EX-99.1 2 a2017q1release_ex991.htm EXHIBIT 99.1 Document

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Media Contact: Mark Polzin (314) 982-1758

EMERSON REPORTS FIRST QUARTER 2017 RESULTS

First quarter sales and profit exceeded expectations
Net sales were $3.2 billion, down 4 percent, or 3 percent on an underlying basis
Earnings per share from continuing operations increased 22 percent to $0.56
Operating cash flow from continuing operations increased 6 percent versus the prior year

ST. LOUIS, February 7, 2017 – Emerson (NYSE: EMR) today announced net sales in the first quarter ended December 31, 2016 were down 4 percent, with underlying sales down 3 percent excluding unfavorable currency translation. The first quarter results reflected mixed but generally improving global economic conditions in our key served markets. Growth in the Commercial & Residential Solutions platform resulted from favorable HVAC, refrigeration and U.S. and Asian construction markets, while the Automation Solutions platform remained down due to the low price of oil but witnessed improving order rates, particularly in North America, as we exited the quarter.
Pretax margin of 14.4 percent exceeded the prior year by 140 basis points. EBIT margin of 15.8 percent also increased 140 basis points primarily due to savings from restructuring activities. Earnings per share from continuing operations of $0.56 increased 22 percent, including an income tax benefit of $0.07 per share. Operating cash flow from continuing operations of $410 million increased 6 percent versus the prior year. Including the impact of discontinued operations (Network Power, Leroy-Somer and Control Techniques), earnings per share were $0.48, down 9 percent, and operating cash flow was $238 million, down 51 percent.
"Our strong first quarter results, which surpassed expectations, represent a solid start to the fiscal year and reflect an improving overall economic environment," said Chairman and Chief Executive Officer David N. Farr. "The benefits from our restructuring actions during the past two years played a critical role in our ability to deliver higher margins across many of our businesses. Considering the improving demand conditions during the quarter, particularly in the automation markets, we are increasing our 2017 full-year EPS guidance by 12 cents at both the top and bottom end of the range, including the 7 cent income tax benefit in the first quarter."




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Business Platform Results
Automation Solutions net sales decreased 9 percent. Underlying sales were down 8 percent excluding unfavorable currency. Spending in energy related and general industrial markets remained down but the pace of business improved during the quarter. Globally, power, chemical and life sciences markets continue to provide opportunities for growth. Underlying sales in North America were down 11 percent, with the U.S. down 9 percent. Spending by oil and gas customers remained down, but MRO activity levels were more favorable and are expected to be a benefit for at least the next two quarters. Asia was down 2 percent, with China up 4 percent reflecting stabilizing market conditions. In other regions, Europe was down 5 percent, Middle East/Africa was up 3 percent and Latin America was down 29 percent. Margin increased 80 basis points to 16.6 percent, primarily due to savings from prior year restructuring actions. The business will remain under pressure during the second quarter from continued low levels of customer spending, with the expectation that market conditions will continue to improve during the fiscal year.
Commercial & Residential Solutions net sales increased 6 percent reflecting strong demand in global HVAC and refrigeration markets and favorable conditions in professional tools. Underlying sales increased 7 percent excluding unfavorable currency. Underlying sales in North America increased 4 percent, led by strong growth in U.S. residential and commercial air conditioning as well as a recovery in professional tools within the oil and gas sector. Asia increased 26 percent as broad strength in air conditioning and refrigeration markets was evident across most of the region. Growth in Asia was led by China, up 40 percent, where significant demand acceleration has occurred over the last two quarters. Europe was up 7 percent with solid growth in air conditioning and professional construction tools. Margin increased 140 basis points to 19.9 percent, primarily due to leverage on higher volume and savings from restructuring actions across the new platform structure. A favorable outlook for global demand in air conditioning, refrigeration and U.S. construction markets supports the expectation for low to mid-single digit growth in fiscal 2017.

2017 Outlook
Considering the first quarter results and recent order trends, we are raising our outlook for 2017. Full-year net sales are expected to be down 1 to 3 percent, with underlying sales flat to down 2 percent excluding unfavorable currency translation of approximately 1 percent. Earnings per share from continuing operations are now expected to be $2.47 to $2.62, including the $0.07 income tax benefit in the first quarter. Automation Solutions net sales are now expected to be down 5 to 7 percent, with underlying sales down 3 to 5 percent excluding unfavorable currency of approximately 2 percent. Commercial & Residential Solutions net and underlying sales are now expected to be up 3 to 5 percent. This outlook continues to exclude any impact related to the pending acquisition of the Pentair Valves & Controls business.

