Emerson 2010 Annual Report Download - page 21

2010 Annual Report
19
Results of Operations
Years ended September 30 | Dollars in millions, except per share amounts
CHANGE CHANGE
2008 2009 2010 2008 - 2009 2009 - 2010
Net sales $23,751 20,102 21,039 (15)% 5%
Gross profit $ 8,938 7,560 8,326 (15)% 10%
Percent of sales 37.6% 37.6% 39.6%
SG&A $ 4,915 4,416 4,817
Percent of sales 20.7% 22.0% 22.9%
Other deductions, net $ 190 474 369
Interest expense, net $ 188 220 261
Earnings from continuing operations
before income taxes $ 3,645 2,450 2,879 (33)% 18%
Percent of sales 15.3% 12.2% 13.7%
Earnings from continuing operations
common stockholders $ 2,446 1,715 1,978 (30)% 15%
Net earnings common stockholders $ 2,412 1,724 2,164 (29)% 26%
Percent of sales 10.2% 8.6% 10.3%
Diluted EPS – Earnings from continuing operations $ 3.10 2.26 2.60 (27)% 15%
Diluted EPS – Net earnings $ 3.06 2.27 2.84 (26)% 25%
Return on common stockholders’ equity 27.0% 19.5% 23.6%
Return on total capital 21.8% 16.2% 18.9%
OVERVIEW
Fiscal 2010 was a challenging year but improving
economic conditions, strong operating results in the
second half of the year, and two key acquisitions leave the
Company well positioned going into 2011. Worldwide
gross fixed investment stabilized during the year and is
slowly recovering. In served markets, industrial produc-
tion and manufacturing have increased while residential
and nonresidential construction remains weak. Overall,
sales increased moderately for the year due essentially
to acquisitions and favorable foreign currency transla-
tion, while earnings increased in all of the Company’s
business segments for 2010. Net sales were $21.0 billion,
an increase of 5 percent versus 2009, and earnings and
earnings per share from continuing operations common
stockholders were $2.0 billion and $2.60, respectively,
both increases of 15 percent. Despite declining slightly
for the year, underlying sales of all segments and in all
geographic regions grew in the fourth quarter, reflecting
the positive trend which began in the second half of the
year. The slight annual sales decrease was due to a decline
in Europe, Canada and Middle East/Africa, partially offset
by a strong increase in Asia, including a 13 percent increase
in China, and a slight increase in the United States. The
growth in segment earnings reflects successful restruc-
turing and cost containment efforts in both 2009 and
2010. Despite completing two key acquisitions in 2010,
Emerson’s financial position remains strong. The
Company generated operating cash flow of $3.3 billion
and free cash flow of $2.8 billion (operating cash flow
less capital expenditures 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
results of operations for these businesses reclassified to
discontinued operations for all periods presented.
NET SALES
Net sales for 2010 were $21.0 billion, an increase of
$937 million, or 5 percent from 2009. Sales growth was
strong in Climate Technologies, aided by China stimulus
programs, while Network Power, Tools and Storage
(formerly Appliance and Tools) and Industrial Automa-
tion increased due to acquisitions and favorable foreign
currency translation. Process Management was down as
end markets were strongly impacted by the economic
slowdown. Consolidated results reflect a 1 percent
($102 million) decline in underlying sales (which exclude
acquisitions, divestitures and foreign currency transla-
tion), a 4 percent ($738 million) contribution from
acquisitions and a 2 percent ($301 million) favorable
impact from foreign currency translation. Underlying