26 Eme r s on 2013 Ann u al R e por t businesses partially offset by a slight decrease in the wet dry vacuums business Underlying sales increased 6 percent in the United States and declined 3 percent internationally Earnings of 404 million were up 8 million compared to the prior year The Knaack divestiture in 2012 unfavorably impacted earnings by 11 million Margin increased 06 percentage points on savings from cost reduction actions and materials cost containment partially offset by unfavorable product mix and higher other costs 2012 vs 2011 Commercial Residential Solutions sales increased 40 million to 19 billion in 2012 refecting 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 refects 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 professional tools business partially offset by a slight decrease in the wetdry 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 07 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 Financial Position Capital Resources and l iquidity The Company continues to generate substantial cash from operations is in a strong fnancial position with total assets of 25 billion and common stockholders equity of 11 billion and has the resources available to reinvest for growth in existing businesses pursue strategic acquisitions and manage its capital structure on a short and longterm basis Ca SH Fl O w dollars in millions 2011 2012 2013 Operating Cash Flow 3233 3053 3649 Percent of sales 133 125 148 Capital Expenditures 647 665 678 Percent of sales 27 27 27 Free Cash Flow Operating Cash Flow less Capital Expenditures 2586 2388 2971 Percent of sales 106 98 120 Operating Working Capital 1705 2132 1686 Percent of sales 70 87 68 Emerson generated operating cash fow of 36 billion in 2013 a 20 percent increase compared to 2012 primarily as a result of focused efforts to reduce operating working capital Operating cash fow of 31 billion in 2012 was a 6 percent decrease compared to 32 billion in 2011 refecting an increase in operating working capital At September 30 2013 operating working capital as a percent of sales was 68 percent compared with 87 percent and 70 percent in 2012 and 2011 respectively The Company made pension contributions of 160 million in 2013 163 million in 2012 and 142 million in 2011 Operating cash fow fully funded capital expenditures acquisitions dividends and share repurchases in all years presented Capital expenditures were 678 million 665 million and 647 million in 2013 2012 and 2011 respectively Free cash fow increased 24 percent to 30 billion in 2013 on lower operating working capital partially offset by increased capital expenditures Free cash fow was 24 billion in 2012 compared with 26 billion in 2011 primarily refecting an increase in operating working capital The Company is targeting capital spending of approximately 750 million in 2014 Net cash paid in connection with acquisitions was 19 million 187 million and 232 million in 2013 2012 and 2011 respectively Proceeds from divestitures in 2013 2012 and 2011 were 3 million 125 million and 103 million respectively Dividends were 1181 million 164 per share in 2013 compared with 1171 million 160 per share in 2012 and 1039 million 138 per share in 2011 In November 2013 the Board of Directors voted to increase the quarterly cash dividend 5 percent to an annualized rate of 172 per share 31 33 32 31 36 56 63 OP e R at I n G C a SH F l O w and P a YO ut Pe RC ent Dollars in billions 63 O P e R a t I n G C a S H F l O w R e tu R ned t O S t OCKH O ld e R S 09 10 11 12 13