Emerson announced Tuesday that net sales for the third quarter ended June 30, 2003, were U.S. $3,573 million, a slight increase over net sales of $3,550 million for the third quarter ended June 30, 2002.
Net earnings were $360 million and diluted earnings per share were $0.85 for the 3 months ended June 30, 2003, compared to net earnings and earnings per share of $281 million and $0.67, respectively, for the three months ended June 30, 2002. The company said increase in net earnings for the third quarter reflects the $82 million, or $0.19 per share, net gain from discontinued operations related to the sale of Jordan stock, including its Dura-Line operations.
Income from continuing operations for the third quarter of 2003 was $0.66 per share, compared to $0.68 per share for the third quarter of 2002, reflecting lower gains from divestitures and other items.
Third-quarter 2003 sales increases in the heating, ventilating, and air-conditioning (HVAC) and industrial automation businesses were largely offset by declines in the electronics and telecommunications and appliance and tools businesses, Emerson said. Sales reflect a 5-percentage point favorable currency impact and a less than 1-percentage point negative impact from divestitures, net of acquisitions. Underlying sales, which are adjusted to remove the impact of exchange rates, acquisitions and divestitures, for the third quarter decreased almost 4 percent, reflecting declines in the United States and Latin America, partially offset by a strong increase in Asia and a modest increase in Europe compared to the prior year.
"Demand in the United States was down significantly during the quarter in many of the markets we serve, which adversely affects our overall margins," CEO David N. Farr said. "I am pleased that even with underlying sales down, our focus on cost containment, restructuring, and key new products allowed us to improve our segment earnings in the third quarter versus the prior year period."
Appliance-Related Operating Highlights
The company’s HVAC business sales increased almost 6 percent to $733 million, compared to $693 million in the third quarter in the prior year, driven by continued penetration gains, market growth, and a 3-percentage point favorable impact from currency, the company said. A 3-percent increase in third quarter underlying sales (excluding acquisitions, divestitures, and currency) reflects strong growth in Latin America, Asia, and the European commercial market, and slight growth in the U.S. HVAC earnings before interest and taxes increased 2 percent compared to the prior year primarily due to higher sales.
Sales in the electronics and telecommunications business declined almost 7 percent to $574 million for the third quarter from $614 million for the same period in the prior year, including an almost 4-percentage point favorable impact from currency. There were significant declines in most major geographic regions, except for Asia, which declined only moderately. Although the systems business continues to experience declines, the embedded power business increased sequentially, Emerson said. Electronics and telecommunications business earnings were $40 million, an increase of 33 percent over the prior year, despite lower sales, reflecting lower costs for rationalization.
Sales of $869 million for the third quarter in the appliance and tools business reflect a decline in underlying sales compared to the prior year, the company said. The 3-percent decrease in sales also includes a more than 2-percentage point favorable impact from currency and a nearly 1-percentage point impact from acquisitions. The motors and appliance component business declined significantly, while the construction and tools business declined modestly, partially resulting from exiting the manufacturing of power woodworking tools businesses. The ClosetMaid consumer storage business continued with strong growth. Appliance and tools business earnings were down 13 percent over the prior year due to lower sales and higher rationalization costs during the quarter.
Mr. Farr said that Emerson’s earnings guidance for fiscal year 2003 has not changed. "We expect reported net earnings per share to be slightly above the $2.52 reported last fiscal year," he said.
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