Emerson 2005 Annual Report Download - page 55

E M E R S O N 2 0 0 5 4 3
(11) POSTRETIREMENT PLANS
The Company sponsors unfunded postretirement benefit plans (primarily health care) for U.S. retirees and their dependents.
Net postretirement plan expense for the years ended September 30 follows:
2003 2004 2005
Service cost $ 7 5 6
Interest cost 27 25 27
Net amortization 8 19 21
Net postretirement plan expense $42 49 54
The reconciliations of the actuarial present value of accumulated postretirement benefit obligations follow:
2004 2005
Benefit obligation, beginning $ 426 444
Service cost 5 6
Interest cost 25 27
Actuarial loss 30 55
Benefits paid (37) (43)
Acquisitions/divestitures and other (5) 13
Benefit obligation, ending 444 502
Unrecognized net loss (101) (134)
Unrecognized prior service benefit 8 7
Postretirement benefit liability recognized in the balance sheet $ 351 375
The assumed discount rates used in measuring the obligations as of September 30, 2005, 2004 and 2003, were 5.25 percent, 5.75 percent
and 6.00 percent, respectively. The assumed health care cost trend rate for 2006 was 9.5 percent, declining to 5.0 percent in the year 2014.
The assumed health care cost trend rate for 2005 was 9.5 percent, declining to 5.0 percent in the year 2013. A one-percentage-point
increase or decrease in the assumed health care cost trend rate for each year would increase or decrease the obligation as of September 30,
2005, and the 2005 postretirement plan expense by less than 5 percent. The Company estimates that future benefit payments will be
$42 annually for 2006 through 2010 and $209 in total over the five years 2011 through 2015.
(12) CONTINGENT LIABILITIES AND COMMITMENTS
Emerson is a party to a number of pending legal proceedings and claims, including those involving general and product liability and other
matters, several of which claim substantial amounts of damages. The Company accrues for such liabilities when it is probable that future
costs will be incurred and such costs can be reasonably estimated. Such accruals are based on developments to date, management’s
estimates of the outcomes of these matters, its experience in contesting, litigating and settling other similar matters, and any related
insurance coverage.
Although it is not possible to predict the ultimate outcome of the matters discussed above, historically, the Company has been successful in
defending itself against claims and suits that have been brought against it. The Company will continue to defend itself vigorously in all such
matters. While the Company believes a material adverse impact is unlikely, given the inherent uncertainty of litigation, a remote possibility
exists that a future adverse development could have a material adverse impact on the Company.
The Company enters into indemnification agreements in the ordinary course of business in which the indemnified party is held harmless
and is reimbursed for losses incurred from claims by third parties. In connection with divestitures of certain assets or businesses, the
Company often provides indemnities to the buyer with respect to certain matters including, for example, environmental liabilities and
unidentified tax liabilities related to periods prior to the disposition. Due to the uncertain nature of the indemnities, the maximum liability
cannot be quantified. Liabilities for obligations are recorded when probable and when they can be reasonably estimated. Historically, the
Company has not made significant payments for these obligations.
At September 30, 2005, there were no known contingent liabilities (including guarantees, pending litigation, taxes and other claims) that
management believes will be material in relation to the Company’s financial statements, nor were there any material commitments outside
the normal course of business.