Exhibit 99.1
| Contact: Mark Polzin (314) 982-1758 |
| or John Hastings (314) 982-8622 |
EMERSON ACHIEVES RECORD 2007 RESULTS
Sales of $22.6 Billion, Earnings Per Share of $2.66 and
Return on Total Capital of 20.1 Percent
| • | Fourth Quarter Sales Up 11 Percent to $6.1 Billion |
| • | Fourth Quarter Earnings Per Share of $0.78, Up 20 Percent |
| • | 2007 Operating Cash Flow of $3.0 billion, Up 20 Percent |
| • | Quarterly Dividend Increased 14 Percent to $0.30 Per Share |
ST. LOUIS, November 6, 2007 – Emerson (NYSE: EMR) today announced record net sales for fiscal 2007 of $22.6 billion, an increase of 12 percent from the prior year. Sales for the fourth quarter ended September 30, 2007 were $6.1 billion, an increase of 11 percent over the $5.5 billion reported in the same period last year. The Company achieved underlying sales growth in the quarter of 7 percent which excludes increases of 3 percent due to favorable currency exchange rates and 1 percent from acquisitions, net of divestitures.
Earnings per share for the fourth quarter of $0.78 represented an increase of 20 percent over the $0.65 achieved in the fourth quarter of 2006. The Company translated strong sales performance during the quarter into expanded operating profit margin, which was a key component of the 20 percent increase in earnings per share. Operating profit margin during the quarter was 16.6 percent, an improvement of 70 basis points from the prior year period. This improvement was driven by a continued focus on cost reduction programs and leverage on sales increases. Pretax earnings margin was 14.8 percent compared to 14.1 percent in the prior year period.
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“Emerson had a great finish to 2007 and enters 2008 with solid momentum,” said Emerson Chairman, Chief Executive Officer and President David N. Farr. “End market conditions tracked expectations and the Company’s ability to execute in this environment led to performance in sales, earnings and cash generation that exceeded our expectations.”
For the year ended September 30, 2007, sales increased 12 percent to $22.6 billion. This strong performance was a result of 7 percent underlying sales growth, which is in line with Emerson’s long-term objective of achieving underlying sales growth in the range of 5 to 7 percent. Currency translation added more than 2 percent and acquisitions, net of divestitures, added nearly 3 percent to reported sales growth. For fiscal 2007, earnings per share rose 19 percent to $2.66 from the $2.24 reported in 2006.
“Emerson’s performance has been outstanding over the last five years,” Farr said. “We have focused on the correct strategies to grow across the business platforms while also enhancing shareholder returns. This is a proven formula that Emerson will continue to follow as it pursues future opportunities.”
Balance Sheet / Cash Flow
Operating cash flow was a record $3.0 billion in 2007, representing a 20 percent increase from 2006. Capital expenditures were $681 million in 2007, an increase of 13 percent from 2006 due primarily to capacity expansions at Climate Technologies and Process Management. Free cash flow (operating cash flow less capital expenditures) for the year was $2.3 billion, also a record amount and an increase of 22 percent from the prior year.
Continued focus on efficient use of working capital, especially in the face of strong underlying sales growth, helped to drive the strong cash flow performance. The ratio of trade working capital as a percent of sales improved to 16.2 percent from 16.5 percent in the prior year quarter. Return on total capital (ROTC), a key measure of earnings and balance sheet performance, increased by 170 basis points to 20.1 percent in fiscal 2007.
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Based on the Company’s continued strong cash generation and positive outlook for the future, the Board of Directors has voted to increase the quarterly cash dividend by 14 percent from twenty-six and one-quarter cents ($0.2625) to thirty cents ($0.30) per share of common stock. The dividend will be payable December 10, 2007 to shareholders of record on November 16, 2007.
“Emerson continued to execute well in 2007, despite weakness from certain parts of the economy during the year. The cash flow and return on total capital performance, as well as the ability to increase the dividend, demonstrate this execution clearly. Achieving these levels of returns and cash generation is significant and indicative of the value creation that continues to occur inside Emerson,” Farr said.
