EX-99.1 3 d476266dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Emerson Reports Second Quarter 2023 Results; Updates 2023 Outlook

ST. LOUIS (May 3, 2023) - Emerson (NYSE: EMR) today reported results for its second quarter ended March 31, 2023 and updated its full year outlook for fiscal 2023, which are presented on a continuing operations basis. Emerson also declared a quarterly cash dividend of $0.52 per share of common stock payable June 9, 2023 to stockholders of record May 12, 2023.

 

(dollars in millions, except per share)

    2022 Q2     2023 Q2     Change  

Underlying Orders1

          7 % 

Net Sales

    $ 3,291     $ 3,756       14 % 

Underlying Sales2

          14 % 

Pretax Earnings

    $ 509     $ 639    

Margin

      15.5 %      17.0 %      150  bps 

Adjusted Segment EBITA3

    $ 703     $ 924    

Margin

      21.4 %      24.6 %      320  bps 

GAAP Earnings Per Share

    $ 0.72     $ 0.92       28 % 

Adjusted Earnings Per Share4

    $ 0.87     $ 1.09       25 % 

Operating Cash Flow

    $ 379     $ 575       51 % 

Free Cash Flow

    $ 312     $ 513       64 % 

Management Commentary

“Emerson’s outstanding second quarter results were driven by strong end market demand and excellent operational execution from our global teams,” said Emerson President and Chief Executive Officer Lal Karsanbhai. “Underlying sales growth, operational leverage and earnings exceeded our expectations, a testament to the strength of our people, technology, and the Emerson Management System.”

“As we accelerate our growth as a leading automation company, we continue to execute on our strategic vision, including our recent definitive agreement to purchase NI, a leader in test and measurement automation,” Karsanbhai continued. “NI’s best-in-class technology and software will accelerate Emerson’s progress toward a cohesive, higher growth and higher margin automation portfolio, diversifying Emerson into attractive discrete markets.”

2023 Outlook

The following tables summarize the fiscal year 2023 guidance framework for continuing operations5. The 2023 outlook includes $2 billion returned to shareholders through share repurchases completed in the first quarter and approximately $1.2 billion of dividend payments. Guidance figures are approximate.

 

     2023 Q3    2023

Net Sales Growth

    10.5% - 12.5%    9% - 10.5%

Underlying Sales Growth

    10% - 12%    8.5% - 10%
  

 

   

 

Earnings Per Share

    $0.92 - $0.96    $3.58 - $3.68

Amortization of Intangibles

    ~$0.15    ~$0.61

Restructuring / Related Costs

    ~$0.03    ~$0.12

Russia Exit Costs

    —      $0.08

AspenTech Micromine Purchase Price Hedge

    —      ~($0.02)

Acquisition / Divestiture Fees

    ~$0.03    ~$0.06

NI Investment Gain

    —      ($0.05)

Interest on Note Receivable From Climate Technologies

    ~($0.02)    ~($0.06)

Interest Income on Climate Technologies Undeployed Proceeds

    ~($0.04)    ~($0.17)

Adjusted Earnings Per Share

    $1.07 - $1.11    $4.15 - $4.25

Operating Cash Flow

       ~$2.5B

Free Cash Flow

       ~$2.2B

1 

Underlying orders does not include AspenTech.

2

Underlying sales excludes the impact of currency translation, and acquisitions and divestitures including heritage AspenTech and Emerson’s businesses contributed to AspenTech.

3 

Adjusted segment EBITA represents segment earnings less restructuring and intangibles amortization expense.

4 

Adjusted EPS excludes restructuring, NI investment gains, acquisition/divestiture costs, write-offs associated with Emerson’s announced Russia exit, an AspenTech Micromine purchase price hedge and intangibles amortization expense.

5

The Company’s 2023 continuing operations after the Climate Technologies divestiture (assumed to close May 31, 2023 for the purposes of guidance) will include interest income from the $2.25 billion note receivable from Climate Technologies and reflect the 45% common equity ownership in the income, or loss, of Climate Technologies. Emerson will not control Climate Technologies post-closing and is therefore unable to estimate the amount of its 45% share of Climate Technologies’ post-close results and this has been excluded from guidance. The effect of Emerson’s 45% share of Climate Technologies is expected to be immaterial to post-closing cash flows. On a discontinued operations GAAP basis, Emerson expects third quarter EPS of $14 - $16 and fiscal 2023 EPS of $18 - $20.

Conference Call

Today, beginning at 7:00 a.m. Central Time / 8:00 a.m. Eastern Time, Emerson management will discuss the second quarter results during an investor conference call. Participants can access a live webcast available at www.emerson.com/investors at the time of the call. A replay of the call will be available for 90 days. Conference call slides will be posted in advance of the call on the company website.

