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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to __________________
Commission file number 1-278
EMERSON ELECTRIC CO.
(Exact name of registrant as specified in its charter)
Missouri 43-0259330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8000 W. Florissant Ave.
P.O. Box 4100
St. Louis, Missouri 63136
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 553-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
Common stock outstanding at December 31, 1993: 224,454,350 shares.
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PART I. FINANCIAL INFORMATION FORM 10-Q
Item 1. Financial Statements.
EMERSON ELECTRIC CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED DECEMBER 31, 1993 AND 1992
(Dollars in millions except per share amounts; unaudited)
Three Months Ended
December 31,
---------------------
1993 1992
---------- --------
Net sales $ 2,009.5 1,983.8
---------- --------
Costs and expenses:
Cost of sales 1,303.4 1,296.2
Selling, general and administrative expenses 396.5 392.1
Interest expense 24.4 30.4
Gain on sale of business and other
non-recurring items (192.0) -
Other deductions, net 7.8 8.1
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Total costs and expenses 1,540.1 1,726.8
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Earnings before income taxes and cumulative
effect of change in accounting principle 469.4 257.0
Income taxes 175.5 93.8
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Earnings before cumulative effect of change
in accounting principle 293.9 163.2
Cumulative effect of change in accounting for
postretirement benefits ($190.0 million less
income tax benefit of $74.1 million) (115.9) -
---------- --------
Net earnings $ 178.0 163.2
========== ========
See accompanying notes to consolidated financial statements.
___________________________________________________________________________
NOTE: Including the pretax impact of the cumulative effect of accounting
change, earnings before income taxes would have been $279.4 million for
the three months ended December 31, 1993 compared to $257.0 million for
the first quarter of the prior year.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED STATEMENTS OF EARNINGS (Continued)
THREE MONTHS ENDED DECEMBER 31, 1993 AND 1992
(Dollars in millions except per share amounts; unaudited)
Three months ended
December 31,
---------------------
1993 1992
Per common share: ---------- --------
-----------------
Earnings before cumulative effect of change
in accounting principle $ 1.31 .73
Cumulative effect of change in accounting
for postretirement benefits (.52) -
---------- --------
Earnings per common share $ .79 .73
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Cash dividends per common share $ .39 .36
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Average number of shares used in
computing earnings per common
share (in thousands) 224,748 224,780
========== ========
See accompanying notes to consolidated financial statements.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(Dollars in millions except per share amounts; unaudited)
December 31, September 30,
ASSETS 1993 1993
------ --------- -------
CURRENT ASSETS
Cash and equivalents $ 194.7 101.9
Receivables, less allowances of $36.4 and $35.7 1,367.6 1,392.1
Inventories 1,248.5 1,298.3
Other current assets 302.0 282.0
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Total current assets 3,112.8 3,074.3
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PROPERTY, PLANT AND EQUIPMENT, NET 1,837.1 1,880.1
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OTHER ASSETS
Excess of cost over net assets of purchased
businesses 1,811.5 1,834.3
Other 1,016.8 1,025.8
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Total other assets 2,828.3 2,860.1
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$ 7,778.2 7,814.5
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings and current maturities
of long-term debt $ 1,091.9 1,183.9
Accounts payable 393.5 492.8
Accrued expenses 848.8 870.0
Income taxes 289.8 145.9
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Total current liabilities 2,624.0 2,692.6
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LONG-TERM DEBT 330.7 438.0
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OTHER LIABILITIES 878.4 768.8
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STOCKHOLDERS' EQUITY
Preferred stock of $2.50 par value per share.
Authorized 5,400,000 shares; issued - none - -
Common stock of $1 par value per share.
