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EMR · EMERSON ELECTRIC CO

33 filings

10-K

EMR 10-K Annual Reports

EMERSON ELECTRIC CO - 33 annual reports

Filing record · 2016–202610-K1010-Q338-K163

2025
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2025
Emerson Electric Co. (EMR) reported a solid fiscal year 2025, demonstrating resilience and strategic execution through significant portfolio transformations. The company's revenue grew 3% to $18.0 billion, with underlying sales also up 3%, driven by a 2.5% increase in price and 0.5% in volume. This growth was achieved despite ongoing integration of major acquisitions, including AspenTech and National Instruments (NI), which are now consolidated into the Software and Control segment. The company has successfully shifted its focus towards higher-growth, higher-margin industrial technology and software solutions, positioning itself as a global automation leader. Financial performance saw a significant rebound in earnings from continuing operations, which increased 41% to $2.3 billion, or $4.03 per diluted share. Adjusted diluted EPS from continuing operations also rose to $6.00, reflecting strong operational execution. Emerson generated substantial operating cash flow of $3.7 billion, enabling continued investment in innovation and shareholder returns, including a 12% increase in free cash flow to $3.2 billion. The company also announced an increase in its quarterly cash dividend to an annualized rate of $2.22 per share, underscoring its commitment to shareholder value.
Nov 10, 2025
2024
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2024
Emerson Electric Co. (EMR) has reported its fiscal year 2024 results, showcasing a significant transformation of its business portfolio and a strategic shift towards higher-growth automation markets. The company completed the acquisition of National Instruments (NI) for $8.2 billion, integrating its automated test and measurement systems into the Software and Control segment. Concurrently, Emerson advanced its portfolio simplification by divesting its Climate Technologies business (Copeland) and the InSinkErator business. These strategic moves are aimed at creating a more cohesive, higher-growth, and higher-margin industrial technology portfolio, positioning Emerson as a global automation leader. Financially, the company reported a 15% increase in net sales to $17.5 billion, driven by the NI acquisition and underlying sales growth. However, net earnings from continuing operations declined by 29% to $1.6 billion, impacted by acquisition-related costs and a loss on a note receivable from the Copeland transaction. Adjusted diluted EPS from continuing operations showed robust growth, increasing by 24% to $5.49. Emerson also demonstrated strong cash flow generation, with operating cash flow up 22% to $3.3 billion and free cash flow up 23% to $2.9 billion. Looking ahead, Emerson is exploring further strategic alternatives, including a potential sale of its Safety & Productivity segment, and has proposed acquiring the remaining stake in AspenTech. The company has also announced an increase in its quarterly dividend.
Nov 12, 2024
2023
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2023
Emerson Electric Co. (EMR) reported a robust fiscal year 2023, demonstrating significant portfolio transformation and strong operational performance. The company's strategic focus on becoming a global automation leader has been underscored by substantial acquisitions and divestitures, most notably the recent acquisition of National Instruments (NI) for $8.2 billion and the majority stake sale of its Climate Technologies business. Financially, Emerson saw a 10% increase in net sales to $15.2 billion, driven by strong growth across its Intelligent Devices and Software and Control segments. Diluted earnings per share from continuing operations rose 18% to $3.72, with adjusted diluted EPS reaching $4.44. The company also generated substantial operating cash flow of $2.7 billion, highlighting its strong cash-generating capabilities. Looking ahead to fiscal year 2024, Emerson anticipates continued sales growth and earnings per share improvement, supported by the integration of NI and ongoing operational efficiencies.
Nov 13, 2023
2022
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2022
Emerson Electric Co.'s 2022 10-K filing reveals a strategic transformation focused on portfolio optimization and an increased emphasis on its core automation and software businesses. The company reported significant net sales growth of 8% to $19.6 billion, driven by a combination of volume and pricing increases, despite ongoing supply chain challenges and geopolitical headwinds. Net earnings saw a substantial 40% increase to $3.2 billion, or $5.41 per diluted share, bolstered by strong operational performance and favorable divestiture gains. Key strategic moves during the fiscal year included the combination of its industrial software businesses with Aspen Technology, Inc., and the announcement of a majority stake sale in its Climate Technologies business to Blackstone. These actions signify Emerson's intent to streamline its portfolio towards higher-growth, more cohesive industrial technology offerings, particularly in intelligent devices and software. The company generated robust operating cash flow of $2.9 billion, though this was down 18% due to increased working capital needs, and maintained a strong financial position with substantial equity and available credit facilities.
Nov 14, 2022
2021
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2021
Emerson Electric Co. reported a strong fiscal year 2021 with net sales of $18.2 billion, a 9% increase over the prior year. This recovery brought sales back to pre-COVID-19 levels, driven by a 5% increase in underlying sales, a 3% boost from foreign currency translation, and a 1% contribution from the OSI acquisition. Net earnings common stockholders rose 17% to $2.3 billion, with diluted earnings per share increasing 18% to $3.82. The company generated robust operating cash flow of $3.6 billion, a 16% increase, demonstrating strong cash-generating capabilities. Key strategic initiatives included the announced agreement to combine two software businesses with Aspen Technology, Inc., positioning Emerson to own 55% of the new entity. The company continues to focus on innovation, sustainability, and operational efficiency, as evidenced by its "Greening Of, Greening By, Greening With" framework and a commitment to reducing greenhouse gas emissions. Despite ongoing supply chain challenges and material price volatility, Emerson successfully navigated these headwinds, ending the year with a solid financial position and a backlog of $6.5 billion, with 85% expected to be recognized within 12 months.
Nov 15, 2021
2020
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2020
Emerson Electric Co.'s 2020 10-K filing highlights a challenging year marked by a 9% decline in net sales to $16.8 billion, primarily due to the global COVID-19 pandemic impacting demand across its industrial, commercial, and residential markets. Despite the sales decrease, the company managed to improve profitability through significant cost containment and restructuring efforts, with SG&A expenses decreasing as a percentage of sales. Emerson strategically navigated the downturn by increasing its cash holdings and issuing new debt to bolster liquidity, while also completing the acquisition of Open Systems International, Inc. (OSI) to enhance its Automation Solutions segment. The company demonstrated resilience by maintaining its commitment to shareholders, increasing its dividend for the 65th consecutive year. The report details Emerson's two primary business segments: Automation Solutions and Commercial & Residential Solutions, with Automation Solutions representing the larger portion of sales and earnings. While facing headwinds, the company maintains a strong financial position, supported by consistent operating cash flow and a robust balance sheet, positioning it for a projected return to growth in fiscal year 2021.
