Emerson 2011 Annual Report Download - page 22

20 | 2011 Emerson
internationally. Earnings for 2011 were $375 million, an
increase of $18 million, reflecting earnings growth in the
professional tools business partially offset by lower earn-
ings in the wet/dry vacuums, residential storage and food
waste disposers businesses. The margin increased on
higher sales volume and resulting leverage in the profes-
sional tools business as well as savings from prior period
cost reductions, largely offset by higher freight costs and
unfavorable product mix. Higher materials costs were
substantially offset by price increases.
2010 vs. 2009 – Sales for Tools and Storage were
$1.8 billion in 2010, a $30 million increase from 2009.
Strong growth in the tools and food waste disposers busi-
nesses was partially offset by a decline in the residential
storage business, due to weakness in the U.S. residential
construction markets. The sales increase reflected a
1 percent decrease in underlying sales on lower volume,
due to the Company outsourcing its freight operations,
with favorable impacts from acquisitions of 2 percent
($34 million) and foreign currency translation of 1 percent
($14 million). Underlying sales in the United States
decreased 1 percent while underlying international sales
increased 4 percent. Earnings for 2010 were $357 million,
an increase of $81 million, and margin increased over
4 percentage points, reflecting earnings growth in the
tools, appliances and storage businesses, benefits of cost
reduction and restructuring actions in 2009, product mix,
lower restructuring expense of $11 million and savings
from materials cost containment.
Financial Position, Capital Resources
and Liquidity
The Company continues to generate substantial cash
from operations, is in a strong financial position with
total assets of $24 billion and common stockholders’
equity of $10 billion, and has the resources available
to reinvest in existing businesses, pursue strategic
acquisitions and manage its capital structure on a short-
and long-term basis.
CASH FLOW
(DOLLARS IN MILLIONS) 2009 2010 2011
Operating Cash Flow $3,086 3,292 3,233
Percent of sales 14.8% 15.6% 13.3%
Capital Expenditures $ 531 524 647
Percent of sales 2.6% 2.5% 2.7%
Free Cash Flow (Operating Cash
Flow less Capital Expenditures) $2,555 2,768 2,586
Percent of sales 12.2% 13.1% 10.6%
Operating Working Capital $1,714 1,402 1,705
Percent of sales 8.2% 6.7% 7.0%
Emerson generated operating cash flow of $3.2 billion
in 2011, a decrease of 2 percent compared to 2010,
reflecting an increase in operating working capital
partially offset by higher net earnings. With resumption
of growth in the current year, additional investment in
working capital has been necessary. Operating cash flow
of $3.3 billion in 2010 was a 7 percent increase from
$3.1 billion in 2009, reflecting higher earnings in 2010
and continued improvement in working capital manage-
ment. At September 30, 2011, operating working capital
as a percent of sales was 7.0 percent, compared with
6.7 percent and 8.2 percent in 2010 and 2009, respec-
tively. Pension contributions were $142 million,
$247 million and $303 million in 2011, 2010 and 2009,
respectively. Operating cash flow fully funded capital
expenditures, dividends and share repurchases in all
years presented and fully funded acquisitions in 2011.
Capital expenditures were $647 million, $524 million and
$531 million in 2011, 2010 and 2009, respectively. The
increase in capital expenditures in 2011 was primarily
due to capacity expansion in the Process Management
and Industrial Automation segments. Free cash flow was
$2.6 billion in 2011, compared with $2.8 billion in 2010,
primarily reflecting higher capital expenditures in 2011.
Free cash flow increased in 2010 from $2.6 billion in
2009, reflecting higher net earnings in 2010. In 2012, the
Company is targeting capital spending of approximately
$700 million, including $100 million already authorized
by the Board of Directors to build, expand or renovate
OPERATING CASH FLOW AND
PAYOUT PERCENT (dollars in billions)
Operating cash flow returned to common stockholders through
dividends and share repurchases increased to 61 percent in 2011.
07
$3.0
11100908
$3.3
$3.1
$3.3 $3.2
07 11100908
56%
61%