<PAGE>
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 June 30, 1995
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 June 30, 1995: 224,499,707 shares.
1
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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 NINE MONTHS ENDED JUNE 30, 1995 AND 1994
(Dollars in millions except per share amounts; unaudited)
Three Months Nine Months
-------------------- -------------------
1995 1994 1995 1994
--------- -------- -------- --------
Net sales $ 2,629.7 2,243.7 7,428.4 6,369.7
--------- -------- -------- --------
Costs and expenses:
Cost of sales 1,707.0 1,459.7 4,834.8 4,133.9
Selling, general and
administrative expenses 498.7 422.2 1,416.0 1,225.1
Interest expense 31.2 21.8 80.2 68.2
Gain on sale of business
and other non-recurring items - - (34.3) (192.0)
Other deductions, net 16.7 13.5 44.8 33.6
--------- -------- -------- --------
Total costs and expenses 2,253.6 1,917.2 6,341.5 5,268.8
Income before income taxes and
cumulative effects of changes
in accounting principles 376.1 326.5 1,086.9 1,100.9
Income taxes 136.6 118.5 395.6 404.7
--------- -------- -------- --------
Income before cumulative effects of
changes in accounting principles 239.5 208.0 691.3 696.2
Cumulative effects of changes in
accounting principles; $.10 and
$.52 per common share,
respectively - - (21.3) (115.9)
--------- -------- -------- --------
Net earnings $ 239.5 208.0 670.0 580.3
========= ======== ======== ========
Earnings per common share $ 1.07 .93 3.00 2.59
========= ======== ======== =======
Cash dividends per common share $ .43 .39 1.29 1.17
========= ======== ======== =======
Average number of shares used in
computing earnings per common
share (in thousands) 223,633 224,083 223,507 224,332
========= ======== ======== =======
See accompanying notes to consolidated financial statements.
____________________________________________________________________________
NOTE: Including the pretax impact of the cumulative
effects of accounting changes, income before income
taxes for the nine months ended June 30, 1995 and 1994
would have been: $1,051.9 910.9
======== ========
2
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(Dollars in millions except per share amounts; unaudited)
June 30, September 30,
ASSETS 1995 1994
------ --------- -------
CURRENT ASSETS
Cash and equivalents $ 213.2 113.3
Receivables, less allowances of $50.7 and $42.0 1,934.8 1,542.6
Inventories 1,603.8 1,392.2
Other current assets 328.5 290.1
--------- -------
Total current assets 4,080.3 3,338.2
--------- -------
PROPERTY, PLANT AND EQUIPMENT, NET 2,100.1 1,947.3
--------- -------
OTHER ASSETS
Excess of cost over net assets of purchased
businesses 2,415.9 1,862.9
Other 1,070.9 1,066.6
--------- -------
Total other assets 3,486.8 2,929.5
--------- -------
$ 9,667.2 8,215.0
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings and current maturities
of long-term debt $ 1,718.3 923.3
Accounts payable 632.1 611.4
Accrued expenses 989.8 936.4
Income taxes 148.7 146.2
--------- -------
Total current liabilities 3,488.9 2,617.3
--------- -------
LONG-TERM DEBT 275.8 279.9
--------- -------
OTHER LIABILITIES 1,105.8 976.0
--------- -------
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 20.7 -
Retained earnings 5,000.7 4,619.1
Cumulative translation adjustments 26.8 8.7
Cost of common stock in treasury, 13,838,796
shares and 14,752,649 shares (489.8) (524.3)
--------- -------
Total stockholders' equity 4,796.7 4,341.8
--------- -------
$ 9,667.2 8,215.0
========= =======
See accompanying notes to consolidated financial statements.
3
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1995 AND 1994
(Dollars in millions; unaudited)
1995 1994
--------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 556.5 669.8
INVESTING ACTIVITIES
Capital expenditures (298.1) (217.0)
Purchases of businesses, net of cash and
equivalents acquired (236.0) (38.6)
Proceeds from divestitures of businesses, net 8.3 205.5
Other 27.8 (11.1)
--------- -------
Net cash used in investing activities (498.0) (61.2)
--------- -------
FINANCING ACTIVITIES
Net increase in short-term borrowings
with maturities of 90 days or less 524.3 15.2
Proceeds from short-term borrowings 0.1 227.6
Principal payments on short-term borrowings (28.7) (265.0)
Proceeds from long-term debt 1.5 1.1
Principal payments on long-term debt (128.8) (113.8)
Net purchases of treasury stock (42.7) (98.2)
Dividends paid (288.4) (262.5)
--------- -------
Net cash provided by (used in) financing activities 37.3 (495.6)
--------- -------
Effect of exchange rate changes on cash and equivalents 4.1 4.5
--------- -------
INCREASE IN CASH AND EQUIVALENTS 99.9 117.5
Beginning cash and equivalents 113.3 101.9
--------- -------
ENDING CASH AND EQUIVALENTS $ 213.2 219.4
========= =======
See accompanying notes to consolidated financial statements.
