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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 March 31, 1994
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 March 31, 1994: 224,211,792 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 AND SIX MONTHS ENDED MARCH 31, 1994 AND 1993
(Dollars in millions except per share amounts; unaudited)
Three Months Six Months
-------------------- --------------------
1994 1993 1994 1993
--------- --------- --------- ---------
Net sales $ 2,116.5 2,056.7 4,126.0 4,040.5
--------- --------- --------- ---------
Costs and expenses:
Cost of sales 1,370.8 1,342.3 2,674.2 2,638.5
Selling, general and
administrative expenses 406.4 396.9 802.9 789.0
Interest expense 22.0 30.4 46.4 60.8
Gain on sale of business and
other non-recurring items - - (192.0) -
Other deductions, net 12.3 7.2 20.1 15.3
--------- --------- --------- ---------
Total costs and expenses 1,811.5 1,776.8 3,351.6 3,503.6
--------- --------- --------- ---------
Earnings before income taxes and
cumulative effect of change in
accounting principle 305.0 279.9 774.4 536.9
Income taxes 110.7 102.2 286.2 196.0
--------- --------- --------- ---------
Earnings before cumulative effect
of change in accounting principle 194.3 177.7 488.2 340.9
Cumulative effect of change in
accounting for postretirement
benefits ($190.0 million less
income tax benefit of
$74.1 million) - - (115.9) -
--------- --------- --------- ---------
Net earnings $ 194.3 177.7 372.3 340.9
========= ========= ========= =========
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 $584.4 million for
the six months ended March 31, 1994 compared to $536.9 million for the same
period of the prior year.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED STATEMENTS OF EARNINGS (Continued)
THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1994 AND 1993
(Dollars in millions except per share amounts; unaudited)
Three Months Six Months
-------------------- --------------------
1994 1993 1994 1993
--------- --------- --------- ---------
Per common share:
- - -----------------
Earnings before cumulative effect
of change in accounting principle $ .87 .79 2.18 1.52
Cumulative effect of change in
accounting for postretirement
benefits - - (.52) -
--------- --------- --------- ---------
Earnings per common share $ .87 .79 1.66 1.52
========= ========= ========= =========
Cash dividends per common share $ .39 .36 .78 .72
========= ========= ========= =========
Average number of shares used in
computing earnings per common
share (in thousands) 224,166 225,115 224,457 224,947
========= ========= ========= =========
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)
March 31, September 30,
ASSETS 1994 1993
------ --------- -------
CURRENT ASSETS
Cash and equivalents $ 191.1 101.9
Receivables, less allowances of $37.9 and $35.7 1,519.2 1,392.1
Inventories 1,272.5 1,298.3
Other current assets 289.4 282.0
--------- -------
Total current assets 3,272.2 3,074.3
--------- -------
PROPERTY, PLANT AND EQUIPMENT, NET 1,851.1 1,880.1
--------- -------
OTHER ASSETS
Excess of cost over net assets of purchased
businesses 1,812.9 1,834.3
Other 1,024.7 1,025.8
--------- -------
Total other assets 2,837.6 2,860.1
--------- -------
$ 7,960.9 7,814.5
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings and current maturities
of long-term debt $ 1,246.9 1,183.9
Accounts payable 470.9 492.8
Accrued expenses 880.5 870.0
Income taxes 110.1 145.9
--------- -------
Total current liabilities 2,708.4 2,692.6
--------- -------
LONG-TERM DEBT 321.9 438.0
--------- -------
OTHER LIABILITIES 888.5 768.8
--------- -------
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 4,379.7 4,182.5
Cumulative translation adjustments (86.8) (69.1)
Cost of common stock in treasury, 14,126,711
shares and 13,575,263 shares (489.1) (440.7)
--------- -------
Total stockholders' equity 4,042.1 3,915.1
--------- -------
$ 7,960.9 7,814.5
========= =======
See accompanying notes to consolidated financial statements.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1994 AND 1993
(Dollars in millions; unaudited)
1994 1993
--------- -------
OPERATING ACTIVITIES
Net earnings $ 372.3 340.9
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 169.2 174.7
Changes in operating working capital (184.0) (189.2)
Cumulative effect of change in accounting principle 115.9 -
Gain on sale of business and other non-recurring
items, net of income taxes (117.1) -
Income taxes paid on sale of business (101.7) -
Other (4.5) 3.5
--------- -------
Net cash provided by operating activities 250.1 329.9
--------- -------
INVESTING ACTIVITIES
Capital expenditures (132.6) (121.7)
Purchases of businesses, net of cash and
equivalents acquired (21.7)(1,254.6)
Proceeds from divestiture of business 301.3 -
Other 4.1 63.4
--------- -------
Net cash provided by (used in) investing activities 151.1 (1,312.9)
--------- -------
FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings
with maturities of 90 days or less (195.4) 1,294.7
Proceeds from short-term borrowings 227.6 74.7
Principal payments on short-term borrowings (65.0) (98.0)
Dividends paid (175.1) (162.0)
Other (102.7) 23.3
--------- -------
Net cash provided by (used in) financing activities (310.6) 1,132.7
--------- -------
Effect of exchange rate changes on cash and equivalents (1.4) (13.3)
--------- -------
INCREASE IN CASH AND EQUIVALENTS 89.2 136.4
Beginning cash and equivalents 101.9 80.2
--------- -------
ENDING CASH AND EQUIVALENTS $ 191.1 216.6
========= =======
CHANGES IN OPERATING WORKING CAPITAL
Receivables $ (133.8) (94.9)
Inventories (3.5) 7.2
Other current assets 26.3 9.0
Accounts payable (2.5) (29.2)
Accrued expenses (45.3) (72.7)
Income taxes (25.2) (8.6)
--------- -------
$ (184.0) (189.2)
========= =======
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)
March 31, September 30,
Inventories 1994 1993
----------- --------- -------
Finished products $ 456.0 484.6
Raw materials and work in process 816.5 813.7
--------- -------
$ 1,272.5 1,298.3
========= =======
March 31, September 30,
Property, plant and equipment, net 1994 1993
---------------------------------- --------- -------
Property, plant and equipment, at cost $ 3,617.9 3,586.6
Less accumulated depreciation 1,766.8 1,706.5
--------- -------
$ 1,851.1 1,880.1
========= =======
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. On December 14, 1993, the Company sold 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 in the first quarter by a charge for the
shutdown of facilities and other non-recurring items ($50 million
pretax impact) and the adoption of SFAS No. 106 (see note 5).
