Emerson 2012 Annual Report Download - page 28

26 | 2012 Annual Report
COMMERCIAL & RESIDENTIAL SOLUTIONS
change CHANGE
(DOLLARS IN MILLIONS) 2010 2011 2012 ‘10 - ‘11 ‘11 - ‘12
Sales $1,755 1,837 1,877 5% 2%
Earnings $ 357 375 396 5% 6%
Margin 20.3% 20.4% 21.1%
2012 vs. 2011 – Commercial & Residential Solutions sales
increased $40 million to $1.9 billion in 2012, reflecting
a 6 percent ($103 million) increase in underlying sales,
partially offset by an unfavorable 4 percent ($63 million)
combined impact from the 2012 Knaack storage business
and 2011 heating elements divestitures. Underlying
sales growth reflects 4 percent higher volume and an
estimated 2 percent from price. The sales increase was
led by strong growth in both the storage and food waste
disposers businesses and moderate growth in the profes-
sional tools business, partially offset by a slight decrease
in the wet/dry vacuums business. Underlying sales
increased 4 percent in the United States and 9 percent
internationally. Earnings of $396 million were up
$21 million compared to the prior year. Higher volume
and leverage increased margin 0.7 percentage points as
pricing and cost containment actions were partially
offset by higher materials, litigation and other costs,
and unfavorable product mix. Earnings were also affected
by a $7 million unfavorable comparison with prior
year from the divested heating elements business.
2011 vs. 2010 – Sales for Commercial & Residential
Solutions were $1.8 billion in 2011, an $82 million
increase. Sales growth reflected an underlying increase
of 5 percent, including approximately 4 percent from
higher volume and an estimated 1 percent from higher
selling prices, and favorable foreign currency translation
of 1 percent ($13 million), partially offset by a nega-
tive 1 percent ($21 million) impact from the heating
elements unit divestiture. The sales increase was led
by very strong growth in the professional tools and
commercial storage businesses and modest growth in
the food waste disposers business, partially offset by
decreases in the consumer-related wet/dry vacuums and
residential storage businesses due to continued weak
U.S. residential construction markets. Underlying sales
increased 5 percent in the United States and 11 percent
internationally. Earnings for 2011 were $375 million, an
increase of $18 million, reflecting earnings growth in
the professional tools business partially offset by lower
earnings in the wet/dry vacuums, residential storage and
food waste disposers businesses. Margin increased on
higher sales volume and resulting leverage in the profes-
sional tools business as well as savings from prior period
cost reductions, largely offset by higher freight costs and
unfavorable product mix. Higher materials costs were
substantially offset by price increases.
Financial Position, Capital Resources
and Liquidity
The Company continues to generate substantial cash
from operations, is in a strong financial position with total
assets of $24 billion and common stockholders’ equity of
$10 billion, and has the resources available to reinvest for
growth in existing businesses, pursue strategic acquisi-
tions and manage its capital structure on a short- and
long-term basis.
CASH FLOW
(DOLLARS IN MILLIONS) 2010 2011 2012
Operating Cash Flow $3,292 3,233 3,053
Percent of sales 15.6% 13.3% 12.5%
Capital Expenditures $ 524 647 665
Percent of sales 2.5% 2.7% 2.7%
Free Cash Flow (Operating Cash
Flow less Capital Expenditures) $2,768 2,586 2,388
Percent of sales 13.1% 10.6% 9.8%
Operating Working Capital $1,402 1,705 2,132
Percent of sales 6.7% 7.0% 8.7%
08
$3.3
12111009
$3.1 $3.3 $3.2 $3.1
63% 64%
OPERATING CASH FLOW AND
PAYOUT PERCENT (Dollars in billions)
64%
OPERATING
CASH FLOW
RETURNED TO
STOCKHOLDERS