4
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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. Certain prior year amounts have been reclassified to
conform to the current year presentation. 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, 1994.
2. Other Financial Information
(Dollars in millions; unaudited)
June 30, September 30,
Inventories 1995 1994
----------- --------- -------
Finished products $ 583.3 506.5
Raw materials and work in process 1,020.5 885.7
--------- -------
$ 1,603.8 1,392.2
========= =======
June 30, September 30,
Property, plant and equipment, net 1995 1994
---------------------------------- --------- -------
Property, plant and equipment, at cost $ 4,185.5 3,840.7
Less accumulated depreciation 2,085.4 1,893.4
--------- -------
$ 2,100.1 1,947.3
========= =======
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 1994 Annual Report on Form 10-K.
4. Effective October 1, 1994, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 112, "Employers'
Accounting for Postemployment Benefits", which establishes
accounting standards for workers' compensation, disability and
severance benefits. The Company recognized the obligation as a
cumulative effect of change in accounting principle of $21.3
million (net of $13.7 million in related income tax benefits).
The statement will not have a material impact on the Company's
ongoing results of operations.
5. In the first quarter of fiscal 1995, the Company purchased F. G.
Wilson (Engineering) Ltd. by issuing $271 million in notes to the
sellers. The Company completed the acquisition of Control
5
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Techniques, plc in the second quarter of 1995 for a purchase price of
approximately $227 million (net of cash and equivalents acquired).
Approximately $49 million of the purchase price was financed by
issuing notes to the sellers. The increases in excess of cost over
net assets of purchased businesses, receivables, inventories, and
short-term borrowings during the nine months ended June 30, 1995
reflect the impact of these acquisitions.
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 third quarter and
first nine months of fiscal 1995 were the highest for any quarter and
first nine-month period in the Company's history.
Net sales were $2,629.7 million for the quarter ended June 30, 1995,
up 17.2 percent over net sales of $2,243.7 million for the quarter ended
June 30, 1994, and $7,428.4 million for the nine months ended June 30,
1995, up 16.6 percent over net sales of $6,369.7 for the same period a
year ago. The third quarter results reflect continued strong
international and slower domestic sales growth. Excluding the positive
impact of currency, underlying international subsidiaries and exports each
reported double-digit sales growth. With the exception of North America,
all major geographic regions experienced double-digit sales growth.
The Appliance and Construction-Related segment reported a moderate sales
increase compared to the third quarter of 1994. Double-digit consolidated
tools sales growth was assisted by strong domestic demand for hand tools
and global demand for professional plumbing tools. Strong sales by the
heating, ventilating and air conditioning business reflected robust
international demand, further acceptance of new products and market
penetration. Sales of the appliance components business rose slightly as
international gains were offset by a slowing domestic market.
The Commercial and Industrial segment reported a double-digit sales
increase compared to the third quarter of 1994. The industrial motors
and drives business reported the largest sales gains for the quarter due
to strong domestic and international capital goods demand and the recent
acquisitions of F.G. Wilson and Control Techniques. The process business
reported robust sales growth as a result of accelerating sales growth for
measurement, distributed control systems, and control valve product lines.
The industrial components and equipment business also experienced double-
digit sales growth due to strengthening international capital goods market
demand. Solid sales growth for the electronics business was due to strong
domestic demand and new products acceptance.
Cost of sales for the third quarter was $1,707.0 million or 64.9
percent of sales, compared with $1,459.7 million, or 65.1 percent of
sales, for the third quarter of 1994. Cost of sales for the nine months
ended June 30, 1995 was $4,834.8 million or 65.1 percent of sales,
compared to $4,133.9 million or 64.9 percent of sales for the same period
6
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
a year ago. Selling, general and administrative expenses for the three
months ended June 30, 1995 were $498.7 million, or 19.0 percent of
sales, compared to $422.2 million, or 18.8 percent of sales for the same
period a year ago. For the first nine months of 1995, selling, general
and administrative expenses were $1,416.0 million or 19.0 percent of
sales, compared to $1,225.1 million or 19.2 percent of sales for the same
period in 1994.
