Emerson 2015 Annual Report Download - page 43

2015 Annual Report | 41
(4) Other Deductions, Net
Other deductions, net are summarized as follows:
2013 2014 2015
Amortization of intangibles (intellectual property and customer relationships) $220 225 214
Rationalization of operations 78 55 211
Other 64 113 146
Total $362 393 571
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, litigation and other items. The increase in
2015 is primarily due to higher litigation costs of $33, an unfavorable foreign currency transaction impact of $14
and fees related to the planned spinoff of the network power systems business of $10, partially offset by a favorable
comparative effect from the $34 Artesyn equity investment loss in 2014. Other increased in 2014 primarily due to
the equity investment loss, the comparative impact of a $13 China research credit in 2013 and several other items.
Reduced foreign currency transaction losses of $20 partially offset the increase.
(5) Rationalization of Operations
Each year the Company incurs costs to size its businesses to levels appropriate for current economic conditions and
to continually improve its cost structure and operational efficiency, deploy assets globally, and remain competitive
on a worldwide basis. Costs result from numerous individual actions implemented across the Company’s various
operating units on an ongoing basis and can include costs for moving facilities to best-cost locations, re-starting
plants after relocation or geographic expansion to better serve local markets, reducing forcecount or the number
of facilities, exiting certain product lines, and other costs resulting from asset deployment decisions. By category,
shutdown costs include severance and benefits, stay bonuses, lease and other contract termination costs and asset
write-downs. Vacant facility costs include security, maintenance, utilities and other costs. Start-up and moving costs
include the costs of relocating fixed assets and employee training and relocation.
Rationalization expenses were $211, $55 and $78, respectively, for 2015, 2014 and 2013. The significant increase
in 2015 is due to the acceleration of activity to address the slowdown in global capital spending. The Company
also incurred $10 of rationalization expense in 2015 that was reported in cost of sales, primarily related to exiting
production facilities in Brazil and China. The Company currently expects 2016 rationalization expense to be
approximately $60, including costs to complete actions initiated before the end of 2015 and for actions anticipated
to be approved and initiated during 2016.
The change in the liability for rationalization of operations during the years ended September 30 follows:
2014 EXPENSE PAID / UTILIZED 2015
Severance and benefits $20 174 89 105
Lease and other contract terminations 1 3 3 1
Asset write-downs — 3 3 —
Vacant facility and other shutdown costs — 12 9 3
Start-up and moving costs 1 19 17 3
Total $22 211 121 112
2013 EXPENSE PAID / UTILIZED 2014
Severance and benefits $27 27 34 20
Lease and other contract terminations 3 3 5 1
Asset write-downs — 2 2 —
Vacant facility and other shutdown costs 1 5 6 —
Start-up and moving costs 1 18 18 1
Total $32 55 65 22