Emerson 2004 Annual Report Download - page 26

24 Emerson 2004
The appliance and tools segment sales increased almost 9 percent to $3.7 billion for 2004. Underlying sales
increased 8 percent, primarily due to volume, excluding a more than 2 percentage point favorable impact
from currency and a negative impact of more than 1 percentage point related to exiting the manufacturing
of bench top and stationary power tools. The improved underlying sales results reflect gains for all of the
businesses within the appliance and tools segment, particularly very strong growth in motors, residential
storage and disposers. The increase in motors was aided by penetration gains in European appliance motors
and underlying growth in hermetic motors. The residential storage and disposers increases resulted from
strength in new and existing home markets, as evidenced by the strong growth in U.S. residential investment
in 2004, and higher demand at major retailers during the year. Earnings for 2004 of $530 million were up
11 percent from $479 million in 2003, primarily due to increased volume and leverage from higher sales and
savings from prior cost reduction efforts, which were impacted by higher commodity costs and sales price
pressure. Rationalization costs of $47 million during 2004 included severance and start-up and moving costs
related to shifting certain motor manufacturing primarily from the United States to Mexico and China in
order to consolidate facilities and improve profitability, and severance related to consolidating manufacturing
operations in the professional tools business for operational efficiency.
Fiscal Year 2003 Compared With Fiscal Year 2002
(dollars in millions, except per share amounts) 2002 2003 Change
Sales $13,748) 13,958) 2%)
Gross Profit $ 4,809) 4,898) 2%)
Percent of sales 35.0%) 35.1%)
SG&A $ 2,904) 2,935)
Percent of sales 21.1%) 21.0%)
Other deductions, net $ 82) 318)
Interest expense, net $ 233) 231)
Pretax earnings $ 1,590) 1,414) (11%)
Earnings from continuing operations $ 1,076) 1,013) (6%)
Net earnings $ 122) 1,089) 795%)
Continuing operations – EPS $ 2.56) 2.41) (6%)
Net earnings – EPS $ 0.29) 2.59) 793%)
Net Sales
Net sales for 2003 were $14.0 billion, an increase of $210 million, or 2 percent, from 2002. Consolidated
results include a nearly 4 percentage point (approximately $520 million) favorable impact from currency
and a less than 1 percentage point negative impact from divestitures, net of acquisitions. Underlying sales
decreased 1 percent from the prior year, reflecting the continuing difficult economic environment. The
Company estimates that underlying sales reflect an approximate 1 percentage point negative impact from
price. Sales in the United States declined $301 million, or 4 percent, from the prior year, while international
sales increased 2 percent, driven by strong growth in Asia. A 7 percent underlying sales increase in the climate
technologies segment was more than offset by a 7 percent decline in underlying sales of the network power
segment and modest declines in the other business segments.
International Sales
International destination sales, including U.S. exports, increased 10 percent, to $6.3 billion in 2003,
representing 45 percent of the Company’s total sales. U.S. exports were down 6 percent compared to the
prior year, at $893 million, reflecting the general sluggish economic environment, divestitures, and a shift
in supplying some non-U.S. customers locally rather than from the United States. International subsidiary
sales, including shipments to the United States, were $5.6 billion in 2003, up 12 percent over 2002. Emerson
continued to expand in Asia during the year, particularly in China, which showed strength in the fourth
quarter, to capitalize on market opportunities and further improve the Company’s cost position. European
markets served by Emerson showed signs of recovery, with sales improving in the second half of the year.
Excluding the net 10 percent impact from acquisitions, divestitures and favorable currency translation,
international subsidiary sales increased 2 percent compared to the prior year.
Net earnings per share was $2.98
in 2004, a 15 percent increase over
the prior year.
Earnings Per Share
02*99 040301
$3.60
$1.80
$2.70
00
$0.90
*before accounting change