Business context and reporting period
Emerson Electric Co. filed an annual report for the fiscal year ended September 30, 2009. Although the request metadata says “2009 Q4,” the supplied filing is a full-year 10-K and does not provide standalone fourth-quarter results. Emerson is a diversified global technology company operating in Process Management, Industrial Automation, Network Power, Climate Technologies, and Appliance and Tools. Sales mix was 29%, 17%, 25%, 15%, and 14%, respectively.
Financial performance and key metrics
| Metric | FY 2009 | FY 2008 | Change |
|---|---|---|---|
| Net sales | $20.915 billion | $24.807 billion | Down 15.7% |
| Earnings from continuing operations | $1.724 billion | $2.454 billion | Down 29.7% |
| Diluted earnings per share from continuing operations | $2.27 | $3.11 | Down 27.0% |
| Cash dividends per common share | $1.32 | $1.20 | Up 10.0% |
| Long-term debt | $3.998 billion | $3.297 billion | Up 21.3% |
| Total assets | $19.763 billion | $21.040 billion | Down 6.1% |
| Order backlog at year-end | $4.615 billion | $5.518 billion | Down 16.4% |
International sales were $11.556 billion, compared with $13.479 billion in 2008. The filing text provided does not give clear values for operating cash flow, free cash flow, cash and short-term liquidity, current debt, or operating margins; detailed financial statements and related notes are incorporated by reference.
Material changes versus the prior comparable period
Sales, continuing-operations earnings, and diluted EPS declined materially year over year, amid a challenging economic environment. Backlog fell across every segment: Process Management to $2.609 billion from $2.897 billion; Industrial Automation to $385 million from $760 million; Network Power to $1.066 billion from $1.230 billion; Climate Technologies to $373 million from $396 million; and Appliance and Tools to $182 million from $235 million. Nearly all year-end 2009 backlog was expected to ship within one year.
Long-term debt increased while total assets declined. Research and development costs were $460 million, versus $458 million in 2008. The annual report’s selected financial data shows dividends per share increased despite lower earnings.
Outlook, risks, contingencies, and unusual items
For fiscal 2010, management expected underlying sales to decline 5%–7%, excluding an estimated favorable 5%–7% effect from currency translation, acquisitions, and potential divestitures. Reported sales were forecast to range from 2% growth to 2% decline versus 2009, with operating profit margin expected to be flat to slightly lower. Management described the economic outlook as uncertain and cautioned that future acquisitions, divestitures, and exchange-rate movements could affect results.
Principal risks include weak end markets and recession, competitive pressure on prices and demand, access to capital markets, raw-material shortages or price increases, foreign-exchange and regulatory exposure, disruption to international operations, acquisition integration, and litigation or environmental liabilities. The filing says environmental compliance had not materially affected capital expenditures, earnings, or competitive position, and no material environmental-control capital expenditures were anticipated for the next fiscal year. Legal proceedings are discussed in incorporated notes; the supplied text does not quantify potential exposure.
The company reported no share repurchases in the quarter ended September 30, 2009; 51.4 million shares remained authorized for repurchase under its program. Disclosure controls were judged effective as of year-end, and no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- Review the incorporated annual report’s statements of cash flows and balance sheets for operating cash flow, capital expenditures, free cash flow, cash balances, and short-term liquidity.
- Check the full MD&A and segment note for segment-level sales, earnings, margins, and drivers of the year-over-year declines.
- Verify debt maturities, borrowing capacity, and liquidity arrangements in the notes and financial-instrument disclosures.
- Review the legal-proceedings and contingency disclosures for quantified claims, reserves, or reasonably possible losses.
- Compare actual fiscal 2010 results with management’s stated sales and operating-margin outlook, including currency and portfolio effects.