Fiscal 2007 Operating Highlights
Process Management had a great year in 2007 with reported sales increasing 17 percent to $5.7 billion. Underlying sales growth for the year was 11 percent, which excludes favorable impacts from currency translation (4 percent) and acquisitions (2 percent). The margin for Process Management expanded by 70 basis points to 18.7 percent as it continued to deliver market-leading technology and achieve strong sales and earnings performance.
Industrial Automation had strong performance in 2007 with reported sales of $4.3 billion, an increase of 13 percent from the prior year. Underlying sales increased by 10 percent, led by strength in Europe. Reported sales included a 4 percent favorable impact from currency translation and a 1 percent unfavorable impact from divestitures. The margin for this segment was 15.6 percent compared to 15.1 percent in the prior year.
Network Power sales were $5.2 billion in 2007, an increase of 18 percent versus the prior year. Underlying sales growth was 9 percent led by strength in Asia. Reported sales growth included a positive impact from acquisitions of 7 percent and favorable currency translation of 2 percent. The margin for this segment was 12.5 percent, a 140 basis point improvement versus the prior year driven by sales volume leverage and benefits from cost reduction activities.
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Climate Technologies sales for the year increased 6 percent to $3.6 billion. Underlying sales growth was 1 percent with strength in Europe and Asia offsetting a 7 percent decline in the United States. Reported sales included a 3 percent benefit from acquisitions and 2 percent from currency translation. The 2007 margin for this segment was 14.9 percent, a 40 basis point decline from 2006.
Appliance and Tools achieved sales of $4.4 billion, an increase of 3 percent which included underlying sales growth of 1 percent. Reported sales included a favorable impact of 1 percent from acquisitions and 1 percent from currency translation. The margin for this segment was 13.0 percent, an increase of 20 basis points over 2006.
Fiscal 2008 Outlook
Order trends for Emerson’s businesses continue to track expectations and the Company has positive momentum heading into fiscal 2008. Underlying sales growth for fiscal 2008 is expected to be in the range of 5 to 7 percent and reported sales growth is expected to be in the range of 7 to 10 percent. Based on this level of sales growth, the Company expects to generate 2008 earnings per share growth in the range of 10 to 15 percent above the $2.66 per share earned in 2007.
Upcoming Investor Events
On Tuesday, November 6, 2007, at 3:00 p.m. EST (2:00 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.emerson.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.
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On November 7, 2007, Mr. Farr will present at the Robert W. Baird Industrial Conference in Chicago, Illinois. The presentation will begin at 9:20 a.m. EST and conclude at approximately 9:50 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.emerson.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 8, 2008, Emerson senior management will host Emerson's annual investment community update meeting in St. Louis, Missouri at Emerson’s Global Headquarters. 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 risks and uncertainties 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 for fiscal 2007, including audited financial statements, within the next 30 days.
