Investor Contact: Colleen Mettler (314) 553-2197
Media Contact: Charlotte Boyd (952) 994-8607
Emerson Reports Second Quarter 2022 Results;
Updates 2022 Outlook
•March Trailing Three-Month Underlying Orders up 13 percent
•Net Sales were $4.8 billion, up 8 percent from the year prior; Underlying Sales were up
10 percent
10 percent
•GAAP EPS was $1.13, up 22 percent from the year prior; Adjusted EPS (as defined below) was $1.29, up 21 percent
•Increased 2022 Full Year Outlook to reflect continued strong demand and execution
•Announced decision to exit Russia business
•Declared quarterly cash dividend of $0.515 per share of common stock payable June 10, 2022 to stockholders of record May 13, 2022
ST. LOUIS, May 4, 2022 - Emerson (NYSE: EMR) today reported results for its second fiscal quarter ended March 31, 2022 and updated its full year outlook for fiscal 2022.
March Trailing Three-Month Underlying Orders were up 13 percent, as demand continued to be strong across both platforms. Second quarter Net Sales were up 8 percent and Underlying Sales were up 10 percent. By geography, the Americas grew 14 percent, Europe grew 2 percent and Asia, Middle East & Africa grew 7 percent. China grew 11 percent.
Second quarter Pretax Margin of 16.9 percent was up 30 basis points. Adjusted EBITA Margin, which excludes restructuring, first year purchase accounting charges, transaction costs and intangibles amortization expense, was 20.2 percent, up 20 basis points.
Earnings Per Share were $1.13 for the quarter, up 22 percent. Adjusted Earnings Per Share, which excludes restructuring, first year purchase accounting charges, transaction and AspenTech pre-closing costs and intangibles amortization expense, were $1.29, up 21 percent. Earnings in the quarter benefited from leverage, continued savings from effective cost management and favorable mix despite
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the ongoing supply chain headwinds and inflationary pressures. Earnings included a tax benefit of 8 cents.
Operating Cash Flow was $442 million for the quarter, down 45 percent, and Free Cash Flow was $333 million, down 53 percent. Cash flow results reflected mainly higher inventory due to supply chain constraints.
“Emerson continues to execute through a dynamic and challenging environment. In the second quarter, we delivered solid margins and drove 10 percent underlying sales growth and over 20 percent adjusted EPS growth. Our performance was indicative of strong end market demand and successful navigation through supply chain constraints and inflationary pressures,” said Emerson President and Chief Executive Officer Lal Karsanbhai. “Despite ongoing uncertainty, our strong performance gives us confidence to increase our 2022 full year outlook.
“Today, Emerson is also announcing our decision to exit our Russia business and, as part of this exit, we are exploring strategic options to divest Metran, our Russia-based manufacturing subsidiary,” Karsanbhai continued. “We are committed to an orderly transfer of these assets and will support our employees through this process.”
Business Platform Results
Automation Solutions March trailing three-month underlying orders were up 17 percent driven by strong demand in all business groups and world areas. Backlog increased $400 million compared to the prior quarter to $6.4 billion.
Net sales increased 5 percent in the quarter, with underlying sales up 7 percent. The Americas were up 13 percent, Europe was down 3 percent and Asia, Middle East & Africa was up 6 percent. China was up 17 percent.
Segment EBIT margin increased 210 basis points to 18.9 percent and Adjusted Segment EBITA margin, which excludes restructuring and intangibles amortization expense, increased 170 basis points to 21.5 percent. Favorable profitability was driven by increased volume, leverage, continued cost management and mix despite increased costs due to inflationary pressures.
Commercial & Residential Solutions March trailing three-month underlying orders were up 7 percent driven by continued strength in both the residential and commercial businesses. Backlog increased $100 million compared to the prior quarter to $1.4 billion.
Net sales increased 13 percent in the quarter, with underlying sales up 14 percent. The Americas were up 15 percent, Europe was up 14 percent and Asia, Middle East & Africa was up 11 percent. China was down 6 percent.
Segment EBIT margin decreased 200 basis points to 19.7 percent and Adjusted Segment EBITA margin (as defined above) decreased 230 basis points to 20.5 percent. Profitability continues to be
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challenged by inflationary costs but was up sequentially as price less net material inflation continues to improve.
