Emerson 2014 Annual Report Download - page 28

2014 Emerson > 24
COMMERCIAL & RESIDENTIAL SOLUTIONS
CHANGE CHANGE
(DOLLARS IN MILLIONS) 2012 2013 2014 ‘12-‘13 ‘13-‘14
Sales $1,877 1,865 1,924 (1)% 3%
Earnings $ 396 404 424 2% 5%
Margin 21.1% 21.7% 22.1%
2014 vs. 2013 -
Commercial & Residential
Solutions sales were
$1.9 billion in 2014, an
increase of $59 million
or 3 percent. Underlying
sales grew 3 percent
($60 million) on higher
volume. Foreign currency
translation subtracted
$1 million. The sales
increase was led by solid
growth in the food waste
disposers and professional
tools businesses and a
moderate increase in
wet/dry vacuums. The
storage businesses were
mixed with residential
increasing slightly while the
commercial business decreased moderately. Underlying
sales were up 3 percent in the U.S. and 4 percent
internationally. Earnings of $424 million were up
$20 million and margin increased 0.4 percentage
points, reflecting higher volume, cost containment and
a $6 million decrease in rationalization expense, partially
offset by unfavorable mix. Solid trends are expected to
continue in North American residential and commercial
construction markets, supporting the outlook for
moderate growth.
2013 vs. 2012 - Commercial & Residential Solutions
sales were $1.9 billion in 2013, a decrease of $12 million
or 1 percent, including a negative 4 percent ($76 million)
comparative impact from the Knaack divestiture in
2012. Underlying sales grew 3 percent ($64 million)
from higher volume, led by strong growth in the food
waste disposers business and modest growth in storage
and professional tools, partially offset by a slight
decrease in the wet/dry vacuums business. Underlying
sales increased 6 percent in the U.S. 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.
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 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) 2012 2013 2014
Operating Cash Flow $3,053 3,649 3,692
Percent of sales 12.5% 14.8% 15.0%
Capital Expenditures $ 665 678 767
Percent of sales 2.7% 2.7% 3.1%
Free Cash Flow (Operating Cash
Flow less Capital Expenditures) $2,388 2,971 2,925
Percent of sales 9.8% 12.0% 11.9%
Operating Working Capital $2,132 1,686 1,729
Percent of sales 8.7% 6.8% 7.0%
Emerson generated operating cash flow of $3.7 billion
in 2014, a $43 million or 1 percent increase compared
to 2013 primarily due to increased earnings, continued
improvements in working capital management and lower
pension funding. Operating cash flow of $3.6 billion
in 2013 was a 20 percent increase compared to
$3.1 billion in 2012. At September 30, 2014, operating
working capital as a percent of sales was 7.0 percent,
compared with 6.8 percent and 8.7 percent in 2013 and
2012, respectively. Operating cash flow funded capital
expenditures, dividends, purchases of common stock
and acquisitions in all years presented. Contributions to
pension plans were $130 million in 2014, $160 million
in 2013 and $163 million in 2012. The Company has
returned over 60 percent of operating cash flow to
stockholders through dividends and purchases of
common stock in each of the last four years.
Capital expenditures were $767 million, $678 million
and $665 million in 2014, 2013 and 2012, respectively.
Free cash flow was $2.9 billion in 2014, down 2 percent
and primarily reflecting the higher capital expenditures.
Free cash flow was $3.0 billion in 2013, compared
with $2.4 billion in 2012, on lower operating working
capital. The Company is targeting capital spending
of approximately $825 million in 2015. Net cash paid
in connection with acquisitions was $610 million,
$19 million and $187 million in 2014, 2013 and 2012,
respectively. In addition, the Company purchased the
noncontrolling interest in Appleton Group for
$574 million. Proceeds from divestitures in 2014, 2013
OPERATING CASH FLOW
AND PERCENTAGE RETURNED
TO STOCKHOLDERS
(Dollars in billions)
14
13
12
11
10
$3.3 $3.2
$3.6
$3.1
$3.7
34%
61%