Emerson 2011 Annual Report Download - page 37

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(5) Rationalization of Operations
Rationalization of operations expense reflects costs associated with the Company’s efforts to continually improve
operational efficiency and deploy assets globally in order to remain competitive on a worldwide basis. Each year the
Company incurs costs for actions to size its businesses to a level appropriate for current economic conditions and to
improve its cost structure for future growth. Rationalization expenses result from numerous individual actions imple-
mented across the Company’s various operating divisions on an ongoing basis and include costs for moving facilities to
best-cost locations, starting up plants after relocation or geographic expansion to serve local markets, exiting certain
product lines, curtailing/downsizing operations because of changing economic conditions and other costs resulting
from asset redeployment decisions. Shutdown costs include severance, benefits, stay bonuses, lease and contract
terminations and asset write-downs. In addition to the costs of moving fixed assets, start-up and moving costs include
employee training and relocation. Vacant facility costs include security, maintenance, utility and other costs.
The Company reported rationalization expenses of $81, $126 and $284, respectively for 2011, 2010 and 2009, with the
significantly higher expense in 2009 due to actions taken in response to the severe economic environment worldwide.
The Company currently expects to incur rationalization expense in 2012 in the range of approximately $100 to $125,
including the costs to complete actions initiated before the end of 2011 and actions anticipated to be approved and
initiated during 2012.
The change in the liability for the rationalization of operations during the years ended September 30 follows:
2010 EXPENSE PAID / UTILIZED 2011
Severance and benefits $57 17 50 24
Lease and other contract terminations 8 3 8 3
Fixed asset write-downs – 12 12 –
Vacant facility and other shutdown costs 4 11 13 2
Start-up and moving costs – 38 37 1
Total $69 81 120 30
2009 expense paid / utilized 2010
Severance and benefits $112 73 128 57
Lease and other contract terminations 7 9 8 8
Fixed asset write-downs – 9 9 –
Vacant facility and other shutdown costs 2 14 12 4
Start-up and moving costs 1 21 22 –
Total $122 126 179 69
Rationalization of operations expense by segment is summarized as follows:
2009 2010 2011
Process Management $ 55 35 11
Industrial Automation 47 48 32
Network Power 118 25 20
Climate Technologies 48 13 11
Tools and Storage 16 5 7
Total $284 126 81
During 2011, the Company’s business segments incurred start-up and moving costs related to relocating assets to
best cost locations, geographic expansion to directly serve local markets, or shutdown costs for the consolidation of
facilities within geographic locations to increase operational efficiency. Severance and benefits expense relates to
exiting approximately 20 facilities, including those consolidated within regions, and eliminating approximately 2,800
positions. Start-up and moving costs were substantially incurred in Industrial Automation and Network Power, while
Industrial Automation incurred most of the fixed-asset write-downs. Facilities consolidation largely occurred in North
America and Europe. Vacant facilities and other shutdown costs were not material for any segment.