2022 Updated Outlook
Emerson updated its 2022 full year outlook to reflect overall strong business performance while considering continued macroeconomic and geopolitical uncertainty, supply chain constraints and challenges related to COVID-19. Net and Underlying Sales guidance is increased by 2 percent to 8 to 10 percent and 9 to 11 percent, respectively. Earnings Per Share guidance of $4.77 to $4.92 is increased to reflect the operational impact of increased sales guidance. Adjusted Earnings Per Share are increased to $4.95 to $5.10. Operating Cash Flow is now expected to be $3.6 billion due to increased inventory resulting from supply chain constraints. Capital spending was reduced to approximately $600 million and Free Cash Flow is now expected to be $3.0 billion. Free cash flow conversion is expected to be approximately 100 percent for 2022.
The following tables summarize the updated fiscal year 2022 and third quarter 2022 guidance framework. Our guidance does not include the operational impact of the transaction with AspenTech, which is expected to close in the second calendar quarter of 2022, but has been updated to include estimated transaction fees and interest expense on $3.0 billion of debt already issued to fund the transaction. Our guidance also excludes the effect of the Therm-O-Disc sale, expected to close in the second calendar quarter of 2022. It includes the estimated operational impact of exiting our Russia business, but excludes any potential charges or other costs associated with the exit.
| 2022 Guidance | |||||||||||
| Net Sales Growth | 8% - 10% | Operating Cash Flow | $3.6B | ||||||||
| Automation Solutions | 6% - 8% | Capital Spend | $600M | ||||||||
| Commercial & Residential Solutions | 11% - 13% | Free Cash Flow | $3.0B | ||||||||
| Dividend | $1.2B | ||||||||||
| Underlying Sales Growth | 9% - 11% | Share Repurchase | $250M - $500M | ||||||||
| Automation Solutions | 7% - 9% | ||||||||||
| Commercial & Residential Solutions | 12% - 14% | Tax Rate | 22% | ||||||||
| Restructuring Actions | $150M | ||||||||||
| GAAP EPS | $4.77 - $4.92 | ||||||||||
| Adjusted EPS | $4.95 - $5.10 | ||||||||||
Page 4
| 2022 Q3 Guidance | |||||
| Net Sales Growth | 7% - 9% | ||||
| Automation Solutions | 4% - 6% | ||||
| Commercial & Residential Solutions | 11% - 13% | ||||
| Underlying Sales Growth | 9% - 11% | ||||
| Automation Solutions | 7% - 9% | ||||
| Commercial & Residential Solutions | 13% - 15% | ||||
| GAAP EPS | $1.00 - $1.05 | ||||
| Adjusted EPS | $1.25 - $1.30 | ||||
Note 1: All figures are approximate
Upcoming Investor Events
Today, beginning at 8:00 a.m. Central Time / 9:00 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/financial 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.
Emerson also announces it will host an in-person investor conference on Nov. 29, 2022 in New York City. Event details will be distributed closer to this date.
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 AspenTech 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, excluding the expected AspenTech and Therm-O-Disc transactions, and the impact related to exiting our Russia business, other than as noted herein.
