Emerson 2010 Annual Report Download

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2010 Emerson
Annual Report

Table of contents

  • Page 1
    2010 Emerson D Annual Report

  • Page 2
    ... the bestcost foundation - all of which prepare Emerson for eventual strong recovery. Emerson continuously supports customers and their industries as they deal with their specific challenges around the world. We are planning, innovating, creating first-of-their-kind solutions and delivering...

  • Page 3
    ...change YearsDendedDSeptemberD30D DollarsDinDmillions,DexceptDperDshareDamounts D D five-year 2005 2010 cagr Sales Net earnings Net earnings per share Earnings per share from continuing operations Dividends per share Operating cash flow Return on total capital Return on equity $20,102 $ 1,724...

  • Page 4
    The Office of the Chief Executive (OCE) FromDleft:DFrankDJ.DDellaquila,DSeniorDViceDPresidentDandDChiefDFinancialDOfficer;DWalterDJ.DGalvin,DViceDChairman;DD DavidDN.DFarr,DChairmanDandDChiefDExecutiveDOfficer;DCraigDW.DAshmore,DExecutiveDViceDPresidentDPlanningDandDDevelopment;DD CharlesDA.DPeters,...

  • Page 5
    ... to perform better, when the economic cycle strengthens. Today the company is in the strongest position ever. Our business foundation is set for solid, profitable growth during the next five years. Emerson's disciplined management process, applied by the strongest and most innovative people, allows...

  • Page 6
    ... Network Power is one of the world's leading providers of reliable power, precision cooling, services and integrated infrastructure solutions for the data centers and telecommunications networks at the heart of the global information exchange. With the acquisition of Avocent this year, Emerson...

  • Page 7
    5 2010 Annual Repor t

  • Page 8
    ... 40 percent of Emerson's total sales. Emerson will be where our customers need us to support them and to provide meaningful solutions. Global customer demand has been improving in all of our five business segments - Process Management, Industrial Automation, Network Power, Climate Technologies, and...

  • Page 9
    ... for new products and technology, and to return cash to shareholders through dividends and stock repurchases. Strong cash flow performance represents our absolute commitment to capital efficiency and driving long-term value for our shareholders. Fiscal 2010 marked Emerson's 54th consecutive annual...

  • Page 10
    .... One of the world's largest integrated energy companies, Chevron constantly looks for new and better ways to operate reliably. A recent Chevron commitment is to Emerson wireless technologies. Ever-present in our daily lives, wireless technologies are transforming energy and other industries by...

  • Page 11
    9 2010 Annual Repor t

  • Page 12
    ... of slower economic growth. We are a company focused on current and future opportunities that expand our served markets and our growth potential. Today, in locations around the world, we apply Emerson's knowledge, insight, technology and passion to grow our customers' businesses and help them win in...

  • Page 13
    ... (2) pursue technology leadership, (3) globalize assets and (4) drive business efficiency. 2010 Annual Repor t Successfully maintaining the proper balance between meeting today's financial needs and designing solutions to meet the needs of tomorrow is an essential building block of Emerson's growth...

  • Page 14
    Global Business Integration Emerson Climate Technologies helps passengers of China's railway and subway systems ride in reliable, airconditioned comfort. Travel by rail is an important solution to the challenges in urban public transportation and is often the preferred choice for moving from one ...

  • Page 15
    13 2010 Annual Repor t

  • Page 16
    ... two key acquisitions in 2010 in Emerson Network Power, Avocent and Chloride, to strengthen our ability to address customers' growing demand for reliable power, energy efficiency and an integrated data center solution. (See related story on Page 4.) In fiscal 2010, we sold our appliance motors and...

  • Page 17
    ... in Sorocaba, Brazil; a Network Power precision cooling facility in Jiangmen, China; and a Process Management sales and service center in Abu Dhabi are fueling growth, supporting customers and delivering best-cost position. There is much more to come. Emerson Climate Technologies' growing presence...

  • Page 18
    ... Wuqing, China Suzhou, China Shanghai, China Manila, Philippines Austin, TX Chanhassen, MN Marshalltown, IA Sidney, OH Columbus, OH Mumbai, India Pune, India Delhi, India At Emerson, We Do what we say we are going to do. Our focus on driving business efficiency benefits both top-line and bottom...

