Emerson Reports First Quarter Fiscal 2002 Results
Free Cash Flow Increases By 25 Percent
biz.yahoo.com
ST. LOUIS--(BUSINESS WIRE)--Feb. 5, 2002--Emerson (NYSE:EMR) announced today that for the first quarter of fiscal 2002 ended December 31, 2001, the company achieved sales of $3.3 billion, net earnings of $255 million, earnings per share of $0.61, and operating cash flow of $252 million. Free cash flow increased 25 percent versus the first quarter of fiscal 2001, from $127 million to $158 million, driven by improvements in working capital and lower capital spending.
In the first quarter of fiscal 2001, Emerson reported sales of $3.9 billion, net earnings of $357 million, earnings per share of $0.83, and operating cash flow of $277 million.
Commenting on the quarter results, David N. Farr, chief executive officer, reiterated remarks made January 17 at the company's annual investor meeting in New York City, ``The first quarter was challenging due both to weak economic conditions and the actions of key customers who reduced their inventories and production. However, we have seen evidence of stabilization across many of our early-cycle businesses, and are optimistic we will see steady improvement in business conditions as the year progresses.
``Important early indicators include our consumer-based tools and appliance businesses, which have shown solid results since early December. In the electronics and telecommunications business, embedded power conversion products, which were an early indicator of the telecom and computing downturn, have also been relatively stable for several weeks.
``In addition, the process business has continued to perform well on top of an outstanding 2001 performance, driven by our industry-leading PlantWeb technology.''
Farr continued, ``Our major emphasis continues to be on implementing restructuring actions for cost structure improvements. We are reducing salaried headcount, closing and consolidating facilities, and discontinuing certain product areas that have not met growth and profitability expectations. At the same time, we have continued to fund important long-term growth initiatives, including using this downturn to extend our leadership in key technologies.''
Business Segment Highlights
Discussing the business segments, Farr said, ``The process control business reported a 3 percent increase in sales, reaching $796 million. Underlying growth, excluding acquisitions, divestitures and unfavorable currency exchange, was approximately 5 percent - building on the 10 percent growth achieved in fiscal 2001. PlantWeb (www.EmersonProcess.com/PlantWeb) digital plant architecture continues to gain acceptance, with over 2,200 project wins across the oil and gas, pharmaceutical, chemical, pulp and paper, and food and beverage industries. During December, we were awarded two major contracts totaling over $25 million each, including a $32 million, multi-stage automation upgrade of the Shell Deer Park refinery. Recognizing our technology leadership, Control magazine, in its January 2002 survey of end users, ranked Emerson Process Management the highest overall among process industry solutions providers. Emerson was voted 'Best in Class' for a total of 21 product and software rankings - including, for the first time, a number one ranking in large-scale systems.
``In electronics and telecommunications, sales declined to $635 million from $1,087 million due to the continued worldwide weakness in telecom and computing equipment. We've taken aggressive actions to deal with the market downturn, and this segment remained profitable despite the sharp decline. Our recent acquisition of Avansys, China's leading power electronics company, enables many of the cost actions, and it has provided important infrastructure to strengthen our global market leadership.
``Sales in the heating, ventilating and air conditioning business decreased by approximately 12 percent as many of our key customers took aggressive actions to reduce their inventory and costs in the quarter. We believe this segment is well positioned for future growth, with relatively low channel inventory levels and several new opportunities for our Copeland Scroll compressor technology.
``Sales in the industrial automation business declined from $753 million to $656 million, driven by continued weakness in capital goods in both the United States and Europe. During the quarter, Emerson divested the Chromalox industrial heating products division, which resulted in a pretax gain of $85 million. The impact of this gain was approximately offset by ongoing costs for the rationalization of operations and other items.
``Sales for the appliance and tools business declined 6 percent, primarily due to weakness in the industrial sector. Demand for consumer-based products improved throughout the quarter, with In-Sink- Erator waste disposers, ClosetMaid storage solutions and several appliance components products posting moderate to strong growth.
Financial Highlights
``Despite the economic environment, Emerson continues to be financially strong,'' Farr said. ``The 25 percent increase in free cash flow is indicative of the successes we are achieving in lean manufacturing and e-business productivity. The reduction of capital spending to under $100 million for the quarter was also an important driver of cash flow growth.
``The company's balance sheet also remains solid. Net debt to net capital was approximately 44 percent at the end of the quarter, with interest coverage at 6.3 times.'' Farr added, ``Solid cash generation and lower levels of acquisitions and stock repurchase throughout the remainder of 2002 are expected to decrease our debt position.''
Adoption of FAS 142
During the quarter, Emerson adopted FAS 142 regarding goodwill amortization, which increases the company's reported fiscal 2002 earnings by $0.35, or approximately $0.09 per quarter. The change also immediately reduces Emerson's effective tax rate by approximately 3 percentage points, due to the non-deductible nature of goodwill. |
