Emerson 2015 Annual Report Download - page 21

2015 Annual Report | 19
Results of Operations
Year s ended September 30 | Dollars in millions, except per share amounts
CHANGE CHANGE
2013 2014 2015 ‘13 - ‘14 ‘14 - ‘15
Net sales $24,669 24,537 22,304 (1)% (9)%
Gross profit $ 9,952 10,158 9,048 2 % (11)%
Percent of sales 40.3% 41.4% 40.6%
SG&A $ 5,648 5,715 5,184
Percent of sales 22.9% 23.3% 23.3%
Gains on divestitures of businesses $— — 1,039
Goodwill impairment $ 528 508 —
Other deductions, net $ 362 393 571
Interest expense, net $ 218 194 171
Earnings before income taxes $ 3,196 3,348 4,161 5 % 24 %
Percent of sales 13.0% 13.6% 18.7%
Net earnings common stockholders $ 2,004 2,147 2,710 7 % 26 %
Percent of sales 8.1% 8.7% 12.2%
Diluted EPS – Net earnings $ 2.76 3.03 3.99 10 % 32 %
Return on common stockholders’ equity 19.2% 20.7% 29.8%
Return on total capital 16.4% 17.5% 22.8%
OVERVIEW
Emerson’s sales for 2015 were $22.3 billion, a decrease
of $2,233 million, or 9 percent in a very challenging
environment. Underlying sales were down 2 percent
compared with prior year due to a slowdown in
industrial capital spending, particularly in oil and gas and
energy-related markets, and slowing economic activity
in China and other emerging markets. In addition, the
significant strength of the U.S. dollar and divestitures
reduced sales by 7 percent.
Net earnings common stockholders were $2,710 million
in 2015, up 26 percent compared with prior year earnings
of $2,147 million. Diluted earnings per share were
$3.99, up 32 percent versus $3.03 per share in 2014.
Excluding certain items, net earnings were $2,151 million,
down 19 percent compared with $2,655 million in 2014,
while diluted earnings per share were $3.17, down
15 percent versus $3.75 in 2014.
Excluded items in 2015 include gains of $532 million,
$0.78 per share, and $79 million, $0.12 per share, from
the divestitures of the power transmission solutions
and commercial storage businesses, respectively, and
costs of $52 million for fees and income tax expense,
($0.08) per share, related to the planned spinoff of the
network power systems business. Excluded from 2014 is
a goodwill impairment charge of $508 million, $0.72 per
share, related to the network power systems business
in Europe. These items collectively benefited 2015
net earnings and earnings per share growth 45 and
47 percentage points, respectively.
Sales declined in four of the Company’s five operating
segments. Process Management sales decreased
7 percent, primarily due to unfavorable foreign currency
translation of 5 percent, and the slowdown in oil and
gas capital spending. Industrial Automation was down
17 percent, due to a negative impact from a divestiture
of 7 percent and unfavorable foreign currency
translation of 6 percent, as well as reduced industrial
capital spending and weakness in Europe. Sales for
Network Power decreased 12 percent on unfavorable
foreign currency translation of 5 percent, divestitures
of 4 percent, and lower customer capital spending.
Climate Technologies sales decreased 2 percent due
to the impact of foreign currency translation, while
underlying sales were flat. Commercial & Residential
Solutions sales were also flat.
The Company generated operating cash flow of
$2.5 billion and free cash flow (operating cash flow
less capital expenditures) of $1.8 billion. Operating
cash flow was reduced $424 million in 2015 for the
payment of income taxes on the divestiture gains.