Emerson 2004 Annual Report Download - page 5

performance
increase. Strong financial performance
led the board of directors in November
2004 to increase the quarterly dividend
to an annualized rate of $1.66 per share.
Fundamental to our business strategy
is generating the cash flow and
returns to fund growth, new product
development, acquisitions, and
dividends to shareholders. Operating
cash flow for fiscal 2004 increased
28 percent to a record $2.2 billion.
Return on total capital increased to
14.2 percent from 12.7 percent, our
third consecutive annual improvement.
For the past few years, Emerson has
been accelerating improvement in
operating and capital efficiencies
through extensive restructuring and a
shift to global best-cost manufacturing.
Together with our lean manufacturing
initiatives, these accomplishments have
strengthened our global competitive
position and helped us overcome
the impact of increased material and
pension costs during this period. This
capital efficiency progress is reflected
in our improved average trade working
capital ratio, which declined to 19.6
percent of sales in 2004, from 21.2
percent last year, led by an 11 percent
improvement in inventory turnover.
The increase in return on capital is a
result of improvements in profitability,
fixed asset utilization, and working
capital efficiency and is an important
measure of our success in effectively
using shareholder resources. We
achieved that increase while investing
during the fiscal year in strategic
acquisitions that extend our global
reach and capabilities. The acquisition
of the outside plant and power systems
business of Marconi Corporation PLC,
renamed Emerson Network Power
Energy Systems – North America,
gave us a stronger position in the U.S.
telecom power industry. We also added
to our leading worldwide position
in the process control business with
the acquisition of Metran Industrial
Group, one of the top suppliers of
measurement instrumentation and
services for the process industry in
Russia and Eastern Europe.
Planning, Priorities,
and Performance
Emerson is committed to a unique
formal management process that
enables the company to focus sharply
on creating value for shareholders
while anticipating changing economic
and industry environments. This
process emphasizes intensive current
and long-term planning, disciplined
control, and clear priorities. Each
priority is a critical component of
our ability to sustain competitive
advantage in a rapidly changing
global market, and each further
defines what it means to be Emerson.
Among these priorities, Emerson’s
long history of technology
investment and leadership provides
competitive advantages and market
differentiation for our customers and
for us. Our focus on sustaining and
expanding this leadership is reflected
in the continuing investment
in research and new product
development, which reached $486
million in 2004. We have established
best-cost engineering resources
around the world that allow us to
work seamlessly around the clock to
increase the velocity with which we
bring new products and technologies
to market. We decided to maintain
higher levels of investment in new
product development through the
recent economic downturn, which set
us apart from our competitors and
positioned us to benefit quickly as the
global economy recovered.