  • Page 19
    ...and the board of directors for their support as we continue to grow this company and take Emerson to higher levels of achievement - on all fronts. Thank you for your continued support and commitment. David N. Farr Chairman and Chief Executive Officer 17 2010 Annual Repor t a healthy and vibrant...

  • Page 20
    ... generally accepted accounting principles. The design of this system recognizes that errors or irregularities may occur and that estimates and judgments are required to assess the relative cost and expected benefits of the controls. Management believes that the Company's internal accounting controls...

  • Page 21
    ... of $0.5 billion). The Company completed significant repositioning actions through the acquisition of Avocent Corporation and Chloride Group PLC, strengthening our Network Power business. In addition, the appliance motors and U.S. commercial and industrial motors businesses were divested, with the...

  • Page 22
    ... The Company acquired Avocent Corporation, Chloride Group PLC, SSB Group GmbH and several smaller businesses during 2010. Avocent is a leader in delivering solutions that enhance companies' integrated data center management capabilities and the acquisition strongly positioned the Company to benefit...

  • Page 23
    ... 2009, the Company acquired Roxar ASA, Trident Powercraft Private Limited, System Plast S.p.A. and several smaller businesses. Roxar supplies measurement solutions and software for reservoir production optimization, enhanced oil and gas recovery and flow assurance. Trident Power manufactures and...

  • Page 24
    ... in Process Management, $228 million in Network Power, $158 million in Climate Technologies and $145 million in Tools and Storage. DISCONTINUED OPERATIONS In connection with the acquisition of Avocent in the first quarter of 2010, the Company announced the LANDesk business unit of Avocent was...

  • Page 25
    ... and movement of the retained hermetic motors business from Tools and Storage (formerly Appliance and Tools) to Industrial Automation. PROCESS MANAGEMENT CHANGE CHANGE (DOLLARS IN MILLIONS) Sales Earnings Margin 2008 $6,548 $1,301 19.9% 2009 6,135 1,060 2010 6,022 1,093 '08 - '09 '09 - '10...

  • Page 26
    ... reduction (approximately 1 point) and higher rationalization costs of $27 million, partially offset by savings from cost reduction actions and price increases. 20% 27% 17% 28% 8% n Process Management n Industrial Automation n Network Power n Climate Technologies n Tools and Storage 24

  • Page 27
    ... - Climate Technologies reported sales of $3.8 billion for 2010, a 19 percent increase from 2009, reflecting increases across all businesses, including compressors, temperature sensors and heater controls. Sales growth was strong in Asia and North America, aided by stimulus programs in support of...

  • Page 28
    ... storage, tools and appliance businesses were due to the continued downturn in the U.S. residential and nonresidential markets, while a decline in the appliance solutions business reflected major customers reducing inventory and production levels due to the difficult economic conditions. The sales...

  • Page 29
    ...worldwide business. In 2011, the Company is targeting capital spending of approximately $600 million. Net cash paid in connection with acquisitions was $2,843 million, $776 million and $561 million in 2010...Purchases of Emerson common stock totaled $100 million, $695 million and $1,128 million in 2010...

  • Page 30
    ... the Avocent and Chloride acquisitions, which also included issuance of long-term debt, proceeds from divestitures and the availability of operating cash flow. See Note 3 for additional information. In the first quarter of 2010, the Company issued $300 million each of 4.25% notes due November 2020...

  • Page 31
    ...FINANCIAL INSTRUMENTS The Company is exposed to market risk related to changes in interest rates, commodity prices and foreign currency exchange rates, and selectively uses derivative financial instruments, including forwards, swaps and purchased options, to manage these risks. The Company does not...

  • Page 32
    ...-related assets, the calculations of defined benefit plan expense and obligations are dependent on assumptions made regarding the expected annual return on plan assets, the discount rate and rate of annual compensation increases. In accordance with U.S. generally accepted accounting principles...

  • Page 33
    ... nings EMERSON ELECTRIC CO. & SUBSIDIARIES Years ended September 30 | Dollars in millions, except per share amounts 2008 Net sales Costs and expenses: Cost of sales selling, general and administrative expenses other deductions, net interest expense, net of interest income: 2008, $56; 2009, $24; 2010...