Authorized 400,000,000 shares; issued
238,338,503 shares and 238,338,503 shares 238.3 238.3
Additional paid-in capital - 4.1
Retained earnings 4,272.7 4,182.5
Cumulative translation adjustments (97.6) (69.1)
Cost of common stock in treasury, 13,884,153
shares and 13,575,263 shares (468.3) (440.7)
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Total stockholders' equity 3,945.1 3,915.1
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$ 7,778.2 7,814.5
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See accompanying notes to consolidated financial statements.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1993 AND 1992
(Dollars in millions; unaudited)
1993 1992
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OPERATING ACTIVITIES
Net earnings $ 178.0 163.2
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 82.9 85.3
Changes in operating working capital (66.5) (122.6)
Cumulative effect of change in accounting principle 115.9 -
Gain on sale of business and other non-recurring items (192.0) -
Income taxes payable on sale of business and other 76.3 4.1
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Net cash provided by operating activities 194.6 130.0
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INVESTING ACTIVITIES
Capital expenditures (67.2) (51.5)
Purchases of businesses, net of cash and
equivalents acquired (1.9)(1,253.7)
Proceeds from divestiture of business 300.9 -
Other 4.9 47.8
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Net cash provided by (used in) investing activities 236.7 (1,257.4)
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FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings
with maturities of 90 days or less (412.8) 1,461.2
Proceeds from short-term borrowings 227.6 -
Principal payments on short-term borrowings - (97.9)
Dividends paid (87.7) (81.0)
Other (63.4) (1.7)
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Net cash provided by (used in) financing activities (336.3) 1,280.6
--------- -------
Effect of exchange rate changes on cash and equivalents (2.2) (10.9)
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INCREASE IN CASH AND EQUIVALENTS 92.8 142.3
Beginning cash and equivalents 101.9 80.2
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ENDING CASH AND EQUIVALENTS $ 194.7 222.5
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CHANGES IN OPERATING WORKING CAPITAL
Receivables $ (6.8) 31.1
Inventories 9.4 (.9)
Other current assets 10.2 7.3
Accounts payable (76.2) (89.2)
Accrued expenses (56.7) (98.9)
Income taxes 53.6 28.0
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$ (66.5) (122.6)
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See accompanying notes to consolidated financial statements.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Notes to Consolidated Financial Statements
1. The accompanying unaudited consolidated financial statements, in
the opinion of management, include all adjustments necessary for
a fair presentation of the results for the interim periods
presented. The consolidated financial statements are presented in
accordance with the requirements of Form 10-Q and consequently do
not include all the disclosures required by generally accepted
accounting principles. For further information refer to the
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended
September 30, 1993.
2. Other Financial Information
(Dollars in millions; unaudited)
December 31, September 30,
Inventories 1993 1993
----------- --------- -------
Finished products $ 448.7 484.6
Raw materials and work in process 799.8 813.7
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$ 1,248.5 1,298.3
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December 31, September 30,
Property, plant and equipment, net 1993 1993
---------------------------------- --------- -------
Property, plant and equipment, at cost $ 3,544.2 3,586.6
Less accumulated depreciation 1,707.1 1,706.5
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$ 1,837.1 1,880.1
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3. The Company has guaranteed performance under certain contracts
related to the government and defense businesses distributed to
stockholders in 1990, and has effectively guaranteed 50 percent
of the indebtedness of a joint venture. For further information,
refer to the Company's 1993 Annual Report on Form 10-K.
4. The Company sponsors unfunded postretirement benefit plans
(primarily health care) for U.S. retirees and their dependents.
Effective October 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions"(OPEB), which
requires that OPEB costs be accrued over the service lives of
employees. The Company elected to immediately recognize the
transition obligation arising from service prior to adoption as a
cumulative effect of change in accounting principle of $115.9
million (net of $74.1 million in related income tax benefits).
The statement will not have a material impact on the Company's
ongoing results of operations.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
As of October 1, 1993, the Company's accumulated postretirement
benefit obligation, including amounts previously accrued in
accordance with APB No. 16, was $296 million, consisting of
$177 million for retirees, $27 million for fully eligible active
plan participants and $92 million for other active plan
participants. The assumed discount rate used in measuring the
obligation was 7.25 percent; the assumed health care cost trend
rate was 12.0 percent in 1994, declining to 5.0 percent in the year
2008. A one-percentage-point increase in the assumed health care
cost trend rate for each year would increase the obligation by
approximately 7 percent.
