Emerson 2004 Annual Report Download - page 28

26 Emerson 2004
Net Earnings and Return on Equity
Net earnings of $1.1 billion and earnings per share of $2.59 for 2003 included the gain from discontinued
operations of $76 million, or $0.18 per share. Net earnings in 2002 were $122 million, or $0.29 per share,
including an accounting change of $938 million, or $2.23 per share (net earnings were $1.1 billion, or $2.52
per share, excluding the accounting change). Net earnings as a percent of sales were 7.8 percent in 2003,
compared to 7.7 percent in 2002 (excluding the accounting change). Return on average stockholders’ equity
was 17.9 percent in 2003 and 2002 (excluding the accounting change).
Business Segments
Process Management
(dollars in millions) 2002 2003 Change
Sales $3,396) 3,394) – %)
Earnings $ 387) 388) – %)
Margin 11.4%) 11.4%)
Process management segment sales of $3.4 billion in 2003 were comparable with the prior year. Reported
sales include an almost 5 percentage point ($153 million) favorable impact from currency, which was partially
offset by a nearly 3 percentage point impact from the Daniel Valve and Intellution divestitures. Excluding
acquisitions, divestitures and currency, underlying sales declined 2 percent due to 9 percent and 7 percent
declines in the United States and Latin America, respectively, which were partially offset by 4 percent growth in
Europe and 7 percent growth in Asia. Process management continued its market penetration and geographic
expansion despite the ongoing weakness in the U.S. market. Systems, services and solutions businesses
continued growing with strong new project activity and displacement of competitors in the market. Earnings
before interest and taxes were $388 million in 2003, compared to $387 million in the prior year, reflecting
increased sales and profitability in the systems, solutions and measurement businesses, offset by weakness in
the valve businesses and $9 million in higher costs for the rationalization of operations during the year.
Industrial Automation
(dollars in millions) 2002 2003 Change
Sales $2,500) 2,600) 4%)
Earnings $ 297) 330) 11%)
Margin 11.9%) 12.7%)
Sales in the industrial automation segment increased 4 percent to $2.6 billion in 2003, reflecting a 7 percentage
point ($170 million) favorable impact from currency, which was partially offset by a 1 percentage point
impact from divestitures. An almost 2 percent decline in underlying sales reflects weakness in industrial
activity in the United States, which contributed to a 6 percent decline in U.S. sales, partially offset by 3 percent
international sales growth, led by a 9 percent increase in Asia and 2 percent growth in Europe. Most end
markets have begun to stabilize. This stability together with the benefits from restructuring drove earnings
growth in the segment. Margin improvements in the fluid control valves, variable-speed drives and materials
joining businesses, as well as $13 million lower rationalization costs, led to an 11 percent increase in earnings
to $330 million in 2003 from $297 million in 2002.
Network Power
(dollars in millions) 2002 2003 Change
Sales $2,465) 2,316) (6%)
Earnings $ 119) 168) 41%)
Margin 4.8%) 7.2%)
Emerson generated record
operating cash flow of $2.2 billion
in 2004, a 28 percent increase
from the prior year.
Operating Cash Flow
and as a Percent of Sales
99 04030201
$2.4
$1.2
$1.8
00
$0.6
(dollars in billions)
20%
10%
15%
5%