Emerson(US:EMR)2024-11-12 12:01Financial Performance - Net sales increased from $13.804 billion in 2022 to $17.492 billion in 2024, representing a growth of approximately 26.7% over the two years[202] - Net earnings for 2023 were significantly higher at $13.2 billion compared to $3.23 billion in 2022 and $1.955 billion in 2024, driven by discontinued operations[202] - Basic earnings per share for 2023 surged to $23.00, up from $5.44 in 2022 and $3.44 in 2024, reflecting the impact of discontinued operations[202] - Comprehensive income for 2023 was $13.433 billion, significantly higher than $2.609 billion in 2022 and $2.344 billion in 2024, driven by net earnings and other comprehensive income[203] - Net earnings for 2023 were $13.2 billion, a significant increase from $3.23 billion in 2022, but dropped to $1.955 billion in 2024[209] - Cash provided by operating activities in 2024 was $3.332 billion, up from $637 million in 2023 and $2.922 billion in 2022[209] - Total pretax earnings for 2024 were $2,020, with $712 from the United States and $1,308 from non-U.S. operations[326] - Income tax expense for 2024 was $415, with current U.S. federal taxes at $325 and non-U.S. taxes at $452[328] - The effective income tax rate for 2024 was 20.6%, down from 22.1% in 2023[329] - Total income taxes paid in 2024 were approximately $950, significantly lower than the $3,310 paid in 2023[337] - Net deferred income tax liability increased to $2,074 in 2024 from $1,869 in 2023[337] Acquisitions and Divestitures - The acquisition of National Instruments (NI) was completed on October 11, 2023, with NI generating $1.7 billion in revenue and $170 million in pretax earnings for the 12 months ended September 30, 2023[247] - The total purchase consideration for NI was $8.653 billion, allocated to assets and liabilities including $3.442 billion in goodwill and $5.275 billion in other intangible assets[249][251] - Results of operations for the year ended September 30, 2024, attributable to the NI acquisition include sales of $1.464 billion and a net loss of $537 million[252] - Pro forma net sales for the year ended September 30, 2023 were $16,858 million, including $1,693 million attributable to NI[253] - Pro forma net earnings from continuing operations for 2023 were $1,508 million, with diluted earnings per share of $2.61[253] - The company completed the acquisition of AspenTech, contributing $6.0 billion in cash and owning 55% of the outstanding shares[256] - The total purchase consideration for Heritage AspenTech was $11,188 million, allocated to assets including $7,225 million in goodwill and $4,390 million in other intangible assets[257][258] - In 2023, the company acquired Flexim and Afag for $715 million, recognizing goodwill of $424 million and other intangible assets of $323 million[264] - The company divested its Climate Technologies business for $14.0 billion, receiving $9.7 billion in upfront cash proceeds and retaining a 40% non-controlling equity interest[270] - The company sold its 40% non-controlling equity interest in Copeland for $1.5 billion, recognizing a gain of $539 million[271] - The company divested its InSinkErator business for $3.0 billion, recognizing a pretax gain of approximately $2.8 billion[272] - The company divested its Therm-O-Disc business, recognizing a pretax gain of $486 million[273] - The company exited its Russia-based manufacturing subsidiary, Metran, recognizing a pretax loss of $47 million in 2023[266] - The company completed the divestiture of a majority stake in Copeland on May 31, 2023, receiving upfront, pre-tax cash proceeds of approximately $9.7 billion[283] Research and Development - Total R&D spending in 2024 was 8.1% of sales, up from 6.9% in 2023 and 6.3% in 2022[23] Backlog and Revenue Recognition - The company's consolidated order backlog was $8.4 billion at September 30, 2024, up from $7.8 billion in 2023[27] - Approximately 75% of the backlog is expected to be recognized as revenue within the next 12 months[27] - The Test & Measurement segment, acquired from NI, contributed approximately $400 million to the backlog[27] - The company's backlog for unsatisfied performance obligations as of September 30, 2024, was approximately $8.4 billion, with $1.3 billion attributable to AspenTech and $400 million to National Instruments[244] - The company expects to recognize 75% of its remaining performance obligations as revenue over the next 12 months[245] - Approximately 10% of the company's revenues are recognized over time, primarily in the Control Systems & Software segment[229] - Approximately 15% of revenues relate to sales arrangements with multiple performance obligations, mainly in the Software and Control business group[229] Employee Engagement and Diversity - Employee engagement score increased to 79% in 2024, up from 78% in 2023[34] - The inclusion index score increased by 3.5 percentage points to 79% in 2024[34] - Women represent 33% of the global workforce and 24% of leadership