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"Our first quarter results reflect the positive momentum building within our two platform businesses as we begin the fiscal year, " continued Farr. "While we expect significant challenges to persist throughout 2017, we are optimistic that the improving market conditions and broad-based increase in demand within many of our global served markets will benefit Emerson in the second half of the year. With this in mind, our focus will continue to be on executing our portfolio repositioning strategy and making the necessary adjustments to deliver improved profitability and cash flow to increase shareholder value."

Upcoming Investor Events
Today at 2:00 p.m. ET, Emerson management will discuss the first quarter 2017 results during a conference call. Access to a live webcast of the discussion will be available at www.emerson.com/financial at the time of the call. A replay of the conference call will remain available for approximately three months.
On Thursday, February 16, 2017, Emerson will host its annual investor conference in New York City from 8:30 a.m. to approximately 12:45 p.m. ET. Access to a live webcast of the presentation will be available at www.emerson.com/financial at the time of the event. A replay of the conference will remain available for approximately three months.

Forward-Looking and Cautionary Statements
Statements in this press 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, protection of intellectual property, and competitive and technological factors, among others, as set forth in the Company's most recent Annual Report on Form 10-K and subsequent reports filed with the SEC.
The outlook contained herein represents the Company's expectations for its consolidated results from continuing operations, and excludes the results of discontinued operations and any results attributable to the pending acquisition of the Pentair Valves & Controls business.


(tables attached)

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Table 1
EMERSON AND SUBSIDIARIES
CONSOLIDATED OPERATING RESULTS
(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)
 
 
 
 
 
 
 
Quarter Ended December 31
 
Percent
 
2015
 
2016
 
Change
 
 
 
 
 
 
Net sales

$3,337

 

$3,216

 
(4)%
Costs and expenses:
 
 
 
 
 
     Cost of sales
1,923

 
1,851

 
 
     SG&A expenses
879

 
822

 
 
     Other deductions, net
54

 
33

 
 
     Interest expense, net
47

 
46

 
 
Earnings from continuing operations before income taxes
434

 
464

 
7%
Income taxes
127

 
94

 
 
Earnings from continuing operations
307

 
370

 
21%
Discontinued operations, net of tax
46

 
(55
)
 
 
Net Earnings
353

 
315

 
 
Less: Noncontrolling interests in earnings of subsidiaries
4

 
6

 
 
Net earnings common stockholders

$349

 

$309

 
(12)%
 
 
 
 
 
 
Diluted avg. shares outstanding
652.5

 
644.3

 
 
 
 
 
 
 
 
Diluted earnings per share common stockholders
 
 
 
 

Earnings from continuing operations

$0.46

 

$0.56

 
22%
Discontinued operations

$0.07

 

($0.08
)
 
 
Diluted earnings per common share

$0.53

 

$0.48

 
(9)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended December 31
 
 
 
2015
 
2016
 
 
Other deductions, net
 
 
 
 
 
     Amortization of intangibles

$22

 

$22

 
 
     Restructuring costs
7

 
11

 
 
     Other
25

 

 
 
          Total

$54

 

$33

 
 


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Table 2
EMERSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS, UNAUDITED)
 
 
 
 
 
Quarter Ended December 31
 
2015
 
2016
Assets
 
 
 
     Cash and equivalents

$3,109

 

$4,151

     Receivables, net
2,490

 
2,426

     Inventories
1,320

 
1,278

     Other current assets
706

 
552

     Current assets held-for-sale
2,069

 
470

          Total current assets
9,694

 
8,877

     Property, plant & equipment, net
2,885

 
2,861

     Goodwill
3,825

 
3,861

     Other intangible assets
917

 
879

     Other
220

 
179

     Noncurrent assets held-for-sale
3,998

 
814

          Total assets

$21,539

 

$17,471

 
 
 
 
Liabilities and equity
 
 
 
     Short-term borrowings and current
 
 
 
        maturities of long-term debt

$3,409

 

$254

     Accounts payable
1,344

 
1,335

     Accrued expenses
1,907

 
1,872

     Income taxes
103

 
396

     Current liabilities held-for-sale
1,439

 
289

          Total current liabilities
8,202

 
4,146

     Long-term debt
4,030

 
3,815

     Other liabilities
1,479

 
1,667

     Noncurrent liabilities held-for-sale
331

 
89

     Total equity
7,497

 
7,754

          Total liabilities and equity

$21,539

 

