Emerson 2015 Annual Report Download - page 25

2015 Annual Report | 23
the network power systems business, partially offset
by a favorable comparative effect from a $34 million
equity investment loss in the prior year. The Company
accelerated restructuring activity in 2015 to address the
global slowdown in capital spending and position itself
for future growth. See Notes 4 and 5.
Other deductions, net were $393 million in 2014, a
$31 million increase from 2013 primarily due to the
$34 million Artesyn equity investment loss, a $13 million
China research incentive credit in 2013 and several
other items, partially offset by a $23 million reduction
in rationalization expense in 2014 and favorable foreign
currency transactions of $20 million.
INTEREST EXPENSE, NET
Interest expense, net was $171 million, $194 million and
$218 million in 2015, 2014 and 2013, respectively. The
decrease of $23 million in 2015 and $24 million in 2014
primarily resulted from the maturity of long-term debt
with relatively higher interest rates.
INCOME TAXES
Income taxes were $1,428 million, $1,164 million and
$1,130 million for 2015, 2014 and 2013, respectively,
resulting in effective tax rates of 34 percent in 2015, and
35 percent for 2014 and 2013. The underlying effective
rates in these years were 31 percent, 30 percent and
29 percent, respectively. The 3 percentage point
unfavorable impact on the 2015 rate is due to
divestitures and income taxes provided for the planned
spinoff. The effective rates in 2014 and 2013 include
5 and 6 percentage point unfavorable impacts,
respectively, from the low tax deductibility of impaired
goodwill, as well as an income tax charge in 2013 for
the repatriation of non-U.S. earnings.
NET EARNINGS (Dollars in billions)
Reported
Adjusted *
15
15
14
14
$2.1
131211
$2.5* $2.7*
$2.6*
$2.5 $2.7
$2.2*
1312
$2.0 $2.0
* Excludes combined gains from divestitures and costs related to the planned
spinoff of the network power systems business of $559 in 2015, and good-
will impairment charges of $508 million in 2014, $566 million in 2013 and
$528 million in 2012.
NET EARNINGS AND EARNINGS
PER SHARE; RETURNS ON EQUITY
AND TOTAL CAPITAL
Net earnings attributable to common stockholders in
2015 were $2,710 million, up 26 percent compared
with 2014, and diluted earnings per share were $3.99,
up 32 percent. Combined, the gains from divestitures
and spinoff-related costs in 2015, and the goodwill
impairment charge in 2014, benefited net earnings and
earnings per share comparisons 45 and 47 percentage
points, respectively. Earnings per share growth also
benefited from the purchase of common stock for
treasury. Segment earnings in 2015 decreased
$425 million in Process Management, $228 million in
Network Power, $202 million in Industrial Automation,
partially due to the power transmission solutions
divestiture, $39 million in Climate Technologies and
$21 million in Commercial & Residential Solutions. See the
Business Segments discussion that follows and Note 17.
Net earnings attributable to common stockholders
in 2014 were $2,147 million, up 7 percent compared
with 2013, and diluted earnings per share were $3.03,
up 10 percent. Earnings per share growth benefited
from the purchase of common stock for treasury. The
goodwill impairment charge in 2014 was $58 million
and $0.06 per share lower than goodwill impairment
and income tax charges in 2013, which aided both
earnings and earnings per share growth 4 percentage
points. Segment earnings in 2014 increased $109 million
in Process Management, $21 million in Climate
Technologies, $25 million in Industrial Automation
and $20 million in Commercial & Residential Solutions.
Earnings decreased $95 million in Network Power
largely due to divestitures.
Return on common stockholders’ equity (net earnings
attributable to common stockholders divided by
average common stockholders’ equity) was 29.8 percent
in 2015 compared with 20.7 percent in 2014 and
19.2 percent in 2013. Return on total capital was
22.8 percent in 2015 compared with 17.5 percent
in 2014 and 16.4 percent in 2013 (computed as
net earnings attributable to common stockholders
excluding after-tax net interest expense, divided by
average common stockholders’ equity plus short- and
long-term debt less cash and short-term investments).
Combined, the impact of divestitures and the spinoff-
related costs increased the 2015 returns on common
stockholders’ equity and total capital approximately
6 and 5 percentage points, respectively. Goodwill
impairment charges in 2014 and 2013 reduced the
returns on common stockholders’ equity and total
capital approximately 3 percentage points in each year.