Emerson 2005 Annual Report Download - page 30

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Net sales for fiscal 2004 were $15.6 billion, an increase of almost $1.7 billion, or 12 percent, over net sales
of $14.0 billion for fiscal 2003, with both U.S. and international sales contributing. The consolidated results
reflect improving markets and increases in all five business segments, with an underlying sales increase of
8 percent ($1,181 million) and an approximate 4 percent ($488 million) favorable impact from the strengthening
Euro and other currencies. The underlying sales increase of 8 percent was driven by 8 percent growth in the
United States and a total international sales increase of 9 percent, which primarily reflects 20 percent growth
in Asia and 4 percent growth in Europe. The Company estimates that the underlying growth reflects the net
result of an approximate 6 percent gain from volume and an approximate 3 percent impact from market
penetration gains, partially offset by an approximate 1 percent negative impact from lower sales prices.
International Sales
International destination sales, including U.S. exports, increased approximately 11 percent, to $8.2 billion
in 2005, representing 47 percent of the Company’s total sales. U.S. exports were up 6 percent compared
to 2004, at $998 million. International subsidiary sales, including shipments to the United States, were
$7.4 billion in 2005, up 12 percent over 2004. Excluding the net 4 percent impact from acquisitions,
divestitures, and favorable currency translation, international subsidiary sales increased 8 percent compared
to 2004. Underlying destination sales grew 11 percent in Asia during the year, driven mainly by 14 percent
growth in China, while sales grew 15 percent in Latin America and 10 percent in the Middle East and sales in
Europe were flat compared to the prior year.
International destination sales, including U.S. exports, increased 17 percent, to $7.4 billion in 2004,
representing 47 percent of the Company’s total sales. U.S. exports were up 5 percent compared to 2003,
at $939 million. International subsidiary sales, including shipments to the United States, were $6.6 billion
in 2004, up 18 percent over 2003. Excluding the net 9 percent impact from acquisitions, divestitures,
and favorable currency translation, international subsidiary sales increased 9 percent compared to 2003.
Underlying destination sales grew 20 percent in Asia during the year, particularly in China, while sales grew
9 percent in Latin America and 4 percent in Europe.
Acquisitions and Divestitures
The Company acquired Do+Able, a manufacturer of ready-to-assemble storage products, and Numatics,
a manufacturer of pneumatic and motion control products, and several smaller businesses during 2005.
Total cash paid for these businesses (including assumed debt of approximately $100 million, which was
repaid in October 2005) was approximately $466 million. During 2004, the Company acquired the North
American outside plant and power systems business of Marconi Corporation PLC, as well as several other
smaller businesses for a total of approximately $414 million in cash. Annualized sales for acquired businesses
were $430 million in both 2005 and 2004. In the third quarter of 2003, the Company sold the Dura-Line
fiber-optic conduit business, which is reported as discontinued operations. See discussion of Discontinued
Operations below for additional information. See Note 3 for additional information regarding acquisitions
and divestitures.
Cost of Sales
Cost of sales for fiscal 2005 and 2004 were $11.1 billion and $10.0 billion, respectively. Cost of sales as
a percent of net sales was 64.3 percent for 2005, compared with 64.4 percent in 2004. The gross profit
margin increased from 35.6 percent in 2004 to 35.7 percent for 2005 primarily as a result of increased
volume and leverage on higher sales, as well as benefits realized from prior rationalization and productivity
improvements. Across the Company, higher costs for raw materials were substantially recovered through
increases in sales prices, which partially offset these improvements.
Cost of sales for fiscal 2004 and 2003 were $10.0 billion and $9.1 billion, respectively. Cost of sales as a
percent of net sales was 64.4 percent for 2004, compared with 64.9 percent in 2003. The increase in the
gross profit margin from 35.1 percent in 2003 to 35.6 percent for 2004 primarily reflects increased volume
and leverage on higher sales, as well as benefits realized from prior rationalization and other cost reduction
efforts. These improvements, however, were partially offset by negative impacts from lower sales prices and
higher costs for wages and benefits (including higher pension costs).
International Sales
(dollars in billions)
International destination sales
increased 11 percent to $8.2 billion
in 2005, representing 47 percent
of total sales.
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