EMR warning:
Emerson Provides Earnings Outlook
ST. LOUIS--(BUSINESS WIRE)--July 11, 2001--Emerson (NYSE:EMR - news) announced today that the company expects to report an 11 percent decline in earnings per share for the third quarter ended June 30, and a mid-single-digit decline in earnings per share for fiscal 2001, driven by a sharp decline in sales and profit in its electronics and telecom business and higher company-wide restructuring that the company treats as normal ``pay as you go'' costs.
``This is a customer demand issue of unprecedented magnitude,'' said David N. Farr, chief executive officer. ``After 25 percent growth throughout fiscal 2000 and the first half of fiscal 2001, electronics and telecom sales are now declining at a percentage rate in the high teens.
``Even in this challenging environment, Emerson continues to generate high levels of earnings and cash flow. Net earnings in fiscal 2001 will exceed $1.3 billion. Operating cash flow for the year is expected to exceed $1.8 billion, and free cash flow will show solid growth. Given the sound fundamentals of our businesses, 'pay as you go' restructuring is appropriate, and a major, one-time charge is unnecessary,'' Farr said.
``After careful consideration, our management team made a proactive decision to not continue Emerson's record 43 consecutive years of increased earnings per share. We could have pared back restructuring and other investments, or taken other operating actions as we have done in the past, to continue the record. Doing so would not have been in the best interest of the company and our shareholders, who have clearly expressed a preference for faster growth. We have no intention of changing the way we manage operations for consistent performance, and taking this action now should position us to return to double-digit earnings per share growth sooner than would otherwise be possible.
``We continue to benefit from leading technology, market participation and cost positions. Where customers are buying, we are winning, and when the economy improves, Emerson will be well-positioned to continue its growth.
``We remain committed to the continued repositioning of Emerson. Growth initiatives based on innovative technologies and global expansion, acquisitions targeted in faster-growth markets, and selective divestitures are key to delivering higher long-term growth. For example, our unique PlantWeb(TM) automation architecture and Scroll compressors have redefined the traditional process and HVAC markets. The expansion of our electronics and telecom segment has also positioned Emerson for faster through-the-cycle growth. The current decline in this sector is clearly the end result of unsustainable growth over the past two years. The long-term growth dynamics of this business continue to be attractive.
``As part of our accelerated restructuring activities, we are capitalizing on the market downturn to reorganize the electronics and telecom business for continued profit improvement,'' Farr said. ``For example, the power systems businesses of our recent Astec APS and Emerson Energy Systems acquisitions are being combined into a single organization. We are also implementing aggressive cost reduction programs across the remainder of the company. Total salaried headcount has been reduced over 6 percent since the beginning of the year, and is now at a level comparable to 1995.''
Emerson will hold a conference call today at 9:00 a.m. Eastern Time. The call is open to all interested parties and is available via a live audio Web cast through the Investor Relations area of the Emerson web site, gotoemerson.com. Emerson will report fiscal third quarter results on Tuesday, August 7.
St. Louis-based Emerson is a global leader in bringing technology and engineering together to provide innovative solutions to customers in electronics and telecommunications; process control; industrial automation; heating, ventilating and air conditioning; and appliance and tools. Sales in fiscal 2000 were $15.5 billion.
Statements in this release that are not strictly historical may be ``forward-looking'' statements, which involve risks and uncertainties. These include economic and currency conditions, market demand, pricing, and competitive and technological factors, among others, which are set forth in the company's SEC filings.
SOURCE: Emerson |
