Emerson 2009 Annual Report Download - page 16

Emerson 200914

Other deductions, net were $530 million in 2009, a
$227 million increase from 2008 that primarily reects
$203 million of incremental rationalization expense.
The Company continuously makes investments in its
operations to improve efciency and remain competitive
on a global basis, and in 2009 incurred costs of
$295 million for actions to rationalize its businesses to
the level appropriate for current economic conditions
and improve its cost structure in preparation for the ulti-
mate economic recovery. The 2009 increase also includes
higher intangible asset amortization of $27 million due
to acquisitions, lower nonrecurring gains of $25 million
and other items. Gains in 2009 included the sale of an
asset for which the Company received $41 million and
recognized a gain of $25 million ($17 million after-tax).
See Notes 4 and 5 for further details regarding other
deductions, net and rationalization costs.
Other deductions, net of $303 million in 2008 represented
a $128 million increase from $175 million in 2007. The
increase in 2008 versus 2007 includes a $31 million
impairment charge related to the North American
appliance control business, higher intangible asset
amortization of $18 million due to acquisitions,
incremental rationalization expense of $17 million, a
$12 million charge for in-process research and develop-
ment in connection with the Embedded Computing
acquisition, $12 million of incremental foreign currency
transaction losses, lower one-time gains of $10 million
and other items. In 2008, the Company received
$54 million and recognized a gain of $39 million
($20 million after-tax) on the sale of its equity investment
in Industrial Motion Control Holdings, a manufacturer of
motion control components for automation equipment,
and also recorded a gain of $18 million related to the sale
of a facility.

Interest expense, net was $220 million, $188 million and
$228 million in 2009, 2008 and 2007, respectively. The
increase of $32 million in 2009 was due to lower interest
income, driven by lower worldwide interest rates, and
higher average long-term borrowings reecting a change
in debt mix. The $40 million decrease in interest expense
in 2008 was primarily due to lower interest rates and
lower average borrowings.

Income taxes were $693 million, $1,137 million and
$964 million for 2009, 2008 and 2007, respectively,
resulting in effective tax rates of 29 percent, 32 percent
and 31 percent. The lower effective tax rate in 2009
reects the Company recognizing a benet from a net
operating loss carryforward at a foreign subsidiary, a
credit related to the repatriation of certain non-U.S. earn-
ings, and a change in the mix of regional pretax income
as operating results declined signicantly in the United
States and Europe while declining only slightly in Asia.
                       

Earnings from continuing operations were $1.7 billion
for 2009, while earnings from continuing operations
per share were $2.27, decreases of 30 percent and
27 percent, respectively, compared with $2.5 billion and
$3.11 for 2008. The earnings decline is due to decreases
in all of the Company’s business segments and reects
lower sales volume, increased rationalization expense and
unfavorable product mix, partially offset by savings from
cost reduction actions and materials cost containment.
Earnings declined $373 million in Industrial Automation,
$238 million in Process Management, $227 million in
Network Power, $162 million in Appliance and Tools and
$154 million in Climate Technologies. Earnings per share
results reect the benet of share repurchases. See
the Business Segments discussion that follows for
additional information.
Earnings from continuing operations and earnings from
continuing operations per share for 2008 increased
15 percent and 17 percent, respectively, compared with
$2.1 billion and $2.65 for 2007, reecting increases in
four of the ve business segments, including $240 million
in Process Management, $149 million in Network Power
and $62 million in Industrial Automation. The increased
earnings reect leverage from higher sales, benets
realized from cost containment and higher selling prices,
partially offset by higher raw material and wage costs.
                        
(dollars in billions)
Earnings from continuing operations were $1.7 billion in
2009, a 7 percent compound annual growth rate since 2004.
2004 2009
$1.2
$1.4
$1.8
$2.1
$2.5
$1.7