Emerson 2004 Annual Report Download - page 41

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39
(4) OTHER DEDUCTIONS, NET
Other deductions, net are summarized as follows:
2002 2003 2004
Rationalization of operations $ 190 141 129
Impairment – 54 3
Amortization of intangibles 26 17 21
Other 97 130 97
Gains from divestitures (231) (24) (27)
Total $ 82 318 223
In January 2004, the Company sold 2 million shares of MKS Instruments, Inc., a publicly traded company, and continues to hold 10 million
shares. The Company also sold its investment in the Louisville Ladder joint venture. The Company recorded a pretax gain of $27 in the
second quarter of 2004 from these transactions. Pretax gains from divestitures were $24 and $231 in 2003 and 2002, respectively. See
Note 3 for information regarding divestiture activities.
Other is comprised of several items which 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 gains and losses, such as capital asset dispositions, asset
impairments, litigation and disputed matters, insurance recoveries and contract settlement gains.
(5) RATIONALIZATION OF OPERATIONS
The change in the liability for rationalization of operations follows:
September 30, September 30,
2003 Expense Paid / Utilized 2004
Severance and benefits $20 50 47 23
Lease/contract terminations 25 12 19 18
Fixed asset writedowns – 9 9 –
Vacant facility and other shutdown costs 2 24 23 3
Start-up and moving costs 5 34 37 2
$52 129 135 46
Rationalization of operations by segment is summarized as follows:
2002 2003 2004
Process Management $ 27 36 31
Industrial Automation 33 20 14
Network Power 71 39 26
Climate Technologies 26 20 17
Appliance and Tools 49 36 47
Corporate 1 (2) (6)
Discontinued operations (a) (17) (8) –
Total $190 141 129
(a) Discontinued operations eliminates the operating results of discontinued operations related to Dura-Line, which are included in the
Network Power segment amounts.
Rationalization of operations comprises expenses associated with the Company’s efforts to continuously improve operational efficiency
and to expand globally in order to remain competitive on a worldwide basis. These expenses result from numerous individual actions
implemented across the divisions on a routine basis and are not part of a large, company-wide program. Rationalization of operations
includes ongoing costs for moving facilities, starting up plants from relocation as well as business expansion, exiting product lines,
curtailing/downsizing operations due to changing economic conditions, and other one-time items resulting from asset redeployment
decisions. Shutdown costs include severance, benefits, stay bonuses, lease/contract terminations and asset writedowns. Start-up
and moving costs include employee training and relocation, moving of assets and other items. Vacant facility costs include security,
maintenance and utility costs associated with facilities that are no longer being utilized.