About Emerson

Emerson (NYSE: EMR) is a global technology and software company providing innovative solutions for the world’s essential industries. Through its leading automation portfolio, including its majority stake in AspenTech, Emerson helps hybrid, process and discrete manufacturers optimize operations, protect personnel, reduce emissions and achieve their sustainability goals. For more information, visit Emerson.com.

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 the Company’s ability to successfully complete on the terms and conditions contemplated, and the financial impact of, the proposed Climate Technologies transaction and the proposed National Instruments transaction, the scope, duration and ultimate impacts of the COVID-19 pandemic and the Russia-Ukraine conflict, as well as economic and currency conditions, market demand, including related to the pandemic and oil and gas price declines and volatility, pricing, protection of intellectual property, cybersecurity, tariffs, competitive and technological factors, inflation, 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 expectation for its consolidated results, other than as noted herein.

Contacts

 

Investors:    Media:   
Colleen Mettler    Charlotte Boyd   
(314) 553-2197    (952) 994-8607   

(tables attached)

 

Page 2

Table 1

EMERSON AND SUBSIDIARIES

CONSOLIDATED OPERATING RESULTS

(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)

 

     Quarter Ended March 31     Percent  
     2022     2023     Change  

Net sales

    $ 3,291     $ 3,756       14 % 

Cost of sales

      1,815       1,955    

SG&A expenses

      888       1,000    

Other deductions, net

      28       109    

Interest expense, net

      51       53    
  

 

 

    

 

 

    

Earnings from continuing operations before income taxes

      509       639       26 % 

Income taxes

      80       134    
  

 

 

    

 

 

    

Earnings from continuing operations

      429       505       18 % 

Discontinued operations, net of tax

      246       265    
  

 

 

    

 

 

    

Net earnings

      675       770    

Less: Noncontrolling interests in subsidiaries

      1       (22 )   
  

 

 

    

 

 

    

Net earnings common stockholders

    $ 674     $ 792       18 % 
  

 

 

    

 

 

    

Earnings common stockholders

       

Earnings from continuing operations

    $ 428     $ 530       24 % 

Discontinued operations

      246       262    
  

 

 

    

 

 

    

Net earnings common stockholders

    $ 674     $ 792       18 % 
  

 

 

    

 

 

    

Diluted avg. shares outstanding

      596.5       573.6    

Diluted earnings per share common stockholders

       

Earnings from continuing operations

    $ 0.72     $ 0.92       28 % 

Discontinued operations

      0.41       0.46    
  

 

 

    

 

 

    

Diluted earnings per common share

    $ 1.13     $ 1.38       22 % 
                          
      
     Quarter Ended March 31        
     2022     2023        

Other deductions, net

       

Amortization of intangibles

    $ 57     $ 119    

Restructuring costs

      9       19    

Other

      (38 )      (29 )   
  

 

 

    

 

 

    

Total

    $ 28     $ 109    
  

 

 

    

 

 

    

 

Page 3

Table 2

EMERSON AND SUBSIDIARIES

CONSOLIDATED OPERATING RESULTS

(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)

 

     Six Months Ended March 31     Percent  
     2022     2023     Change  

Net sales

    $ 6,447     $ 7,129       11 % 

Cost of sales

      3,556       3,708    

SG&A expenses

      1,737       2,030    

Gain on subordinated interest

      (453 )      —      

Other deductions, net

      66       229    

Interest expense, net

      90       101    
  

 

 

    

 

 

    

Earnings from continuing operations before income taxes

      1,451       1,061       (27 )% 

Income taxes

      276       232    
  

 

 

    

 

 

    

Earnings from continuing operations

      1,175       829       (29 )% 

Discontinued operations, net of tax

      395       2,267    
  

 

 

    

 

 

    

Net earnings

      1,570       3,096    

Less: Noncontrolling interests in subsidiaries

      —         (27 )   
  

 

 

    

 

 

    

Net earnings common stockholders

    $ 1,570     $ 3,123       99 % 
  

 

 

    

 

 

    

Earnings common stockholders

       

Earnings from continuing operations

    $ 1,174     $ 859       (27 )% 

Discontinued operations

      396       2,264    
  

 

 

    

 

 

    

Net earnings common stockholders

    $ 1,570     $ 3,123       99 % 
  

 

 

    

 

 

    

Diluted avg. shares outstanding

      597.3       580.1    

Diluted earnings per share common share

       

Earnings from continuing operations

    $ 1.96     $ 1.48       (24 )% 

Discontinued operations

      0.67       3.90    
  

 

 

    

 

 

    

Diluted earnings per common share

    $ 2.63     $ 5.38       105 % 
                          
      
     Six Months Ended March 31        
     2022     2023        

Other deductions, net

       