Nov 16, 2020
2019
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2019
Emerson Electric Co. (EMR) reported total net sales of $18.4 billion for the fiscal year ended September 29, 2019, representing a 6% increase over the prior year, driven significantly by acquisitions which contributed 5% to the growth. Underlying sales, excluding the impact of acquisitions and foreign currency fluctuations, increased by 3%. Net earnings attributable to common stockholders rose by 5% to $2.3 billion, translating to diluted earnings per share of $3.71, a 7% increase. The company generated robust operating cash flow of $3.0 billion. Emerson operates through two primary segments: Automation Solutions and Commercial & Residential Solutions. The Automation Solutions segment, comprising over two-thirds of total sales, showed strong growth with a 7% increase in sales, driven by acquisitions and underlying volume increases. The Commercial & Residential Solutions segment saw a more modest 3% sales increase, with mixed performance between its Climate Technologies and Tools & Home Products sub-segments, impacted by acquisition contributions and differing market conditions. The company continued its strategic portfolio management through acquisitions, particularly in the Automation Solutions segment, aiming to enhance its technology offerings and market position.
Nov 18, 2019
2018
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2018
Emerson Electric Co. reported solid performance for the fiscal year ended September 29, 2018, with net sales increasing 14% to $17.4 billion. This growth was driven by a strong 21% increase in the Automation Solutions segment, bolstered by acquisitions and broad-based demand, and a more modest 2% increase in Commercial & Residential Solutions. Net earnings attributable to common stockholders saw a significant jump of 45% to $2.2 billion, or $3.46 per diluted share, benefiting from this robust sales performance and a notable income tax benefit of $0.30 per share resulting from the U.S. Tax Cuts and Jobs Act. The company continued its strategic portfolio repositioning through several key acquisitions in 2018, including Aventics and Textron's tools and test equipment business, aimed at strengthening its core segments. Emerson also maintained a strong cash flow generation, with operating cash flow increasing 8% to $2.9 billion, supporting its investment in acquisitions, dividends, and share repurchases. The company outlook for fiscal 2019 remains positive, with expected net sales growth of 6-9%.
Nov 19, 2018
2017
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2017
Emerson Electric Co.'s (EMR) 2017 10-K filing highlights a year of significant portfolio transformation. The company successfully divested its Network Power Systems and Power Generation, Motors, and Drives businesses, reporting them as discontinued operations. Concurrently, Emerson strengthened its core Automation Solutions segment with the acquisition of Pentair's valves & controls business. This strategic repositioning resulted in a reported net sales increase of 5% to $15.3 billion, driven by the acquisition and a 1% increase in underlying sales, reflecting gradual improvement in industrial end markets. While net earnings attributable to common stockholders decreased by 7% to $1.518 billion, earnings from continuing operations saw a modest 3% increase to $1.643 billion, with diluted EPS from continuing operations rising 4% to $2.54. The company generated strong operating cash flow of $2.7 billion, demonstrating robust cash generation capabilities to fund acquisitions, dividends, and share repurchases. The outlook for fiscal year 2018 indicated continued market stabilization and expected growth in key segments.
Nov 20, 2017
2016
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2016
Emerson Electric Co. (EMR) is undergoing a significant strategic portfolio repositioning, marked by agreements to sell its Network Power Systems business and its Power Generation, Motors, and Drives businesses, while simultaneously agreeing to acquire Pentair's Valves & Controls business for approximately $3.15 billion. These divestitures are reported as discontinued operations. The company's core continuing operations are organized into Process Management, Industrial Automation, Climate Technologies, and Commercial & Residential Solutions segments. For fiscal year 2016, Emerson experienced a notable decline in net sales, largely attributed to weak global oil and gas prices, reduced industrial spending, and general economic uncertainty. This led to a significant decrease in earnings from continuing operations and diluted EPS compared to the prior year. Despite the sales and earnings headwinds in 2016, Emerson is actively reshaping its business to focus on higher-growth end markets and improve profitability. The planned acquisition of Pentair's Valves & Controls business is expected to strengthen its Process Management segment. The company is emphasizing its core strengths in automation solutions and climate technologies while managing through a challenging macroeconomic environment. Investors should monitor the successful integration of acquired businesses and the impact of ongoing portfolio adjustments on future financial performance.
Nov 16, 2016
2015
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2015
Emerson Electric's fiscal 2015 10-K (year ended September 30, 2015) shows a company in transition. Reported net sales fell 9% to $22.3 billion, and underlying sales (excluding currency, divestitures and acquisitions) declined 2%, driven by weak oil and gas capital spending, slowing China and emerging markets, and a strong U.S. dollar. Reported results were flattered by non-recurring items: net earnings to common stockholders rose 26% to $2.71 billion and diluted EPS rose 32% to $3.99, but excluding divestiture gains and spinoff costs, earnings were $2.15 billion ($3.17 per share), down 15% year over year. Operating cash flow fell 32% to $2.5 billion, held down by $424 million of taxes paid on divestiture gains, and free cash flow dropped 37% to $1.8 billion. The central story is portfolio restructuring. Emerson announced a tax-free spinoff of its Network Power Systems business and is exploring strategic alternatives, including a potential sale, for Power Generation, Motors & Drives, and Residential Storage. Together these represent roughly 29% of 2015 sales. The company also sold its mechanical power transmission business to Regal Beloit for $1.4 billion and its InterMetro commercial storage business for $411 million. Management guided fiscal 2016 net sales down roughly 6% to 8% and reported EPS of $2.50 to $2.85 including $300 to $400 million of separation and transaction costs, with adjusted EPS of $3.05 to $3.25. Investors should note the lower underlying quality of the 2015 EPS increase and the execution risk around the separation. Balance sheet leverage increased meaningfully. Total debt rose to $6.8 billion, the total debt-to-capital ratio climbed to 45.8% from 37.3%, and common stockholders' equity fell to $8.1 billion because of heavy buybacks ($2.5 billion repurchased in 2015). Goodwill of $6.7 billion remains large relative to equity, and the Network Power goodwill ($2.1 billion) sits in the spinoff perimeter, so impairment risk is a watch item. Dividends were held at an annualized $1.90 after a 1% increase.
