Emerson 2010 Annual Report Download - page 41

2010 Annual Report
39
(2) Weighted Average Common Shares
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 and incentive shares. Options to purchase
approximately 3.9 million, 7.6 million and 3.6 million shares of common stock were excluded from the computation of
diluted earnings per share in 2010, 2009 and 2008, respectively, as the effect would have been antidilutive. Earnings
allocated to participating securities were inconsequential for all years presented. Reconciliations of weighted average
shares for basic and diluted earnings per common share follow:
(shares in millions) 2008 2009 2010
Basic shares outstanding 780.3 753.7 750.7
Dilutive shares 9.1 5.0 6.3
Diluted shares outstanding 789.4 758.7 757.0
(3) Acquisitions and Divestitures
The Company acquired one-hundred percent of Avocent Corporation and SSB Group GmbH during the first quarter
of 2010 and Chloride Group PLC during the fourth quarter of 2010. Avocent is a leader in enhancing companies’
integrated data center management capability, which strongly positions Emerson for the growth of infrastructure
management in data centers worldwide, and is included in the Network Power segment. SSB is a designer and manu-
facturer of electrical pitch systems and control technology used in wind turbine generators and is included in the
Industrial Automation segment. Chloride provides commercial and industrial uninterruptible power supply systems
and services, which significantly strengthens the Company’s Network Power business in Europe, and is included in the
Network Power segment. In addition to Avocent, SSB and Chloride, the Company acquired other smaller businesses
during 2010, mainly in the Process Management and Industrial Automation segments. Total cash paid for all businesses
was approximately $2,843, net of cash acquired of $150. Additionally, the Company assumed debt of $169. Annualized
sales for businesses acquired in 2010 were approximately $1.1 billion. Identifiable intangible assets of $1,166, primarily
customer relationships and intellectual property with a weighted-average life of approximately 10 years, were recog-
nized along with goodwill of $1,633, of which only a small amount is tax deductible.
The purchase price of Avocent and Chloride was allocated to assets and liabilities as follows. Valuations of acquired
assets and liabilities are in-process; purchase price allocations for 2010 acquisitions are subject to refinement.
Accounts receivable $ 197
Inventory 155
Property, plant & equipment and other assets 148
Intangibles 1,071
Goodwill 1,509
Assets held for sale, including deferred taxes 278
Total assets 3,358
Accounts payable and accrued expenses 183
Debt assumed 165
Deferred taxes and other liabilities 395
Cash paid, net of cash acquired $2,615
Results of operations for 2010 include combined sales of $373 and a combined net loss of $73 from Avocent and
Chloride, including intangible asset amortization, interest, first year acquisition accounting charges and deal costs.
Pro forma sales and net earnings common stockholders of the Company including full year results of operations for
Avocent and Chloride are approximately $21.6 billion and $2.1 billion in 2010, and $21.0 billion and $1.6 billion in
2009, respectively. These pro forma results include intangible asset amortization and interest cost in both periods, and
first year acquisition accounting charges and deal costs in 2009.
In the fourth quarter 2010, the Company sold the LANDesk business unit, which was acquired as part of Avocent and
not a strategic fit with Emerson, for $230, resulting in an after-tax gain of $12 ($10 of income taxes). Additionally,
LANDesk incurred operating losses of $19. This business was classified as discontinued operations throughout 2010.
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 and were formerly reported in the Tools and Storage segment.
Proceeds from the sale were $622 resulting in an after-tax gain of $155 ($126 of income taxes). The Motors disposition
includes working capital of $98, property, plant and equipment of $152, goodwill of $44, and other of $47. The Motors
businesses had total annual sales of $827, $813 and $1,056 and net earnings (excluding the divestiture gain) of $38, $9