,142 | 1,111 | |||||
Tools & Home Products | 466 | 444 | |||||
Commercial & Residential Solutions | 1,608 | 1,555 | |||||
Eliminations | (5 | ) | (2 | ) | |||
Net sales | $4,971 | $4,558 | |||||
Earnings | |||||||
Automation Solutions | $619 | $511 | |||||
Climate Technologies | 233 | 238 | |||||
Tools & Home Products | 102 | 84 | |||||
Commercial & Residential Solutions | 335 | 322 | |||||
Stock compensation | (37 | ) | (41 | ) | |||
Unallocated pension and postretirement costs | 27 | 16 | |||||
Corporate and other | (78 | ) | (3 | ) | |||
Interest expense, net | (40 | ) | (40 | ) | |||
Earnings before income taxes | $826 | $765 | |||||
Restructuring costs | |||||||
Automation Solutions | $39 | $50 | |||||
Climate Technologies | 12 | 9 | |||||
Tools & Home Products | 2 | 9 | |||||
Commercial & Residential Solutions | 14 | 18 | |||||
Corporate | 2 | — | |||||
Total | $55 | $68 | |||||
The table above does not include $5 of costs related to restructuring actions that were reported in cost of sales in the fourth quarter of fiscal 2020. | |||||||
Depreciation and Amortization | |||||||
Automation Solutions | $142 | $143 | |||||
Climate Technologies | 44 | 51 | |||||
Tools & Home Products | 17 | 19 | |||||
Commercial & Residential Solutions | 61 | 70 | |||||
Corporate and other | 10 | 10 | |||||
Total | $213 | $223 |
Table 6 | |||||||
EMERSON AND SUBSIDIARIES | |||||||
SEGMENT SALES AND EARNINGS | |||||||
(DOLLARS IN MILLIONS, UNAUDITED) | |||||||
Years Ended Sept 30 | |||||||
2019 | 2020 | ||||||
Sales | |||||||
Automation Solutions | $12,202 | $11,155 | |||||
Climate Technologies | 4,313 | 3,980 | |||||
Tools & Home Products | 1,856 | 1,663 | |||||
Commercial & Residential Solutions | 6,169 | 5,643 | |||||
Eliminations | 1 | (13 | ) | ||||
Net sales | $18,372 | $16,785 | |||||
Earnings | |||||||
Automation Solutions | $1,947 | $1,523 | |||||
Climate Technologies | 883 | 801 | |||||
Tools & Home Products | 388 | 317 | |||||
Commercial & Residential Solutions | 1,271 | 1,118 | |||||
Stock compensation | (120 | ) | (110 | ) | |||
Unallocated pension and postretirement costs | 108 | 53 | |||||
Corporate and other | (173 | ) | (93 | ) | |||
Interest expense, net | (174 | ) | (156 | ) | |||
Earnings before income taxes | $2,859 | $2,335 | |||||
Restructuring costs | |||||||
Automation Solutions | $65 | $232 | |||||
Climate Technologies | 20 | 23 | |||||
Tools & Home Products | 7 | 21 | |||||
Commercial & Residential Solutions | 27 | 44 | |||||
Corporate | 3 | 8 | |||||
Total | $95 | $284 | |||||
The table above does not include $20 of costs related to restructuring actions that were reported in cost of sales for the twelve months ended September 30, 2020. | |||||||
Depreciation and Amortization | |||||||
Automation Solutions | $535 | $557 | |||||
Climate Technologies | 176 | 184 | |||||
Tools & Home Products | 71 | 77 | |||||
Commercial & Residential Solutions | 247 | 261 | |||||
Corporate and other | 40 | 36 | |||||
Total | $822 | $854 |
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): | ||||||||||||||||||
Q4 2020 Underlying Sales Change | Auto Solns | Comm & Res Solns | Emerson | |||||||||||||||
Reported (GAAP) | (11 | )% | (3 | )% | (8 | )% | ||||||||||||
(Favorable) / Unfavorable FX | — | % | — | % | (1 | )% | ||||||||||||
Acquisitions / Divestitures | — | % | — | % | — | % | ||||||||||||
Underlying* | (11 | )% | (3 | )% | (9 | )% | ||||||||||||
2020 Underlying Sales Change | Emerson | |||||||||||||||||
Reported (GAAP) | (9 | )% | ||||||||||||||||
(Favorable) / Unfavorable FX | 1 | % | ||||||||||||||||
Acquisitions / Divestitures | — | % | ||||||||||||||||
Underlying* | (8 | )% | ||||||||||||||||
FY 2021E Underlying Sales Change | Auto Solns | Comm & Res Solns | Emerson | |||||||||||||||
Reported (GAAP) | (1)% - 2% | 5% - 8% | 1% - 4% | |||||||||||||||
(Favorable) / Unfavorable FX | ~ (1)% | ~ (1)% | ~ (1)% | |||||||||||||||