Excluding income taxes paid on the Aero divestiture ($101.7
million), cash flow provided by operating activities would have
been $351.8 million compared to $329.9 million for the same period
of the prior year.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
5. Effective October 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", which requires that
these costs be accrued over the service lives of employees. The
Company recognized the transition obligation arising from service
prior to adoption in the first quarter 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.
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 second quarter and
first six months of fiscal 1994 were the highest for any quarter and
first six-month period in the Company's history.
Net sales were $2,116.5 million for the quarter ended March 31, 1994,
up 2.9 percent over net sales of $2,056.7 million for the quarter ended
March 31, 1993, and $4,126.0 million for the six months ended March 31,
1994, up 2.1 percent over net sales of $4,040.5 million for the same
period a year ago. Consolidated sales in 1994 were affected by
unfavorable foreign exchange rates, the Aero divestiture and several
minor acquisitions. Orders grew faster than sales in each business
during the quarter.
Underlying domestic sales increased over 5 percent from the second
quarter of the prior year as all businesses reported increased domestic
sales despite unfavorable weather conditions. Excluding the effects of
foreign exchange, underlying non-U.S. subsidiary sales increased
slightly. Export sales experienced double-digit sales growth.
Sales of the Appliance and Construction-Related segment increased
solidly compared to the second quarter of 1993. The appliance components
business reported a double-digit sales increase due to an acquisition and
continued strong end market demand. The fractional motors business
experienced solid sales gains as its European subsidiary reported a
double-digit sales increase at constant exchange rates. Sales of the
heating, ventilating and air conditioning business rose moderately due
to penetration gains at domestic original equipment manufacturers.
Consolidated tool business sales increased modestly, while the
unconsolidated tool joint ventures experienced strong sales growth as
shipment of a large number of new products began in the quarter.
Commercial and Industrial segment sales were up slightly compared to the
second quarter of the prior year. The electronics business experienced a
strong sales increase led by sales of environmental systems in the U.S.
and Asia/Pacific and the continued success of new products. Sales in the
underlying process control business rose moderately due to improved
demand in international markets. Sales of the industrial components and
equipment business rose slightly, as domestic gains were partially offset
by international weakness. Sales of the industrial motors and drives
business were up slightly, excluding the effects of foreign exchange.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Cost of sales for the second quarter was $1,370.8 million or 64.8 percent
of sales, compared with $1,342.3 million, or 65.3 percent of sales, for
the second quarter of 1993. Costs of sales for the six months ended
March 31, 1994 was $2,674.2 million or 64.8 percent of sales, compared to
$2,638.5 million, or 65.3 percent of sales for the same period a year ago.
Selling, general and administrative expenses for the three months ended
March 31, 1994 were $406.4 million, or 19.2 percent of sales, compared to
$396.9 million, or 19.3 percent of sales for the same period a year ago.
For the first six months of 1994, selling, general and administrative
expenses were $802.9 million or 19.5 percent of sales, compared to $789.0
million, or 19.5 percent of sales for the same period in 1993.
The second quarter consolidated profit margins improved from the prior
year as the result of ongoing commitment to cost reduction efforts and
productivity improvement programs. Interest expense for the second
quarter decreased by $8.4 million compared to the prior year due to
continued strong cash flow.
Earnings in the first quarter of 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 second quarter as compared to the end of the prior
fiscal year follows:
March 31, September 30,
1994 1993
-------- --------
Working capital (in millions) $563.8 381.7
Current ratio 1.2 to 1 1.1 to 1
Total debt to total capital 28.0% 29.3%
Net debt to net capital 25.4% 27.9%
The Company's interest coverage ratio (earnings before income taxes,
non-recurring items and interest expense, divided by interest expense)
was 13.6 times for the six months ended March 31, 1994 compared to 9.8
times for the same period one year earlier.
Cash and equivalents increased by $89.2 million during the six months
ended March 31, 1994. Operating cash flow and proceeds from the Aero
divestiture ($199.6 million net of income taxes) were primarily used to
pay dividends of $175.1 million, fund capital expenditures of $132.6
million and manage the capital structure.
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 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on February 1, 1994. The
directors listed in the Notice of Annual Meeting of Stockholders dated
December 16, 1993 were elected for terms ending in 1997 with voting for
each as follows:
DIRECTOR FOR WITHHELD
-------- ----------- ---------
L.L. Browning, Jr. 197,018,347 1,905,123
A.A. Busch III 197,225,096 1,698,374
R.B. Horton 197,183,437 1,740,033
G.A. Lodge 197,034,604 1,888,866
V.R. Loucks, Jr. 196,453,491 2,469,979
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 March 31, 1994.
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: May 11, 1994 By /s/ Walter J. Galvin
-----------------------
Walter J. Galvin
Senior Vice President - Finance
and Chief Financial Officer
(on behalf of the registrant and as
Principal Financial Officer)
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