Emerson 2008 Annual Report Download - page 44

A Powerful Force for Innovation [ 37 ]
In 2007, the Company divested two small business units that had total annual sales of $113 and $115 for scal years
2006 and 2005, respectively. In the fourth quarter of 2006, the Company received approximately $80 from the dives-
titure of the materials testing business, resulting in a pretax gain of $31 ($22 after-tax). The materials testing business
represented total annual sales of approximately $58 and $59 in 2006 and 2005, respectively. These businesses were
not reclassied as discontinued operations because of immateriality.
The Company acquired Artesyn Technologies, Inc. (Artesyn) during the third quarter of scal 2006, and Knürr AG
(Knürr) and Bristol Babcock (Bristol) during the second quarter of scal 2006. Artesyn is a global manufacturer of
advanced power conversion equipment and board-level computing solutions for infrastructure applications in
telecommunication and data-communication systems and is included in the Network Power segment. Knürr is a
manufacturer of indoor and outdoor enclosure systems and cooling technologies for telecommunications, electronics
and computing equipment and is included in the Network Power segment. Bristol is a manufacturer of control and
measurement equipment for oil and gas, water and wastewater, and power industries and is included in the Process
Management segment. In addition to Artesyn, Knürr and Bristol, the Company acquired several smaller businesses
during 2006 mainly in the Industrial Automation and Appliance and Tools segments. Total cash paid for these busi-
nesses was approximately $752 (net of cash and equivalents acquired of approximately $120 and debt assumed of
approximately $90) and their annualized sales were $920. Goodwill of $481 ($54 of which is expected to be deductible
for tax purposes) and identiable intangible assets (primarily technology and customer relationships) of $189, which
are being amortized on a straight-line basis over a weighted-average life of nine years, were recognized from these
transactions in 2006.
The results of operations of these businesses have been included in the Company’s consolidated results of operations
since the respective dates of acquisition and prior to the respective dates of divestiture.
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Other deductions, net are summarized as follows:
     2006  2007  2008
Rationalization of operations $ 80 75 92
Amortization of intangibles (intellectual property and customer relationships) 47 63 81
Other 114 111 194
Gains, net (68) (74) (64)
Total $173 175 303
Other is comprised of several items that are individually immaterial, including minority interest expense, foreign
currency gains and losses, bad debt expense, equity investment income and losses, as well as one-time items, such
as litigation and disputed matters, insurance recoveries and interest refunds. Other increased from 2007 to 2008
primarily because of an additional $12 loss on foreign currency exchange transactions, an approximate $12 charge for
in-process research and development in connection with the acquisition of the Embedded Computing business and
a $31 goodwill impairment charge related to the North American appliance control business due to a slow economic
environment for consumer appliance and residential end-markets and a major customer’s strategy to diversify
suppliers and transition to and internalize the production of electronic controls. The customer’s strategy will result in
a reduction of volume and potential elimination of the appliance control business as a supplier. As a result, sales and
prots for this business are forecasted to decline. The Company considered the potential sale of this business and two
strategic buyers expressed preliminary interest in the third quarter of 2008. Both subsequently decided not to pursue the
acquisition of this business. Therefore, the decision was made to restructure these operations and integrate them with
the North American appliance motors business.
Gains, net for 2008 includes the following items. The Company received $54 and recognized a gain of $39 ($20 after-
tax) on the sale of an equity investment in Industrial Motion Control Holdings, LLC, a manufacturer of motion control
components for automation equipment. The Company also recorded a gain of $18 related to the sale of a facility.
Gains, net for 2007 includes the following items. The Company recorded gains of approximately $32 in 2007 related to
the sale of its remaining 4.5 million shares of MKS Instruments, Inc. (MKS), a publicly-traded company. The Company
also recorded a gain of approximately $24 in 2007 for payments received under the U.S. Continued Dumping and
Subsidy Offset Act (Offset Act).
Gains, net for 2006 includes the following items. The Company recorded gains of approximately $26 in 2006 related
to the sale of 4.4 million shares of MKS. In the fourth quarter of 2006, the Company recorded a pretax gain of approxi-
mately $31 related to the divesture of the materials testing business. Also during the fourth quarter of 2006, the
Company recorded a pretax charge of $14 related to the write-down of two businesses that were sold in 2007 to their
net realizable values. The Company also recorded a gain of approximately $18 in 2006 for payments received under the
Offset Act.