Nov 18, 2015
2014
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2014
Emerson Electric's fiscal 2014 (year ended September 30, 2014) was a year of portfolio reshaping rather than headline growth. Net sales declined 1% to $24.5 billion as divestitures of the Artesyn embedded computing and power business and the connectivity solutions business subtracted 5 points, while underlying sales (excluding acquisitions, divestitures, and currency) grew 3%, led by Process Management (+7% reported) and Climate Technologies (+6%). Reported earnings were flattered by a smaller goodwill impairment than the prior year: net earnings to common stockholders rose 7% to $2.15 billion and diluted EPS rose 10% to $3.03. Excluding goodwill impairment and tax charges, diluted EPS was $3.75, up 6%. The $508 million non-cash impairment in European Network Power is the key item to watch, as management said that goodwill cannot be supported given weak Western European economics. Cash generation remained strong, with record operating cash flow of $3.7 billion and free cash flow of $2.9 billion. Emerson returned more than 60% of operating cash flow to shareholders through dividends ($1.2 billion) and buybacks ($971 million). The company also spent about $1.2 billion on acquisitions and the buyout of the Appleton noncontrolling interest, while total debt rose to $6.0 billion, mainly from short-term commercial paper. Balance sheet quality remains solid, with a 37.3% total debt-to-capital ratio and an interest coverage ratio of 16.3x. Management guided 2015 underlying sales growth of 4% to 5% and signaled a strategic review of the Power Transmission Solutions business, a potential divestiture.
Nov 19, 2014
2013
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2013
Emerson Electric's fiscal 2013 (year ended September 30, 2013) results show modest top-line growth, a sharp rebound in cash generation, and a meaningful non-cash charge tied to its embedded computing and power business. Net sales rose 1% to $24.7 billion, with underlying sales up 2%, led by Process Management (sales up 9% to $8.6 billion, earnings up 13%). Industrial Automation (down 6%) and Network Power (down 4%) remained weak, reflecting softness in industrial goods and telecom/IT end markets. Diluted EPS was $2.76, up 3%, but this includes $566 million ($0.78 per share) of goodwill impairment and income tax charges. Excluding those items, EPS was $3.54, up 4%. Cash flow was the standout. Operating cash flow reached a record $3.6 billion (up 20%) and free cash flow reached $3.0 billion (up 24%), driven mainly by a reduction in operating working capital to 6.8% of sales. The balance sheet remains conservative: the total debt-to-capital ratio rose to 34.8%, while the net debt-to-net capital ratio improved to 18.3%, and cash on hand increased to $3.3 billion. The board raised the quarterly dividend 5% to an annualized $1.72, and the company repurchased 20.3 million shares for $1.19 billion. Looking ahead, management guides to fiscal 2014 underlying sales growth of 3% to 5% and reported sales of (1)% to +1%. Reported EPS is expected to rise 33% to 38%, or 4% to 7% excluding roughly 30 percentage points of impairment and repatriation effects. The pending sale of a 51% stake in embedded computing and power, plus an accelerated buyback, is expected to be roughly neutral to 2014 EPS. Key risks include continued weakness in Europe and in telecom/IT end markets, a patent infringement suit from Invensys against Micro Motion, and the goodwill exposure of the European network power systems business, whose fair value exceeded carrying value by less than 10%.
Nov 19, 2013
2012
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2012
Emerson Electric's fiscal 2012 (year ended September 30, 2012) was a year of solid top-line stability but sharply lower reported earnings, driven almost entirely by a noncash goodwill impairment. Net sales rose 1% to $24.4 billion, with underlying sales up 3% despite a 2% currency headwind from the stronger U.S. dollar. Process Management (+13% sales, +14% earnings) and Commercial & Residential Solutions carried growth, while Network Power (-6% sales, -17% earnings), Climate Technologies (-6% sales) and Industrial Automation (-2% sales) weakened. Diluted EPS from continuing operations fell 18% to $2.67, but excluding the $0.72 per-share charge tied to the embedded computing and power and DC power businesses, EPS was $3.39 versus $3.30 a year earlier, which is the more representative operating baseline. Cash generation and balance sheet strength remained intact. Operating cash flow was $3.1 billion and free cash flow was $2.4 billion, both down year over year as operating working capital rose to 8.7% of sales from 7.0%. Management returned substantial capital: dividends of $1.60 per share ($1.2 billion) and $787 million of buybacks, with the quarterly dividend raised 3% to an annualized $1.64. Long-term debt declined to $3.8 billion, and the total debt-to-capital ratio held at about 34%. Backlog grew to $6.25 billion, led by Process Management, which supports the company's guidance. The outlook is cautious. Management expects fiscal 2013 sales growth of only 0 to 5%, with Process Management strong, Industrial Automation sluggish especially in Europe, and Climate Technologies uneven. It guides to 10 to 20 basis points of EBIT margin improvement (excluding the impairment) and EPS growth in the mid-to-high single digits from the $3.39 base. Key watch items for investors are whether the Network Power restructuring, including a potential sale of the embedded computing and power business with about $1.4 billion in revenue, can stabilize that segment and whether working capital normalizes.
Nov 20, 2012
2011
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2011
Emerson Electric's fiscal 2011 10-K (year ended September 30, 2011) reports a strong year: net sales rose 15% to $24.2 billion, with underlying sales up 11%, acquisitions contributing 2% and favorable currency 2%. Earnings from continuing operations to common stockholders increased 24% to $2.45 billion, and diluted EPS from continuing operations rose 25% to $3.24. Operating cash flow was $3.2 billion and free cash flow $2.6 billion. Growth was led by Process Management (sales up 16%, earnings up 28%) and Industrial Automation (sales up 23%, earnings up 40%), while Network Power earnings declined 6% on Asian weakness, amortization from the Chloride and Avocent acquisitions, and pricing pressure in China. The balance sheet strengthened. Total debt-to-capital fell to 33.3% from 34.1%, the net debt-to-net capital ratio improved to 23.2%, and the interest coverage ratio rose to 15.8x from 11.3x. Emerson also raised its quarterly dividend 16% to an annualized $1.60 per share and repurchased $958 million of stock during the year. Management guides fiscal 2012 to underlying sales growth of 5% to 7%, total net sales growth of 4% to 6%, an operating margin of about 18%, and EPS growth of 8% to 12%. The filing notes that business conditions were weakening at the time, particularly in the U.S. and Europe, and that Thai flooding is a near-term supply risk for Process Management. Key risks flagged include materials cost inflation (steel, copper, rare earths), currency and emerging-market exposure (over one-third of sales now come from emerging markets), goodwill impairment sensitivity in Network Power and Tools and Storage, and reliance on acquisitions for growth. The company's pension plans were underfunded by $732 million at year end.
