To Our Shareholders:
In fiscal 2016, Emerson made significant strides to transform the company into a more focused enterprise poised for stronger, long-term growth. We completed a number of the vital strategic initiatives outlined in last year's letter to reshape Emerson for the future, the most significant of which was the implementation of our One Emerson approach to realign our businesses and people into two key business platforms: Automation Solutions and Commercial & Residential Solutions. By taking this important first step, we ensured Emerson is ready and able to quickly adapt to ever-changing market dynamics and return to growth as we create broader and deeper solutions for our global customers' most complex challenges.
Our determination to create a new path to long-term growth and prosperity in the quickly evolving markets we serve became more evident in 2016. We signed agreements to sell the Network Power, Leroy-Somer and Control Techniques businesses at favorable values; all while working to streamline our total enterprise cost structure to best operate in a continued weak, low-growth global environment. Further, we acquired several strong and innovative businesses that strengthen the core of our two realigned business platforms. Much was accomplished during the year by the entire Emerson organization and there is much more work to be done entering 2017 as we rebuild sales and earnings momentum and strive to return our sales level to more than $20 billion per year.
Given the challenging market conditions and the length of the industrial investment downturn that impacted our businesses in 2015 and 2016, we believe it is important to reiterate the strategic framework we have designed to drive long-term growth and shareholder value. We also believe it is equally important to provide further transparency into our strategic planning process and projected use of capital so that all of our stakeholders have a clear understanding of the path forward and why Emerson will emerge stronger as a result of the significant transformation of our portfolio.
Emerson's strategic framework has been driven historically by our focus on creating value, delivering premium sales growth, increasing margins and cash flow and geographic expansion, particularly in emerging markets. The framework is set on a firm foundation: that Emerson is a well-managed, financially strong and highly focused enterprise with a history of delivering strong total shareholder return and 60 consecutive years of increasing dividends. Our products, technologies, systems and services hold leading positions in their served markets and support a broad range of customers that include some of the world's most recognizable brands. Our Automation Solutions business has strong leadership positions in many critical industries such as oil & gas, chemical, refining, power and life sciences and is actively working to help customers achieve top quartile performance in uncertain times and rapidly changing market conditions. Our Commercial & Residential Solutions business provides global business-to-business and business-to-consumer technologies that shape the industries which advance energy efficiency and environmental conservation, ensure human comfort and serve and protect food quality and sustainability along with other temperature-sensitive products such as medicines.
As we execute our core strategy, we look to increase our operating cash flow to above $3 billion once again, for continued investment in both internal programs and acquisitions while maintaining our historical focus of returning cash to shareholders. By focusing our investments in our core served markets where we hold leading positions, we can tap into new revenue streams, expand our product and solutions offerings, drive margin growth and drive earnings per share back to levels above three dollars. The acquisition strategy will continue to focus on both bolt-on and strategic acquisitions of products and technologies that complement our current offerings and/or expand our solutions capabilities. By doing so, we are able to provide our global customers with the most complete solutions.
Our recent acquisitions are tied closely to this strategy. The acquisition of Pentair's Valves & Controls business will allow us to expand the geographic and product footprint of our already broad automation portfolio. It also allows our Final Control business to offer the most complete valve solution available in the process market supported by an extensive global service network. In addition, its broad market exposure provides us the opportunity to further enhance our position as an industry leader in key served markets such as chemical, power, refining and oil and gas.
Our Commercial & Residential Solutions platform is comprised of market leading businesses and technologies that are poised for growth in 2017, supported by the expectation of improved end markets. We will leverage this growth to fund increased investments in unique technologies and solutions as we continue to reshape these businesses for long-term value creation. We will accomplish this by growing our core market segments and investing in innovation around energy efficiency and sustainability, environmentally friendly technologies, cold chain management and human comfort. Initiatives like The Helix Innovation Center, an investment we made during difficult economic times, ensure we are well positioned to take a leading role in shaping critical trends throughout the industry. We will also work to leverage our vast product domain knowledge in the air conditioning and refrigeration markets in order to pivot and offer more services and solutions to customers around the world. Bob Sharp's letter on the following pages outlines some examples of our focus in these areas.
We have and will continue to work very closely with our Board of Directors as we execute this strategy. The Emerson Board is highly engaged and they bring tremendous experience, insight and ideas to the table as we debate the challenges and opportunities ahead of us. Their support and willingness to actively engage with management as we reposition Emerson to enhance long-term value is one of the things I believe makes our Board unique and gives us a competitive advantage.
We will succeed and grow because Emerson has the smartest, most talented and engaged people – up and down the organization and around the globe. We're heavily invested in training and developing our people and ensuring they are challenged, supported and positioned to win. I firmly believe that as we continue to reshape the company and take the necessary steps to grow our business, we cannot accomplish this without the best and brightest talent. We must continue to identify and recruit the next generation of leaders and provide them with an environment that encourages innovation, and new ways of thinking and tackling challenges to ensure Emerson's long-term success.
Responsible Business & Ethics
This year, we enhanced our approach to sustainability as we undertook a significant update to our Corporate Social Responsibility report. This report showcases our efforts to ensure our operations are efficient and environmentally responsible, an important issue for our Board, employees, customers and shareholders. We have long been committed to conducting our business with the highest levels of integrity and responsibility, and we take this charge very seriously. The customers and industries we serve in process, industrial, commercial and residential markets provide key building blocks for critical human progress. This new report provides background on our efforts across Environmental Stewardship, Integrity & Ethics, Corporate Governance, People & Workplace, Supply Chain and Community Involvement. I encourage you to read this report which is available on our website.
2016 has been a successful year of change for Emerson, and that change could not have happened without the support, commitment and hard work of all our employees around the world. I want to extend a very special thank you to them for everything they do, day after day, to make Emerson a great company.
I would also like to thank our Board of Directors for their insight, guidance and active involvement in the company and their support during this transition. The Board has been instrumental in the transformation process, and we could not have achieved what we have in such a short amount of time without their help and willingness to take new and important risks.
On behalf of the Board of Directors and all of Emerson's global employees, we want to thank you, our shareholders, for your trust and confidence in us. I know we all share the same vision for a more focused, profitable, growth-oriented Emerson, and I look forward to working with you as we continue to reposition Emerson for the future.
David N. Farr
Chairman and Chief Executive Officer