Amortization of intangibles

    $ 114     $ 237    

Restructuring costs

      15       29    

Other

      (63 )      (37 )   
  

 

 

    

 

 

    

Total

    $ 66     $ 229    
  

 

 

    

 

 

    

 

Page 4

Table 3

EMERSON AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN MILLIONS, UNAUDITED)

 

     Quarter Ended March 31  
     2022      2023  

Assets

      

Cash and equivalents

    $ 6,929      $ 2,046  

Receivables, net

      2,081        2,330  

Inventories

      1,819        2,034  

Other current assets

      1,079        1,228  

Current assets held-for-sale

      1,631        1,347  
  

 

 

     

 

 

  

Total current assets

      13,539        8,985  

Property, plant & equipment, net

      2,350        2,263  

Goodwill

      6,906        14,097  

Other intangible assets

      2,533        6,299  

Other

      1,809        2,265  

Noncurrent assets held-for-sale

      2,360        2,238  
  

 

 

     

 

 

  

Total assets

    $ 29,497      $ 36,147  
  

 

 

     

 

 

  

Liabilities and equity

      

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

    $ 2,762      $ 1,959  

Accounts payable

      1,176        1,207  

Accrued expenses

      2,759        3,245  

Current liabilities held-for-sale

      1,375        1,138  
  

 

 

     

 

 

  

Total current liabilities

      8,072        7,549  

Long-term debt

      8,203        8,174  

Other liabilities

      2,400        2,928  

Noncurrent liabilities held-for-sale

      208        149  

Equity

      

Common stockholders’ equity

      10,575        11,360  

Noncontrolling interests in subsidiaries

      39        5,987  
  

 

 

     

 

 

  

Total equity

      10,614        17,347  

Total liabilities and equity

    $ 29,497      $ 36,147  
  

 

 

     

 

 

  

 

Page 5

Table 4

EMERSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN MILLIONS, UNAUDITED)

 

     Six Months Ended March 31  
     2022     2023  

Operating activities

     

Net earnings

    $ 1,570     $ 3,096  

Earnings from discontinued operations, net of tax

      (395 )      (2,267 ) 

Adjustments to reconcile net earnings to net cash provided by operating activities:

     

Depreciation and amortization

      349       523  

Stock compensation

      77       142  

Changes in operating working capital

      (298 )      (390 ) 

Gain on subordinated interest

      (453 )      —    

Other, net

      (94 )      (227 ) 
  

 

 

    

 

 

  

Cash from continuing operations

      756       877  

Cash from discontinued operations

      209       (391 ) 
  

 

 

    

 

 

  

Cash provided by operating activities

      965       486  
  

 

 

    

 

 

  

Investing activities

     

Capital expenditures

      (140 )      (121 ) 

Purchases of businesses, net of cash and equivalents acquired

      (35 )      —    

Proceeds from subordinated interest

      438       15  

Other, net

      (16 )      (76 ) 
  

 

 

    

 

 

  

Cash from continuing operations

      247       (182 ) 

Cash from discontinued operations

      (88 )      2,916  
  

 

 

    

 

 

  

Cash provided by investing activities

      159       2,734  
  

 

 

    

 

 

  

Financing activities

     

Net increase (decrease) in short-term borrowings

      871       (31 ) 

Proceeds from long-term debt

      2,975       —    

Payments of long-term debt

      (504 )      (742 ) 

Dividends paid

      (613 )      (603 ) 

Purchases of common stock

      (285 )      (2,000 ) 

Other, net

      15       (55 ) 
  

 

 

    

 

 

  

Cash provided by (used in) financing activities

      3,499       (3,036 ) 
  

 

 

    

 

 

  

Effect of exchange rate changes on cash and equivalents

      (48 )      58  
  

 

 

    

 

 

  

Increase in cash and equivalents

      4,575       242  

Beginning cash and equivalents

      2,354       1,804  
  

 

 

    

 

 

  

Ending cash and equivalents

    $ 6,929     $ 2,046  
  

 

 

    

 

 

  

 

Page 6

Table 5

EMERSON AND SUBSIDIARIES

SEGMENT SALES AND EARNINGS

(AMOUNTS IN MILLIONS, UNAUDITED)

The following tables show results for the Company’s segments on an adjusted segment EBITA basis and are intended to supplement the Company’s results of operations, including its segment earnings which are defined as earnings before interest and taxes. The Company defines adjusted segment and total segment EBITA as segment earnings excluding intangibles amortization expense, and restructuring and related expense. Adjusted segment and total segment EBITA, and adjusted segment and total segment EBITA margin are measures used by management and may be useful for investors to evaluate the Company’s segments’ operational performance.

