Emerson 2012 Annual Report Download - page 21

2012 Annual Report | 19
Results of Operations
Years ended September 30 | Dollars in millions, except per share amounts
CHANGE CHANGE
2010 2011 2012 ‘10 - ‘11 ‘11 - ‘12
Net sales $21,039 24,222 24,412 15% 1 %
Gross profit $ 8,326 9,557 9,768 15% 2 %
Percent of sales 39.6% 39.5% 40.0%
SG&A $ 4,817 5,328 5,436
Percent of sales 22.9% 22.0% 22.3%
Goodwill impairment $ – 19 592
Other deductions, net $ 369 356 401
Interest expense, net $ 261 223 224
Earnings from continuing operations
before income taxes $ 2,879 3,631 3,115 26% (14)%
Percent of sales 13.7% 15.0% 12.8%
Earnings from continuing operations
common stockholders $ 1,978 2,454 1,968 24% (20)%
Net earnings common stockholders $ 2,164 2,480 1,968 15% (21)%
Percent of sales 10.3% 10.2% 8.1%
Diluted EPS – Earnings from continuing operations $ 2.60 3.24 2.67 25% (18)%
Diluted EPS – Net earnings $ 2.84 3.27 2.67 15% (18)%
Return on common stockholders’ equity 23.6% 24.6% 19.0%
Return on total capital 18.9% 19.6% 15.8%
OVERVIEW
Emerson delivered another solid year of operational
performance in 2012 despite a challenging global macro-
economic environment. The Company’s businesses
remained focused on execution and managing through
uncertain market conditions. Net sales for 2012 increased
1 percent from the prior year to $24.4 billion, led by
a second consecutive year of double-digit growth in
Process Management. Underlying sales growth of
3 percent reflected a substantial deceleration in global
economic activity as the year progressed. Currency
translation deducted 2 percent due to the strengthening
U.S. dollar. The U.S. grew 2 percent, Asia grew 3 percent
and Europe declined 1 percent.
The protracted slowdown in global telecommunications
and information technology end markets has resulted
in slower growth expectations for the embedded
computing and power and DC power businesses,
requiring a noncash goodwill impairment charge of
$592 million ($528 million after-tax, or $0.72 per share).
Net earnings per share of $2.67 includes this charge and
compares to $3.27 in the prior year. Excluding the charge
and a small impairment in the prior year, net earnings
per share was $3.39 versus $3.30.
Operating results for the first half of 2012 were adversely
affected by a supply chain disruption related to flooding
in Thailand. Sales delayed by the flooding were recovered
as the year progressed contributing to strong second-
half volume leverage. Process Management reported
strong sales and earnings growth on continued strength
in global oil and gas, chemicals, and power end markets.
Improvement in commercial and residential construction
spending aided sales and earnings growth in Commercial
& Residential Solutions. Sales in Industrial Automation
decreased modestly on mixed results among businesses
and unfavorable foreign currency translation. Network
Power results showed persistent weakness in telecom-
munications and information technology markets and
deleverage in the embedded computing and power busi-
ness. Sales and earnings declined for Climate Technologies
on weakness in global air conditioning markets.
The Company generated operating cash flow of $3.1 billion
and free cash flow (operating cash flow less capital expen-
ditures) of $2.4 billion. Despite the uncertain economic
outlook, Emerson is well positioned moving into 2013
given its strong financial position, global footprint in
mature and emerging markets, and focus on products
and technology.