Emerson 2006 Annual Report Download - page 44

Notes to Consolidated Financial Statements
                   
Comprehensive income is primarily comprised of net earnings and changes in foreign currency translation, minimum pension liability
and cash ow hedges. Accumulated other comprehensive income, after-tax, consists of foreign currency translation credits of $269
and $94, minimum pension liability charges of $57 and $178, and cash ow hedges and other credits of $94 and $19 at September 30,
2006 and 2005, respectively.
                               
The preparation of the nancial statements in conformity with U.S. generally accepted accounting principles requires management
to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those
estimates. Certain prior year amounts have been reclassied to conform to the current year presentation.

Basic earnings per common share consider only the weighted average of common shares outstanding while diluted earnings per
common share consider the dilutive effects of stock options, incentive shares and convertible securities. Options to purchase approxi-
mately 0.5 million, 2.6 million and 1.0 million shares of common stock were excluded from the computation of diluted earnings per
share in 2006, 2005 and 2004, respectively, because their effect would have been antidilutive. Reconciliations of weighted average
common shares for basic earnings per common share and diluted earnings per common share follow:
(sharesinmillions)    2004 2005 2006
Basic 419.3 414.9 
Dilutive shares 2.9 4.0 3.9
Diluted 422.2 418.9 412.2

The Company acquired Artesyn Technologies, Inc. (Artesyn) during the third quarter of scal 2006, and Knürr AG (Knürr) and Bristol
Babcock (Bristol) during the second quarter of scal 2006. Artesyn is a global manufacturer of advanced power conversion equipment
and board-level computing solutions for infrastructure applications in telecommunication and data-communication systems and is
included in the Network Power segment. Knürr is a manufacturer of indoor and outdoor enclosure systems and cooling technologies
for telecommunications, electronics and computing equipment and is included in the Network Power segment. Bristol is a manu-
facturer of control and measurement equipment for oil and gas, water and wastewater, and power industries and is included in the
Process Management segment. In addition to Artesyn, Knürr and Bristol, the Company acquired several smaller businesses during
2006 mainly in the Industrial Automation and Appliance and Tools segments. Total cash paid for these businesses (net of cash and
equivalents acquired of approximately $120 and debt assumed of approximately $90) and annualized sales were approximately $752
and $920, respectively. Goodwill of $481 ($54 of which is expected to be deductible for tax purposes) and identiable intangible
assets (primarily technology and customer relationships) of $189, which are being amortized on a straight-line basis over a weighted-
average life of nine years, were recognized from these transactions in 2006. Third-party valuations of assets are in-process; purchase
price allocations are subject to renement.
In 2006, the Company divested or had plans to divest several business units, including the materials testing business. These businesses
had total annual sales of $171, $174 and $204 for scal years 2006, 2005 and 2004, respectively, and earnings were approximately
break-even. The Company recorded a pretax gain of $31 ($22 after-tax) from the sale of the materials testing business in the fourth
quarter of 2006. The sales of the other business units are expected to close in 2007, and the units were written down to their net
realizable values, which resulted in a charge of $14 ($2 after-tax) in the fourth quarter of 2006. These businesses were not reclassied
as discontinued operations due to immateriality.
The Company acquired Do+Able, a manufacturer of ready-to-assemble wood and steel home and garage organization and storage
products, which is included in the Appliance and Tools segment, in the second quarter of 2005 and Numatics, a manufacturer of pneu-
matic and motion control products for industrial applications, which is included in the Industrial Automation segment, in the fourth
quarter of 2005. In addition to Do+Able and Numatics, the Company acquired several smaller businesses during 2005, mainly in the
Process Management and Appliance and Tools segments. Total cash paid (including assumed debt of approximately $100, which was