Nov 22, 2011
2010
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2010
Emerson Electric's FY2010 10-K (fiscal year ended September 30, 2010) shows a company recovering from a severe 2009 downturn while executing a significant portfolio reshaping. Net sales rose 5% to $21.0 billion, but underlying sales (excluding acquisitions, divestitures and currency) fell 1%, so growth came mainly from the Avocent and Chloride acquisitions and favorable FX. Earnings from continuing operations to common stockholders rose 15% to $1.98 billion ($2.60 diluted EPS), helped by lower rationalization expense, cost-reduction savings and a strong second half. Operating margin improved to 39.6% gross margin and 13.7% pretax margin, and return on common equity recovered to 23.6% from 19.5%. The balance sheet absorbed roughly $2.8 billion of acquisition spending, funded largely with commercial paper and new long-term debt. Total debt rose to about $5.1 billion, and the total debt-to-capital ratio was 34.1%. Operating cash flow of $3.3 billion and free cash flow of $2.8 billion comfortably covered the $1.0 billion dividend. Management guided fiscal 2011 to net sales growth of 12% to 15%, with underlying growth of 7% to 10%, and operating cash flow of $3.4 to $3.5 billion. The key investor questions are whether underlying demand in Process Management and Industrial Automation can sustain the recovery, and whether the newly acquired Network Power businesses can deliver the margins management expects.
Nov 23, 2010
2009
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2009
Emerson Electric's fiscal 2009 (year ended September 30, 2009) was a sharp cyclical downturn. Net sales fell 16% to $20.9 billion from $24.8 billion, driven by an approximately 13% decline in underlying sales (about 14% from volume), a 4% unfavorable currency impact, and a 1% contribution from acquisitions. Earnings from continuing operations fell 30% to $1.7 billion, and diluted EPS dropped 27% to $2.27. Every segment declined, with Industrial Automation hit hardest (sales down 24%, earnings down 51%). Operating margin compressed as deleverage on lower volume and $295 million of rationalization costs outweighed gross margin, which held flat at 36.8% thanks to cost actions and pricing. Management reported that roughly 20,000 positions were eliminated and about 25 facilities exited. Balance sheet and cash flow remained solid despite the downturn. Operating cash flow was $3.1 billion and free cash flow was $2.6 billion, supported by a $620 million working capital release. Total debt rose to about $4.6 billion, with a total debt-to-capital ratio of 34.8% and a net debt-to-capital ratio of 25.7%. Credit ratings remain A2/A. The company paid $998 million in dividends ($1.32 per share, up 10%), raised the quarterly dividend 1.5% to an annualized $1.34 in November 2009, and repurchased $695 million of stock, leaving 51.4 million shares authorized. Backlog declined 16% to $4.6 billion. Looking ahead, management guided fiscal 2010 underlying sales down 5% to 7%, with reported sales between down 2% and up 2% after favorable currency and acquisition effects. Operating margin is expected to be flat to slightly down, operating cash flow is expected to decline after the working capital release, and rationalization expense is projected at $125 to $175 million. The pending $1.2 billion Avocent acquisition, expected to close in December 2009, extends the Network Power franchise. The central investor question is how quickly volume recovers in capital goods, nonresidential construction, and housing, and whether Emerson's cost actions and balance sheet strength can protect earnings until that recovery arrives.
Nov 23, 2009
2008
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2008
Emerson Electric's fiscal 2008 (year ended September 30, 2008) was a record year: net sales rose 12% to $24.8 billion, earnings from continuing operations rose 15% to $2.5 billion, and diluted EPS from continuing operations reached $3.11, up 17%. Growth was broad-based, with four of five segments improving. Underlying sales (excluding acquisitions, divestitures and currency) grew about 7%, with a 4% currency tailwind and a 1% acquisition contribution, led by Asia, Latin America and Middle East/Africa. Gross margin widened to 36.8%, and operating cash flow of $3.3 billion produced free cash flow of $2.6 billion, both up on the prior year. Return on equity was 27.0% and return on total capital was 21.8%. The filing's main investor concern is the outlook. Management describes 2009 as an uncertain, recessionary environment and forecasts sales of $23.5 billion to $25.5 billion (down 5% to up 3%) and EPS of $2.80 to $3.20, implying a decline from 2008 at the midpoint. Weakness in U.S. consumer appliance and residential end markets already hurt the Appliance and Tools and Climate Technologies segments, and the Appliance and Tools segment's sales fell 4%. The company also recorded a $31 million impairment on its North American appliance control business and a $92 million loss on the European appliance motor and pump divestiture. Rationalization spending for 2009 is expected at $125 to $150 million. Balance sheet and capital allocation remain conservative. Total debt was $4.5 billion, the total debt-to-capital ratio was 33.1%, and the interest coverage ratio improved to 15.7 times. Ratings are A2 (Moody's) and A (S&P). Emerson returned cash through dividends of $940 million (the Board raised the quarterly dividend 10% to an annualized $1.32) and share repurchases of $1.1 billion. An $2.8 billion undrawn revolver supports liquidity, and management says current funding is adequate despite recent credit-market volatility. Pension plans were underfunded by roughly $400 million as of October 31, 2008, after asset declines in the market downturn.