  • Page 34
    ... Receivables, less allowances of $93 in 2009 and $98 in 2010 inventories: finished products Raw materials and work in process total inventories other current assets total current assets Property, plant and equipment land Buildings machinery and equipment Construction in progress 2009 $ 1,560 3,623...

  • Page 35
    ... short-term borrowings and current maturities of long-term debt Accounts payable Accrued expenses income taxes total current liabilities Long-term debt Other liabilities Equity Preferred stock, $2.50 par value per share; Authorized, 5,400,000 shares; issued, none Common stock, $0.50 par value per...

  • Page 36
    ConsolidAted s tAtements of eQ U it Y EMERSON ELECTRIC CO. & SUBSIDIARIES Years ended September 30 | Dollars in millions, except per share amounts 2010 477 2008 Common stock Additional paid-in capital Beginning balance stock plans and other ending balance Retained earnings Beginning balance net ...

  • Page 37
    ... other current assets Accounts payable Accrued expenses income taxes total changes in operating working capital $ $ (293) (90) 19 199 154 (11) (22) 1,011 580 42 (709) (94) (210) 620 (341) (160) (69) 498 298 83 309 2010 Annual Repor t See accompanying Notes to Consolidated Financial Statements. 35

  • Page 38
    ... of significant accounting Policies Finanuial statement Presentation the preparation of the financial statements in conformity with U.s. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual...

  • Page 39
    .... management believes that all relevant criteria and conditions are considered when recognizing revenue. deriVatiVes and HedGinG in the normal course of business, the Company is exposed to changes in interest rates, foreign currency exchange rates and commodity prices due to its worldwide presence...

  • Page 40
    ... 30, 2010, the Company adopted updates to AsC 715, Comuensation - Retirement Fenefits. these updates expand disclosure about an entity's investment policies and strategies for assets held by defined benefit pension or postretirement plans, including information regarding major classes of plan assets...

  • Page 41
    ... power supply systems and services, which significantly strengthens the Company's Network Power business in europe, and is included in the Network Power segment. in addition to Avocent, ssB and Chloride, the Company acquired other smaller businesses during 2010, mainly in the Process management...

  • Page 42
    ...the industrial Automation segment. in addition to Roxar, trident Power and system Plast, the Company acquired other smaller businesses during 2009, mainly in the Climate technologies, tools and storage and Process management segments. total cash paid for all businesses was approximately $776, net of...

  • Page 43
    ...Actions during 2010 included Process management reducing worldwide forcecount and consolidating some North American and european production; industrial Automation consolidating production and sales facilities within europe and North America; Network Power reducing worldwide forcecount, consolidating...

  • Page 44
    ... and storage shifting production from Canada to the U.s. and closing motor production facilities in europe. (6) Goodwill and other intangibles Acquisitions are accounted for under the purchase method, with substantially all goodwill assigned to the reporting unit that acquires the business. Under...

  • Page 45
    ... currency Commodity total 2010 location other income (deductions) Cost of sales $(67) (11) $(78) 117 - 117 Regardless of whether or not derivatives receive deferral accounting, the Company expects hedging gains or losses to be essentially offset by losses or gains on the related underlying...

  • Page 46
    ...: 2009 Current maturities of long-term debt Commercial paper Payable to banks total Weighted-average short-term borrowing interest rate at year end $566 - 11 $577 1.1% 2010 71 401 8 480 0.3% the Company periodically issues commercial paper as a source of short-term financing. to support short-term...

  • Page 47
    ...components: u.s. plans non-u.s. plans 2008 defined benefit plans: service cost (benefits earned during the period) interest cost expected return on plan assets Net amortization Net periodic pension expense defined contribution plans total retirement plans expense 2009 2010 2008 2009 2010 $ 48...

  • Page 48
    ... U.s. retirement plans was 5.0 percent as of september 30, 2010. An actuarially determined, company-specific yield curve is used to determine the discount rate. defined benefit pension plan expense for 2011 is expected to be approximately $145 versus $132 in 2010. the expected return on plan assets...

  • Page 49
    ..., recent transactions, transferability restrictions, prevailing discount rates, volatilities, credit ratings and other factors. in the other class, interests in mixed assets funds are level 2 and U.s. life insurance contracts and non-U.s. general fund investments and insurance arrangements are level...

