Emerson 2004 Annual Report Download - page 29

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The network power segment reported sales of $2.3 billion in 2003, down 6 percent from 2002. Underlying
sales, excluding a 2 percentage point impact from divestitures and a 3 percentage point favorable impact
from currency, declined 7 percent as a result of significant declines in most major geographic regions, except
Asia and Latin America which turned positive in the fourth quarter. The significant restructuring efforts in
this business paid off and helped drive margins higher. Despite lower sales volume, earnings increased
$49 million, or 41 percent, to $168 million in 2003, primarily driven by the precision cooling and power
systems business and $25 million lower rationalization costs in the current year. This business segment
strengthened its position through 2003 with a continued focus on restructuring initiatives, engineering and
technology investments, and international expansion.
Climate Technologies
(dollars in millions) 2002 2003 Change
Sales $2,389) 2,614) 9%)
Earnings $ 333) 386) 16%)
Margin 13.9%) 14.8%)
Sales in the climate technologies segment increased over 9 percent to $2.6 billion in 2003, driven by
continued global penetration gains, market growth and a nearly 3 percentage point favorable impact from
currency. The underlying sales increase of nearly 7 percent compared to the prior year reflects 22 percent
growth in Asia and almost 19 percent growth in Latin America, and 5 percent and 4 percent increases,
respectively, in the United States and the European commercial market. The combination of new wins, market
dynamics, and higher efficiency regulations worldwide is driving long-term scroll technology penetration and
growth. In addition, energy management and site monitoring services are growing, particularly by helping
supermarkets reduce energy costs and safeguard food quality. Climate technologies earnings increased
$53 million, or 16 percent, over the prior year to $386 million, primarily due to higher sales and improved
margins from increased operating efficiencies for the compressor and heating controls businesses in 2003.
Appliance and Tools
(dollars in millions) 2002 2003 Change
Sales $3,437) 3,453) –%)
Earnings $ 456) 479) 5%)
Margin 13.3%) 13.9%)
The appliance and tools segment sales were $3.5 billion in 2003, compared to sales of $3.4 billion in the prior
year. Sales reflect a 3 percent decline in underlying sales, which was offset by a 2 percentage point favorable
impact from currency and an almost 1 percentage point impact from acquisitions. Earnings of $479 million
were up 5 percent over $456 million in 2002, primarily driven by the disposer, residential storage and
plumbing tools businesses and $13 million lower costs for rationalization compared to the prior year, partially
offset by weakness in the motors business. Residential storage products sales continued to show strength,
driven by new product offerings, innovative Web-enabled design and support services, and favorable market
conditions. The motors and appliance component business sales declined moderately, while the construction
and tools business sales declined slightly, partially resulting from exiting the manufacturing of power
woodworking tools. Emerson made the strategic business decision to discontinue the manufacture of bench
top and stationary woodworking power tools, which had sales of approximately $60 million in 2003.
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
The Company continues to generate substantial cash from operations and is in a strong financial position
with total assets of $16 billion and stockholders’ equity of $7 billion, and has the resources available for
reinvestment in existing businesses, strategic acquisitions and managing the capital structure on a short- and
long-term basis.
Emerson continues to effectively
manage capital spending.
Capital Expenditures
and as a Percent of Sales
99 04030201
$700
$350
$525
00
$175
(dollars in millions)
6.0%
3.0%
4.5%
1.5%