Emerson 2015 Annual Report Download - page 42

40 | 2015 Annual Report
In January 2015, the Company completed the sale of its mechanical power transmission solutions business to Regal
Beloit Corporation for $1.4 billion, and recognized a pretax gain from the transaction of $939 ($532 after-tax, $0.78
per share). Assets and liabilities sold were as follows: current assets, $182 (accounts receivable, inventories, other
current assets); other assets, $374 (property, plant and equipment, goodwill, other noncurrent assets); accrued
expenses, $56 (accounts payable, other current liabilities); and other liabilities, $41. Proceeds from the divestiture
were used for share repurchase. This business was previously reported in the Industrial Automation segment, and
had partial year sales in 2015 of $189 and related pretax earnings of $21. Power transmission solutions designs and
manufactures market-leading couplings, bearings, conveying components and gearing and drive components, and
provides supporting services and solutions.
On September 30, 2015, the Company sold its InterMetro commercial storage business to Ali Group of Italy for $411
in cash and recognized a pretax gain from the transaction of $100 ($79 after-tax, $0.12 per share). This business had
annual sales of $288 and pretax earnings of $42 in 2015 and is reported in the Commercial & Residential Solutions
segment. Assets and liabilities sold were as follows: current assets, $62 (accounts receivable, inventories, other
current assets); other assets, $292 (property, plant and equipment, goodwill, other noncurrent assets); current
liabilities, $34 (accounts payable, other current liabilities); and other liabilities, $9. InterMetro is a leading manufacturer
and supplier of storage and transport products in the food service, commercial products and health care industries.
In the first quarter of 2014, the Company acquired 100 percent of Virgo Valves and Controls Limited and Enardo
Holdings, both in the Process Management final control business. Virgo is a manufacturer of engineered valves and
automation systems and Enardo is a manufacturer of tank and terminal safety equipment. Total cash paid for both
businesses was approximately $506, net of cash acquired, and the Company also assumed $76 of debt. Combined
sales for Virgo and Enardo in 2014 were $321. Goodwill of $323 (largely nondeductible) and identifiable intangible
assets of $178, primarily customer relationships and patents and technology with weighted-average lives of
approximately 12 years, were recognized from these transactions. The Company also acquired four other smaller
businesses in 2014 for a total of approximately $104, net of cash acquired. Combined annual sales for these four
businesses were approximately $55. These acquisitions were complementary to the existing business portfolio.
In the second quarter of 2014, the Company acquired the remaining 44.5 percent noncontrolling interest in
Appleton Group (formally EGS Electrical Group), which is reported in Industrial Automation, for $574. Full ownership
provides growth opportunities in the oil and gas and chemicals end markets by leveraging the Company’s Process
Management and international distribution channels. The transaction reduced noncontrolling interests $101
and common stockholders equity $343, and increased deferred tax assets $130. The transaction did not affect
consolidated results of operations other than eliminating the noncontrolling interest’s share of future earnings
and distributions from this business. Sales for this electrical distribution business were $542 in 2014.
In November 2013, the Company completed the divestiture of a 51 percent controlling interest in Artesyn and
received proceeds of $264, net of working capital adjustment. The Company retained an interest with a fair value
of approximately $60, determined using a Level 3 option pricing model. A tax benefit of $20 was recognized on
completion of the transaction. Consolidated operating results for 2014 include sales of $146 and a net loss of $9
for this business through the closing date. As the Company retained a noncontrolling interest in this business, it
was not classified as discontinued operations. Assets and liabilities held-for-sale at the closing date were: other
current assets, $367 (accounts receivable, inventories, other current assets); other assets, $212 (property plant
and equipment, goodwill, other noncurrent assets); and accrued expenses, $255 (accounts payable and other
liabilities). Prior to the divestiture, cash of $376 ($308, after tax provided for in fiscal 2013) was repatriated from this
business. In fiscal 2013, the Company initiated the purchase of $600 of Emerson common stock in anticipation of
the sale proceeds and the cash repatriation. The purchase of shares was completed in the first quarter of 2014. The
Company recorded goodwill impairment and income tax charges in 2013 related to this business. See Note 6.
In the fourth quarter of 2014, the Company sold its connectivity solutions business for $99 in cash, and recognized
a slight gain. This business reported 2014 sales of $63 and pretax earnings of $3. Connectivity solutions offered
industry-leading fiber optic, radio-frequency and microwave-coaxial technologies that safeguard network reliability.
The results of operations of the acquired businesses discussed above have been included in the Company’s
consolidated results of operations since the respective dates of acquisition.