The third quarter consolidated profit margins remained at high levels
as a result of the Company's ongoing commitments to cost reduction
efforts and productivity improvement programs despite higher interest
expense associated with recent acquisitions.
Earnings in the first quarter of fiscal 1995 included a $41.3 million
preferential distribution from the S-B Power Tool joint venture which
was substantially offset by other non-recurring items and the adoption of
SFAS No. 112. Earnings in the first quarter of fiscal 1994 included a
gain on the sale of business which was substantially offset by non-
recurring items and the adoption of SFAS No. 106 ($115.9 million, net
of $74.1 million in related income tax benefits).
Financial Condition
A comparison of key elements of the Company's financial condition at
the end of the third quarter as compared to the end of the prior
fiscal year follows:
June 30, September 30,
1995 1994
-------- --------
Working capital (in millions) $591.4 720.9
Current ratio 1.2 to 1 1.3 to 1
Total debt to total capital 29.4% 21.7%
Net debt to net capital 27.1% 20.0%
The Company's interest coverage ratio (earnings before income taxes,
non-recurring items and interest expense, divided by interest expense)
was 14.1 times for the nine months ended June 30, 1995 compared to 14.3
times for the same period one year earlier. The current ratio decrease
and the increase in the debt to capital ratios reflect additional debt
related to the acquisitions.
Cash flow provided by operating activities was $556.5 million for the
nine months ended June 30, 1995 versus $669.8 million for the same period
in the prior year. These results reflect increases in inventories and
receivables associated with strong sales growth. Cash flow provided by
operating activities and an increase in borrowings of $368.4 million were
used primarily to fund capital expenditures of $298.1 million, purchase
businesses (net of cash and equivalents acquired) for $236.0 million, and
pay dividends of $288.4 million. In addition, $320 million of notes were
issued to the sellers to finance the F.G. Wilson and Control Techniques
acquisitions.
7
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
The Company is in a strong financial position and has the resources
available for reinvestment in existing businesses, strategic acquisitions
and managing the capital structure.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits (Listed by numbers corresponding to the Exhibit Table
of Item 601 in Regulation S-K).
3(a) Restated Articles of Incorporation of Emerson Electric Co.,
incorporated by reference to Emerson Electric Co. 1989 Form
10-K, Exhibit 3(a).
3(b) Bylaws of Emerson Electric Co., as amended through May 3,
1994, incorporated by reference to Emerson Electric Co. 1994
Form 10-K, Exhibit 3(b).
27 Financial Data Schedule
(b) Reports on Form 8-K. The Company did not file any reports on
Form 8-K during the quarter ended June 30, 1995.
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: August 14, 1995 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)
8
<TABLE> <S> <C>
<ARTICLE> 5 EXHIBIT 27
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE EMERSON
ELECTRIC CO. CONSOLIDATED STATEMENT OF EARNINGS AND CONSOLIDATED BALANCE SHEET
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 1995 FILED WITH THE COMPANY'S
1995 THIRD QUARTER FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 213,200
<SECURITIES> 0
<RECEIVABLES> 1,985,500
<ALLOWANCES> 50,700
<INVENTORY> 1,603,800
<CURRENT-ASSETS> 4,080,300
<PP&E> 4,185,500
<DEPRECIATION> 2,085,400
<TOTAL-ASSETS> 9,667,200
<CURRENT-LIABILITIES> 3,488,900
<BONDS> 275,800
<COMMON> 238,300
0
0
<OTHER-SE> 4,558,400
<TOTAL-LIABILITY-AND-EQUITY> 9,667,200
<SALES> 7,428,400
<TOTAL-REVENUES> 7,428,400
<CGS> 4,834,800
<TOTAL-COSTS> 4,834,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80,200
<INCOME-PRETAX> 1,086,900 <F1>
<INCOME-TAX> 395,600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (21,300) <F2>
<NET-INCOME> 670,000
<EPS-PRIMARY> 3.00
<EPS-DILUTED> 0
<FN>
<F1> Income-pretax (before accounting change) includes $34.3 million
non-recurring items. The net earnings impact of the non-recurring
items was substantially offset by the accounting change.
<F2> Cumulative effect of change in accounting for postemployment benefits.
Income before accounting change was $691.3 million.
</FN>
</TABLE>
