<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996
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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock of $1.00 par value per share New York Stock Exchange
Chicago Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
<PAGE>
Aggregate market value of the voting stock held by nonaffiliates of the
registrant as of close of business on October 31, 1996: $19,790 million.
Common stock outstanding at October 31, 1996: 223,663,349 shares.
Documents Incorporated by Reference
1. Portions of Emerson Electric Co. 1996 Annual Report to Stockholders
(Parts I and II).
2. Portions of Emerson Electric Co. Notice of 1997 Annual Meeting of
the Stockholders and Proxy Statement (Part III).
<PAGE>
PART I
Item 1. Business
-----------------
Emerson was incorporated in Missouri in 1890. Originally engaged in
the manufacture and sale of electric motors and fans, Emerson's product
lines were subsequently expanded through internal growth and acquisitions.
Emerson is now engaged principally in the worldwide design, manufacture
and sale of a broad range of electrical, electromechanical and electronic
products and systems.
------------------------------------------------------
The products manufactured by the Company are classified into the
following industry segments: Commercial and Industrial Components and
Systems; and Appliance and Construction-Related Components. Net sales,
income before income taxes and accounting changes and total assets
attributable to each industry segment for the three years ended
September 30, 1996 are set forth in Note 13 of Notes to Consolidated
Financial Statements on page 39 of the 1996 Annual Report, which note is
hereby incorporated by reference. Information with respect to acquisition
and divestiture activities by Emerson is set forth in Note 2 of Notes to
Consolidated Financial Statements on page 33 of the 1996 Annual Report,
which note is hereby incorporated by reference.
COMMERCIAL AND INDUSTRIAL COMPONENTS AND SYSTEMS
------------------------------------------------
The Commercial and Industrial segment includes process control
instrumentation, valves and systems; industrial motors and drives;
industrial machinery, equipment and components; and electronic products.
These products are generally highly engineered, both in product design
and manufacturing process. Products of this segment are sold to commercial
and industrial distributors and end-users for manufacturing and commercial
applications.
Products used in process industries include various types of
instrumentation, valves and control systems for measurement and
control of fluid flow. Included are various types of meters such as
rotameters, positive displacement meters, magnetic flow meters,
turbine meters, direct mass flow meters and instruments to measure water
quality. Other products include solid state telemetering equipment, various
types of pressure and vacuum relief valves and personal computer-based
software used for industrial automation applications. In addition, Emerson
manufactures and sells temperature sensors, pressure sensors and transmitters
used to measure and/or control temperature, pressure, level and rate and
amount of flow. Also produced are process gas chromatographs, in-situ oxygen
analyzers, infrared gas and process fluid analyzers, combustion analyzers and
systems, and other analyzers which measure pH and conductivity. The Company
also manufactures and sells sliding stem valves, rotary valves, plastic-lined
plug valves, butterfly valves, pressure regulators, and related actuators and
controllers.
2
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Emerson also manufactures electronic measurement and data acquisition
equipment for use in industrial processing. In addition, Emerson
produces vibratory separating equipment used primarily in the chemical,
mining, pharmaceutical, food processing, pulp and paper, ceramic and
metal-working markets.
Beginning with a line of electric motors for industrial and heavy
commercial applications, Emerson's products for industrial automation
include certain kinds of integral horsepower motors, gear drives, pump
motors, alternators, electronic variable speed drives and diesel generator
sets. Emerson also produces and services electronic uninterruptible power
supplies, power conditioning and distribution equipment, modular power systems
and environmental control systems used in communications and information
processing applications.
Emerson manufactures and sells components for the transmission and regulation
of mechanical power, such as certain kinds of chains, sprockets, sheaves,
gears, bearings, couplings and speed reducers, and a line of cam-operated
index drives, programmable motion controllers and automation accessories.
These products are used primarily in industrial and commercial applications
requiring the transmission of mechanical motion or drive systems of various
types.
Emerson also manufactures a line of multi-purpose pressure and solenoid
valves, pressure, vacuum and temperature switches, automatic transfer
switches, remote control switches and electric power control systems.
These products are widely used in the automation of equipment and industrial
processes and for the control of emergency electric power.
Emerson also produces a variety of industrial and commercial ultrasonic
products for applications such as cleaning, sealing, welding and flaw
detection. Other products include material preparation and microstructure
analysis equipment. Emerson also manufactures electric circulation heaters,
fluid heat transfer systems and component heating elements.
Emerson manufactures a broad line of components for current-and noncurrent-
carrying electrical distribution devices such as panelboards, receptacles,
fittings, cable handling reels and lighting products for use in hazardous and
nonhazardous environments.
APPLIANCE AND CONSTRUCTION-RELATED COMPONENTS
---------------------------------------------
The Appliance and Construction-Related segment consists of fractional motors
and appliance components; heating, ventilating and air conditioning
components; and tools. This segment includes components sold to distributors
and original equipment manufacturers for inclusion in end-products and systems
(ultimately sold through commercial and residential building construction
channels); and construction-related products which retain their identity and
are sold through distributors to consumers and the professional trades.
3
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Emerson manufactures and sells a variety of components and systems for
refrigeration and comfort control applications, including hermetic and semi-
hermetic compressors; hermetic motors and terminals for hermetically sealed
compressors; and fractional and sub-fractional horsepower motors for selected
appliance, office equipment, ventilating equipment, pump, heater and other
motor-driven machine applications. Automatic temperature controls, timers,
switches, and thermo-protective devices are manufactured for gas and electric
heating systems, refrigeration and air conditioning equipment and various
large and small appliances. Emerson also manufactures and sells a variety of
electric heating elements and electrostatic air cleaners.
