Emerson 2008 Annual Report Download - page 31

[ 24 ] Emerson 2008
commercial motors businesses declined. The strong
growth in the professional tools business was driven by
U.S. non-residential and Latin American markets. The
declines in the residential storage and appliance-related
businesses primarily reect the continued and ongoing
downturn in the U.S. consumer appliance and residential
end-markets. The U.S. markets represent more than
80 percent of sales for this segment. Underlying sales in the
United States were down 6 percent from the prior year,
while international underlying sales increased 13 percent
in total. The sales decrease reects a 3 percent decline in
underlying sales, an unfavorable impact from divestitures
of 2 percent ($65 million) and a favorable impact from
foreign currency translation of 1 percent ($40 million).
The underlying sales decrease of 3 percent reects an
estimated 7 percent decline in volume and an approxi-
mate 4 percent positive impact from higher sales prices.
Earnings for 2008 were $527 million, a 7 percent decrease
from 2007. Earnings decreased because of deleverage on
the lower sales volume and an impairment charge of
$31 million in the appliance control business (see Note 4),
which was partially offset by savings from cost reduction
actions. The increase in sales prices was substantially
offset by higher material (copper and other commodi-
ties) and wage costs. The 2007 sale of the consumer hand
tools product line favorably impacted the margin.
 Sales in the Appliance and Tools segment
were $4.0 billion in 2007, a 2 percent increase from
2006. The sales increase reects a 1 percent increase in
underlying sales and a contribution from acquisitions of
1 percent ($37 million). The underlying sales increase
of 1 percent reects an estimated 4 percent decline
in volume, which includes a positive 1 percent impact
from penetration gains, and an approximate 5 percent
positive impact from higher sales prices. The results were
mixed across the businesses for this segment. The tools
and storage businesses showed moderate growth, while
sales increased slightly in the motors businesses when
compared with 2006. These increases were partially
offset by declines in the appliance controls businesses.
The growth in the tools businesses was driven by the
professional tools and disposer businesses, reecting the
success of new product launches. The volume declines
in the appliance controls and certain motors and storage
businesses were primarily caused by the downturn in U.S.
residential construction. International underlying sales
increased 13 percent in total, while underlying sales in the
United States were down 1 percent from the prior year.
Earnings for 2007 were $564 million, a 5 percent increase
from 2006. The earnings increases in tools and motor
businesses were partially offset by declines in appliance
component and certain storage businesses. Overall, the
slight margin improvement primarily reects the benets
from prior year actions, as well as lower restructuring inef-
ciencies and costs compared with the prior year. Sales
price increases were offset by higher material and wage
costs, as well as deleverage from the lower volume.

Annual dividends increased to a record $1.20 per share in
2008, representing the 52nd consecutive year of increases.


The Company continues to generate substantial cash
from operations and is in a strong nancial position with
total assets of $21 billion and stockholders’ equity of
$9 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.

(d o l l A R s inm i l l i o n s )   2006 2007 2008
Operating Cash Flow $2,512 3,016 
Percent of sales 12.5% 13.4% 13.3%
Capital Expenditures $ 601 681 
Percent of sales 3.0% 3.0% 2.9%
Free Cash Flow (Operating Cash
Flow Less Capital Expenditures) $1,911 2,335 
Percent of sales 9.5% 10.3% 10.4%
Operating Working Capital $2,044 1,915 
Percent of sales 10.1% 8.5% 8.9%
Emerson generated operating cash ow of $3.3 billion in
2008, a 9 percent increase from 2007, driven by higher
net earnings. Cash ow in 2008 also reects continued
improvements in operating working capital manage-
ment. Operating cash ow was $3.0 billion in 2007, a
20 percent increase from 2006, driven by higher net earn-
ings. At September 30, 2008, operating working capital
as a percent of sales was 8.9 percent, compared with
8.5 percent and 10.1 percent in 2007 and 2006,
respectively. Operating cash ow also reects pension
contributions of $135 million, $136 million and
$124 million in 2008, 2007 and 2006, respectively.
Free cash ow (operating cash ow less capital expendi-
tures) was $2.6 billion in 2008, compared with $2.3 billion
2003 2008
$0.79
$1.20
$0.80 $0.83 $0.89
$1.05