(tables attached)
Page 5
| Table 1 | |||||||||||||||||
| EMERSON AND SUBSIDIARIES | |||||||||||||||||
| CONSOLIDATED OPERATING RESULTS | |||||||||||||||||
| (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) | |||||||||||||||||
| Quarter Ended March 31 | Percent | ||||||||||||||||
| 2021 | 2022 | Change | |||||||||||||||
| Net sales | $4,431 | $4,791 | 8% | ||||||||||||||
| Cost of sales | 2,569 | 2,839 | |||||||||||||||
| SG&A expenses | 1,054 | 1,049 | |||||||||||||||
| Other deductions, net | 33 | 40 | |||||||||||||||
| Interest expense, net | 38 | 52 | |||||||||||||||
| Earnings before income taxes | 737 | 811 | 10% | ||||||||||||||
| Income taxes | 169 | 136 | |||||||||||||||
| Net earnings | 568 | 675 | |||||||||||||||
| Less: Noncontrolling interests in subsidiaries | 7 | 1 | |||||||||||||||
| Net earnings common stockholders | $561 | $674 | 20% | ||||||||||||||
| Diluted avg. shares outstanding | 602.8 | 596.5 | |||||||||||||||
| Diluted earnings per share common share | $0.93 | $1.13 | 22% | ||||||||||||||
| Quarter Ended March 31 | |||||||||||||||||
| 2021 | 2022 | ||||||||||||||||
| Other deductions, net | |||||||||||||||||
| Amortization of intangibles | $74 | $62 | |||||||||||||||
| Restructuring costs | 17 | 10 | |||||||||||||||
| Other | (58) | (32) | |||||||||||||||
| Total | $33 | $40 | |||||||||||||||
Page 6
| Table 2 | |||||||||||||||||
| EMERSON AND SUBSIDIARIES | |||||||||||||||||
| CONSOLIDATED OPERATING RESULTS | |||||||||||||||||
| (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) | |||||||||||||||||
| Six Months Ended March 31 | Percent | ||||||||||||||||
| 2021 | 2022 | Change | |||||||||||||||
| Net sales | $8,592 | $9,264 | 8% | ||||||||||||||
| Cost of sales | 5,007 | 5,490 | |||||||||||||||
| SG&A expenses | 2,052 | 2,060 | |||||||||||||||
| Gain on subordinated interest | — | (453) | |||||||||||||||
| Other deductions, net | 155 | 91 | |||||||||||||||
| Interest expense, net | 78 | 90 | |||||||||||||||
| Earnings before income taxes | 1,300 | 1,986 | 53% | ||||||||||||||
| Income taxes | 280 | 416 | |||||||||||||||
| Net earnings | 1,020 | 1,570 | |||||||||||||||
| Less: Noncontrolling interests in subsidiaries | 14 | — | |||||||||||||||
| Net earnings common stockholders | $1,006 | $1,570 | 56% | ||||||||||||||
| Diluted avg. shares outstanding | 602.3 | 597.3 | |||||||||||||||
| Diluted earnings per share common share | $1.67 | $2.63 | 57% | ||||||||||||||
| Six Months Ended March 31 | |||||||||||||||||
| 2021 | 2022 | ||||||||||||||||
| Other deductions, net | |||||||||||||||||
| Amortization of intangibles | $152 | $125 | |||||||||||||||
| Restructuring costs | 83 | 19 | |||||||||||||||
| Other | (80) | (53) | |||||||||||||||
| Total | $155 | $91 | |||||||||||||||
Page 7
| Table 3 | |||||||||||
| EMERSON AND SUBSIDIARIES | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| (DOLLARS IN MILLIONS, UNAUDITED) | |||||||||||
| Quarter Ended March 31 | |||||||||||
| 2021 | 2022 | ||||||||||
| Assets | |||||||||||
| Cash and equivalents | $2,342 | $6,929 | |||||||||
| Receivables, net | 2,754 | 2,958 | |||||||||
| Inventories | 2,016 | 2,399 | |||||||||
| Other current assets | 849 | 1,253 | |||||||||
| Total current assets | 7,961 | 13,539 | |||||||||
| Property, plant & equipment, net | 3,663 | 3,567 | |||||||||
| Goodwill | 7,787 | 7,631 | |||||||||
| Other intangible assets | 3,095 | 2,699 | |||||||||
| Other | 1,294 | 2,061 | |||||||||
| Total assets | $23,800 | $29,497 | |||||||||
| Liabilities and equity | |||||||||||
| Short-term borrowings and current | |||||||||||