positions[36] Environmental, Social, and Governance (ESG) - The company aims to achieve net zero greenhouse gas emissions across its value chain by 2045[40] - A target of 25% reduction in value chain emissions by 2030 has been set[40] - The company has a goal to achieve zero waste to landfill in manufacturing facilities by 2032[40] Balance Sheet and Cash Flow - Total assets grew from $42.746 billion in 2023 to $44.246 billion in 2024, with goodwill increasing from $14.48 billion to $18.067 billion[204] - Retained earnings rose from $28.053 billion in 2023 to $40.83 billion in 2024, supported by net earnings and dividend payments[207] - Cash and equivalents decreased significantly from $8.051 billion in 2023 to $3.588 billion in 2024, indicating potential cash outflows or investments[204] - Long-term debt decreased slightly from $7.61 billion in 2023 to $7.155 billion in 2024, reflecting debt repayment or refinancing activities[204] - Total equity increased from $26.598 billion in 2023 to $27.509 billion in 2024, supported by retained earnings and other equity adjustments[207] - Foreign currency translation contributed positively to other comprehensive income, with gains of $254 million in 2023 and $400 million in 2024[203] - Capital expenditures increased to $419 million in 2024, compared to $363 million in 2023 and $299 million in 2022[209] - Purchases of businesses, net of cash and equivalents acquired, were $8.342 billion in 2024, significantly higher than $705 million in 2023 and $5.702 billion in 2022[209] - The company sold its 40% non-controlling common equity interest in Copeland for $1.5 billion and its note receivable to Copeland for $1.9 billion in 2024[210] - Total inventories increased to $2.18 billion in 2024 from $2.006 billion in 2023, with finished products rising to $512 million and raw materials and work in process to $1.668 billion[218] - Property, plant and equipment, net, increased to $2.807 billion in 2024 from $2.363 billion in 2023, with buildings rising to $2.048 billion and machinery and equipment to $3.538 billion[221] - The company adopted ASU No. 2022-04 in 2024, which requires disclosures about supplier finance programs but had no material impact on financial statements[211] - The company adopted ASU No. 2021-10 in 2023, requiring annual disclosures about government assistance, with no material impact on financial statements[212] - The company's long-term debt fair value is classified as Level 2, estimated using current interest rates and pricing from financial institutions[219] - Product warranty expense is less than 0.5% of sales[227] Restructuring and Related Costs - Restructuring expenses for 2024 were $228 million, compared to $72 million in 2023 and $75 million in 2022[280] - The company expects fiscal year 2025 restructuring and related costs to be approximately $120 million[280] Leases and Debt - Operating lease expense for 2024 was $208 million, up from $178 million in 2023[288] - The weighted-average remaining lease term for operating leases was 7.7 years as of September 30, 2024[289] - The fair value of the company's long-term debt was $7.0 billion as of September 30, 2024, lower than the carrying value by $705 million[299] - Short-term borrowings and current maturities of long-term debt totaled $532 million as of September 30, 2024[303] - Long-term debt maturing in the next four years after 2025 is $562 million, $760 million, $497 million, and $998 million, respectively[305] - Total interest paid on long-term debt was approximately $193 million in 2024[305] - The company repaid €500 million of euro-denominated debt in 2024, reducing foreign currency risk[296] Pension and Retirement Plans - The company's net periodic pension income increased in 2024 due to higher returns on plan assets, partially offset by higher interest costs[308] - The company is implementing a new profit-sharing retirement program for U.S. non-union employees effective January 1, 2025[309] - U.S. pension plans were overfunded by $800 million in 2024, including unfunded plans totaling $161 million, while non-U.S. plans were underfunded by $38 million, including unfunded plans totaling $230 million[310] - The total projected benefit obligation for U.S. plans increased from $3,112 million in 2023 to $3,089 million in 2024, while non-U.S. plans increased from $965 million to $1,004 million[310] - The fair value of U.S. plan assets increased from $3,625 million in 2023 to $3,889 million in 2024, and non-U.S. plan assets increased from $908 million to $966 million[310] - Future benefit payments by U.S. plans are estimated to be $272 million in 2025, $262 million in 2026, $260 million in 2027, $255 million in 2028, $250 million in 2029, and $1,165 million from 2030 to 2034[312] - The discount rate for U.S. retirement plans decreased from 6.03% in 2023 to 4.97% in 2024, while non-U.S. plans decreased from 5.2% to 4.7%[313] - The expected return on U.S. plan assets increased from 6.00% in 2023 to 6.50% in 