Emerson 2004 Annual Report Download - page 49

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Summarized information regarding stock options outstanding and exercisable at September 30, 2004, follows (shares in thousands):
Outstanding Exercisable
Range of Average Average Average
Exercise Prices Shares Contractual Life Price Shares Price
up to $44 3,046 3.9 years $43.15 3,046 $43.15
$45 to 54 3,919 6.3 $52.19 2,862 $52.40
$55 to 74 2,106 4.6 $61.10 2,006 $61.05
Total 9,071 5.1 $51.22 7,914 $51.03
During 2004 and 2003, respectively, 307 thousand and 335 thousand options were granted, resulting in $1.7 and $0.7 of compensation
expense, pursuant to FAS 123, which Emerson adopted effective October 1, 2002. The fair value of each option grant is estimated on the
date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants: risk-free
interest rate of 3.1 percent, 2.8 percent and 4.2 percent, dividend yield of 2.8 percent, 3.4 percent and 2.9 percent for 2004, 2003 and
2002, respectively, and expected volatility of 25 percent and expected life of five years for all years. The weighted average fair value of
options granted was $11.13, $8.13 and $11.03 for 2004, 2003 and 2002, respectively.
The Company’s Incentive Shares Plans authorize the distribution of common stock to key management personnel subject to certain
conditions and restrictions. Upon accomplishment of the five-year performance objectives, 2,085,314 shares were distributed to
participants in 2002, including 1,216,985 shares paid in cash; additionally, participants elected to defer 97,604 shares for future
distribution. At September 30, 2004, 1,531,987 shares were outstanding with restriction periods of three to ten years, including 97,500
shares issued in 2004. In addition, 1,074,219 rights to receive common shares have been awarded, including 2,000 rights awarded in
2004, which are contingent upon accomplishing certain objectives by 2005; 2,342,786 rights to receive common shares were also awarded
in 2004, and are contingent upon accomplishing certain objectives by 2007. At September 30, 2004, approximately 1.1 million shares
remained available for award under these plans. Compensation expense charged against income for the Company’s Incentive Shares Plans
was $65, $28 and $27 for 2004, 2003 and 2002, respectively.
At September 30, 2004, 23,889,014 shares of common stock were reserved, primarily for issuance under the Company’s stock plans.
During 2004, 2,631,200 treasury shares were acquired and 905,283 treasury shares were issued.
Approximately 1.2 million preferred shares are reserved for issuance under a Preferred Stock Purchase Rights Plan. Under certain conditions
involving the acquisition of or an offer for 20 percent or more of the Company’s common stock, all holders of Rights, except an acquiring
entity, would be entitled (i) to purchase, at an exercise price of $260, common stock of the Company or an acquiring entity with a value
twice the exercise price, or (ii) at the option of the Board, to exchange each Right for one share of common stock. The Rights remain in
existence until November 1, 2008, unless earlier redeemed (at one-half cent per Right), exercised or exchanged under the terms of the plan.
(15) BUSINESS SEGMENT INFORMATION
The Company designs and supplies product technology and delivers engineering services in a wide range of industrial, commercial and
consumer markets around the world. The divisions of the Company are primarily organized based on the nature of the products and
services provided. The Process Management segment includes systems and software, measurement and analytical instrumentation,
valves, actuators and regulators, and services and solutions for automated industrial processes. The Industrial Automation segment
includes industrial motors and drives, power transmission equipment, alternators, materials joining and precision cleaning, fluid power
and control, materials testing, and electrical distribution equipment. The Network Power segment consists of uninterruptible power
supplies, power conditioning and electrical switching equipment, and precision cooling, site monitoring and connectivity systems. The
Climate Technologies segment consists of compressors, temperature sensors and controls, thermostats, flow controls, and remote
monitoring services. The Appliance and Tools segment includes general and special purpose motors and controls, appliances and appliance
components, as well as hand and plumbing tools, and storage products.
The primary income measure used for assessing performance and making operating decisions is earnings before interest and income taxes.
Intersegment sales approximate market prices. Accounting method differences between segment reporting and the consolidated financial
statements primarily include management fees allocated to segments based on a percentage of sales and the accounting for pension and
other retirement plans. Gains and losses from divestitures of businesses are included in Corporate and other. Corporate assets primarily
include cash and equivalents, investments, pensions, deferred charges, and certain fixed assets.