| maturities of long-term debt | $1,456 | $2,762 | |||||||||
| Accounts payable | 1,797 | 2,049 | |||||||||
| Accrued expenses | 3,041 | 3,261 | |||||||||
| Total current liabilities | 6,294 | 8,072 | |||||||||
| Long-term debt | 5,823 | 8,203 | |||||||||
| Other liabilities | 2,503 | 2,608 | |||||||||
| Total equity | 9,180 | 10,614 | |||||||||
| Total liabilities and equity | $23,800 | $29,497 | |||||||||
Page 8
| Table 4 | ||||||||||||||
| EMERSON AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| (DOLLARS IN MILLIONS, UNAUDITED) | ||||||||||||||
| Six Months Ended March 31 | ||||||||||||||
| 2021 | 2022 | |||||||||||||
| Operating activities | ||||||||||||||
| Net earnings | $1,020 | $1,570 | ||||||||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | 483 | 452 | ||||||||||||
| Stock compensation | 125 | 91 | ||||||||||||
| Pension expense | 16 | 2 | ||||||||||||
| Changes in operating working capital | 66 | (588) | ||||||||||||
| Gain on subordinated interest | — | (453) | ||||||||||||
| Other, net | (95) | (109) | ||||||||||||
| Cash provided by operating activities | 1,615 | 965 | ||||||||||||
| Investing activities | ||||||||||||||
| Capital expenditures | (222) | (225) | ||||||||||||
| Purchases of businesses, net of cash and equivalents acquired | (1,611) | (37) | ||||||||||||
| Proceeds from subordinated interest | — | 438 | ||||||||||||
| Other, net | 61 | (17) | ||||||||||||
| Cash provided by (used in) investing activities | (1,772) | 159 | ||||||||||||
| Financing activities | ||||||||||||||
| Net increase in short-term borrowings | 60 | 871 | ||||||||||||
| Proceeds from short-term borrowings greater than three months | — | 1,040 | ||||||||||||
| Proceeds from long-term debt | — | 2,975 | ||||||||||||
| Payments of long-term debt | (301) | (504) | ||||||||||||
| Dividends paid | (606) | (613) | ||||||||||||
| Purchases of common stock | (78) | (285) | ||||||||||||
| Other, net | 83 | 15 | ||||||||||||
| Cash provided by (used in) financing activities | (842) | 3,499 | ||||||||||||
| Effect of exchange rate changes on cash and equivalents | 26 | (48) | ||||||||||||
| Increase (Decrease) in cash and equivalents | (973) | 4,575 | ||||||||||||
| Beginning cash and equivalents | 3,315 | 2,354 | ||||||||||||
| Ending cash and equivalents | $2,342 | $6,929 | ||||||||||||
Page 9
| Table 5 | |||||||||||
| EMERSON AND SUBSIDIARIES | |||||||||||
| SEGMENT SALES AND EARNINGS | |||||||||||
| (DOLLARS IN MILLIONS, UNAUDITED) | |||||||||||
| Quarter Ended March 31 | |||||||||||
| 2021 | 2022 | ||||||||||
| Sales | |||||||||||
| Measurement & Analytical Instrumentation | $732 | $767 | |||||||||
| Valves, Actuators & Regulators | 836 | 883 | |||||||||
| Industrial Solutions | 555 | 602 | |||||||||
| Systems & Software | 670 | 685 | |||||||||
| Automation Solutions | 2,793 | 2,937 | |||||||||
| Climate Technologies | 1,160 | 1,341 | |||||||||
| Tools & Home Products | 485 | 516 | |||||||||
| Commercial & Residential Solutions | 1,645 | 1,857 | |||||||||
| Eliminations | (7) | (3) | |||||||||
| Net sales | $4,431 | $4,791 | |||||||||
| Earnings | |||||||||||
| Automation Solutions | $471 | $556 | |||||||||
| Climate Technologies | 245 | 262 | |||||||||
| Tools & Home Products | 112 | 103 | |||||||||
| Commercial & Residential Solutions | 357 | 365 | |||||||||
| Stock compensation | (61) | (50) | |||||||||
| Unallocated pension and postretirement costs | 23 | 25 | |||||||||
| Corporate and other | (15) | (33) | |||||||||
| Interest expense, net | (38) | (52) | |||||||||
| Earnings before income taxes | $737 | $811 | |||||||||
Page 10
