Emerson 2006 Annual Report Download - page 33

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Operating cash ow was $2.2 billion in 2005, a 1 percent
decrease from 2004. Higher net earnings were more than offset
by additional working capital necessary to support the higher
level of sales and the $140 million tax refund in 2004 related
to the sale of Jordan stock including its Dura-Line operations in
2003. At September 30, 2006, operating working capital as a
percent of sales was 10.1 percent, compared with 9.5 percent
and 10.5 percent in 2005 and 2004, respectively. Operating cash
ow was decreased by pension contributions of $124 million,
$124 million and $167 million in 2006, 2005 and 2004, respec-
tively. Pension contributions are expected to be approximately
$100 million to $150 million in 2007.
Free cash ow (operating cash ow less capital expendi-
tures) was $1.9 billion in 2006, compared to $1.7 billion and
$1.8 billion in 2005 and 2004, respectively. The 15 percent
increase in free cash ow in 2006 compared to 2005 reects
the increase in operating cash ow, primarily due to higher
net earnings, partially offset by higher capital spending. The
8 percent decrease in 2005 compared to 2004 was primarily
due to higher capital expenditures. Capital expenditures were
$601 million, $518 million and $400 million in 2006, 2005 and
2004, respectively. The increase in capital expenditures during
2006 compared to the prior year includes capacity expansion
and acquisitions in the Network Power segment, while the
increase in 2005 compared to 2004 was primarily driven by
unitary air-conditioning scroll compressor capacity expansion in
the United States and Asia. In 2007, the Company is targeting
capital spending of approximately 3 percent of net sales. Cash
paid in connection with Emerson’s acquisitions was $752 million,
$366 million and $414 million in 2006, 2005 and 2004, respectively.
                  
Dividends increased to a record $1.78 per share in 2006,
representing the 50th consecutive year of increased dividends.
Dividends were $730 million ($1.78 per share, up 7 percent) in
2006, compared with $694 million ($1.66 per share) in 2005, and
$675 million ($1.60 per share) in 2004. In November 2006, the
Board of Directors voted to increase the quarterly cash dividend
18 percent to an annualized rate of $2.10 per share. Also in
November 2006, the Company’s Board of Directors declared a
two-for-one split of the Company’s common stock effected in the
form of a 100 percent stock dividend to shareholders of record as
of November 17, 2006, with a distribution date of December 11,
2006 (shares begin trading on a post-split basis on December 12,
2006). In 2006, approximately 10,726,000 shares were repur-
chased under the 2002 Board of Directors’ authorization; in
2005, approximately 10,035,000 shares were repurchased under
the 2002 authorization, and in 2004, approximately 2,630,000
shares were repurchased under the scal 1997 and 2002 Board of
Directors’ authorizations; 16.8 million shares remain available for
repurchase under the 2002 authorization and none remain under
the 1997 authorization. Purchases of treasury stock totaled
$871 million, $671 million and $157 million in 2006, 2005 and
2004, respectively.
                      
(dollarsinmillions)   2004 2005 2006
Total Assets $16,361 17,227 
Long-term Debt $ 3,136 3,128 
Stockholders’ Equity $ 7,238 7,400 
Total Debt-to-Capital Ratio 35.8% 35.6% 
Net Debt-to-Net Capital Ratio 27.0% 27.7% 
Operating Cash Flow-to-Debt Ratio 54.9% 53.4% 
Interest Coverage Ratio 8.9 9.8 
Total debt was $4.0 billion, $4.1 billion and $4.0 billion for 2006,
2005 and 2004, respectively. The total debt-to-capital ratio was
33.1 percent at year-end 2006, compared with 35.6 percent for
2005 and 35.8 percent for 2004. At September 30, 2006, net
debt (total debt less cash and equivalents and short-term invest-
ments) was 28.1 percent of net capital, compared with
27.7 percent of net capital in 2005 and 27.0 percent of net
capital in 2004. The operating cash ow-to-debt ratio was
62.4 percent, 53.4 percent and 54.9 percent in 2006, 2005
and 2004, respectively. The Company’s interest coverage ratio
(earnings before income taxes and interest expense, divided by
interest expense) was 12.9 times in 2006, compared with
9.8 times in 2005 and 8.9 times in 2004. The increase in the
interest coverage ratio over the last three years reects higher
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