Emerson 2005 Annual Report Download - page 29

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E M E R S O N 2 0 0 5 1 7
OVERVIEW
Emerson achieved record sales and earnings per share in the fiscal year ended September 30, 2005. The
Process Management, Industrial Automation and Network Power businesses drove gains in a favorable
economic environment, as gross fixed investment expanded moderately during 2005. All of the business
segments generated higher sales, while earnings for four out of the five business segments increased over
the prior year. Strong growth in Asia, moderate gains in the United States and favorable exchange rates
contributed to these results. Profit margins improved primarily due to leverage on higher sales volume and
benefits from previous rationalization actions. The Company continues to manage commodity cost inflation
pressures through sourcing initiatives, productivity improvements and sales price. Emerson’s financial
position remains strong and the Company continues to generate substantial cash flow.
RESULTS OF OPERATIONS
Years Ended September 30,
‘03 - ‘04 ‘04 - ‘05
(dollars in millions, except per share amounts) 2003 2004 2005 Change Change
Net sales $13,958 15,615 17,305 12% 11%
Gross profit $ 4,898 5,566 6,183 14% 11%
Percent of sales 35.1% 35.6% 35.7%
SG&A $ 2,935 3,281 3,595
Percent of sales 21.0% 21.0% 20.7%
Other deductions, net $ 318 223 230
Interest expense, net $ 231 210 209
Pretax earnings $ 1,414 1,852 2,149 31% 16%
Earnings from continuing operations $ 1,013 1,257 1,422 24% 13%
Net earnings $ 1,089 1,257 1,422 15% 13%
Percent of sales 7.8% 8.1% 8.2%
Continuing operations – EPS $ 2.41 2.98 3.40 24% 14%
Net earnings – EPS $ 2.59 2.98 3.40 15% 14%
Net earnings and EPS for 2005 include a $63 million tax expense ($0.15 per share) for repatriation under the
American Jobs Creation Act.
Net Sales
Net sales for fiscal 2005 were a record $17.3 billion, an increase of approximately $1.7 billion, or 11 percent,
over fiscal 2004, with growth in both the U.S. and international markets. Continued strength in commercial
and industrial demand and increases in all of the business segments drove the consolidated results, with an
underlying sales (which exclude acquisitions, divestitures and currency) increase of 6 percent ($895 million),
a 2 percent ($257 million) favorable impact from a stronger Euro and other currencies, and an over 3 percent
($552 million) positive impact from acquisitions. The underlying sales increase of 6 percent was driven by
6 percent growth in the United States (including a strong finish to the year with 10 percent growth in the
fourth quarter) and a total international sales growth of 6 percent, which primarily reflects 11 percent growth
in Asia. The Company estimates that the underlying growth primarily reflects an approximate 4 percent gain
from volume, an approximate 1 percent impact from market penetration gains, and an approximate
1 percent impact from higher sales prices.
$17.0
$12.75
$8.5
$4.25
Sales
00 0504030201
(dollars in billions)
Emerson achieved record sales
of $17.3 billion in 2005. All of
the business segments generated
higher sales over the prior year.