| Table 5 (cont.) | |||||||||||
| EMERSON AND SUBSIDIARIES | |||||||||||
| SEGMENT SALES AND EARNINGS | |||||||||||
| (DOLLARS IN MILLIONS, UNAUDITED) | |||||||||||
| Quarter Ended March 31 | |||||||||||
| 2021 | 2022 | ||||||||||
| Restructuring costs | |||||||||||
| Automation Solutions | $12 | $8 | |||||||||
| Climate Technologies | 3 | 1 | |||||||||
| Tools & Home Products | 1 | 1 | |||||||||
| Commercial & Residential Solutions | 4 | 2 | |||||||||
| Corporate | 1 | — | |||||||||
| Total | $17 | $10 | |||||||||
The table above does not include $4 and $5 of costs related to restructuring actions that were reported in cost of sales and selling, general and administrative expenses for the three months ended March 31, 2021 and 2022, respectively. | |||||||||||
| Depreciation and Amortization | |||||||||||
| Automation Solutions | $156 | $147 | |||||||||
| Climate Technologies | 47 | 46 | |||||||||
| Tools & Home Products | 20 | 19 | |||||||||
| Commercial & Residential Solutions | 67 | 65 | |||||||||
| Corporate and other | 16 | 9 | |||||||||
| Total | $239 | $221 | |||||||||
Page 11
| Table 6 | |||||||||||
| EMERSON AND SUBSIDIARIES | |||||||||||
| SEGMENT SALES AND EARNINGS | |||||||||||
| (DOLLARS IN MILLIONS, UNAUDITED) | |||||||||||
| Six Months Ended March 31 | |||||||||||
| 2021 | 2022 | ||||||||||
| Sales | |||||||||||
| Measurement & Analytical Instrumentation | $1,430 | $1,502 | |||||||||
| Valves, Actuators & Regulators | 1,642 | 1,699 | |||||||||
| Industrial Solutions | 1,063 | 1,168 | |||||||||
| Systems & Software | 1,350 | 1,373 | |||||||||
| Automation Solutions | 5,485 | 5,742 | |||||||||
| Climate Technologies | 2,191 | 2,504 | |||||||||
| Tools & Home Products | 930 | 1,024 | |||||||||
| Commercial & Residential Solutions | 3,121 | 3,528 | |||||||||
| Eliminations | (14) | (6) | |||||||||
| Net sales | $8,592 | $9,264 | |||||||||
| Earnings | |||||||||||
| Automation Solutions | $832 | $1,082 | |||||||||
| Climate Technologies | 457 | 454 | |||||||||
| Tools & Home Products | 210 | 210 | |||||||||
| Commercial & Residential Solutions | 667 | 664 | |||||||||
| Stock compensation | (125) | (91) | |||||||||
| Unallocated pension and postretirement costs | 47 | 51 | |||||||||
| Corporate and other | (43) | (83) | |||||||||
| Gain on subordinated interest | — | 453 | |||||||||
| Interest expense, net | (78) | (90) | |||||||||
| Earnings before income taxes | $1,300 | $1,986 | |||||||||
Page 12
| Table 6 (cont.) | |||||||||||
| EMERSON AND SUBSIDIARIES | |||||||||||
| SEGMENT SALES AND EARNINGS | |||||||||||
| (DOLLARS IN MILLIONS, UNAUDITED) | |||||||||||
| Six Months Ended March 31 | |||||||||||
| 2021 | 2022 | ||||||||||
| Restructuring costs | |||||||||||
| Automation Solutions | $76 | $13 | |||||||||
| Climate Technologies | 4 | 3 | |||||||||
| Tools & Home Products | 2 | 2 | |||||||||
| Commercial & Residential Solutions | 6 | 5 | |||||||||
| Corporate | 1 | 1 | |||||||||
| Total | $83 | $19 | |||||||||
The table above does not include $7 and $14 of costs related to restructuring actions that were reported in cost of sales and selling, general and administrative expenses for the six months ended March 31, 2021 and 2022, respectively. | |||||||||||
| Depreciation and Amortization | $312 | $302 | |||||||||
| Automation Solutions | |||||||||||
| Climate Technologies | 96 | 93 | |||||||||
| Tools & Home Products | 39 | 39 | |||||||||
| Commercial & Residential Solutions | 135 | 132 | |||||||||
| Corporate and other | 36 | 18 | |||||||||
| Total | $483 | $452 | |||||||||
Page 13