(tables attached)
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TABLE 1
EMERSON AND SUBSIDIARIES
CONSOLIDATED OPERATING RESULTS
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
| Quarter Ended September 30, |
| Percent | |||||
|
| 2006 |
|
| 2007 |
| Change | |
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 5,516 |
| $ | 6,134 |
| 11% |
Less: Costs and expenses |
|
|
|
|
|
|
|
|
Cost of sales |
|
| 3,531 |
|
| 3,875 |
|
|
SG&A expenses |
|
| 1,107 |
|
| 1,240 |
|
|
Other deductions, net |
|
| 47 |
|
| 62 |
|
|
Interest expense, net |
|
| 56 |
|
| 50 |
|
|
Earnings before income taxes |
|
| 775 |
|
| 907 |
| 17% |
Income taxes |
|
| 249 |
|
| 284 |
|
|
Net earnings |
| $ | 526 |
| $ | 623 |
| 18% |
|
|
|
|
|
|
|
|
|
Diluted avg. shares outstanding (millions) |
|
| 816.0 |
|
| 800.0 |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share |
| $ | 0.65 |
| $ | 0.78 |
| 20% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter Ended September 30, |
|
| |||||
|
| 2006 |
|
| 2007 |
|
| |
Other deductions, net |
|
|
|
|
|
|
|
|
Rationalization of operations |
| $ | 31 |
| $ | 23 |
|
|
Amortization of intangibles |
|
| 15 |
|
| 17 |
|
|
Other |
|
| 27 |
|
| 27 |
|
|
Gains, net |
|
| (26 | ) |
| (5 | ) |
|
Total |
| $ | 47 |
| $ | 62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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TABLE 2
EMERSON AND SUBSIDIARIES
CONSOLIDATED OPERATING RESULTS
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
| Year Ended September 30, |
| Percent | |||||
|
| 2006 |
|
| 2007 |
| Change | |
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 20,133 |
| $ | 22,572 |
| 12% |
Less: Costs and expenses |
|
|
|
|
|
|
|
|
Cost of sales |
|
| 12,965 |
|
| 14,461 |
|
|
SG&A expenses |
|
| 4,099 |
|
| 4,593 |
|
|
Other deductions, net |
|
| 178 |
|
| 183 |
|
|
Interest expense, net |
|
| 207 |
|
| 228 |
|
|
Earnings before income taxes |
|
| 2,684 |
|
| 3,107 |
| 16% |
Income taxes |
|
| 839 |
|
| 971 |
|
|
Net earnings |
| $ | 1,845 |
| $ | 2,136 |
| 16% |
|
|
|
|
|
|
|
|
|
Diluted avg. shares outstanding (millions) |
|
| 824.5 |
|
| 803.9 |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share |
| $ | 2.24 |
| $ | 2.66 |
| 19% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Year Ended September 30, |
|
| |||||
|
|
| 2006 |
|
| 2007 |
|
|
Other deductions, net |
|
|
|
|
|
|
|
|
Rationalization of operations |
| $ | 84 |
| $ | 83 |
|
|
Amortization of intangibles |
|
| 47 |
|
| 63 |
|
|
Other |
|
| 115 |
|
| 111 |
|
|
Gains, net |
|
| (68 | ) |
| (74 | ) |
|
Total |
| $ | 178 |
| $ | 183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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TABLE 3
EMERSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
| September 30, | ||||
|
| 2006 |
|
| 2007 |
Assets |
|
|
|
|
|
Cash and equivalents | $ | 810 |
| $ | 1,008 |
Receivables, net |
| 3,716 |
|
| 4,260 |
Inventories |
| 2,222 |
|
| 2,227 |
Other current assets |
| 582 |
|
| 570 |
Total current assets |
| 7,330 |
|
| 8,065 |
Property, plant & equipment, net |
| 3,220 |
|
| 3,431 |
Goodwill |
| 6,013 |
|
| 6,412 |
