Emerson 2008 Annual Report Download - page 32

A Powerful Force for Innovation [ 25 ]
and $1.9 billion in 2007 and 2006, respectively. The
10 percent increase in free cash ow in 2008 compared
with 2007 and the 22 percent increase in 2007 compared
with 2006 reect the increases in operating cash ow,
partially offset by higher capital spending. Capital expen-
ditures were $714 million, $681 million and $601 million
in 2008, 2007 and 2006, respectively. The increase in
capital expenditures during 2008 compared with the
prior year was primarily due to capacity expansion in
the Process Management and Industrial Automation
segments and construction of a corporate technology
facility, while the increase in 2007 compared with 2006
included capacity expansion in the Process Manage-
ment and Climate Technologies segments. In 2009, the
Company is targeting capital spending of approximately
3 percent of net sales. Cash paid in connection with
Emerson’s acquisitions was $561 million, $295 million
and $752 million in 2008, 2007 and 2006, respectively.
Dividends were $940 million ($1.20 per share, up
14 percent) in 2008, compared with $837 million ($1.05
per share) in 2007, and $730 million ($0.89 per share) in
2006. In November 2008, the Board of Directors voted
to increase the quarterly cash dividend 10 percent to an
annualized rate of $1.32 per share. In 2008, the Board of
Directors approved a new program for the repurchase of
up to 80 million additional shares. In 2008, 22,404,000
shares were repurchased under the scal 2002 and 2008
Board of Directors’ authorizations; in 2007, 18,877,000
shares were repurchased under the 2002 authoriza-
tion, and in 2006, 21,451,000 shares were repurchased
under the 2002 authorization; 72.4 million shares remain
available for repurchase under the 2008 authorization
and none remain available under the 2002 authoriza-
tion. Purchases of treasury stock totaled $1,128 million,
$849 million and $871 million in 2008, 2007 and 2006,
respectively.

(d o l l A R s inm i l l i o n s )   2006 2007 2008
Total Assets $18,672 19,680 
Long-term Debt $ 3,128 3,372 
Stockholders’ Equity $ 8,154 8,772 
Total Debt-to-Capital Ratio 33.1% 30.1% 
Net Debt-to-Net Capital Ratio 28.1% 23.6% 
Operating Cash Flow-to-Debt Ratio 62.4% 79.9% 
Interest Coverage Ratio 12.9 12.9 
Total debt was $4.5 billion, $3.8 billion and $4.0 billion
for 2008, 2007 and 2006, respectively. During 2008,
the Company issued $400 million of 5.250% notes due
October 2018, under a shelf registration statement
led with the Securities and Exchange Commission and
$250 million of 5 ½% notes matured. During 2007, the
Company issued $250 million of 5.125%, ten-year notes
due December 2016 and $250 million of 5.375%, ten-year
notes due October 2017. During 2006, $250 million
of 6.3% notes matured. The total debt-to-capital ratio
was 33.1 percent at year-end 2008, compared with
30.1 percent for 2007 and 33.1 percent for 2006. At
September 30, 2008, net debt (total debt less cash and
equivalents and short-term investments) was 22.7 percent
of net capital, compared with 23.6 percent of net capital
in 2007 and 28.1 percent of net capital in 2006. The
operating cash ow-to-debt ratio was 72.9 percent,
79.9 percent and 62.4 percent in 2008, 2007 and 2006,
respectively. The Company’s interest coverage ratio
(earnings before income taxes and interest expense,
divided by interest expense) was 15.7 times in 2008,
compared with 12.9 times in 2007 and 2006. The
increase in the interest coverage ratio from 2007 to
2008 reects higher earnings and lower interest rates.
See Notes 3, 8 and 9 for additional information. The
Company’s strong nancial position supports long-term
debt ratings of A2 by Moody’s Investors Service and A by
Standard and Poor’s.
At year-end 2008, the Company maintained, but has
not drawn upon, a ve-year revolving credit facility
effective until April 2011 amounting to $2.8 billion to
support short-term borrowings. The credit facility does
not contain any nancial covenants and is not subject
to termination based on a change in credit ratings or a
material adverse change. In addition, as of September 30,
2008, the Company could issue up to $1.35 billion in debt
securities, preferred stock, common stock, warrants,
share purchase contracts and share purchase units under
the shelf registration statement led with the Securities
and Exchange Commission. The Company intends to le a
new shelf registration statement prior to the expiration of
the existing registration in December 2008.
The credit markets, including the commercial paper
sector in the United States, have recently experienced
adverse conditions. Continuing volatility in the capital
markets may increase costs associated with issuing
commercial paper or other debt instruments, or affect
the Company’s ability to access those markets. Notwith-
standing these adverse market conditions, the Company
has been able to issue commercial paper and currently
believes that sufcient funds will be available to meet
the Company’s needs in the foreseeable future through
existing resources, ongoing operations and commercial
paper (or backup credit lines). However, the Company
could be adversely affected if the credit market condi-
tions deteriorate further or continue for an extended
period of time and customers, suppliers and nancial
institutions are unable to meet their commitments
to the Company.