Nov 25, 2008
2007
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2007
Emerson Electric's fiscal 2007 10-K (fiscal year ended September 30, 2007) reports a record year: net sales rose 12% to $22.6 billion, net earnings rose 16% to $2.1 billion, and diluted EPS rose 19% to $2.66. Growth was broad-based across all five segments, driven by strong international demand (international destination sales reached $11.6 billion, or 52% of sales), acquisitions (Artesyn, Knürr and Bristol in 2006; Damcos and Stratos in 2007), and favorable currency translation. Underlying sales grew roughly 7%, with about 3% from volume, 2% from penetration gains and 2% from price. Gross margin improved modestly to 35.9%, and operating cash flow rose 20% to $3.0 billion, producing free cash flow of $2.3 billion. The balance sheet strengthened over the year. The total debt-to-capital ratio fell to 30.1% from 33.1%, and the operating cash flow-to-debt ratio rose to 79.9%. Emerson returned substantial capital to shareholders through $837 million in dividends and $849 million in treasury stock purchases, and the board approved a 14% dividend increase to an annualized $1.20 per share. Backlog grew to $4.9 billion from $4.1 billion, and management guided fiscal 2008 to 5-7% underlying sales growth and 10-15% EPS growth, while noting that the U.S. consumer and housing markets were a drag on the Climate Technologies and Appliance and Tools segments. The filing also flags a pending $350 million acquisition of Motorola's Embedded Communications Computing business, expected to close by the end of calendar 2007. The company disclosed no material contingent liabilities and reported effective internal controls, as audited by KPMG. Key risks include competitive pricing pressure, reliance on global production (with most facilities outside the U.S.), raw material cost volatility (copper and steel), and exposure to cyclical end markets.
Nov 19, 2007
2006
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2006
Emerson Electric's fiscal 2006 10-K (fiscal year ended September 30, 2006) reports a record year: net sales rose 16% to $20.1 billion, net earnings rose 30% to $1.85 billion, and diluted EPS rose 32% to $4.48. All five business segments grew sales and earnings. Underlying sales (excluding acquisitions, divestitures and currency) grew more than 12%, with roughly 9 points from volume and about 4 points from acquisitions, mainly Artesyn, Knürr and Bristol. Gross margin held near 35.6%, and operating leverage on higher volume offset higher wage, pension and raw material costs. Return on average equity improved to 23.7% from 19.4%. Cash generation and balance sheet strength remained solid. Operating cash flow reached $2.5 billion (up 15%), and free cash flow was $1.9 billion. Total debt-to-capital fell to 33.1% from 35.6%, interest coverage rose to 12.9x, and the company returned cash through $730 million in dividends and $871 million in share repurchases. Management guides fiscal 2007 underlying sales growth of 5-7%, reported sales growth of 7-11%, and EPS growth of 12-15% above $4.48. Risks flagged include commodity inflation (copper and steel), pension cost pressures, and the expected $800 million pretax FAS 158 charge to equity. The board also approved a 100% stock dividend (two-for-one split, effective December 2006) and an 18% increase in the quarterly dividend to an annualized $2.10 per share. Together these signal confidence in sustained growth and a continued capital return policy.
Nov 21, 2006
2005
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2005
Emerson Electric's fiscal 2005 10-K (year ended September 30, 2005) reports a record year: net sales rose 11% to $17.3 billion, and earnings from continuing operations increased 13% to $1.42 billion, or $3.40 per diluted share (up 14%). Underlying sales grew 6%, with roughly 2 points from favorable currency and over 3 points from acquisitions such as Do+Able, Numatics, and Marconi's North American outside plant and power systems business. Gross margin edged up to 35.7%, and return on average equity reached 19.4%. Growth was broad: all five segments posted higher sales, and four of five increased earnings. Process Management earnings jumped 41% and Network Power rose 26%, while Climate Technologies declined 3% on lower volume and Appliance and Tools was roughly flat. The balance sheet and cash generation remain strong. Operating cash flow was $2.2 billion (down 1%, reflecting working capital build), and free cash flow was $1.7 billion. Capital expenditures rose to $518 million (3.0% of sales) as the company expanded scroll compressor capacity. Total debt-to-capital fell to 35.6% from 39.0% in 2003, interest coverage improved to 9.8x, and long-term debt ratings are A2 (Moody's) and A (S&P). Emerson repatriated about $1.4 billion of foreign earnings under the American Jobs Creation Act, incurring a $63 million ($0.15 per share) tax charge. The company also repurchased about 10 million shares for $671 million and raised its annualized dividend to $1.78 per share. Its backlog grew 26% to $3.2 billion. Key risks flagged in the filing include competitive pricing pressure, raw material cost inflation (steel and copper), exposure to emerging markets with substantial production outside the U.S., foreign currency swings, and integration risk from acquisitions. The company also noted a possible future pension-related equity charge of about $530 million if markets fail to close a funding gap, though management views it as an unlikely outcome.
Nov 22, 2005
2004
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2004
Emerson Electric's fiscal 2004 (year ended September 30, 2004) was a strong year, with record net sales of $15.6 billion, up 12% from $14.0 billion, and an underlying (organic, ex-currency and acquisitions) increase of 8%. Earnings from continuing operations rose 24% to $1.26 billion, and diluted EPS from continuing operations reached $2.98 versus $2.41. Growth was broad-based: all five segments posted higher sales and earnings, with Network Power showing the sharpest recovery (earnings up 77%) and Climate Technologies and Process Management also growing strongly. Margins improved, with gross margin up to 35.6% and the operating-margin trend supported by volume leverage and prior restructuring. Asia (underlying destination sales up 20%) and the United States were the main growth drivers, and about 47% of sales were international. Cash generation and the balance sheet strengthened materially. Operating cash flow reached a record $2.2 billion (up 28%), and free cash flow rose 30% to $1.8 billion, helped by lower pension contributions and better working capital. Total debt fell to $4.0 billion, the debt-to-capital ratio dropped to 35.8% from 39.0%, and the interest coverage ratio improved to 8.9x from 6.7x. The company spent about $414 million on acquisitions, mainly the Marconi outside plant and power systems business, and raised its quarterly dividend to an annualized $1.66 per share. Key risks to monitor include a pension funding exposure: if 2005 equity and bond markets fail to close a roughly $300 million excess, Emerson could record an after-tax equity charge of about $550 million. Management also flagged commodity cost inflation (copper, steel), pricing pressure in Asia, rising wage and benefit costs, and ongoing rationalization spending expected at about $130 million in 2005, plus exposure to emerging-market and currency risk.
