Message #10 From:
NewsBot Date: November 7, 2006 03:55:00 AM
EMR News Emerson Sales Top $20 Billion in 2006; Earnings Per Share of $4.48
ST. LOUIS--(BUSINESS WIRE)--Emerson (NYSE: EMR):
Fourth Quarter Sales up 19 percent to $5.5 billion
Fourth Quarter Earnings per Share of $1.29, up 28 percent
Operating Cash Flow for 2006 of $2.5 billion, up 15 percent
Return on Total Capital of 18.4 percent, up 290 basis points from
fiscal 2005
Emerson (NYSE: EMR) today announced record net sales for fiscal 2006 of
$20.1 billion, an increase of 16 percent from the prior year. Sales for
the fourth quarter ended September 30, 2006 were $5.5 billion, an
increase of 19 percent over the $4.6 billion reported in the same period
last year. The Company achieved underlying sales growth in the quarter
of 11 percent, which excludes increases of 6 percent for acquisitions
and 2 percent for favorable exchange rates.
“The sales performance for both the year and
the fourth quarter was exceptional,” said
Emerson Chairman, Chief Executive Officer and President David N. Farr. “Customer
adoption of our technologies has been strong all year, and our global
platforms enabled Emerson to capture accelerating growth outside the
United States during the fourth quarter.”
Earnings per share in the fourth quarter of $1.29 represented an
increase of 28 percent over the $1.01 achieved in the fourth quarter of
2005. The earnings increase was driven primarily by leverage on higher
sales volumes and benefits from prior cost reduction activities. Results
in the fourth quarter of 2006 included a pretax gain of $31 million, or
$0.05 per share, related to the sale during the quarter of the Buehler
materials testing business. This business had been part of the
Industrial Automation segment.
For fiscal 2006 earnings per share rose 32 percent to $4.48 from the
$3.40 reported in 2005. In 2005, the Company recognized a tax expense of
$63 million, or $0.15 per share, related to repatriation of foreign
earnings under the American Jobs Creation Act. Excluding this expense,
2006 earnings per share increased 26 percent over 2005.
“Emerson had a great year in 2006 and achieved
some significant milestones,” Farr said. “Our
long-term focus on growth platforms has paid off as revenue exceeded the
$20 billion mark for the first time. This year also marked the 50th
consecutive year of dividend increases for the Company. We are proud of
these accomplishments and the value creation they have generated for our
shareholders over many years.”
Balance Sheet / Cash Flow
Operating cash flow was $2.5 billion in 2006, a 15 percent increase from
2005. Of this record operating cash flow, 63 percent was returned to
shareholders during the year in the form of dividends and share
repurchases. Managing increasing working capital needs as our business
expands is an important element of cash management. Emerson saw
continued improvement in working capital efficiency as the average
days-in-the-cash-cycle improved from 71 days in fiscal 2005 to 65 days
in fiscal 2006. Return on total capital, a key measure of earnings and
balance sheet performance, increased by 290 basis points to 18.4 percent
in 2006.
“Emerson maintains a sharp focus on having a
strong and flexible balance sheet. Generating significant amounts of
cash and putting that cash to the proper use is at the heart of how we
create value for our shareholders,” Farr said.
Fiscal 2006 Operating Highlights
Process Management’s strong performance
continued in 2006 as sales increased 16 percent to $4.9 billion.
Underlying sales growth was 13 percent, led by 15 percent growth in the
United States and Asia and 20 percent growth in Latin America. Reported
sales included a 3 percent positive impact from acquisitions. Emerson
Process Management continued to be recognized as the industry technology
leader in 2006 as it was again named the best supplier of process
management technologies in the CONTROL magazine’s
Readers’ Choice Awards and was recognized by
Frost & Sullivan as the Industrial Automation and Process Control
Company of the Year. Margins for this business expanded by 200 basis
points to 18.0 percent, driven primarily by leverage on sales volume
increases.
Industrial Automation experienced another strong year as global capital
spending remained favorable for these businesses. Total sales were $3.8
billion, an increase of 16 percent versus the prior year. Underlying
sales growth was 11 percent, with balanced growth from the United States
(12 percent), Europe (10 percent) and Asia (13 percent). Reported sales
growth included a positive acquisition impact of 6 percent and an
unfavorable currency impact of 1 percent. The margin for this segment
was 15.1 percent, an increase of 80 basis points from 2005. The margin
improvement reflects primarily leverage on higher sales and benefits
from prior cost reduction activities.
