Financial Performance - Net sales increased from 12.932billionin2021to15.165 billion in 2023, representing a growth of 17.3% over the two years[171] - Basic earnings per share rose significantly from 3.85in2021to23.00 in 2023, driven by a substantial increase in discontinued operations earnings[171] - Net earnings for common stockholders surged from 2.303billionin2021to13.219 billion in 2023, primarily due to a sharp rise in discontinued operations earnings[171] - Cash and equivalents increased dramatically from 1.804billionin2022to8.051 billion in 2023, reflecting strong liquidity growth[174] - Total current assets grew from 8.506billionin2022to13.819 billion in 2023, indicating a 62.5% increase in liquid assets[174] - Long-term debt decreased from 8.259billionin2022to7.610 billion in 2023, showing a reduction in long-term liabilities[176] - Retained earnings expanded from 28.053billionin2022to40.070 billion in 2023, reflecting strong profitability and reinvestment[177] - Total equity increased from 16.316billionin2022to26.598 billion in 2023, demonstrating significant growth in shareholder value[177] - Comprehensive income for common stockholders grew from 2.618billionin2022to13.451 billion in 2023, driven by strong earnings and other comprehensive income[172] - Net earnings increased significantly from 2,327millionin2021to13,200 million in 2023, driven by strong performance in continuing operations[183] - Total pretax earnings increased from 2,432in2022to2,726 in 2023[281] - Effective income tax rate decreased from 22.6% in 2022 to 22.0% in 2023[283] - Net deferred income tax liability decreased from (1,859)in2022to(1,629) in 2023[290] - Total income taxes paid in 2023 were approximately 3,310,including2.3 billion related to gains on the Copeland transaction and InSinkErator divestiture[291] Backlog and Revenue Recognition - The company's consolidated order backlog was 7.8billionatSeptember30,2023,upfrom7.0 billion in 2022, with 1.2billionrelatedtoAspenTech[26]−Approximately754.47 billion in 2023 from 3.93billionin2022[26]−TheSoftwareandControlsegmentbackloggrewto3.30 billion in 2023 from 3.06billionin2022[26]−Revenuerecognitionovertimeaccountsforapproximately107.8 billion, with 1.2billionrelatedtoAspenTech[213]−Thecompanyexpectstorecognizeapproximately75534 million from the beginning contract liability balance[212] Acquisitions and Divestitures - The company engages in acquisitions and divestitures, such as the acquisition of National Instruments and the divestiture of a majority stake in Copeland, with potential integration challenges[44] - The company retains a 40% non-controlling equity interest in Copeland, with future value dependent on Copeland's business performance[45] - On May 16, 2022, the company completed the acquisition of AspenTech, contributing 6.0billionincashandtwoindustrialsoftwarebusinesses,resultingina5511,188 million, with goodwill of 7,225millionandotherintangibleassetsof4,390 million[217][219] - In 2023, the company acquired Flexim and Afag for 705million,recognizinggoodwillof429 million and other identifiable intangible assets of 314million[224]−OnAugust1,2023,AspenTechterminatedtheagreementtoacquireMicromineduetounclearRussianregulatoryapprovaltimelines[225]−OnMarch31,2023,thecompanydivesteditsRussia−basedsubsidiaryMetran,recognizingapretaxlossof47 million[226] - In 2022, the company acquired three businesses for 130million,withcombinedannualsalesofapproximately40 million[226] - The Company completed the sale of its Climate Technologies business to Blackstone for 14.0billion,receiving9.7 billion in upfront cash proceeds and retaining a 40% non-controlling equity interest in the new joint venture named Copeland[228][229] - The Climate Technologies business had 2022 net sales of 5.0billionandpretaxearningsof1.0 billion, with the Company recognizing a pretax gain of approximately 10.6billion(8.4 billion after-tax) from the transaction[229] - The Company divested its InSinkErator business to Whirlpool Corporation for 3.0billion,recognizingapretaxgainofapproximately2.8 billion (2.1billionafter−tax)inQ12023[231]−TheCompanydivesteditsTherm−O−Discbusiness,recognizingapretaxgainof486 million (429millionafter−tax)inQ32022[231]−Cashfrominvestingactivitiesfor2023reflectsproceedsofapproximately9.7 billion from the Copeland transaction and 3.0 billion from the InSinkErator divestiture[234] Research and Development - Total R&D spending in 2023 was 6.9% of sales, up from 6.3% in 2022[21] - The company's success depends on the acceptance of new and improved products and services, with challenges in research, development, and market introduction[40][41] Employee and Workforce Metrics - Employee engagement score in 2023 was 78%, with over 85% participation in the survey[31] - Total recordable rate of injuries in 2023 was 0.30 per 100 employees, and lost or restricted workday case rate was 0.22[32] - Women represent 33% of the global workforce and 23% of leadership positions[33] - In the U.S., minorities represent 35% of the workforce and 21% of leadership positions[33] - The company's success depends on attracting and retaining key personnel, with potential risks from failure to do so impacting business performance[49] Environmental and Sustainability Goals - The company aims to achieve net zero greenhouse gas emissions across its value chain by 2045, with a 25% reduction target by 2030[36] - The company is focusing on decarbonization and electrification efforts, including technologies like battery storage, hydrogen use, and carbon capture, which are not yet widely adopted[42] Competitive and Market Risks - The company faces competitive pressures that could affect prices or demand for its products, potentially impacting sales, profit margins, and market share[39] - The company's intellectual property is critical to its competitive position, and any failure to protect it could result in competitive harm[43] - The company relies on raw materials like