Nov 18, 2004
2003
EMERSON ELECTRIC CO Annual Report, Year Ended Nov 14, 2003
Emerson Electric's fiscal 2003 10-K (year ended September 30, 2003) shows a company that held sales roughly flat and protected profitability through cost reductions, while its balance sheet improved meaningfully. Net sales were $13.96 billion, up 2% reported but down 1% on an underlying basis, with a roughly 4-point currency tailwind offsetting weakness in the U.S. Net earnings rose to $1.09 billion, or $2.59 per diluted share, versus $122 million in fiscal 2002, which was depressed by a $938 million non-cash goodwill impairment. Continuing-operations EPS was $2.41, down from $2.56, reflecting lower divestiture gains, a $54 million goodwill impairment in Electronics & Telecommunications, and higher pension costs. The 2003 results were also helped by a $76 million gain from discontinued operations, tied to the sale of the Dura-Line business, and a $68 million tax benefit from the restructuring of the retained ETP business. Segment performance was mixed. HVAC was the standout, with underlying sales up nearly 7% and earnings up 16% to $386 million. Industrial Automation earnings rose 11% to $330 million, and Electronics & Telecommunications earnings jumped 41% to $168 million despite a 7% underlying sales decline, helped by restructuring. Process Control was flat at $388 million in earnings, and Appliance & Tools earnings grew 5% to $479 million. Backlog grew to $2.36 billion from $2.07 billion, led by Process Control and Electronics & Telecommunications, which supports near-term revenue visibility. Financially, Emerson strengthened its position. Total debt fell to about $4.1 billion, and the debt-to-capital ratio improved to 39.0% from 44.2%. Operating cash flow was $1.73 billion and free cash flow was $1.4 billion, although pension contributions of $308 million weighed on cash generation. The company raised its quarterly dividend to an annualized $1.60 per share and did not repurchase shares during 2003. Management's stated focus for 2004 includes capital spending of about 3% of sales and an expected increase in retirement plan expense of roughly $60 million.
Nov 14, 2003
2002
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2002
Emerson Electric's fiscal 2002 (year ended September 30, 2002) was a challenging year driven by a sharp downturn in telecommunications, weak European and U.S. industrial markets, and cyclical softness across most segments. Net sales fell 10.7% to $13.8 billion, and underlying sales (excluding acquisitions, divestitures and currency) declined 11%. The Electronics and Telecommunications segment was hit hardest, with underlying sales down 38%, while Industrial Automation fell 11% underlying. Process Control was the relative bright spot, with modest underlying growth driven by systems and solutions. Reported net earnings were $122 million, or $0.29 per diluted share, but this figure includes a non-cash, after-tax charge of $938 million ($2.23 per share) from the transitional goodwill impairment under the new FAS 142 accounting standard. Excluding that charge, earnings were about $1.1 billion, or $2.52 per diluted share, down 16% from $3.01 in 2001 excluding the prior-year repositioning charge. Operating cash flow rose 6.5% to $1.8 billion, and free cash flow reached a record $1.4 billion, helped by a 31% reduction in capital spending and lower inventory levels. Balance sheet leverage increased. Total debt was about $4.6 billion, the debt-to-capital ratio rose to 44.2% from 43.5%, and the goodwill charge added almost 4 percentage points to leverage ratios. Interest coverage remained solid at 7.3 times. Management continued to invest in growth markets, notably China through the $750 million Avansys acquisition, and raised the quarterly dividend to an annualized $1.57 per share. Investors should watch for continued end-market weakness, pension-related equity exposure, and the pace of recovery in telecom and industrial spending.
Dec 23, 2002
2001
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2001
Emerson Electric's fiscal 2001 (year ended September 30, 2001) was a year of sharp earnings deterioration driven by a severe downturn in its Electronics and Telecommunications business and broad weakness in U.S. capital goods markets. Net sales were essentially flat at $15.5 billion (down 0.4%), but net earnings fell 27.5% to $1.03 billion, and diluted EPS dropped to $2.40 from $3.30. The decline was amplified by a $377 million pretax repositioning charge recorded in the fourth quarter, which cut EPS by $0.61. Excluding that charge, EPS was $3.01, down 9% year over year. Fourth-quarter results were particularly weak, with a net loss of $14.7 million, as second-half sales in Electronics and Telecommunications fell more than 20%. Balance sheet and cash flow metrics weakened. Total debt rose to $4.7 billion, the debt-to-capital ratio climbed to 43.5% from 41.8%, and the interest coverage ratio fell to 6.2x from 8.6x. Operating cash flow declined 7% to $1.7 billion, though capital expenditures fell 20%, which supported free cash flow. Management continued to return capital through a record dividend of $1.53 per share (up 7%), a raised quarterly rate to an annualized $1.55, and a new authorization to repurchase 40 million shares over roughly five years. Return on equity dropped to 16.5% from 22.6%. Looking forward, the company is repositioning toward faster-growing markets. Subsequent to year-end it agreed to exchange its ENI semiconductor equipment division for 12 million MKS Instruments shares, announced the divestiture of Chromalox, and acquired Avansys Power in China for about $750 million. Process Control was the bright spot, with segment earnings up 28% excluding charges, reflecting strength in PlantWeb and services. Investors should weigh the cyclical exposure of the Electronics and Telecommunications and Industrial Automation segments against the company's strong market positions, high international mix (40% of sales), and disciplined cost management.
Dec 21, 2001
2000-A
EMERSON ELECTRIC CO Annual Report (Amendment), Year Ended Sep 30, 2000
Emerson Electric's Amendment No. 1 to its fiscal 2000 Form 10-K (year ended September 30, 2000) reports record net sales of $15.5 billion, up 8.9%, and record net earnings of $1.42 billion, up 8.3%. Diluted EPS rose 10% to $3.30, and return on average stockholders' equity was 22.6%. Growth came mainly from the Electronics and Telecommunications segment, whose sales rose 58% to $3.4 billion on strong demand for network power and connectivity products and on two 2000 acquisitions, Jordan Telecommunication Products and Ericsson Energy Systems. The Company also cited underlying organic growth of over 7% and a return to positive underlying sales in the Process Control business in the fourth quarter. The amendment does not restate results. It removes the non-GAAP metric "diluted earnings per share excluding goodwill amortization" from the income statement and adds divested businesses to the segment disclosures in Note 12. Investors should note that management's own EPS figure excluding goodwill amortization was $3.63, which is no longer presented in the financial statements. Balance sheet leverage rose meaningfully. Total debt climbed to $4.6 billion from $3.3 billion, driven by roughly $2.0 billion of acquisition spending and continued share repurchases. The debt-to-capital ratio increased to 41.8% from 34.6%, and the interest coverage ratio fell to 8.6 times from 11.7 times. Operating cash flow of $1.84 billion was roughly flat. Management still described the company as financially strong, with $3.0 billion in commercial paper backup credit lines and a 2000 dividend of $1.43 per share, which was raised 7% to an annualized $1.53. The Company also stated its intent to move the dividend payout ratio toward 40-45% of prior-year earnings over time.