$17,471


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Table 3
EMERSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS, UNAUDITED)
 
 
 
 
 
 
Quarter Ended December 31
 
 
2015
 
2016
Operating activities
 
 
 
 
Net earnings
 
$353
 
$315
(Earnings) Loss from discontinued operations, net of tax
 
(46
)
 
55

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
 
        Depreciation and amortization
 
144

 
143

        Changes in operating working capital
 
(155
)
 
(138
)
        Other, net
 
90

 
35

            Cash from continuing operations
 
386

 
410

            Cash from discontinued operations
 
101

 
(172
)
            Cash provided by operating activities
 
487

 
238

 
 
 
 
 
Investing activities
 
 
 
 
Capital expenditures
 
(124
)
 
(100
)
Purchases of businesses, net of cash and equivalents acquired
 
(6
)
 
(16
)
Other, net
 
(13
)
 
(20
)
    Cash from continuing operations
 
(143
)
 
(136
)
    Cash from discontinued operations
 
(20
)
 
3,894

    Cash provided by (used in) investing activities
 
(163
)
 
3,758

 
 
 
 
 
Financing activities
 
 
 
 
Net increase (decrease) in short-term borrowings
 
34

 
(2,225
)
Proceeds from short-term borrowings greater than three months
 
827

 

Payments of short-term borrowings greater than three months
 

 
(90
)
Payments of long-term debt
 
(251
)
 
(251
)
Dividends paid
 
(310
)
 
(311
)
Purchases of common stock
 
(507
)
 

Other, net
 
(4
)
 
(43
)
    Cash used in financing activities
 
(211
)
 
(2,920
)
 
 
 
 
 
Effect of exchange rate changes on cash and equivalents
 
(58
)
 
(107
)
Increase (Decrease) in cash and equivalents
 
55

 
969

Beginning cash and equivalents
 
3,054

 
3,182

Ending cash and equivalents
 
$3,109
 
$4,151
 
 
 
 
 



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Table 4
EMERSON AND SUBSIDIARIES
SEGMENT SALES AND EARNINGS
(DOLLARS IN MILLIONS, UNAUDITED)
 
 
 
 
 
Quarter Ended December 31
 
2015
 
2016
Sales
 
 
 
     Automation Solutions

$2,162

 

$1,967

 
 
 
 
     Climate Technologies
786

 
859

     Tools & Home Products
392

 
393

     Commercial & Residential Solutions
1,178

 
1,252

 
 
 
 
     Eliminations
(3
)
 
(3
)
          Net sales

$3,337

 

$3,216

 
 
 
 
Earnings
 
 
 
     Automation Solutions

$341

 

$326

 
 
 
 
     Climate Technologies
133

 
161

     Tools & Home Products
85

 
88

     Commercial & Residential Solutions
218

 
249

 

 

     Differences in accounting methods
44

 
33

     Corporate and other
(122
)
 
(98
)
     Interest expense, net
(47
)
 
(46
)
          Earnings before income taxes

$434

 

$464

 
 
 
 
Restructuring costs
 
 
 
     Automation Solutions

$5

 

$6

 
 
 
 
     Climate Technologies
1

 
4

     Tools & Home Products
1

 
1

     Commercial & Residential Solutions
2

 
5

 
 
 
 
          Total

$7

 

$11



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Reconciliations of Non-GAAP Financial Measures & Other
Table 5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliations of Non-GAAP measures (denoted by *) with the most directly comparable GAAP measure (dollars in millions, except per share amounts):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1 2017 Underlying Sales Change
 Auto Solns
 
 Comm & Res Solns
 
 Emerson
 
 
 
 
Reported (GAAP)
 
(9
)%
 
6
%
 
(4
)%
 
 
 
 
Unfavorable FX
1
 %
 
1
%
 
1
 %
 
 
 
 
Underlying*
 
(8
)%
 
7
%
 
(3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBIT Margin
 
Q1 FY17
 
Q1 FY16
 
Change
 
 
 
 
Pretax margin (GAAP)
 
14.4
 %
 
13
%
 
140 bps

 
 
 
 
Interest expense, net
 
1.4

 
1.4

 
- bps

 
 
 
 
EBIT margin*
 
15.8
 %
 
14.4
%
 
140 bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Commercial & Residential Solutions business includes the results of both our Climate Technologies and Tools & Home Products segments.
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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