Emerson 2012 Annual Report Download - page 42

40 | 2012 Annual Report
In addition to Chloride and Avocent, the Company acquired several smaller businesses during 2010 reported mainly
in the Process Management and Industrial Automation segments. Total cash paid for all businesses acquired 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.
In the fourth quarter of 2010, the Company sold the LANDesk business unit, which was acquired as part of Avocent and
was 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 had slower growth profiles and were formerly reported in the Commercial & Residential
Solutions segment. Proceeds from the sale were $622 resulting in an after-tax gain of $155 ($126 of income taxes). The
Motors disposition included 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 and net earnings (excluding the divestiture gain) of $38 in
2010. Results of operations for Motors have been reclassified into discontinued operations for 2010 and earlier periods.
The results of operations of the businesses discussed above have been included in the Company’s consolidated results
of operations since the respective dates of acquisition.
(4) Other Deductions, Net
Other deductions, net are summarized as follows:
2010 2011 2012
Amortization of intangibles (intellectual property and customer relationships) $176 261 241
Rationalization of operations 126 81 119
Other 71 38 91
Gains, net (4) (24) (50)
Total $369 356 401
Other is composed of several items that are individually immaterial, including foreign currency transaction gains
and losses, bad debt expense, equity investment income and losses, as well as one-time items such as litigation and
disputed matters and insurance recoveries. Other increased in 2012 primarily because of higher foreign currency trans-
action losses and the loss on the sale of Knaack. Other decreased in 2011 primarily because of lower acquisition-related
costs. Gains, net for 2012 reflect $43 for payments received related to dumping duties collected by U.S. Customs for
2006 through 2010, but not distributed to affected domestic producers pending resolution of certain legal challenges
to the U.S. Continued Dumping and Subsidy Offset Act. Gains, net for 2011 included $15 related to the acquisition of
full ownership of a Process Management joint venture in India.
(5) Rationalization of Operations
Rationalization of operations expense reflects costs associated with the Company’s efforts to continually improve oper-
ational efficiency and deploy assets globally to remain competitive on a worldwide basis. Each year the Company incurs
costs to size its businesses to levels appropriate for current economic conditions and to improve its cost structure for
future growth. Rationalization expenses result from numerous individual actions implemented across the Company’s
various operating units on an ongoing basis and include costs for moving facilities to best-cost locations, starting
up plants after relocation or geographic expansion to serve local markets, exiting certain product lines, curtailing/
downsizing operations because of changing economic conditions and other costs resulting from asset redeploy-
ment decisions. Shutdown costs include severance, benefits, stay bonuses, lease and contract terminations and asset
write-downs. In addition to the costs of moving fixed assets, start-up and moving costs include employee training and
relocation. Vacant facility costs include security, maintenance, utilities and other costs.
The Company reported rationalization expenses of $119, $81 and $126, respectively, for 2012, 2011 and 2010.
The Company currently expects to incur rationalization expense in 2013 in the range of approximately $70 to $80,
including the costs to complete actions initiated before the end of 2012 and actions anticipated to be approved and
initiated during 2013.