Other |
| 2,109 |
|
| 1,772 |
|
|
|
|
|
|
| $ | 18,672 |
| $ | 19,680 |
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
Short-term borrowings and current | $ | 898 |
| $ | 404 |
Accounts payable |
| 2,305 |
|
| 2,501 |
Accrued expenses |
| 1,933 |
|
| 2,337 |
Income taxes |
| 238 |
|
| 304 |
Total current liabilities |
| 5,374 |
|
| 5,546 |
Long-term debt |
| 3,128 |
|
| 3,372 |
Other liabilities |
| 2,016 |
|
| 1,990 |
Stockholders’ equity |
| 8,154 |
|
| 8,772 |
|
|
|
|
|
|
| $ | 18,672 |
| $ | 19,680 |
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TABLE 4
EMERSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
| Year Ended September 30, | |||||
|
| 2006 |
|
| 2007 |
|
Operating Activities |
|
|
|
|
|
|
Net earnings | $ | 1,845 |
| $ | 2,136 |
|
Depreciation and amortization |
| 607 |
|
| 656 |
|
Changes in operating working capital |
| (152 | ) |
| 137 |
|
Pension funding |
| (124 | ) |
| (136 | ) |
Other |
| 336 |
|
| 223 |
|
Net cash provided by operating activities |
| 2,512 |
|
| 3,016 |
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
Capital expenditures |
| (601 | ) |
| (681 | ) |
Purchases of businesses, net of cash and |
| (752 | ) |
| (295 | ) |
Other |
| 137 |
|
| 106 |
|
Net cash used in investing activities |
| (1,216 | ) |
| (870 | ) |
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
Net increase (decrease) in short-term |
| 89 |
|
| (800 | ) |
Proceeds from long-term debt |
| 6 |
|
| 496 |
|
Principal payments on long-term debt |
| (266 | ) |
| (5 | ) |
Dividends paid |
| (730 | ) |
| (837 | ) |
Purchases of treasury stock |
| (862 | ) |
| (853 | ) |
Other |
| 32 |
|
| 5 |
|
Net cash used in financing activities |
| (1,731 | ) |
| (1,994 | ) |
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and |
| 12 |
|
| 46 |
|
|
|
|
|
|
|
|
Increase (decrease) in cash and equivalents |
| (423 | ) |
| 198 |
|
|
|
|
|
|
|
|
Beginning cash and equivalents |
| 1,233 |
|
| 810 |
|
|
|
|
|
|
|
|
Ending cash and equivalents | $ | 810 |
| $ | 1,008 |
|
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TABLE 5
EMERSON AND SUBSIDIARIES
SEGMENT SALES AND EARNINGS
(DOLLARS IN MILLIONS)
| Quarter Ended September 30, | |||||
|
| 2006 |
|
| 2007 |
|
Sales |
|
|
|
|
|
|
Process Management | $ | 1,402 |
| $ | 1,665 |
|
Industrial Automation |
| 1,008 |
|
| 1,123 |
|
Network Power |
| 1,252 |
|
| 1,438 |
|
Climate Technologies |
| 901 |
|
| 938 |
|
Appliance and Tools |
| 1,102 |
|
| 1,119 |
|
|
| 5,665 |
|
| 6,283 |
|
Eliminations |
| (149 | ) |
| (149 | ) |
Net Sales | $ | 5,516 |
| $ | 6,134 |
|
|
|
|
|
|
|
|
| Quarter Ended September 30, | |||||
|
| 2006 |
|
| 2007 |
|
Earnings |
|
|
|
|
|
|
Process Management | $ | 291 |
| $ | 341 |
|
Industrial Automation |
| 153 |
|
| 187 |
|
Network Power |
| 118 |
|
| 204 |
|
Climate Technologies |
| 141 |
|
| 133 |
|
Appliance and Tools |
| 138 |
|
| 162 |
|
|
| 841 |
|
| 1,027 |
|
Differences in accounting methods |
| 48 |
|
| 54 |
|
Corporate and other |
| (58 | ) |
| (124 | ) |
Interest expense, net |
| (56 | ) |
| (50 | ) |
Earnings before income taxes | $ | 775 |
| $ | 907 |
|
|
|
|
|
|
|
|