Network Power sales were $4.4 billion in 2006, an increase of 31 percent
versus the prior year. Underlying sales growth was 21 percent with the
strongest growth coming from Asia (37 percent) and the United States (22
percent). Reported sales growth included a positive acquisition impact
of 10 percent. End markets were strong across this segment with
particular strength in the computing and data-center markets, which led
to strong growth in the AC power system and precision cooling
businesses. The margin for this segment was 11.1 percent, a 10 basis
point decline versus the prior year. The margin decrease was primarily
the result of dilution from acquisitions.
Climate Technologies sales for the year increased 13 percent to $3.4
billion. Underlying sales growth was 13 percent with the strongest
growth coming from the United States (14 percent) and Europe (20
percent). The Copeland Scroll™ compressor was
a main driver of growth for this segment as it continued to provide
energy efficiency benefits to customers in heating, ventilation and
air-conditioning applications around the world. The 2006 margin for this
segment was 15.3 percent, a 40 basis point improvement from 2005. Sales
volume leverage and cost reduction activity were able to offset the
unfavorable impact of commodity and other inflation.
Appliance and Tools achieved sales of $4.3 billion, an increase of 8
percent which included underlying sales growth of 6 percent. The growth
was led by strength in the tools and storage businesses and modest
growth from the motors and appliance component businesses. Reported
sales included a favorable impact of 2 percent from acquisitions. The
margin for this segment was 12.8 percent, a decrease of 50 basis points
as significant material costs and other inflation could not be offset by
price increases and cost reductions.
Dividend Increase and 2-for-1 Stock
Split
The Board of Directors has voted to increase the quarterly cash dividend
from forty-four and one-half cents ($0.445) to fifty-two and one-half
cents ($0.525) per share of common stock, payable December 11, 2006 to
shareholders of record on November 17, 2006. This represents an increase
of 18 percent.
The Board of Directors also approved a 2-for-1 stock split in the form
of a 100 percent stock dividend. The stock dividend will be payable
December 11, 2006 to shareholders of record on November 17, 2006. The
cash dividend will be paid on a pre-split basis.
“Emerson is committed to delivering value to
our shareholders,” Farr said. “By
increasing our cash returns to shareholders and paying a stock dividend,
we make ownership of Emerson shares more attractive to a broader base of
investors.”
Fiscal 2007 Outlook
The outlook for Emerson remains positive moving into fiscal 2007. Many
of Emerson’s end markets remain strong, but a
moderation in growth rates is expected when compared to 2006. Underlying
sales growth for fiscal 2007 is expected to be in the range of 5 to 7
percent. Reported sales growth is expected to be in the range of 7 to 11
percent. Based on this level of sales growth, the Company expects to
generate 2007 earnings per share growth in the range of 12 to 15 percent
above the $4.48 per share earned in 2006.
First-quarter 2007 comparisons with prior year results will be affected
by two key factors that were disclosed during the first quarter of 2006.
Restructuring expense was unusually low during the first quarter of
2006, which benefited earnings in that period by approximately $0.03 per
share. Also, the Climate Technologies business experienced unusually
strong demand as a result of customer order patterns before the
implementation of new energy efficiency standards, which also benefited
earnings by approximately $0.03 per share.
Upcoming Investor Events
On Tuesday, November 7, 2006, at 4:30 p.m. EST (3:30 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 Web site at www.gotoemerson.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 Web site. Details of upcoming events will be posted as they occur in
the Investor Relations Calendar of Events on the corporate Web site.
On November 8, 2006, David N. Farr will present at the Robert W. Baird
Industrial Conference in Chicago, Illinois. The presentation will begin
at 11:05 a.m. EST and conclude at approximately 11:35 a.m. EST. All
interested parties may listen to the live Web cast via the Internet by
going to the Investor Relations area of Emerson's Web site at www.gotoemerson.com/financial
and completing a brief registration form. A replay of the Web cast will
be available for approximately one week at the same location on the Web
site.
On Friday morning, February 9, 2007, 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 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 including audited financial
statements within the next 30 days.