| 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, 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 | |||||||||||
| 2021 | 2022 | ||||||||||
| Pretax earnings | $737 | $811 | |||||||||
| Percent of sales | 16.6 | % | 16.9 | % | |||||||
| Interest expense, net | 38 | 52 | |||||||||
| Restructuring and related costs | 21 | 15 | |||||||||
| Amortization of intangibles | 82 | 76 | |||||||||
| Acquisition/divestiture costs | — | 13 | |||||||||
| OSI first year acquisition accounting charges | 10 | — | |||||||||
| Adjusted EBITA | $888 | $967 | |||||||||
| Percent of sales | 20.0 | % | 20.2 | % | |||||||
| Quarter Ended March 31 | |||||||||||
| 2021 | 2022 | ||||||||||
| GAAP earnings per share | $0.93 | $1.13 | |||||||||
| Restructuring and related costs | 0.03 | 0.02 | |||||||||
| Amortization of intangibles | 0.10 | 0.10 | |||||||||
| Acquisition/divestiture costs and interest on AspenTech debt | — | 0.04 | |||||||||
| OSI first year acquisition accounting charges | 0.01 | — | |||||||||
| Adjusted earnings per share | $1.07 | $1.29 | |||||||||
Page 14
| Table 8 | |||||||||||
| EMERSON AND SUBSIDIARIES | |||||||||||
| ADJUSTED EBITA & EPS SUPPLEMENTAL | |||||||||||
| (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) | |||||||||||
| Six Months Ended March 31 | |||||||||||
| 2021 | 2022 | ||||||||||
| Pretax earnings | $1,300 | $1,986 | |||||||||
| Percent of sales | 15.1 | % | 21.4 | % | |||||||
| Interest expense, net | 78 | 90 | |||||||||
| Restructuring and related costs | 90 | 33 | |||||||||
| Amortization of intangibles | 163 | 153 | |||||||||
| Gain on subordinated interest | — | (453) | |||||||||
| Acquisition/divestiture costs | — | 36 | |||||||||
| Gain on acquisition of full ownership of equity investment | (17) | — | |||||||||
| OSI first year acquisition accounting charges and fees | 31 | — | |||||||||
| Adjusted EBITA | $1,645 | $1,845 | |||||||||
| Percent of sales | 19.2 | % | 19.9 | % | |||||||
| Six Months Ended March 31 | |||||||||||
| 2021 | 2022 | ||||||||||
| GAAP earnings per share | $1.67 | $2.63 | |||||||||
| Restructuring and related costs | 0.12 | 0.04 | |||||||||
| Amortization of intangibles | 0.20 | 0.20 | |||||||||
| Gain on subordinated interest | — | (0.60) | |||||||||
| Acquisition/divestiture costs and interest on AspenTech debt | — | 0.07 | |||||||||
| Gain on acquisition of full ownership of equity investment | (0.03) | — | |||||||||
| OSI first year acquisition accounting charges and fees | 0.04 | — | |||||||||
| Adjusted earnings per share | $2.00 | $2.34 | |||||||||
Page 15
| Table 9 | |||||||||||
| EMERSON AND SUBSIDIARIES | |||||||||||
| SEGMENT EBITA | |||||||||||
| (DOLLARS IN MILLIONS, UNAUDITED) | |||||||||||
| Quarter Ended March 31 | |||||||||||
| 2021 | 2022 | ||||||||||
| Automation Solutions | |||||||||||
| Automation Solutions EBIT | $471 | $556 | |||||||||
| Percent of sales | 16.8 | % | 18.9 | % | |||||||
| Restructuring and related costs | 14 | 11 | |||||||||
| Amortization of intangibles | 69 | 64 | |||||||||
| Automation Solutions EBITA | $554 | $631 | |||||||||
| Percent of sales | 19.8 | % | 21.5 | % | |||||||
| Commercial & Residential Solutions | |||||||||||
| Commercial & Residential Solutions EBIT | $357 | $365 | |||||||||
| Percent of sales | 21.7 | % | 19.7 | % | |||||||
| Restructuring and related costs | 5 | 3 | |||||||||
| Amortization of intangibles | 13 | 12 | |||||||||
| Commercial & Residential Solutions EBITA | $375 | $380 | |||||||||
| Percent of sales | 22.8 | % | 20.5 | % | |||||||
Page 16
| Table 10 | |||||||||||
| EMERSON AND SUBSIDIARIES | |||||||||||
| SEGMENT EBITA | |||||||||||
