Emerson 2005 Annual Report Download - page 32

2 0 E M E R S O N 2 0 0 5
Earnings from continuing operations were $1.3 billion and earnings per share were $2.98 for 2004,
increases of 24 percent compared to $1.0 billion and $2.41 for 2003. These earnings results reflect
increases for all of the business segments, particularly in the Network Power, Process Management and
Climate Technologies businesses. The higher earnings also reflect increased volume and leverage from the
higher sales, savings from cost reduction efforts, partially offset by lower sales prices and other items. The
increase also reflects the decrease in other deductions, net discussed above, partially offset by a $14 million
($0.03 per share) contribution in 2003 from the tax benefits of the restructuring of the ETP business net of
the impairment charge.
Discontinued Operations
In May 2003, the Board of Directors approved a plan to restructure the Jordan business acquired in 2000,
in which the Dura-Line business would be sold and its other businesses would be retained by Emerson.
Discontinued operations of $76 million, or $0.18 per share, in 2003 included a net gain of $83 million
(including income tax benefit of $170 million), or $0.20 per share, related to the sale of Jordan stock
including its Dura-Line operations. The operating results of Dura-Line have been reclassified to
discontinued operations in the Consolidated Statements of Earnings for fiscal year 2003. See Note 3
for additional information.
Net Earnings and Return on Equity
Net earnings and earnings per share for 2005 increased 13 percent and 14 percent, respectively, to
$1.4 billion and a record $3.40 per share, compared to $1.3 billion and $2.98 per share in 2004. Net earnings
as a percent of net sales was 8.2 percent in 2005 compared to 8.1 percent in 2004. Net earnings for 2005
include a tax expense of $63 million, or $0.15 per share, related to the one-time opportunity to repatriate
foreign earnings. The 14 percent increase in earnings per share also reflects the purchase of treasury shares.
Return on average stockholders’ equity was 19.4 percent and 18.4 percent for 2005 and 2004, respectively.
Net earnings for 2004 were $1.3 billion, or $2.98 per share, compared to $1.1 billion, or $2.59 per share, for
2003, increases of 15 percent. Net earnings in 2003 include the net gain from discontinued operations of
$76 million, or $0.18 per share. Net earnings as a percent of net sales were 8.1 percent in 2004, compared to
7.8 percent in 2003. Return on average stockholders’ equity was 18.4 percent and 17.9 percent for 2004 and
2003, respectively.
Business Segments
Process Management
‘03 - ‘04 ‘04 - ‘05
(dollars in millions) 2003 2004 2005 Change Change
Sales $3,394 3,703 4,200 9% 13%
Earnings $ 388 476 671 23% 41%
Margin 11.4% 12.9% 16.0%
Sales in the Process Management segment were $4.2 billion in 2005, up $497 million, or 13 percent, over
2004, reflecting stronger market demand for capital goods (including process automation products and
systems), penetration gains in excess of 1 percent and acquisitions. Nearly all of the businesses reported
sales increases, with sales and earnings particularly strong for the valves and measurement business due
to growth in oil and gas projects, and expansion in China. Underlying sales increased 9 percent, excluding a
2 percent ($84 million) positive contribution from the Metran, Tescom and Mobrey acquisitions and a
2 percent ($79 million) favorable impact from currency translation. The increase in underlying sales reflects
22 percent growth in Asia, 29 percent growth in Canada, 13 percent growth in Latin America and 5 percent
growth in the United States, while sales in Europe increased 1 percent compared with 2004. Volume growth,
leverage on the higher sales of approximately 2 percentage points and savings from prior cost reduction
efforts drove a 41 percent increase in earnings (defined as earnings before interest and taxes), from
$476 million in 2004 to $671 million for 2005.
(dollars in millions)
Earnings from continuing
operations increased 13 percent
to $1.4 billion in 2005.
Earnings from
Continuing Operations
$1,400
$1,050
$700
$350
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