Emerson 2014 Annual Report Download - page 21

2014 Emerson > 17
Results of Operations
Years ended September 30 | Dollars in millions, except per share amounts
CHANGE CHANGE
2012 2013 2014 ‘12 - ‘13 ‘13 - ‘14
Net sales $24,412 24,669 24,537 1% (1)%
Gross profit $ 9,768 9,952 10,158 2% 2 %
Percent of sales 40.0% 40.3% 41.4%
SG&A $ 5,436 5,648 5,715
Percent of sales 22.3% 22.9% 23.3%
Goodwill impairment $ 592 528 508
Other deductions, net $ 401 362 393
Interest expense, net $ 224 218 194
Earnings before income taxes $ 3,115 3,196 3,348 3% 5 %
Percent of sales 12.8% 13.0% 13.6%
Net earnings common stockholders $ 1,968 2,004 2,147 2% 7 %
Percent of sales 8.1% 8.1% 8.7%
Diluted EPS – Net earnings $ 2.67 2.76 3.03 3% 10 %
Return on common stockholders’ equity 19.0% 19.2% 20.7%
Return on total capital 15.8% 16.4% 17.5%
OVERVIEW
Emerson’s sales for 2014 were $24.5 billion, a decrease
of $132 million, or 1 percent compared with prior
year as divestitures negatively affected reported sales
growth. Underlying sales growth was 3 percent, as
global economic conditions remained sluggish for a
third consecutive year due to geopolitical instability
and structural challenges limiting growth in several
emerging markets and in Europe. Sales growth was led
by the U.S. and Asia, both of which increased 4 percent
(China up 7 percent), while Europe grew 1 percent.
Net earnings common stockholders were $2,147 million
in 2014, up 7 percent compared with prior year earnings
of $2,004 million. Diluted earnings per share were
$3.03, up 10 percent versus $2.76 per share in 2013.
Excluding goodwill impairment and income tax charges,
2014 net earnings were $2,655 million, up 3 percent
compared with $2,570 million in 2013, while diluted
earnings per share were $3.75, up 6 percent versus
$3.54 in 2013.
In 2014, the European network power business incurred
a goodwill impairment charge of $508 million, $0.72
per share. In 2013, impairment and income tax charges
totaling $566 million, $0.78 per share were recognized.
These charges primarily related to the embedded
computing and power business, which was divested
in early 2014. The relatively smaller charges in 2014
aided both reported earnings and net earnings per share
comparisons 4 percentage points.
Four of the Company’s five operating segments
reported increased sales and earnings. Process
Management sales increased 7 percent on continued
strong energy and chemicals end market demand,
and acquisitions. Climate Technologies reported sales
growth of 6 percent on demand in the refrigeration and
air conditioning businesses. Slowly recovering industrial
goods end markets led to a 2 percent sales increase
in Industrial Automation, while improvement in U.S.
residential and commercial construction markets aided
sales growth of 3 percent in Commercial & Residential
Solutions. The impact of the embedded computing and
power and connectivity solutions divestitures resulted in
a sales decrease of 18 percent in Network Power, while
underlying sales increased 2 percent.
The Company generated record operating cash flow
of $3.7 billion, a slight increase from very strong cash
flow in 2013, while free cash flow (operating cash flow
less capital expenditures) of $2.9 billion was down
slightly due to increased capital spending. Emerson is
well positioned moving into next year with its strong
financial position, global footprint in both mature and
emerging markets, and focus on products, technology
and customer solutions.