 

     Quarter Ended March 31  
     2022      2023      Reported     Underlying  

Sales

           

Final Control

    $ 884      $ 992        12 %      16 % 

Measurement & Analytical

      769        888        15 %      20 % 

Discrete Automation

      644        683        6 %      9 % 

Safety & Productivity

      355        361        2 %      3 % 
  

 

 

     

 

 

     

 

 

    

 

 

  

Intelligent Devices

    $ 2,652      $ 2,924        10 %      14 % 

Control Systems & Software

      573        623        9 %      13 % 

AspenTech

      84        230        172 %      — % 
  

 

 

     

 

 

     

 

 

    

 

 

  

Software and Control

    $ 657      $ 853        30 %      13 % 

Eliminations

      (18 )       (21 )      
  

 

 

     

 

 

     

 

 

    

 

 

  

Total

    $ 3,291      $ 3,756        14 %      14 % 

Sales Growth by Geography

 

     Quarter Ended
March 31		  

Americas

      15 % 

Europe

      14 % 

Asia, Middle East & Africa

      11 % 

 

Page 7

Table 5 cont.

 

     Six Months Ended March 31  
     2022      2023      Reported     Underlying  

Sales

           

Final Control

    $ 1,701      $ 1,854        9 %      14 % 

Measurement & Analytical

      1,506        1,637        9 %      15 % 

Discrete Automation

      1,261        1,301        3 %      8 % 

Safety & Productivity

      706        671        (5 )%      (3 )% 
  

 

 

     

 

 

     

 

 

    

 

 

  

Intelligent Devices

      $5,174        $5,463        6 %      10 % 

Control Systems & Software

      1,143        1,229        8 %      13 % 

AspenTech

      166        473        184 %      — % 
  

 

 

     

 

 

     

 

 

    

 

 

  

Software and Control

    $ 1,309      $ 1,702        30 %      13 % 

Eliminations

      (36 )       (36 )      
  

 

 

     

 

 

     

 

 

    

 

 

  

Total

    $ 6,447      $ 7,129        11 %      11 % 

Sales Growth by Geography     

 

     Six Months
Ended March 31		  

Americas

      14 % 

Europe

      9 % 

Asia, Middle East & Africa

      6 % 

 

Page 8

Table 5 cont.

 

     Quarter Ended March 31     Quarter Ended March 31  
     2022     2023  
     As
Reported
(GAAP)		     Adjusted
EBITA
(Non-
GAAP)		     As
Reported
(GAAP)		     Adjusted
EBITA
(Non-
GAAP)		  

Earnings

         

Final Control

    $ 152     $ 184     $ 215     $ 246  

Margins

      17.2 %      20.8 %      21.6 %      24.7 % 

Measurement & Analytical

      176       184       229       234  

Margins

      23.0 %      24.0 %      25.8 %      26.5 % 

Discrete Automation

      130       138       133       147  

Margins

      20.3 %      21.6 %      19.5 %      21.5 % 

Safety & Productivity

      65       72       83       92  

Margins

      18.1 %      20.0 %      22.9 %      25.2 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Intelligent Devices

    $ 523     $ 578     $ 660     $ 719  

Margins

      19.7 %      21.8 %      22.6 %      24.6 % 

Control Systems & Software

      101       106       127       137  

Margins

      17.7 %      18.7 %      20.4 %      22.1 % 

AspenTech

      (4 )      19       (54 )      68  

Margins

      (5.0 )%      21.5 %      (23.4 )%      29.5 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Software and Control

    $ 97     $ 125     $ 73     $ 205  

Margins

      14.7 %      19.1 %      8.6 %      24.1 % 

Corporate items and interest expense, net:

         

Stock compensation

      (43 )      (43 )      (40 )      (40 ) 

Unallocated pension and postretirement costs

      25       25       46       46  

Corporate and other

      (42 )      (33 )      (47 )      (55 ) 

Interest expense, net

      (51 )        (53 )   
  

 

 

    

 

 

    

 

 

    

 

 

  

Pretax Earnings / Adjusted EBITA

    $ 509     $ 652     $ 639     $ 875  

Margins

      15.5 %      19.8 %      17.0 %      23.3 % 

Supplemental Total Segment Earnings:

         

Adjusted Total Segment EBITA

      $ 703       $ 924  

Margins

        21.4 %        24.6 % 

 

Page 9

Table 5 cont.

