Emerson 2006 Annual Report Download - page 45

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repaid in October 2005) and annualized sales for these businesses were approximately $466 and $430, respectively. Goodwill of $236
($58 of which is expected to be deductible for tax purposes) and identiable intangible assets of $122, which are being amortized on a
straight-line basis over a weighted-average useful life of ten years, were recognized from these transactions in 2005.
In the fourth quarter of 2004, the Company acquired the outside plant and power systems business of Marconi Corporation PLC, a
leading provider of DC power products and engineering and installation services to major telecommunication carriers throughout
North America, which is included in the Network Power segment. Marconi (renamed Emerson Network Power Energy Systems –
North America) and several smaller businesses acquired during 2004 for a total of $414 in cash (net of cash and equivalents acquired)
had annualized sales of approximately $430. Goodwill of $224 (substantially all of which is expected to be deductible for tax purposes)
and identiable intangible assets of $120 (all of which is being amortized on a straight-line basis with a weighted-average life of
14 years) were recognized from these transactions.
The results of operations of these businesses have been included in the Company’s consolidated results of operations since the
respective dates of acquisition and prior to the respective dates of divestiture.
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Other deductions, net are summarized as follows:
     2004  2005  2006
Rationalization of operations $129 110 84
Amortization of intangibles (intellectual property and customer relationships) 21 28 47
Other 100 118 115
Gains, net (27) (26) (68)
Total $223 230 178
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 items, such as litigation and disputed matters,
insurance recoveries and interest refunds.
Gains, net for 2006 includes the following items. The Company recorded gains of approximately $26 in 2006 related to the sale of
4.4 million shares of MKS Instruments, Inc. (MKS), a publicly-traded company, and continues to hold 4.5 million shares at September 30,
2006. In the fourth quarter of 2006, the Company recorded a pretax gain of approximately $31 related to the divesture of the materials
testing business. Also during the fourth quarter of 2006, the Company recorded a pretax charge of $14 related to the write-down of
two businesses expected to be sold in early 2007 to their net realizable values. The Company also recorded a gain of approximately
$18 in 2006 for payments received under the U.S. Continued Dumping and Subsidy Offset Act (Offset Act).
Gains, net for 2005 and 2004 include the following items. An approximate $13 gain from the sale of a manufacturing facility and an
approximate $13 gain for a payment received under the Offset Act were recorded in 2005. In January 2004, the Company sold
2 million shares of MKS. The Company also sold its investment in the Louisville Ladder joint venture in 2004. The Company recorded
a pretax gain of $27 in the second quarter of 2004 from these transactions.
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The change in the liability for the rationalization of operations during the years ended September 30 follows:
   2005  expense acquisitions paid/utilized 2006
Severance and benefits $22 38 16 45 31
Lease/contract terminations 11 5 4 8 12
Fixed asset writedowns – 2 – 2 –
Vacant facility and other shutdown costs – 9 – 8 1
Start-up and moving costs – 30 – 29 1
$33 84 20 92 45