Emerson 2013 Annual Report Download - page 28

26 Emerson > 2013 Annual Report
businesses, partially offset by a slight decrease in the wet/
dry vacuums business. Underlying sales increased 6 percent
in the United States and declined 3 percent internationally.
Earnings of $404 million were up $8 million compared to
the prior year. The Knaack divestiture in 2012 unfavorably
impacted earnings by $11 million. Margin increased
0.6 percentage points on savings from cost reduction
actions and materials cost containment, partially offset by
unfavorable product mix and higher other costs.
2012 vs. 2011 – Commercial & Residential Solutions sales
increased $40 million to $1.9 billion in 2012, reflecting
a 6 percent ($103 million) increase in underlying sales,
partially offset by an unfavorable 4 percent ($63 million)
combined impact from the 2012 Knaack storage business
and 2011 heating elements divestitures. Underlying sales
growth reflects 4 percent higher volume and an estimated
2 percent from price. The sales increase was led by strong
growth in both the storage and food waste disposers
businesses and moderate growth in the professional tools
business, partially offset by a slight decrease in the wet/dry
vacuums business. Underlying sales increased 4 percent in
the United States and 9 percent internationally. Earnings
of $396 million were up $21 million compared to the prior
year. Higher volume and leverage increased margin
0.7 percentage points as pricing and cost containment
actions were partially offset by higher materials, litigation
and other costs, and unfavorable product mix. Earnings
were also affected by a $7 million unfavorable comparison
with prior year from the divested heating elements business.
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 $25 billion and common stockholders’ equity of
$11 billion, and has the resources available to reinvest
for growth in existing businesses, pursue strategic
acquisitions and manage its capital structure on a short-
and long-term basis.
CASH FLOW
(DOLLARS IN MILLIONS) 2011 2012 2013
Operating Cash Flow $3,233 3,053 3,649
Percent of sales 13.3% 12.5% 14.8%
Capital Expenditures $ 647 665 678
Percent of sales 2.7% 2.7% 2.7%
Free Cash Flow (Operating Cash
Flow less Capital Expenditures) $2,586 2,388 2,971
Percent of sales 10.6% 9.8% 12.0%
Operating Working Capital $1,705 2,132 1,686
Percent of sales 7.0% 8.7% 6.8%
Emerson generated operating cash flow of $3.6 billion in
2013, a 20 percent increase compared to 2012 primarily
as a result of focused efforts to reduce operating working
capital. Operating cash flow of $3.1 billion in 2012 was
a 6 percent decrease compared to $3.2 billion in 2011,
reflecting an increase in operating working capital. At
September 30, 2013, operating working capital as a
percent of sales was 6.8 percent, compared with
8.7 percent and 7.0 percent in 2012 and 2011, respectively.
The Company made pension contributions of $160 million
in 2013, $163 million in 2012 and $142 million in 2011.
Operating cash flow fully funded capital expenditures,
acquisitions, dividends and share repurchases in all
years presented.
Capital expenditures were $678 million, $665 million
and $647 million in 2013, 2012 and 2011, respectively.
Free cash flow increased 24 percent to $3.0 billion in
2013, on lower operating working capital, partially offset
by increased capital expenditures. Free cash flow was
$2.4 billion in 2012, compared with $2.6 billion in 2011,
primarily reflecting an increase in operating working
capital. The Company is targeting capital spending of
approximately $750 million in 2014. Net cash paid in
connection with acquisitions was $19 million, $187 million
and $232 million in 2013, 2012 and 2011, respectively.
Proceeds from divestitures in 2013, 2012 and 2011 were
$3 million, $125 million and $103 million, respectively.
Dividends were $1,181 million ($1.64 per share) in 2013,
compared with $1,171 million ($1.60 per share) in 2012
and $1,039 million ($1.38 per share) in 2011. In November
2013, the Board of Directors voted to increase the quarterly
cash dividend 5 percent to an annualized rate of
$1.72 per share.
$3.1 $3.3 $3.2 $3.1
$3.6
56%
63%
OPERATING CASH FLOW AND
PAYOUT PERCENT (Dollars in billions)
63%
OPERATING
CASH FLOW
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