 

     Quarter Ended March 31      Quarter Ended March 31  
     2022      2023  
     Amortization of
Intangibles1		      Restructuring
and
Related Costs2		      Amortization of
Intangibles1		      Restructuring
and
Related Costs2		  

Final Control

    $ 24      $ 8      $ 22      $ 9  

Measurement & Analytical

      5        3        5        —    

Discrete Automation

      7        1        7        7  

Safety & Productivity

      7        —          7        2  
  

 

 

     

 

 

     

 

 

     

 

 

  

Intelligent Devices

    $ 43      $ 12      $ 41      $ 18  

Control Systems & Software

      5        —          5        5  

AspenTech

      23        —          122        —    
  

 

 

     

 

 

     

 

 

     

 

 

  

Software and Control

    $ 28      $ 0      $ 127      $ 5  

Corporate

      —          2        —          3  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 71      $ 14      $ 168      $ 26  

 

1

Amortization of intangibles includes $14 and $49 reported in cost of sales for the three months ended March 31, 2022 and 2023, respectively.

2

Restructuring and related costs includes $5 and $7 reported in cost of sales for the three months ended March 31, 2022 and 2023, respectively.

 

     Quarter Ended March 31  
     2022      2023  

Depreciation and Amortization

      

Final Control

    $ 50      $ 45  

Measurement & Analytical

      30        28  

Discrete Automation

      22        22  

Safety & Productivity

      14        15  
  

 

 

     

 

 

  

Intelligent Devices

      116        110  

Control Systems & Software

      22        24  

AspenTech

      24        123  
  

 

 

     

 

 

  

Software and Control

      46        147  

Corporate

      9        6  
  

 

 

     

 

 

  

Total

    $ 171      $ 263  
  

 

 

     

 

 

  

 

Page 10

Table 6

EMERSON AND SUBSIDIARIES

ADJUSTED CORPORATE AND OTHER SUPPLEMENTAL

(AMOUNTS IN MILLIONS, UNAUDITED)

The following table shows the Company’s corporate and other expenses on an adjusted basis. The Company’s definition of adjusted corporate and other excludes corporate restructuring and related costs, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments. This metric is useful for reconciling from total adjusted segment EBITA to the Company’s consolidated adjusted EBITA.

 

     Quarter Ended March 31  
Corporate and Other    2022      2023  

Corporate and other (GAAP)

    $ (42 )     $ (47 ) 

Corporate restructuring and related costs

      2        3  

National Instruments investment gain

      —          (35 ) 

Acquisition / divestiture costs

      7        10  

Russia business exit

      —          —    

AspenTech Micromine purchase price hedge

      —          14  
  

 

 

     

 

 

  

Adjusted corporate and other (Non-GAAP)

    $ (33 )     $ (55 ) 

 

Page 11

Table 7

EMERSON AND SUBSIDIARIES

ADJUSTED EBITA & EPS SUPPLEMENTAL

(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)

The following tables, which show results on an adjusted EBITA basis and diluted earnings per share on an adjusted basis, are intended to supplement the Company’s discussion of its results of operations herein. The Company defines adjusted EBITA as earnings excluding interest expense, net, income taxes, intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments. Adjusted earnings per share excludes intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees, interest on note receivable and interest on undeployed assets, and certain gains, losses or impairments. Adjusted EBITA, adjusted EBITA margin, and adjusted earnings per share are measures used by management and may be useful for investors to evaluate the Company’s operational performance.

 

     Quarter Ended March 31  
     2022     2023  

Pretax earnings

    $ 509     $ 639  

Percent of sales

      15.5 %      17.0 % 

Interest expense, net

      51       53  

Amortization of intangibles

      71       168  

Restructuring and related costs

      14       26  

National Instruments investment gain

      —         (35 ) 

Acquisition/divestiture costs

      7       10  

Russia business exit

      —         —    

AspenTech Micromine purchase price hedge

      —         14  
  

 

 

    

 

 

  

Adjusted EBITA

    $ 652     $ 875  

Percent of sales

      19.8 %      23.3 % 

 

     Quarter Ended March 31  
     2022      2023  

GAAP earnings from continuing operations per share

    $ 0.72      $ 0.92  

Amortization of intangibles

      0.09        0.16  

Restructuring and related costs

      0.02        0.04  

National Instruments investment gain

      —          (0.05 ) 

Acquisition/divestiture costs

      0.04        0.01  

Russia business exit

      —          —    

AspenTech Micromine purchase price hedge

      —          0.01  
  

 

 

     

 

 

  

Adjusted earnings from continuing operations per share

    $ 0.87      $ 1.09  
  

 

 

     

 

 

  

Less: AspenTech contribution to adjusted earnings per share

         (0.04 ) 
     

 

 

  

Adjusted earnings per share excluding AspenTech contribution

       $ 1.05  

 

Page 12

Table 7 cont.

