Emerson 2013 Annual Report Download - page 42

40 Emerson > 2013 Annual Report
The Company acquired several small businesses during 2011 which were complementary to the existing portfolios in
mainly the Process Management and Climate Technologies segments. Total cash paid for all businesses was approximately
$232, net of cash acquired of $2. Annualized sales for businesses acquired in 2011 were approximately $100. Goodwill of
$125 (none of which is expected to be tax deductible) and identifiable intangible assets of $75, primarily customer
relationships and patents and technology with a weighted-average life of approximately 12 years, were recognized from
these transactions.
In the fourth quarter of 2011, the Company sold its heating elements unit, which was previously included in the Commercial
& Residential Solutions segment, for $73, resulting in an after-tax gain of $21 (net of $30 of income taxes). Heating
elements had 2011 fourth quarter sales of $12 and net earnings of $1. Only the gain on divestiture and fourth quarter
operating results for heating elements, plus the impact of finalizing the 2010 Motors and LANDesk divestitures, were
classified as discontinued operations for 2011; prior fiscal 2011 quarters and prior year results of operations for heating
elements were inconsequential and were not reclassified.
The results of operations of the acquired businesses discussed above have been included in the Company’s consolidated
results of operations since the respective dates of acquisition.
(4) Other Deductions, Net
Other deductions, net are summarized as follows:
2011 2012 2013
Amortization of intangibles (intellectual property and customer relationships) $261 241 220
Rationalization of operations 81 119 78
Other 38 91 65
Gains, net (24) (50) (1)
Total $356 401 362
Other is composed of several items that are individually immaterial, including foreign currency transaction gains and
losses, bad debt expense, equity investment income and losses, as well as other items such as litigation and disputed
matters and insurance recoveries. Other decreased in 2013 primarily because of the receipt of an international research
and development credit, lower foreign currency transaction losses and the comparative impact from the loss on the sale of
the Knaack business in 2012. Other increased in 2012 due to higher foreign currency transaction losses and the loss on the
Knaack sale. Gains, net decreased in 2013 due to $43 of dumping duties collected from U.S. Customs in 2012. Gains, net
for 2011 included $15 related to the acquisition of full ownership of a Process Management joint venture in India.
(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 to remain competitive on a worldwide basis. Each year the Company
incurs costs to size its businesses to levels appropriate for current economic conditions and to improve its cost structure
for future growth. Rationalization expenses result from numerous individual actions implemented across the Company’s
various operating units 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 and benefits, stay bonuses, lease and contract termination costs 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, utilities and other costs.
Rationalization expenses were $78, $119 and $81, respectively, for 2013, 2012 and 2011. The Company currently expects
to incur 2014 rationalization expense of approximately $90, including costs to complete actions initiated before the end of
2013 and for actions anticipated to be approved and initiated during 2014.
The change in the liability for the rationalization of operations during the years ended September 30 follows:
2012 EXPENSE PAID / UTILIZED 2013
Severance and benefits $23 45 41 27
Lease and other contract terminations 5 3 5 3
Fixed asset write-downs — 1 1 —
Vacant facility and other shutdown costs 3 6 8 1
Start-up and moving costs 1 23 23 1
Total $32 78 78 32