Emerson 2013 Annual Report Download - page 41

Emerson > 2013 Annual Report 39
(2) Weighted-Average Common Shares
Basic earnings per common share consider only the weighted-average of common shares outstanding while diluted
earnings per common share also consider the dilutive effects of stock options and incentive shares. Options to purchase
approximately 0.6 million, 7.7 million and 4.6 million shares of common stock were excluded from the computation of
diluted earnings per share in 2013, 2012 and 2011, respectively, as the effect would have been antidilutive. Earnings
allocated to participating securities were inconsequential for all years presented. Reconciliations of weighted-average
shares for basic and diluted earnings per common share follow:
(shares in millions) 2011 2012 2013
Basic shares outstanding 748.5 730.6 717.7
Dilutive shares 5.0 4.0 5.2
Diluted shares outstanding 753.5 734.6 722.9
(3) Acquisitions and Divestitures
On July 31, 2013, the Company entered into an agreement to sell a 51 percent controlling interest in the embedded
computing and power business for which it will receive approximately $300 in cash from the acquirer and through
borrowing by a new entity which will include this business. The transaction is expected to close before the end of calendar
2013 pending regulatory approvals. Embedded computing and power had 2013 revenue of $1.2 billion and earnings
before taxes of $44 which are included in the Network Power segment. Sales and earnings for embedded computing
and power will continue to be reported in the Company’s consolidated results until completion of the transaction. As the
Company will retain a noncontrolling interest in this business, it will not be classified as discontinued operations and will
be accounted for on the equity basis upon completion. Transaction fair value was determined based on anticipated cash
proceeds and the estimated value of the retained interest using a Level 3 market approach (option pricing model). Assets
and liabilities for embedded computing and power are classified as held-for-sale in the consolidated balance sheet at
September 30, 2013 as follows: other current assets, $408 (accounts receivable, inventories, other); other assets, $190
(property plant and equipment, goodwill, other noncurrent assets); accrued expenses, $272 (accounts payable and other
current liabilities); and other liabilities, $20. The Company recorded goodwill impairment charges in both 2013 and 2012,
and income tax charges in 2013, related to this business. See Note 6 for information regarding impairment charges.
In October 2013 (fiscal 2014), the Company acquired Virgo Valves and Controls, LTD, a leading manufacturer of ball
valves and automation systems which will complement Process Management’s existing final control business, and allow
opportunities for additional growth in global oil and gas, mining and power end markets. Also in October 2013, the
Company acquired Enardo LLC, a manufacturer of tank and terminal safety equipment used in the oil and gas, chemical and
other industries which will complement Process Management’s existing regulator technologies and extend the Company’s
expertise in both upstream and downstream markets. Total cash paid for both businesses was approximately $506, net of
cash acquired. The Company also assumed $76 of debt. Combined annualized sales for Virgo and Enardo were over $300.
The Company acquired one-hundred percent of Avtron Loadbank and a marine controls business during the second
quarter of 2012. Avtron is a designer and manufacturer of high quality load banks and testing systems for power
equipment industries and is included in the Network Power segment. The marine controls business supplies controls
and software solutions for optimal operation of refrigerated sea containers and marine boilers and is included in the
Climate Technologies segment. In addition, the Company acquired two smaller businesses during 2012 in the Process
Management and Network Power segments. These small acquisitions were complementary to the existing business
portfolios and none was individually significant. Total cash paid for all businesses was approximately $187, net of cash
acquired of $5. Annualized sales for businesses acquired in 2012 were approximately $115. Goodwill of $94 ($36 of which
is expected to be tax deductible) and identifiable intangible assets of $82, primarily customer relationships and patents
and technology with a weighted-average life of approximately 9 years, were recognized from these transactions.
In the fourth quarter of 2012, the Company sold its Knaack business unit for $114, resulting in an after-tax loss of $5
($3 income tax benefit). Knaack had 2012 sales of $95 and net earnings of $7. Knaack, a leading provider of premium
secure storage solutions for job sites and work vehicles, was previously reported in the Commercial & Residential Solutions
business segment.