 

Quarter Ended March 31, 2023

  
     Pretax
Earnings		     Income
Taxes		     Earnings
from
Cont.
Ops.		     Non-Controlling
Interests 3		     Net
Earnings
Common
Stockholders		     Diluted
Earnings
Per
Share		  

As reported (GAAP)

    $ 639     $ 134     $ 505     $ (25 )    $ 530     $ 0.92  

Amortization of intangibles

      168  1      38       130       42       88       0.16  

Restructuring and related costs

      26  2      6       20       —         20       0.04  

National Instruments investment gain

      (35 )      (8 )      (27 )      —         (27 )      (0.05 ) 

Acquisition/divestiture costs

      10       3       7       —         7       0.01  

AspenTech Micromine purchase price hedge

      14       3       11       5       6       0.01  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted (Non-GAAP)

    $ 822     $ 176     $ 646     $ 22     $ 624     $ 1.09  

Interest expense

      53            
  

 

 

            

Adjusted EBITA (Non-GAAP)

    $ 875            

 

1 

Amortization of intangibles includes $49 reported in cost of sales.

2 

Restructuring and related costs includes $7 reported in cost of sales and SG&A.

3 

Represents the 45 percent non-controlling interest in AspenTech applied to AspenTech’s share of each adjustment presented herein and eliminated from Emerson’s consolidated results.

 

Page 13

Table 8

EMERSON AND SUBSIDIARIES

ASPENTECH CONTRIBUTION TO EMERSON RESULTS SUPPLEMENTAL

(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)

The following tables reconcile the financial results of AspenTech reported to its shareholders with the amounts included in Emerson’s consolidated financial results. Emerson owns 55 percent of AspenTech, a separately traded public company (NASDAQ: AZPN), and consolidates AspenTech in its financial results. The 45 percent non-controlling interest in AspenTech is removed from Emerson’s net earnings common stockholders through the non-controlling interest line item. AspenTech is also one of Emerson’s segments and its GAAP segment earnings is reconciled below to its consolidated impact to clarify that certain items are reported outside of its segment earnings within Emerson corporate, including interest income, stock compensation and the Micromine purchase price hedge.

 

Quarter Ended March 31, 2023

  
     Pretax
Earnings		     Income
Taxes
(Benefit)		     Earnings
from
Cont.
Ops.		     Non-Controlling
Interests 5		     Net
Earnings
Common
Stockholders		     Diluted
Earnings
Per
Share		  

Standalone reporting (GAAP)

    $ (82 ) 1    $ (24 )    $ (58 )       

Interim tax reporting/Other

      1       2  2      (1 )       
  

 

 

    

 

 

    

 

 

        

Reported in Emerson consolidation (GAAP)

      (81 )      (22 )      (59 )      (26 )      (33 )    $ (0.06 ) 

Adjustments:

             

Amortization of intangibles

      122  3      28       94       42       52       0.09  

AspenTech Micromine purchase price hedge

      14  4      3       11       5       6       0.01  
  

 

 

    

 

 

    

 

 

        

Adjusted (Non-GAAP)

    $ 55     $ 9     $ 46     $ 21     $ 25     $ 0.04  

Interest income

      (10 ) 4           

Stock compensation

      23  4           

Adjusted Segment EBITA (Non-GAAP)

    $ 68            

Reconciliation to Segment EBIT

 

Pre-tax earnings

    $ (81 )           

Interest income

      (10 ) 4           

Stock compensation

      23  4           

Micromine purchase price hedge

      14  4           
  

 

 

            

Segment EBIT (GAAP)

    $ (54 )           

Amortization of intangibles

      122  3           
  

 

 

            

Adjusted Segment EBITA (Non-GAAP)

    $ 68            

 

1

Amount reflects AspenTech’s pretax earnings for the three months ended March 31, 2023, reported in its standalone quarterly report on Form 10-Q.

2

GAAP income taxes reported by AspenTech differ from the amount reflected in Emerson’s consolidated financial statements due to the application of the ASC 740 interim tax rules at the AspenTech entity level in their stand-alone publicly reported financial statements as compared to the amount computed at the Emerson consolidated level.

3

Amortization of intangibles includes $48 reported in cost of sales.

4

Reported in Emerson corporate line items.

5 

Represents the 45 percent non-controlling interest in AspenTech applied to each adjustment presented herein and eliminated from Emerson’s consolidated results.

 

Page 14

Reconciliations of Non-GAAP Financial Measures & Other    Table 9

Reconciliations of Non-GAAP measures with the most directly comparable GAAP measure (dollars in millions, except per share amounts). See tables 5 through 8 for additional non-GAAP reconciliations.