Jul 3, 2001
2000
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2000
Emerson Electric's fiscal 2000 (year ended September 30, 2000) was a record year on the top line and earnings. Net sales rose 8.9% to a record $15.5 billion, driven by very strong demand in Electronics and Telecommunications (sales up 65% to $3.3 billion, with underlying growth near 30%), acquisitions with roughly $1 billion of annualized sales, and underlying growth of over 7% excluding acquisitions, divestitures and currency. Net earnings reached a record $1.42 billion (up 8.3%), and diluted EPS rose 10% to $3.30 ($3.63 excluding goodwill amortization, up 11%). Return on average equity was 22.6%. Management also noted that Process Control showed its first organic sales improvement since 1998 in the fourth quarter. The balance sheet and cash flow picture is more mixed. Acquisitions consumed $1.97 billion of cash, pushing total debt up to $4.6 billion. The total debt-to-capital ratio rose to 41.8% from 34.6%, and interest coverage fell to 8.6x from 11.7x. Operating cash flow was $1.84 billion, up only 1.6%, with the growth partly held back by divestiture-related taxes. Goodwill grew to $5.3 billion, and the company's share repurchases slowed as it prioritized repositioning and acquisitions. For investors, the key points are strong growth and margin stability alongside a materially more leveraged balance sheet. Management signaled a dividend increase of 7% (to an annualized $1.53) and a longer-term plan to moderate the payout ratio toward 40-45% of prior-year earnings to fund growth investments. The filing reports no material pending legal proceedings or environmental capital expenditures.
Dec 22, 2000
1999
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 1999
Emerson Electric's fiscal 1999 (year ended September 30, 1999) was a record year on the top and bottom lines. Net sales rose 6.1% to a record $14.3 billion, driven by acquisitions and underlying growth in consumer-related and HVAC businesses, while capital goods businesses (Industrial Automation and Process Control) were flat to weak on soft oil prices and global capex. Net earnings grew 6.9% to a record $1.3 billion, diluted EPS reached $3.00 (up 8.3%), and return on average equity held at 21.9%. Operating cash flow was a record $1.8 billion, and the Company paid out $566 million in dividends while repurchasing $324 million of stock. The balance sheet became more leveraged. Total debt rose to $3.3 billion, the debt-to-capital ratio climbed to 34.6% from 30.8%, and the interest coverage ratio fell to 11.7x from 13.7x, largely due to acquisition financing. Management nonetheless characterizes the company as financially strong, with $2.4 billion in credit lines and $2 billion of shelf capacity. Goodwill grew to $4.3 billion, a significant share of total assets of $13.6 billion. Key 1999 acquisitions included Westinghouse Process Control, Daniel Industries, and MagneTek's alternator operations, and a definitive agreement was announced on December 14, 1999 to acquire Jordan Telecommunication Products for about $440 million in cash plus roughly $540 million of assumed debt and liabilities. For investors, the key considerations are the strength of the Electronics and Telecommunications and HVAC segments versus the cyclical weakness in Process Control and Industrial Automation, the rising leverage tied to an acquisition-led growth strategy, and the pending Jordan transaction. Emerson also reported a 35% new-product sales share and about $510 million in R&D spending, and it disclosed no material pending legal proceedings or environmental capital expenditures.
Dec 20, 1999
1998
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 1998
Emerson Electric's fiscal 1998 10-K (year ended September 30, 1998) reports a record year: net sales rose 9.3% to $13.4 billion, net earnings grew 9.5% to $1.23 billion, and diluted EPS reached $2.77, up 10.8%. Growth was balanced across both segments and was driven by domestic strength (particularly electronics and fractional motors), acquisitions, and cost reduction. Gross margin improved modestly to 36.1% (cost of sales at 63.9% of sales), and return on average equity rose to 21.9%. Operating cash flow was a record $1.65 billion (the MD&A cites $1.7 billion), supporting $603 million of capital expenditures and $573 million of acquisitions. The balance sheet became more leveraged. Total debt rose to $2.6 billion, the debt-to-capital ratio climbed to 30.8% from 27.1%, and long-term debt more than doubled to $1.06 billion, largely to fund acquisitions and $499 million of share repurchases. Management still characterizes the company as financially strong, citing interest coverage of 13.7 times and roughly $1.8 billion of credit lines. Year 2000 remediation is more than half complete on critical systems and is expected to be substantially complete by September 1999, with costs described as immaterial. Looking ahead, management expects acquisitions completed in fiscal 1998 and the pending Westinghouse Process Control Division purchase to add about $1 billion of sales in fiscal 1999. The company also raised its quarterly dividend 10.2% to an annualized $1.30 per share. Risks to monitor include the stronger dollar, weakness in Asian economies, and the company's reliance on continued acquisitions and buybacks for growth in its per-share results.