  • Page 50
    ... less than 5 percent. the Company estimates that future health care benefit payments will be $39 in 2011, $39 in 2012, $38 in 2013, $37 in 2014, $36 in 2015 and $160 in total over the five years 2016 through 2020. (12) uontingent liabilities and uommitments emerson is a party to a number of pending...

  • Page 51
    ... 170 49 2010 Annual Repor t if none of the unrecognized tax benefits shown is ultimately paid, the tax provision and the calculation of the effective tax rate would be favorably impacted by $132. Acquired positions of $27 in 2010 are included in additions for the current year. the Company accrues...

  • Page 52
    .... stouK oPtions the Company's stock option plans permit key officers and employees to purchase common stock at specified prices. options are granted at 100 percent of the average of the high and low prices of the Company's common stock on the date of grant, generally vest one-third each year and...

  • Page 53
    ...222,379 non-vested shares of restricted stock outstanding, including 254,379 shares related to the one-time Avocent conversion. Changes in awards outstanding but not yet earned under the incentive shares plans during the year ended september 30, 2010 follow: average grant date (shares in thousands...

  • Page 54
    ... conditioning and uninterruptible AC and dC power supplies, embedded power supplies, precision cooling systems, electrical switching equipment, and integrated infrastructure monitoring and management systems for telecommunications networks, data centers and other critical applications. the Climate...

  • Page 55
    depreciation and intersegment sales amortization expense capital expenditures 2008 Process management industrial Automation Network Power Climate technologies tools and storage Corporate and other total $ 5 570 15 53 29 2009 2 499 16 43 23 2010 3 570 31 46 6 2008 148 135 149 139 115 21 707 2009...

  • Page 56
    ... deferred income taxes Pension plans Postretirement plans, excluding current portion other total $ 406 613 460 624 $2,103 2010 762 612 380 702 2,456 other operating cash flow is comprised of the following: 2008 Pension expense stock compensation expense (Gain)/loss on sale of businesses, net of tax...

  • Page 57
    ...for defined benefit pension and postretirement plans by adopting the measurement date provision of AsC 715, and effective october 1, 2009, the Company changed its method of accounting for business combinations (AsC 805), noncontrolling interests (AsC 810) and earnings per share (AsC 260). st. louis...

  • Page 58
    ... stockholders operating cash flow Return on average common stockholders' equity Per Share of Common Stock diluted: earnings from continuing operations Net earnings Cash dividends Book value Year-End Financial Position operating working capital Percent of net sales Property, plant and equipment, net...

  • Page 59
    ...,904 1.51 1.65 0.72 7.49 2,336 15.0% 3,243 15,164 2,248 6,403 41.8% 40.2% 692 454 1,196 3,376 123,400 35,000 862,790 57 2010 Annual Repor t

  • Page 60
    ..., illinois chairman of the Board, the aethena Group, LLc Audit Committee John B. Menzer irving, texas chief executive officer, Michaels stores, inc. ADVISORY DIRECTORS E.K. Feeney executive Vice President, emerson David N. Farr st. Louis, Missouri chairman and chief executive officer, emerson...

  • Page 61
    ... MANAGEMENT E.K. Feeney executive Vice President R.E. Browning Vice Presidentdevelopment L.A. Rodriguez Presidentemerson Latin america V.A. Lazzaretti Vice President and deputy General counsel K. Button Bell Vice President and chief Marketing officer S.C. Roemer Vice Presidentfinancial Planning...

  • Page 62
    ... in emerson's World Headquarters Building, 8000 W. florissant ave., st. Louis, Missouri 63136. Notice of the meeting, proxy statement, and proxy were sent to stockholders with this annual report. REGISTRAR AND TRANSFER AGENT By Mail: BNY Mellon shareowner services LLc attention: emerson electric co...

  • Page 63
    ...; emerson Process Management; emerson climate technologies; emerson tools and storage; emerson appliance and tools; avocent; Business-critical continuity; chloride; copeland scroll; trellis; and their related designs and logotypes are trademarks, service marks and/or trade names of emerson, its...

  • Page 64
    Emerson World Headquarters 8000 W. florissant ave. P.o. Box 4100 st. Louis, Mo 63136 emerson.com