5. On December 14, 1993, the Company completed the sale of the
Aerospace unit (Aero) of its Rosemount Inc. subsidiary (fiscal 1993
sales of approximately $130 million) for $301 million. The
transaction resulted in a pretax gain of $242 million. The net
earnings impact of this gain was substantially offset by a charge for
the shutdown of facilities and other non-recurring items of
$50 million and the adoption of SFAS No. 106.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Results of Operations
Sales, net earnings and earnings per share for the first quarter of
fiscal 1994 were the highest for any first quarter in the Company's
history.
Net sales for the quarter ended December 31, 1993 were $2,009.5 million,
up 1.3 percent over net sales of $1,983.8 million for the quarter ended
December 31, 1992. Domestic sales were up over 7 percent compared to
the first quarter of 1993, with all businesses reporting domestic sales
increases. Excluding the impact of unfavorable exchange rates of
approximately $50 million, sales of non-U.S. subsidiaries declined
moderately due to continued weakness in Europe and Japan. Total export
sales increased approximately 8 percent.
Sales of the Appliance and Construction-Related segment increased
moderately compared to the first quarter of 1993 as strong end market
demand resulted in the appliance components and fractional motors
businesses achieving double-digit sales gains. Sales in the heating,
ventilating and air conditioning business were up slightly as strong
domestic gains were offset by weak markets in Europe and Japan. The
consolidated tools business was up modestly while the unconsolidated
tool joint ventures experienced strong sales growth.
In the Commercial and Industrial segment, sales decreased modestly
compared to the first quarter of the prior year. Excluding the impact
of unfavorable exchange rates, sales of the segment increased slightly.
Sales of the underlying process control and industrial motors and drives
businesses were flat, excluding the effects of the stronger dollar, as
domestic sales gains offset declines in non-U.S. subsidiary sales.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Sales of the industrial components and equipment business were up
slightly due to improved domestic demand. Sales in the computer support
products business rose moderately due to continued improvement in
domestic and Asia-Pacific markets and new product sales.
Cost of sales for the first quarter was $1,303.4 million or 64.9
percent of sales, compared with $1,296.2 million, or 65.3 percent of
sales, for the first quarter of 1993. Selling, general and
administrative expenses for the three months ended December 31, 1993
were $396.5 million, or 19.7 percent of sales, compared to $392.1
million, or 19.8 percent of sales for the same period a year ago.
The first quarter consolidated profit margins improved from the
prior year as a result of ongoing commitments to cost reduction
efforts and productivity improvement programs. Interest expense
decreased $6.0 million reflecting the reduction of debt.
Earnings in 1994 included a gain on sale of business which was
substantially offset by a charge for the shutdown of facilities and
other non-recurring items and the adoption of SFAS No. 106 (see notes
4 and 5).
Financial Condition
A comparison of key elements of the Company's financial condition at
the end of the first quarter as compared to the end of the prior
fiscal year follows:
December 31, September 30,
1993 1993
-------- --------
Working capital (in millions) $488.8 381.7
Current ratio 1.2 to 1 1.1 to 1
Total debt to total capital 26.5% 29.3%
Net debt to net capital 23.7% 27.9%
The Company's interest coverage ratio (earnings before income taxes,
non-recurring items and interest expense, divided by interest expense)
was 12.4 times for the quarter ended December 31, 1993 compared to 9.4
times for the same period one year earlier.
Cash and equivalents increased by $92.8 million during the three
months ended December 31, 1993. The proceeds received from the Aero
divestiture of $300.9 million and cash flow provided by operating
activities of $194.6 million were primarily used to reduce debt by $190.1
million, pay dividends of $87.7 million and fund capital expenditures of
$67.2 million. The income taxes related to the Aero divestiture will be
paid in the second quarter of 1994.
The Company is in a strong financial position, continues to generate
strong operating cash flow, and has the resources available for
reinvestment in existing businesses, strategic acquisitions and managing
the capital structure.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. The Company did not file any reports on
Form 8-K during the quarter ended December 31, 1993.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
EMERSON ELECTRIC CO.
Date: February 14, 1994 By /s/ Walter J. Galvin
-----------------------
Walter J. Galvin
Senior Vice President - Finance
and Chief Financial Officer
(on behalf of the registrant and
as Chief Financial Officer)
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