2024, while non-U.S. plans increased from 4.4% to 4.7%[313] - U.S. plan asset allocation shifted from 39% equity securities in 2023 to 29% in 2024, while debt securities increased from 51% to 63%[314] - The fair value of U.S. equities decreased from $1,024 million in 2023 to $875 million in 2024, while corporate bonds increased from $1,851 million to $2,100 million[317] - The company expects to contribute approximately $40 million to its retirement plans in 2025[312] - The postretirement benefit liability for U.S. plans was $71 million in 2024, with net postretirement income of $18 million for the year[320] - Future health care benefit payments are estimated to be $7 per year for 2025 through 2029 and $27 in total over the five years 2030 through 2034[322] Stock Compensation and Equity - Stock compensation expense for 2024 was $260, with $96 related to NI restricted stock units[345] - Performance share payouts for 2024 were at 118% of target, with 1,733 shares earned[347] - Approximately 919,000 shares awarded in 2022 will be distributed in early fiscal 2025 after meeting performance objectives at the 118% level[347] - In 2024, approximately 55,000 shares of restricted stock and 1,462,000 restricted stock units vested, with 38,000 shares and 1,404,000 units issued, and 17,000 shares and 58,000 units withheld for taxes[349] - As of September 30, 2024, there were approximately 2,269,000 shares of unvested restricted stock and restricted stock units outstanding[349] - In 2024, the Company awarded approximately 19,000 restricted stock units to non-management directors, with 38,000 shares available for issuance under this plan as of September 30, 2024[350] - As of September 30, 2024, 17.5 million shares remained available for award under incentive shares plans[350] - The total fair value of shares earned/vested in 2024 was $284 million, with $81 million distributed in cash primarily for tax withholding[351] - In 2024, AspenTech granted 263,000 performance stock units with a performance condition and service condition, with up to 150% vesting possible based on performance goals[360] - The total fair value of vested shares from AspenTech RSU grants in 2024 amounted to $62 million, with $21 million paid in withholding taxes[360] - At September 30, 2024, common stock reserved for future issuance under all AspenTech equity compensation plans was 4 million shares[363] - At September 30, 2024, 23.3 million shares of common stock were reserved for issuance under the Company's stock-based compensation plans[364] - In 2024, 4.4 million common shares were purchased and 2.6 million treasury shares were reissued[364] Business Segments - The Final Control segment provides control valves, isolation valves, shutoff valves, pressure relief valves, pressure safety valves, actuators, and regulators for process and hybrid industries[368] - The Measurement & Analytical segment supplies intelligent instrumentation measuring physical properties of liquids or gases, such as pressure, temperature, level, flow, acoustics, corrosion, pH, conductivity, water quality, toxic gases, and flame[369] - These devices transfer data and asset management information to control systems and automation software, enabling process and hybrid industry operators to make informed decisions regarding production, reliability, sustainability, and safety[369] Climate Technologies - Net sales for Climate Technologies in 2022 were $4.976 billion, while in 2023 they were $3.156 billion[275] - Earnings before income taxes for Climate Technologies in 2023 were $11.124 billion, significantly higher than the $1.002 billion in 2022[275] - Net cash from operating activities for Climate Technologies in 2023 was $(1.314) billion, compared to $881 million in 2022[276] - The company recognized a gain on the sale of its 40% non-controlling common equity interest in Copeland, amounting to $539 million in 2024[275] - Cash from investing activities for 2024 reflects proceeds of approximately $1.5 billion from the sale of the company's 40% non-controlling common equity interest in Copeland[276] Goodwill and Intangible Assets - Goodwill increased from $13.946 billion in 2022 to $18.067 billion in 2024, driven by acquisitions and foreign currency translation[292] - Intangible assets' net carrying amount rose from $6.263 billion in 2023 to $10.436 billion in 2024, with amortization expense expected to be $1.168 billion in 2025[293] Foreign Currency and Hedging - The company's foreign currency hedge positions had a notional amount of approximately $3.3 billion as of September 30, 2024[295] - Foreign currency translation contributed positively to other comprehensive income, with gains of $254 million in 2023 and $400 million in 2024[203] Tax and Unrecognized Tax Benefits - Unrecognized tax benefits increased to $291 in 2024, up from $235 in 2023[335] Shareholder Equity and Treasury Shares - In 2024, 4.4 million common shares were purchased and 2.6 million treasury shares were reissued[364]