Emerson 2009 Annual Report Download - page 41

Annual Report 39
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The Company sponsors unfunded postretirement benet plans (primarily health care) for U.S. retirees and their depen-
dents. The components of net postretirement plan expense for the years ended September 30 follow:
     2007  2008  2009
Service cost $ 6 5 4
Interest cost 29 29 30
Net amortization 26 27 15
Net postretirement expense $61 61 49
Reconciliations of the actuarial present value of accumulated postretirement benet obligations follow:
      2008  2009
Benefit obligation, beginning $501 465
Service cost 5 4
Interest cost 29 30
Actuarial loss (gain) (24) 24
Benefits paid (39) (34)
Acquisitions/divestitures and other (7) 10
Benefit obligation, ending, recognized in balance sheet $465 499
Approximately $1 of the $13 of losses deferred in accumulated other comprehensive income at September 30, 2009
will be amortized into earnings in 2010. The assumed discount rates used in measuring the obligations as of September
30, 2009, 2008 and 2007, were 5.00 percent, 6.50 percent and 6.00 percent, respectively. The assumed health care
cost trend rate for 2010 is 8.5 percent, declining to 5.0 percent in the year 2017. The assumed health care cost trend
rate for 2009 was 9.0 percent, declining to 5.0 percent in the year 2017. 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,
2009 and the 2009 postretirement plan expense by less than 5 percent. The Company estimates that future health care
benet payments will be as follows: $43 in 2010, $47 in 2011, $48 in 2012, $47 in 2013, $46 in 2014 and $208 in total
over the ve years 2015 through 2019.
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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 (including legal fees and expenses) 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; the Company’s experience in contesting, litigating and settling similar matters and any related insur-
ance coverage.
Although it is not possible to predict the ultimate outcome of the matters discussed above, the Company historically
has been successful in defending itself against claims and suits that have been brought against it, and 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 development could have a material adverse
impact on the Company.
The Company enters into certain indemnication agreements in the ordinary course of business in which the indemni-
ed party is held harmless and is reimbursed for losses incurred from claims by third parties, usually up to a prespecied
limit. In connection with divestitures of certain assets or businesses, the Company often provides indemnities to the
buyer with respect to certain matters including, as examples, environmental liabilities and unidentied tax liabilities
related to periods prior to the disposition. Because of the uncertain nature of the indemnities, the maximum liability
cannot be quantied. As such, liabilities are recorded when they are both probable and reasonably estimable. Histori-
cally, payments under indemnity arrangements have been inconsequential.
At September 30, 2009, 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 nancial statements, nor were
there any material commitments outside the normal course of business.