Acquisitions / Divestitures | ~ (2)% | ~ -% | ~ (1)% | |||||||||||||||
Underlying* | (4)% - (1)% | 4% - 7% | (1)% - 2% | |||||||||||||||
Q4 Earnings Per Share | Q4 FY19 | Q4 FY20 | Change | |||||||||||||||
Earnings per share (GAAP) | $ | 1.16 | $ | 1.20 | 3 | % | ||||||||||||
Restructuring and related charges | 0.07 | 0.10 | 3 | % | ||||||||||||||
Certain tax benefits | (0.09 | ) | (0.20 | ) | (10 | )% | ||||||||||||
Adjusted earnings per share* | $ | 1.14 | $ | 1.10 | (4 | )% | ||||||||||||
Earnings Per Share | FY19 | FY20 | Change | |||||||||||||||
Earnings per share (GAAP) | $ | 3.71 | $ | 3.24 | (13 | )% | ||||||||||||
Restructuring and related charges | 0.12 | 0.42 | 9 | % | ||||||||||||||
Certain tax benefits | (0.14 | ) | (0.20 | ) | (2 | )% | ||||||||||||
Adjusted earnings per share* | $ | 3.69 | $ | 3.46 | (6 | )% | ||||||||||||
Earnings Per Share | FY2020E Prior Guidance | FY2021E | ||||||||||||||||
Earnings per share (GAAP) | $2.80 - $2.95 | ~ $3.11 | ||||||||||||||||
Restructuring and related charges | ~ 0.40 | ~ 0.28 | ||||||||||||||||
OSI purchase accounting | ~ - | ~ 0.06 | ||||||||||||||||
Adjusted earnings per share* | $3.20 - $3.35 | ~ $3.45 | ||||||||||||||||
EBIT Margin | Q4 FY19 | Q4 FY20 | Change | |||||||||||||||
Pretax margin (GAAP) | 16.6 | % | 16.8 | % | 20 bps | |||||||||||||
Interest expense, net | 0.8 | % | 0.9 | % | 10 bps | |||||||||||||
Earnings before interest and taxes margin* | 17.4 | % | 17.7 | % | 30 bps | |||||||||||||
Restructuring and related charges | 1.1 | % | 1.6 | % | 50 bps | |||||||||||||
Adjusted earnings before interest and taxes margin* | 18.5 | % | 19.3 | % | 80 bps |
- more - | |||||||||||||||||
Automation Solutions Segment EBIT Margin | Q4 FY19 | Q4 FY20 | Change | ||||||||||||||
Automation Solutions Segment EBIT margin (GAAP) | 18.4 | % | 17.0 | % | (140) bps | ||||||||||||
Restructuring charges impact | 1.1 | % | 1.7 | % | 60 bps | ||||||||||||
Automation Solutions Adjusted Segment EBIT margin* | 19.5 | % | 18.7 | % | (80) bps | ||||||||||||
Depreciation / amortization | 4.2 | % | 4.8 | % | 60 bps | ||||||||||||
Automation Solutions Adjusted Segment EBITDA margin* | 23.7 | % | 23.5 | % | (20) bps | ||||||||||||
Commercial & Residential EBIT Margin | Q4 FY19 | Q4 FY20 | Change | ||||||||||||||
Commercial & Residential EBIT margin (GAAP) | 20.8 | % | 20.7 | % | (10) bps | ||||||||||||
Restructuring charges impact | 0.8 | % | 1.4 | % | 60 bps | ||||||||||||
Commercial & Residential Adjusted EBIT margin* | 21.6 | % | 22.1 | % | 50 bps | ||||||||||||
Depreciation / amortization | 3.8 | % | 4.5 | % | 70 bps | ||||||||||||
Commercial & Residential Adjusted EBITDA margin* | 25.4 | % | 26.6 | % | 120 bps | ||||||||||||
Q4 Cash Flow | Q4 FY19 | Q4 FY20 | % Change | ||||||||||||||
Operating cash flow (GAAP) | $ | 1,204 | $ | 1,229 | 2 | % | |||||||||||
Capital expenditures | (199 | ) | (209 | ) | — | % | |||||||||||
Free cash flow* | $ | 1,005 | $ | 1,020 | 2 | % | |||||||||||
Cash Flow | FY 2019 | FY 2020 | % Change | ||||||||||||||
Operating cash flow (GAAP) | $ | 3,006 | $ | 3,083 | 3 | % | |||||||||||
Capital expenditures | (594 | ) | (538 | ) | 3 | % | |||||||||||
Free cash flow* | $ | 2,412 | $ | 2,545 | 6 | % | |||||||||||
FY 2021E Cash Flow | FY 2021E | ||||||||||||||||
Operating cash flow (GAAP) | ~ $3,100 | ||||||||||||||||
Capital expenditures | ~ (600) | ||||||||||||||||
Free cash flow* | ~ $2,500 | ||||||||||||||||
Cash Flow to Net Earnings Conversion | Q4 FY20 | FY20 | |||||||||||||||
Operating cash flow to net earnings (GAAP) | 168 | % | 155 | % | |||||||||||||
Capital expenditures | (28 | )% | (27 | )% | |||||||||||||
Free cash flow to net earnings* | 140 | % | 128 | % | |||||||||||||
Note: Underlying sales and orders exclude the impact of acquisitions, divestitures and currency translation. | |||||||||||||||||
### |