| (DOLLARS IN MILLIONS, UNAUDITED) | |||||||||||
| Six Months Ended March 31 | |||||||||||
| 2021 | 2022 | ||||||||||
| Automation Solutions | |||||||||||
| Automation Solutions EBIT | $832 | $1,082 | |||||||||
| Percent of sales | 15.2 | % | 18.8 | % | |||||||
| Restructuring and related costs | 78 | 23 | |||||||||
| Amortization of intangibles | 137 | 129 | |||||||||
| Automation Solutions EBITA | $1,047 | $1,234 | |||||||||
| Percent of sales | 19.1 | % | 21.5 | % | |||||||
| Commercial & Residential Solutions | |||||||||||
| Commercial & Residential Solutions EBIT | $667 | $664 | |||||||||
| Percent of sales | 21.4 | % | 18.8 | % | |||||||
| Restructuring and related costs | 8 | 7 | |||||||||
| Amortization of intangibles | 26 | 24 | |||||||||
| Commercial & Residential Solutions EBITA | $701 | $695 | |||||||||
| Percent of sales | 22.4 | % | 19.7 | % | |||||||
Page 17
| Reconciliations of Non-GAAP Financial Measures & Other | Table 11 | |||||||||||||||||||||||||||||||||||||
Reconciliations of Non-GAAP measures (denoted by *) with the most directly comparable GAAP measure (dollars in millions, except per share amounts). See tables 7 through 10 for additional non-GAAP reconciliations. | ||||||||||||||||||||||||||||||||||||||
| Q2 2022 Underlying Sales Change | Auto Solns | Comm & Res Solns | Emerson | |||||||||||||||||||||||||||||||||||
| Reported (GAAP) | 5 | % | 13 | % | 8 | % | ||||||||||||||||||||||||||||||||
| (Favorable) / Unfavorable FX | 2 | % | 1 | % | 2 | % | ||||||||||||||||||||||||||||||||
| Acquisitions / Divestitures | — | % | — | % | — | % | ||||||||||||||||||||||||||||||||
| Underlying* | 7 | % | 14 | % | 10 | % | ||||||||||||||||||||||||||||||||
| Q3 2022E Underlying Sales Change | Auto Solns | Comm & Res Solns | Emerson | |||||||||||||||||||||||||||||||||||
| Reported (GAAP) | 4% - 6% | 11% - 13% | 7% - 9% | |||||||||||||||||||||||||||||||||||
| (Favorable) / Unfavorable FX | 3 | % | 2 | % | 2 | % | ||||||||||||||||||||||||||||||||
| Acquisitions / Divestitures | — | % | — | % | — | % | ||||||||||||||||||||||||||||||||
| Underlying* | 7% - 9% | 13% - 15% | 9% - 11% | |||||||||||||||||||||||||||||||||||
| FY 2022E Underlying Sales Change | Auto Solns | Comm & Res Solns | Emerson | |||||||||||||||||||||||||||||||||||
| Reported (GAAP) | 6% - 8% | 11% - 13% | 8% - 10% | |||||||||||||||||||||||||||||||||||
| (Favorable) / Unfavorable FX | 1 | % | 1 | % | 1 | % | ||||||||||||||||||||||||||||||||
| Acquisitions / Divestitures | — | % | — | % | — | % | ||||||||||||||||||||||||||||||||
| Underlying* | 7% - 9% | 12% - 14% | 9% - 11% | |||||||||||||||||||||||||||||||||||
| Q2 Earnings Per Share | Q2 FY21 | Q2 FY22 | Change | |||||||||||||||||||||||||||||||||||
| Earnings per share (GAAP) | $ | 0.93 | $ | 1.13 | 22 | % | ||||||||||||||||||||||||||||||||
| Restructuring and related costs | 0.03 | 0.02 | (1) | % | ||||||||||||||||||||||||||||||||||
| Amortization of intangibles | 0.10 | 0.10 | (3) | % | ||||||||||||||||||||||||||||||||||
| Acquisition/divestiture costs and interest on AspenTech debt | — | 0.04 | 4 | % | ||||||||||||||||||||||||||||||||||
| OSI purchase accounting | 0.01 | — | (1) | % | ||||||||||||||||||||||||||||||||||
| Adjusted earnings per share* | $ | 1.07 | $ | 1.29 | 21 | % | ||||||||||||||||||||||||||||||||
| Earnings Per Share | Q3 FY22E | FY22E | ||||||||||||||||||||||||||||||||||||
| Earnings per share (GAAP) | $1.00 - $1.05 | $4.77 - $4.92 | ||||||||||||||||||||||||||||||||||||
| Restructuring and related costs | 0.05 | 0.20 | ||||||||||||||||||||||||||||||||||||