 

Q2 FY23

Underlying Sales Change

    Final
Control		     Measurement &
Analytical		     Discrete
Automation		     Safety &
Productivity		     Intelligent
Devices		  

Reported (GAAP)

      12 %      15 %      6 %      2 %      10 % 

(Favorable) / Unfavorable FX

      3 %      3 %      3 %      1 %      3 % 

(Acquisitions)

      — %      — %      — %      — %      — % 

Divestitures

      1 %      2 %      — %      — %      1 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Underlying (Non-GAAP)

      16 %      20 %      9 %      3 %      14 % 

 

Q2 FY23 Underlying Sales Change    Control
Systems &
Software		     AspenTech     Software
and
Control		     Emerson  

Reported (GAAP)

      9 %      172 %      30 %      14 % 

(Favorable) / Unfavorable FX

      3 %      — %      3 %      3 % 

(Acquisitions)

      — %      (172 )%      (21 )%      (4 )% 

Divestitures

      1 %        1 %      1 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Underlying (Non-GAAP)

      13 %      — %      13 %      14 % 

 

Six Months Ended March 31, 2023

Underlying Sales Change

    Final
Control		     Measurement &
Analytical		     Discrete
Automation		     Safety &
Productivity		     Intelligent
Devices		  

Reported (GAAP)

      9 %      9 %      3 %      (5 )%      6 % 

(Favorable) / Unfavorable FX

      4 %      4 %      5 %      2 %      4 % 

(Acquisitions)

      — %      — %      — %      — %      — % 

Divestitures

      1 %      2 %      — %      — %      — % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Underlying (Non-GAAP)

      14 %      15 %      8 %      (3 )%      10 % 

 

Six Months Ended March 31, 2023

Underlying Sales Change

    Control
Systems &
Software		     AspenTech     Software
and
Control		     Emerson  

Reported (GAAP)

      8 %      184 %      30 %      11 % 

(Favorable) / Unfavorable FX

      4 %      — %      4 %      4 % 

(Acquisitions)

      — %      (184 )%      (22 )%      (5 )% 

Divestitures

      1 %      — %      1 %      1 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Underlying (Non-GAAP)

      13 %      — %      13 %      11 % 

 

2023E April Guidance Underlying Sales Change    Q3 FY23E     FY23E  

Reported (GAAP)

      10.5 - 12.5 %      9% - 10.5%  

(Favorable) / Unfavorable FX

      ~ 0.5 %      ~ 1.5 % 

(Acquisitions)

      ~ (1.5 )%      ~ (2.5 )% 

Divestitures

      ~ 0.5 %      ~ 0.5 % 
  

 

 

    

 

 

  

Underlying (Non-GAAP)

      10% - 12%       8.5% - 10%  

 

Page 15

Final Control Adjusted EBITA    Q2 2022      Q2 2023      Q2 2022     Q2 2023  

Business Segment EBIT / EBIT margin (GAAP)

    $ 152      $ 215        17.2 %      21.6 % 

Amortization of intangibles and restructuring and related costs

      32        31        3.6 %      3.1 % 
  

 

 

     

 

 

     

 

 

    

 

 

  

Adjusted Business Segment EBITA / EBITA margin (Non-GAAP)

    $ 184      $ 246        20.8 %      24.7 % 

 

Measurement & Analytical Adjusted EBITA    Q2 2022      Q2 2023      Q2 2022     Q2 2023  

Business Segment EBIT / EBIT margin (GAAP)

    $ 176      $ 229        23.0 %      25.8 % 

Amortization of intangibles and restructuring and related costs

      8        5        1.0 %      0.7 % 
  

 

 

     

 

 

     

 

 

    

 

 

  

Adjusted Business Segment EBITA / EBITA margin (Non-GAAP)

    $ 184      $ 234        24.0 %      26.5 % 

 

Discrete Automation Adjusted EBITA    Q2 2022      Q2 2023      Q2 2022     Q2 2023  

Business Segment EBIT / EBIT margin (GAAP)

    $ 130      $ 133        20.3 %      19.5 % 

Amortization of intangibles and restructuring and related costs

      8        14        1.3 %      2.0 % 
  

 

 

     

 

 

     

 

 

    

 

 

  

Adjusted Business Segment EBITA / EBITA margin (Non-GAAP)

    $ 138      $ 147        21.6 %      21.5 % 

 

Safety & Productivity Adjusted EBITA    Q2 2022      Q2 2023      Q2 2022     Q2 2023  

Business Segment EBIT / EBIT margin (GAAP)

    $ 65      $ 83        18.1 %      22.9 % 

Amortization of intangibles and restructuring and related costs

      7        9        1.9 %      2.3 % 
  

 

 

     

 

 

     

 

 

    

 

 

  

Adjusted Business Segment EBITA / EBITA margin (Non-GAAP)

    $ 72      $ 92        20.0 %      25.2 % 

 

Intelligent Devices Adjusted EBITA    Q2 2022      Q2 2023      Q2 2022     Q2 2023  

Business Segment EBIT / EBIT margin (GAAP)

    $ 523      $ 660        19.7 %      22.6 % 

Amortization of intangibles and restructuring and related costs

      55        59        2.1 %      2.0 % 
  

 

 

     

 

 

     

 

 