steel, electronics, and rare earth metals, with potential risks from supply disruptions or price increases[46] - Over one-third of the company's sales come from emerging markets, with production facilities located globally, exposing it to risks like political unrest and natural disasters[47] - The company's access to capital markets is essential for business operations, and any disruption could adversely affect its financial results[48] Goodwill and Intangible Assets - Goodwill rose from 13.946 billion in 2022 to 14.480billionin2023,indicatingcontinuedinvestmentinacquisitionsandintangibleassets[178]−Goodwillandintangibleassetsincreasedin2022duetotheHeritageAspenTechacquisition,withgoodwillbalancereaching14.48 billion as of September 30, 2023[252] - Intangible asset amortization expense for 2023 was 764million,withexpectedamortizationexpensesof768 million in 2024 and 696millionin2025[252]LeasesandLiabilities−Thecompany′soperatingleaseright−of−useassetsincreasedto550 million in 2023, with a weighted-average remaining lease term of 6.2 years and a weighted-average discount rate of 4.2%[248] - Total lease liabilities as of September 30, 2023, amount to 548million,withfutureleasepaymentstotaling614 million, less 66millionininterest[250]−Thecompanyhasanoperatingleasesettocommencein2024witha15−yeartermandundiscountedfutureminimumpaymentsofapproximately80 million[250] Pension and Retirement Plans - U.S. pension plans were overfunded by 656millionasofSeptember30,2023,whilenon−U.S.planswereunderfundedby62 million[268] - Total accumulated benefit obligation decreased from 3,910in2022to3,719 in 2023[269] - U.S. plans' future benefit payments estimated at 222in2024,226 in 2025, 229in2026,230 in 2027, 231in2028,and1,142 total from 2029-2033[270] - Non-U.S. plans' future benefit payments estimated at 62in2024,58 in 2025, 61in2026,63 in 2027, 69in2028,and358 total from 2029-2033[270] - Company expects to contribute approximately 45toretirementplansin2024[270]−U.S.retirementplans′discountrateincreasedto6.034,533 in 2022 to 4,454in2023[273]−Postretirementbenefitliabilitydecreasedfrom83 in 2022 to 72in2023[277]StockCompensationandEquity−Totalstockcompensationexpenseincreasedfrom144 in 2022 to 271in2023,with250 from continuing operations[294] - As of September 30, 2023, total unrecognized compensation expense related to unvested shares under Emerson plans was 119,expectedtoberecognizedover1.1years[294]−Performancesharepayoutsfor2022−2023periodresultedin1,557sharesearned,with684sharesdistributedincashfortaxwithholding[295]−Approximately1,468,000sharesawardedin2021wereoutstandingasofSeptember30,2023,witha118158, with 73distributedincashfortaxwithholding[298]−AspenTechgrantedperformancestockunitsin2023withapotentialvestingofupto1752.4 billion, with gains and losses expected to be recognized over the next 12 months[254] - The company issued €1.5 billion in euro-denominated debt in 2019 to hedge foreign currency risk, with gains or losses deferred in accumulated other comprehensive income[255] - Accumulated other comprehensive income (loss) for foreign currency translation ended at (1,012)in2023,comparedto(1,265) in 2022[315] - Reclassified gain on sale of business contributed 95toforeigncurrencytranslationin2023[315]−Amortizationofdeferredactuariallossesintoearningsresultedinanetlossof(51) in 2023, compared to 70 in 2022[315] Business Segments and Realignment - The company realigned its business segments into six segments and two business groups, including Final Control, Measurement & Analytical, and Discrete Automation[316] - The Final Control segment provides control valves, actuators, and regulators for process and hybrid industries[318] - The Measurement & Analytical segment supplies intelligent instrumentation for measuring physical properties of liquids or gases[318] - The Discrete Automation segment includes solenoid valves, pneumatic valves, and programmable automation control systems[319] - The AspenTech segment reflects the combined results of Heritage AspenTech and the Emerson Industrial Software Business[317] - Prior year amounts have been reclassified to conform to the current year presentation[317] - The company reclassified certain product sales from Control Systems & Software to Discrete Automation[316] Warranty and Contract Assets - Warranty expense is less than 0.5% of sales, with provisions estimated based on historical experience and adjusted quarterly for known issues[198] - The company's unbilled receivables (contract assets) increased from 1,390 million in 2022 to 1,453millionin2023,whilecustomeradvances(contractliabilities)increasedfrom776 million to 897million,resultinginanetcontractassetsdecreasefrom614 million to 556million[211]DebtandCreditFacilities−Long−termdebtmaturitiesfor2025,2026,2027,and2028are538 million, 746million,497 million, and 520million,respectively[263]−Thecompanymaintainsa3.5 billion five-year revolving backup credit facility, with no borrowings incurred as of September 30, 2023[262] Other Financial Metrics - Cash provided by operating activities decreased from 3,575millionin2021to637 million in 2023, primarily due to lower cash from discontinued operations[183] - Capital expenditures remained relatively stable, with 404millionin2021,299 million in 2022, and 363millionin2023[183]−Purchasesofbusinessesdecreasedfrom1,592 million in 2021 to 705millionin2023,indicatingaslowdowninacquisitions[183]−Totalinventoriesincreasedfrom1,742 million in 2022 to 2,006millionin2023,reflectinghigherrawmaterialsandworkinprocess[189]−Property,plantandequipment,netincreasedfrom2,239 million in 2022 to 2,363millionin2023,drivenbyinvestmentsinbuildingsandmachinery[189]−ThecompanyadoptedASUNo.2021−10(Topic832)in2023,requiringannualdisclosuresaboutgovernmentassistance,thoughithadnomaterialimpactonfinancialstatements[185]−Thefairvalueofthecompany′snotereceivableasofSeptember30,2023,wasapproximately1.9 billion, lower than the carrying value by $200 million[258]
Emerson(EMR)2023-11-12 16:00