| Amortization of intangibles | 0.10 | 0.39 | ||||||||||||||||||||||||||||||||||||
| Gain on subordinated interest | — | (0.60) | ||||||||||||||||||||||||||||||||||||
| Acquisition/divestiture costs and interest on AspenTech debt | 0.10 | 0.19 | ||||||||||||||||||||||||||||||||||||
| Adjusted earnings per share* | $1.25 - $1.30 | $4.95 - $5.10 | ||||||||||||||||||||||||||||||||||||
| - more - | ||||||||||||||||||||||||||||||||||||||
Page 18
| EBIT and EBITA Margin | Q2 FY21 | Q2 FY22 | Change | |||||||||||||||||||||||||||||||||||
| Pretax margin (GAAP) | 16.6 | % | 16.9 | % | 30 bps | |||||||||||||||||||||||||||||||||
| Interest expense, net | 0.9 | % | 1.1 | % | 20 bps | |||||||||||||||||||||||||||||||||
| Restructuring and related costs | 0.5 | % | 0.3 | % | (20) bps | |||||||||||||||||||||||||||||||||
| Amortization of intangibles | 1.8 | % | 1.6 | % | (20) bps | |||||||||||||||||||||||||||||||||
| Acquisition/divestiture costs and interest on AspenTech debt | — | % | 0.3 | % | 30 bps | |||||||||||||||||||||||||||||||||
| OSI purchase accounting items | 0.2 | % | — | % | (20) bps | |||||||||||||||||||||||||||||||||
| Adjusted EBITA margin* | 20.0 | % | 20.2 | % | 20 bps | |||||||||||||||||||||||||||||||||
| Automation Solutions Segment EBIT Margin | Q2 FY21 | Q2 FY22 | Change | |||||||||||||||||||||||||||||||||||
| Automation Solutions Segment EBIT margin (GAAP) | 16.8 | % | 18.9 | % | 210 bps | |||||||||||||||||||||||||||||||||
| Restructuring and related costs | 0.5 | % | 0.4 | % | (10) bps | |||||||||||||||||||||||||||||||||
| Amortization of intangibles impact | 2.5 | % | 2.2 | % | (30) bps | |||||||||||||||||||||||||||||||||
| Automation Solutions Adjusted Segment EBITA margin* | 19.8 | % | 21.5 | % | 170 bps | |||||||||||||||||||||||||||||||||
| Commercial & Residential EBIT Margin | Q2 FY21 | Q2 FY22 | Change | |||||||||||||||||||||||||||||||||||
| Commercial & Residential EBIT margin (GAAP) | 21.7 | % | 19.7 | % | (200) bps | |||||||||||||||||||||||||||||||||
| Restructuring and related costs | 0.3 | % | 0.2 | % | (10) bps | |||||||||||||||||||||||||||||||||
| Amortization of intangibles impact | 0.8 | % | 0.6 | % | (20) bps | |||||||||||||||||||||||||||||||||
| Commercial & Residential Adjusted EBITA margin* | 22.8 | % | 20.5 | % | (230) bps | |||||||||||||||||||||||||||||||||
| Q2 Cash Flow | Q2 FY21 | Q2 FY22 | Change | |||||||||||||||||||||||||||||||||||
| Operating cash flow (GAAP) | $ | 807 | $ | 442 | (45) | % | ||||||||||||||||||||||||||||||||
| Capital expenditures | (100) | (109) | (8) | % | ||||||||||||||||||||||||||||||||||
| Free cash flow* | $ | 707 | $ | 333 | (53) | % | ||||||||||||||||||||||||||||||||
| FY 2022E Cash Flow | FY 2022E | |||||||||||||||||||||||||||||||||||||
| Operating cash flow (GAAP) | ~ $3.6B | |||||||||||||||||||||||||||||||||||||
| Capital expenditures | (600)M | |||||||||||||||||||||||||||||||||||||
| Free cash flow* | ~ $3.0B | |||||||||||||||||||||||||||||||||||||
| Cash Flow to Net Earnings Conversion | FY 2022E | |||||||||||||||||||||||||||||||||||||
| Operating cash flow to net earnings (GAAP) | ~ 120% | |||||||||||||||||||||||||||||||||||||
| Capital expenditures | (20) | % | ||||||||||||||||||||||||||||||||||||
| Free cash flow to net earnings* | ~ 100% | |||||||||||||||||||||||||||||||||||||
| Note 1: Underlying sales and orders exclude the impact of acquisitions, divestitures and currency translation. | ||||||||||||||||||||||||||||||||||||||
| Note 2: All fiscal year 2022E figures are approximate, except where range is given. | ||||||||||||||||||||||||||||||||||||||
| ### | ||||||||||||||||||||||||||||||||||||||