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22
INCOME TAXES
Income taxes were $848 million, $688 million and
$1,125 million for 2010, 2009 and 2008, respectively,
resulting in effective tax rates of 29 percent, 28 percent
and 31 percent. The 2010 effective tax rate primarily
reflects a $30 million capital loss benefit generated by
restructuring at foreign subsidiaries and a change in the
mix of regional pretax income which increased in the
United States and Europe as compared with 2009. The
lower effective tax rate in 2009 compared with 2008
primarily reflects the benefit from a $44 million net
operating loss carryforward at a foreign subsidiary, a
credit related to the repatriation of certain non-U.S. earn-
ings and a change in the mix of regional pretax income
as operating results declined significantly in the United
States and Europe while declining only slightly in Asia.
EARNINGS FROM CONTINUING
OPERATIONS COMMON STOCKHOLDERS
(dollars in billions)
Earnings from continuing operations common stockholders were
$2.0 billion in 2010, a 15 percent increase over the prior year.
EARNINGS FROM CONTINUING OPERATIONS
Earnings and earnings per share from continuing opera-
tions common stockholders were $2.0 billion and $2.60,
respectively, for 2010, both increases of 15 percent,
compared with $1.7 billion and $2.26 for 2009. Earnings
increased in all segments, reflecting decreased rational-
ization expense, savings from cost reduction actions and
favorable foreign currency translation. Earnings improved
$280 million in Climate Technologies, $221 million in
Network Power, $121 million in Industrial Automation,
$81 million in Tools and Storage and $33 million in Process
Management. Earnings per share were negatively impacted
$0.10 per share by the Avocent and Chloride acquisitions,
including acquisition accounting charges, deal costs and
interest expense. See the Business Segments discussion
that follows and Note 3 for additional information.
Earnings and earnings per share from continuing opera-
tions common stockholders were $1.7 billion and $2.26,
respectively, for 2009, decreases of 30 percent and
27 percent, respectively, compared with $2.4 billion
and $3.10 for 2008. The decline is due to decreases in
all of the Company’s business segments and reflects
lower sales volume worldwide, increased rationalization
expense and unfavorable product mix, partially offset by
savings from cost reduction actions and materials cost
containment. Earnings declined $395 million in Industrial
Automation, $241 million in Process Management,
$228 million in Network Power, $158 million in Climate
Technologies and $145 million in Tools and Storage.
DISCONTINUED OPERATIONS
In connection with the acquisition of Avocent in the first
quarter of 2010, the Company announced the LANDesk
business unit of Avocent was not a strategic fit and would
be sold. The sale of LANDesk was completed in the fourth
quarter and proceeds of approximately $230 million were
received, resulting in an after-tax gain of $12 million
($10 million of income taxes). Including LANDesk oper-
ating losses of $19 million, the total per share impact was
negative $0.01. LANDesk was classified as discontinued
operations throughout the year.
Also in the fourth quarter of 2010, the Company sold its
appliance motors and U.S. commercial and industrial
motors businesses (Motors) which have slower growth
profiles. Proceeds from the sale were $622 million, resulting
in an after-tax gain of $155 million ($126 million of income
taxes) or $0.20 per share. Motors had total annual sales
of $827 million, $813 million and $1,056 million and net
earnings, excluding the divestiture gain, of $38 million
($0.05 per share), $9 million and $8 million, in 2010, 2009
and 2008, respectively. Results of operations for Motors
have been reclassified into discontinued operations for all
periods presented.
Total cash received from the sale of Motors and
LANDesk, net of cash income taxes, was approximately
$800 million. Income from discontinued operations in
2010 reflects the Motors and LANDesk divestitures and
includes both operating results for the year and the gains
on disposition. The income from discontinued opera-
tions reported for 2009 relates only to the operations of
the Motors businesses. In addition to operating results
for Motors, the 2008 loss from discontinued operations
includes operating results for the European appliance
motor and pump and Brooks Instruments businesses,
and the loss and gain on disposal of these businesses,
respectively. See Acquisitions and Divestitures discussion
in Note 3 for additional information regarding
discontinued operations.
$2.0
$1.7
$2.4
$2.1
$1.8
20102006 2008