    

 

 

  

Adjusted Business Segment EBITA / EBITA margin (Non-GAAP)

    $ 578      $ 719        21.8 %      24.6 % 

 

Control Systems & Software Adjusted EBITA    Q2 2022      Q2 2023      Q2 2022     Q2 2023  

Business Segment EBIT / EBIT margin (GAAP)

    $ 101      $ 127        17.7 %      20.4 % 

Amortization of intangibles and restructuring and related costs

      5        10        1.0 %      1.7 % 
  

 

 

     

 

 

     

 

 

    

 

 

  

Adjusted Business Segment EBITA / EBITA margin (Non-GAAP)

    $ 106      $ 137        18.7 %      22.1 % 

 

Page 16

AspenTech Adjusted EBITA    Q2 2022      Q2 2023      Q2 2022     Q2 2023  

Business Segment EBIT / EBIT margin (GAAP)

    $ (4 )     $ (54 )       (5.0 )%      (23.4 )% 

Amortization of intangibles and restructuring and related costs

      23        122        26.5 %      52.9 % 
  

 

 

     

 

 

     

 

 

    

 

 

  

Adjusted Business Segment EBITA / EBITA margin (Non-GAAP)

    $ 19      $ 68        21.5 %      29.5 % 

 

Software and Control Adjusted EBITA    Q2 2022      Q2 2023      Q2 2022     Q2 2023  

Business Segment EBIT / EBIT margin (GAAP)

    $ 97      $ 73        14.7 %      8.6 % 

Amortization of intangibles and restructuring and related costs

      28        132        4.4 %      15.5 % 
  

 

 

     

 

 

     

 

 

    

 

 

  

Adjusted Business Segment EBITA / EBITA margin (Non-GAAP)

    $ 125      $ 205        19.1 %      24.1 % 

 

Total Business Segment Adjusted EBITA Margin    Q2 2022      Q2 2023      Q2 2022     Q2 2023     Change  

Pretax earnings / margin (GAAP)

    $ 509      $ 639        15.5 %      17.0 %      150 bps  

Corporate items and interest expense, net

      111        94        3.4 %      2.5 %      (90) bps  
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

  

Total Business Segment EBIT / margin

    $ 620      $ 733        18.9 %      19.5 %      60 bps  

Amortization of intangibles and restructuring and related costs

    $ 83      $ 191        2.5 %      5.1 %      260 bps  
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

  

Adjusted Total Business Segment EBITA / margin (Non-GAAP)

    $ 703      $ 924        21.4 %      24.6 %      320 bps  

 

Q2 Earnings Per Share    Q2 FY22      Q2 FY23      Change  

Earnings per share (GAAP)

    $ 0.72      $ 0.92        28 % 

Amortization of intangibles

      0.09        0.16        6 % 

Restructuring and related costs

      0.02        0.04        2 % 

National Instrument investment gain

      —          (0.05 )       (7 )% 

Acquisition/divestiture costs

      0.04        0.01        (5 )% 

AspenTech Micromine purchase price hedge

      —          0.01        1 % 
  

 

 

     

 

 

     

 

 

  

Adjusted earnings per share (Non-GAAP)

    $ 0.87      $ 1.09        25 % 

 

2023E April Guidance Earnings Per Share    Q3 FY23E      FY23E  

Earnings per share (GAAP)

    $ 0.92 - $0.96        $ 3.58 - $3.68    

Amortization of intangibles

      ~ 0.15        ~ 0.61  

Restructuring and related costs

      ~ 0.03        ~ 0.12  

Russia business exit

      —          ~ 0.08  

AspenTech Micromine purchase price hedge

      —          (0.02 ) 

Acquisition/divestiture fees

      ~ 0.03        ~ 0.06  

National Instrument investment gain

      —          ~ (0.05)  

Interest on note receivable from Climate Technologies

      ~ (0.02)        ~ (0.06)  

Interest income on undeployed proceeds

      ~ (0.04)        ~ (0.17)  
  

 

 

     

 

 

  

Adjusted earnings per share (Non-GAAP)

    $ 1.07 - $1.11        $ 4.15 - $4.25    

 

Page 17

Cash Flow    Q2 FY22      Q2 FY23      Change     FY23E
($ in
billions)		  

Operating cash flow (GAAP)

    $ 379      $ 575        51 %    $ 2.5  

Capital expenditures

      (67 )       (62 )       13 %      (0.3 ) 
  

 

 

     

 

 

     

 

 

    

 

 

  

Free cash flow (Non-GAAP)

    $ 312      $ 513        64 %    $ 2.2  

Note 1: Underlying sales and orders exclude the impact of acquisitions, divestitures and currency translation.

Note 2: All fiscal year 2023E figures are approximate, except where range is given.

 

Page 18