Emerson 2012 Annual Report Download - page 24

22 | 2012 Annual Report
Other deductions, net were $356 million in 2011, a
$13 million decrease from 2010 that primarily reflected
a decrease in rationalization expense of $45 million, lower
acquisition-related costs and the $15 million India joint
venture acquisition gain, partially offset by higher amorti-
zation expense of $85 million.
INTEREST EXPENSE, NET
Interest expense, net was $224 million, $223 million
and $261 million in 2012, 2011 and 2010, respectively.
The decrease of $38 million in 2011 was primarily due to
lower average long-term borrowings.
INCOME TAXES
Income taxes were $1,091 million, $1,127 million and
$848 million for 2012, 2011 and 2010, respectively,
resulting in effective tax rates of 35 percent, 31 percent
and 29 percent. The higher 2012 effective tax rate
includes an unfavorable 4 percentage point impact from
the goodwill impairment charge, as only a small portion
of the charge was tax deductible. The higher 2011 effec-
tive tax rate compared with 2010 primarily reflected
a change in the mix of regional pretax income due to
stronger earnings growth in the United States, where tax
rates are generally higher than internationally, and lower
tax benefits versus 2010, including non-U.S. tax holidays
and a $30 million capital loss tax benefit from restruc-
turing at a foreign subsidiary.
EARNINGS FROM CONTINUING OPERATIONS
Earnings from continuing operations attributable to
common stockholders were $2.0 billion in 2012, a
20 percent decrease compared with $2.5 billion in 2011.
The decrease was primarily due to the $528 million after-
tax goodwill impairment charge in 2012 which reduced
earnings 21 percent. Earnings per share from continuing
operations were $2.67, an 18 percent decrease versus
$3.24 in the prior year. The decrease was primarily due to
the $0.72 per share goodwill impairment charge in 2012
which reduced earnings per share 21 percent. Earnings
increased $197 million in Process Management,
$41 million in Industrial Automation and $21 million in
Commercial & Residential Solutions. Earnings decreased
$132 million in Network Power and $41 million in Climate
Technologies. See the Business Segments discussion that
follows and Note 16 for additional information.
Earnings from continuing operations were $2.5 billion
in 2011, an increase of 24 percent compared with
$2.0 billion in 2010. Earnings per share from continuing
operations were $3.24 in 2011, an increase of 25 percent
compared with $2.60 for 2010. Earnings improved
$309 million in Process Management, $239 million in
Industrial Automation, and $18 million in both Commercial
& Residential Solutions and Climate Technologies, slightly
offset by a $44 million decrease in Network Power.
DISCONTINUED OPERATIONS
In the fourth quarter of 2011, the Company sold its
heating elements unit for $73 million, resulting in an
after-tax gain of $21 million. Fourth quarter 2011 sales
and earnings for heating elements were $12 million and
$1 million, respectively. The after-tax gain on divesti-
ture and fourth quarter operating results for heating
elements, and the impact of finalizing the 2010 Motors
and LANDesk divestitures, were classified as discontinued
operations for 2011. Prior fiscal 2011 quarters and prior
year results of operations for heating elements were
inconsequential and were not reclassified.
In the fourth quarter of 2010, the Company sold its
appliance motors and U.S. commercial and industrial
motors businesses (Motors) for proceeds of $622 million,
resulting in an after-tax gain of $155 million ($126 million
of income taxes). Motors had total annual sales of
$827 million and net earnings, excluding the divestiture
gain, of $38 million in 2010. Results of operations
for Motors have been reclassified into discontinued
operations for 2010 and prior. LANDesk (acquired with
Avocent in 2010) was sold in the fourth quarter of 2010
for proceeds of approximately $230 million, resulting in
an after-tax gain of $12 million ($10 million of income
taxes). LANDesk was classified as discontinued operations
throughout 2010.
Income from discontinued operations in 2011 included
only the fourth quarter operating results and gain on
disposition for heating elements. Income from discon-
tinued operations in 2010 reflected the Motors and
LANDesk divestitures and included both operating results
for the year and the gains on disposition. See Acquisitions
and Divestitures discussion in Note 3 for additional
information regarding discontinued operations.
NET EARNINGS (Dollars in billions)
* Excludes charges of $528 million in 2012; $19 million in 2011.
08
$2.4
12111009
$1.7
$2.2
$2.5*
$2.5*
BILLION NET
EARNINGS
IN 2012
1211
$2.5*
$2.0