Dec 23, 1998
1997
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 1997
Emerson Electric's fiscal 1997 (year ended September 30, 1997) was a record year. Net sales rose 10.3% to $12.3 billion, with roughly half of the increase from international demand and the remainder from acquisitions, while domestic sales grew about 12%. Net earnings reached a record $1.12 billion (up 10.2%), and earnings per share rose 11.0% to $2.52 (post the March 1997 two-for-one split). Return on average equity improved to 20.8% from 19.9%, and gross margin improved as cost of sales fell to 64.0% of sales from 64.3%. Operating cash flow was a record $1.5 billion, up 14%, comfortably funding $575 million of capital expenditures, $319 million of acquisitions, and $481 million of dividends, with the balance supporting about $377 million of net share repurchases. Balance sheet leverage rose modestly. Total debt increased to $2.0 billion, and the total debt-to-capital ratio climbed to 27.1% from 24.5%, though interest coverage improved to 15.8 times. Backlog grew to $1.99 billion from $1.81 billion. Management reported record new product sales of $3.9 billion (32% of sales) and R&D spending of $445 million. The company also formed a joint venture with General Signal, producing a pretax gain of about $80 million that was largely offset by related restructuring and other charges. Income before taxes rose 10.9% to $1.78 billion. The filing describes a diversified industrial portfolio across two segments: Commercial and Industrial ($7.4 billion in sales, 13.8% margin) and Appliance and Construction-Related ($4.9 billion, 16.5% margin). The company has about 360 manufacturing locations, 190 of them outside the U.S., and international sales were 43% of the total. Management noted that foreign currency translation reduced sales by about $235 million, and a weaker dollar was a headwind in certain segments. Management stated that no pending legal proceedings are expected to be material and that no material environmental capital expenditures are anticipated.
Dec 19, 1997
1996
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 1996
Emerson Electric's fiscal 1996 10-K (year ended September 30, 1996) shows a company at record levels on nearly every headline metric. Net sales rose 11.4% to a record $11.15 billion, with roughly half of the increase from strong international demand (international sales including exports reached $4.87 billion, about 44% of total) and the remainder from domestic growth and acquisitions. Net earnings grew 12.2% to a record $1.02 billion, and earnings per share rose 12.1% to $4.55. Return on average equity improved to 19.9%, and operating cash flow reached a record $1.32 billion. Gross margin improved slightly, with cost of sales at 64.3% of sales versus 64.7% in 1995, though SG&A rose to 19.6% of sales as the company increased investment in new product development. The balance sheet expanded through acquisitions, including Vermont American (now consolidated after the company gained control of the joint venture with Bosch), F.G. Wilson, Control Techniques, Kop-Flex and Dieterich Standard. Total assets increased to $10.48 billion and long-term debt rose to $772.6 million from $208.6 million, largely due to a $250 million 6.3% note issuance and commercial paper. Total debt to capital remained moderate at 24.5%, and interest coverage was a solid 13.7 times. Management also approved a share repurchase program of up to 20 million shares (about 9% of shares outstanding) to be executed over four to five years, along with a proposed two-for-one stock split and a 10.2% dividend increase to an annualized $2.16 per share. Note that the filing carries a contingent guarantee of approximately $340 million for Vermont American's debt, though Bosch would indemnify up to about $130 million of that exposure. From an investor standpoint, the filing portrays a financially strong, diversified industrial company with consistent margins, high returns on equity, and growing international exposure. Key items to monitor include the sustainability of international growth given currency translation headwinds, the pace of acquisition-driven growth, the higher leverage relative to prior years, and the execution of the buyback program, which signals management's confidence in the company's cash generation.
Dec 19, 1996
1995
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 1995
Emerson Electric's fiscal 1995 (year ended September 30, 1995) was a record year on nearly every measure. Net sales rose 16.3% to $10.0 billion, net earnings grew 15.1% to $908 million, and earnings per share reached $4.06, up 15.3%. Return on average stockholders' equity improved to 19.7% from 19.1%. Growth was driven by strong international demand (international sales up 35% to $4.4 billion, about 44% of total sales), the acquisitions of F.G. Wilson and Control Techniques, and new product sales of $2.6 billion, roughly 26% of revenue. Excluding acquisitions, currency, and non-recurring items, pre-tax income rose about 15%. Operating cash flow was a record $1,142 million, and the Board raised the quarterly dividend 14% to an annualized $1.96 per share. The balance sheet became more leveraged. Total debt rose to about $1.6 billion from $1.2 billion, lifting the total debt-to-capital ratio to 24.7% from 21.7%, and short-term borrowings grew to $1.39 billion as acquisition financing matured. Interest coverage remained solid at 13.9 times, down from 15.0 times. Goodwill climbed to $2.4 billion, now roughly a quarter of total assets, which is worth monitoring for future impairment or amortization drag. Capital expenditures rose 27% to $421 million, including plans to nearly double Copeland Compliant Scroll compressor capacity. Looking ahead, the filing flags a pending Caterpillar equity investment in F.G. Wilson, a planned sale of Emerson's 50% interest in S-B Power Tool to Robert Bosch GmbH expected in late 1996 (with an expected gain), and a $370 million guarantee of Vermont American Corporation debt, of which $147 million is indemnified by Bosch. Management reports no material pending litigation or contingent liabilities.
Dec 21, 1995
1994
EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 1994
Emerson Electric's fiscal 1994 (year ended September 30, 1994) was a record year on the top line and bottom line. Net sales rose 5.3% to $8.6 billion, and net earnings reached a record $788.5 million, up 11.4%, with earnings per share of $3.52 (up 11.7%). Results were helped by a $242 million pretax gain on the sale of the Aerospace unit of Rosemount, which was largely offset by $50 million of other non-recurring charges and a $115.9 million after-tax cumulative effect charge from adopting SFAS No. 106 (postretirement health care). Excluding non-recurring items, pretax income grew about 11%, driven by domestic volume, improved margins and lower interest expense. Return on average equity was 19.1%, and the net margin of 9.2% was the highest in the company's 37 consecutive years of earnings growth. The balance sheet strengthened considerably. Operating cash flow was a record $1,097 million, and total debt fell $449 million to $1.2 billion, lowering the total debt-to-capital ratio to 21.7% from 29.3% a year earlier. Interest coverage improved to 15.0 times. Management also raised the quarterly dividend 10.3% to an annualized $1.72 per share, consistent with a 45-50% payout target, and bought back $111 million of stock. Growth is being pursued through acquisitions, with pending deals for F.G. Wilson and Control Techniques expected to total about $450 million in annual sales for roughly $550 million. The main watch items are uneven segment performance and international exposure. The Appliance and Construction-Related segment grew 11.5% on strong U.S. HVAC and motor demand, while Commercial and Industrial sales rose only 1.1%. International sales were flat-to-modestly up at $3.2 billion, weighed down by recession in Japan and currency headwinds of roughly $60 million. The company also carries about $1.5 billion of backlog and $1.9 billion of goodwill, and it guarantees $373 million of a joint venture's debt, though management does not consider any contingency material.
Dec 22, 1994