| Quarter Ended September 30, | |||||
|
| 2006 |
|
| 2007 |
|
Rationalization of operations |
|
|
|
|
|
|
Process Management | $ | 8 |
| $ | 7 |
|
Industrial Automation |
| 3 |
|
| 3 |
|
Network Power |
| 10 |
|
| 9 |
|
Climate Technologies |
| 3 |
|
| – |
|
Appliance and Tools |
| 7 |
|
| 4 |
|
Total Emerson | $ | 31 |
| $ | 23 |
|
|
|
|
|
|
|
|
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TABLE 6
EMERSON AND SUBSIDIARIES
SEGMENT SALES AND EARNINGS
(DOLLARS IN MILLIONS)
| Year Ended September 30, | |||||
|
| 2006 |
|
| 2007 |
|
Sales |
|
|
|
|
|
|
Process Management | $ | 4,875 |
| $ | 5,699 |
|
Industrial Automation |
| 3,767 |
|
| 4,269 |
|
Network Power |
| 4,350 |
|
| 5,150 |
|
Climate Technologies |
| 3,424 |
|
| 3,614 |
|
Appliance and Tools |
| 4,313 |
|
| 4,447 |
|
|
| 20,729 |
|
| 23,179 |
|
Eliminations |
| (596 | ) |
| (607 | ) |
Net Sales | $ | 20,133 |
| $ | 22,572 |
|
|
|
|
|
|
|
|
| Year Ended September 30, | |||||
|
| 2006 |
|
| 2007 |
|
Earnings |
|
|
|
|
|
|
Process Management | $ | 878 |
| $ | 1,066 |
|
Industrial Automation |
| 569 |
|
| 665 |
|
Network Power |
| 484 |
|
| 645 |
|
Climate Technologies |
| 523 |
|
| 538 |
|
Appliance and Tools |
| 550 |
|
| 578 |
|
|
| 3,004 |
|
| 3,492 |
|
Differences in accounting methods |
| 176 |
|
| 210 |
|
Corporate and other |
| (289 | ) |
| (367 | ) |
Interest expense, net |
| (207 | ) |
| (228 | ) |
Earnings before income taxes | $ | 2,684 |
| $ | 3,107 |
|
|
|
|
|
|
|
|
| Year Ended September 30, | |||||
|
| 2006 |
|
| 2007 |
|
Rationalization of operations |
|
|
|
|
|
|
Process Management | $ | 14 |
| $ | 15 |
|
Industrial Automation |
| 12 |
|
| 14 |
|
Network Power |
| 19 |
|
| 23 |
|
Climate Technologies |
| 14 |
|
| 9 |
|
Appliance and Tools |
| 25 |
|
| 22 |
|
Total Emerson | $ | 84 |
| $ | 83 |
|
|
|
|
|
|
|
|
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TABLE 7
Reconciliations of Non-GAAP Financial Measures
The following reconciles non-GAAP measures with the most directly comparable GAAP measures (dollars in millions):
|
|
| 4Q 2007 |
| Fiscal 2007 |
Net Sales |
|
|
|
|
|
Underlying Sales (Non-GAAP) |
|
| 7 % |
| 7 % |
Foreign Currency Translation |
|
| 3 pts |
| 2 pts |
Acquisitions / Divestitures |
|
| 1 pt |
| 3 pts |
Net Sales |
|
| 11 % |
| 12 % |
|
|
|
|
|
|
|
|
|
|
| Expected |
|
|
|
|
| Fiscal 2008 |
Underlying Sales (Non-GAAP) |
|
|
|
| 5 – 7 % |
Foreign Currency Translation / Acq. / Div. |
|
|
|
| 2 – 3 pts |
Net Sales |
|
|
|
| 7 – 10 % |
|
|
|
|
|
|
Full Year 2007 Cash Flow |
|
|
|
| Fiscal 2007 |
Operating Cash Flow |
|
|
|
| $ 3,016 |
Capital Expenditures |
|
|
|
| 681 |
Free Cash Flow (Non-GAAP) |
|
|
|
| $ 2,335 |
|
|
|
|
|
|
Fourth-Quarter Operating Profit | Q4 2006 |
| Q4 2007 |
|
|
Net Sales | $ 5,516 |
| $ 6,134 |
| 11% |
Cost of Sales | 3,531 |
| 3,875 |
|
|
SG&A Expenses | 1,107 |
| 1,240 |
|
|
Operating Profit (Non-GAAP) | 878 |
| 1,019 |
| 16% |
Operating Profit Margin % (Non-GAAP) | 15.9% |
| 16.6% |
|
|
Other Deductions, Net | 47 |
| 62 |
|
|
Interest Expense, Net | 56 |
| 50 |
|
|
Pretax Earnings | $ 775 |
| $ 907 |
| 17% |
Pretax Earnings Margin % | 14.1% |
| 14.8% |
|
|
###