Emerson 2006 Annual Report Download - page 31

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volume of approximately 7 percent and estimated penetration
gains of approximately 4 percent, offset by an estimated
3 percent impact from lower sales prices. Geographically,
underlying sales reect an 11 percent increase in the United
States and a 14 percent increase in Asia (primarily China), offset
by a 2 percent decrease in Europe. The growth in the United
States reects strong market demand for communications and
enterprise computer equipment in 2005. Growth in Asia was
driven by increased demand for communications and power
equipment, supported by a robust economic environment.
Earnings increased 26 percent, or $76 million, to $373 million,
compared with $297 million in 2004, primarily reecting higher
sales volume, leverage of approximately 2 percentage points
and benets from prior cost reductions. The earnings increase
and margin were impacted by negative price, partially offset by
material cost containment. In addition, negative product mix
in the embedded power business, as well as integration costs
related to the Marconi acquisition, impacted protability.
                   
      change change
(dollarsinmillions) 2004 2005 2006 ‘04-‘05  ‘05-‘06
Sales $2,983 3,041  2% 
Earnings $ 467 453  (3%) 
Margin 15.7% 14.9% 
 Sales in the Climate Technologies segment
were $3.4 billion in 2006, an increase of 13 percent compared
to 2005. Underlying sales grew 13 percent, which reects a
14 percent increase in the United States, a 20 percent increase
in Europe and a 1 percent increase in Asia. The underlying sales
growth was largely due to strong demand in the air-conditioning
compressor business and an estimated 1 percent positive
impact from higher sales prices. The volume increase of
12 percent, one-fourth of which is estimated to be from market
share gains, was primarily related to scroll compressors. The
air-conditioning compressor business was very strong during
the year primarily due to demand relating to the transition in
the United States to higher efciency standards that became
effective January 23, 2006, as well as weather related demand.
Earnings increased 15 percent to $523 million in 2006 compared
to $453 million in 2005, primarily due to higher volume. The margin
increase reects leverage on higher sales and savings from prior
period cost reduction efforts, partially offset by higher wages
and benets (pension). The margin increase was negatively
impacted as the higher sales prices were more than offset by
higher material costs. The Company has begun capacity expansion
in Mexico where the next generation scroll compressor design and
hermetic motors for the North American market will be produced.
 Climate Technologies segment sales were
$3.0 billion in 2005, an increase of 2 percent compared to 2004.
Excluding a 1 percent positive impact from foreign currency
translation, underlying sales grew 1 percent versus strong 2004
results. Higher sales prices of approximately 2 percent and
market share gains were substantially offset by volume decreases
due to inventory reductions in the supply chain in the United
States and China, as well as decreased wholesaler exports from
Europe due to the strong Euro. Sales results for 2005 were
mixed across the businesses, with strong growth in U.S. air-
conditioning compressors during the fourth quarter driving the
overall increase. The growth in the compressor business reects
replenishment of inventories in the distribution channel in the
fourth quarter due to late season, warm weather in the United
States, as well as anticipatory demand due to the pending
transition in the United States to higher efciency standards.
The underlying sales reect a 3 percent increase in the United
States, an 8 percent decline in Europe and a 4 percent decline
in Asia, while sales in Latin America increased 35 percent off a
smaller base. Earnings from Climate Technologies decreased
3 percent to $453 million in 2005 compared to $467 million
in 2004, primarily due to negative impacts from lower sales
volume, product mix and higher wage costs, partially offset by
benets from prior cost reduction efforts and lower rationalization
costs compared to 2004. Higher sales prices substantially offset
higher material costs, which had a dilutive impact on the margin.
                  
      changechange
(dollarsinmillions) 2004 2005 2006 ‘04-‘05 ‘05-‘06
Sales $3,749 4,008  7% 
Earnings $ 530 534  1% 
Margin 14.1% 13.3% 
 The Appliance and Tools segment sales increased
8 percent to $4.3 billion for 2006. This increase reects 6 percent
growth in underlying sales and a 2 percent ($62 million) contribu-
tion from the Do+Able acquisition. Sales grew in nearly all of the
businesses with most experiencing moderate to strong growth.