Emerson manufactures and sells a line of electrical products primarily for the
residential markets, including electric waste disposers, hot water dispensers,
ventilating equipment and exhaust fans.
Emerson is a producer of selected professional and hardware tools and
accessories, and service equipment. These products include certain kinds of
wrenches, thread cutters, pipe cutters, reamers, vises, pipe and bolt
threading machines and sewer and drain cleaning equipment. The principal
markets for these professional tools and service equipment include plumbing,
heating and air conditioning contractors, construction and maintenance
companies, petroleum and gas producers, refiners and processors, and farm and
home consumers.
Emerson produces ladders, scaffolding and related accessories. Also produced
by Emerson for marketing by a major retailer are shop vacuum cleaners, a line
of bench power tools for home workshop use and a line of hand tools including
adjustable wrenches, screwdrivers, pliers and chisels.
PRODUCTION
----------
Emerson utilizes various production operations and methods. The principal
production operations are metal stamping, forming, casting, machining,
welding, plating, heat treating, painting and assembly. In addition,
Emerson also uses specialized production operations, including automatic
and semiautomatic testing, automated material handling and storage, ferrous
and nonferrous machining and special furnaces for heat treating and foundry
applications. Management believes the equipment, machinery and tooling used
in these processes are of modern design and well maintained.
RAW MATERIALS AND ENERGY
------------------------
Emerson's major requirements for basic raw materials include steel, copper,
cast iron, aluminum and brass and, to a lesser extent, plastics and other
petroleum-based chemicals. Emerson has multiple sources of supply for each
of its material requirements. The raw materials and various purchased
components required for its products have generally been available in
sufficient quantities.
4
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Emerson uses various forms of energy, principally natural gas and electricity,
obtained from public utilities. A majority of the plants have the capability
of being converted to use alternative sources of energy.
PATENTS, TRADEMARKS, LICENSES AND FRANCHISES
--------------------------------------------
The Company has a number of patents, trademarks, licenses and franchises, none
of which is considered material to any segment of its consolidated operations.
BACKLOG
-------
The estimated consolidated order backlog of the Company was $1,810 million
and $1,815 million at September 30, 1996 and 1995, respectively. Nearly all
of the September 30, 1996 consolidated backlog amount is expected to be
shipped within one year. The estimated backlog by industry segment at
September 30, 1996 and 1995 follows (dollars in millions):
1996 1995
------- -------
Commercial and Industrial $ 1,191 1,215
Appliance and Construction-Related 619 600
------- -------
Consolidated Order Backlog $ 1,810 1,815
======= =======
COMPETITION
-----------
Emerson's businesses are highly competitive and the methods of competition
vary across the industry segments served. Although no single company
competes directly with Emerson in all of its product lines, various
companies compete in one or more product lines. Some of these companies
have substantially greater sales and assets than Emerson. In addition,
Emerson competes with many smaller companies.
RESEARCH AND DEVELOPMENT
------------------------
Costs associated with Company-sponsored research, new product development
and product improvement were $398.7 million in 1996, $354.2 million in 1995
and $298.2 million in 1994.
ENVIRONMENT
-----------
The Company's manufacturing locations generate waste, the treatment, storage,
transportation and disposal of which are subject to federal, state and local
laws and regulations relating to the protection of the environment.
Compliance with laws regulating the discharge of materials into the
environment or otherwise relating to the protection of the environment has not
had a material effect upon Emerson's capital expenditures, earnings or
competitive position. It is not anticipated that Emerson will have material
capital expenditures for environmental control facilities during the next
fiscal year.
5
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EMPLOYEES
---------
Emerson and its subsidiaries had an average of approximately 86,400 employees
during 1996.
DOMESTIC AND FOREIGN OPERATIONS
-------------------------------
International sales were $4,867 million in 1996, $4,386 million in 1995 and
$3,243 million in 1994, including U.S. exports of $885 million, $768 million
and $589 million in 1996, 1995 and 1994, respectively. Although there are
additional risks attendant to foreign operations, such as nationalization of
facilities, currency fluctuations and restrictions on the movement of funds,
Emerson's financial position has not been materially affected thereby to date.
See Note 13 of Notes to Consolidated Financial Statements on page 39 of the
1996 Annual Report for further information with respect to foreign operations.
Item 2. Properties
-------------------
At September 30, 1996, Emerson had approximately 325 manufacturing locations
worldwide, of which approximately 170 were located outside the United States,
primarily in Europe and to a lesser extent in Asia-Pacific, Canada and Latin
America. Approximately 200 locations are occupied by the Commercial and
Industrial segment, and approximately 125 are occupied by the Appliance and
Construction-Related segment. The majority of the locations are owned or
occupied under capital lease obligations with the remainder occupied under
operating leases. The Company considers its facilities suitable and adequate
for the purposes for which they are used.
Item 3. Legal Proceedings
--------------------------
Emerson is a party to a number of pending legal proceedings, several of which
claim substantial amounts of damages. There are no pending legal proceedings
that management believes will be material in relation to the Company's
business or financial position.
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
There were no matters submitted to a vote of security holders during the
quarter ended September 30, 1996.
-------------------------------------------
6
<PAGE>
Executive Officers of the Registrant
The following sets forth certain information as of December 1996 with respect
to Emerson's executive officers. These officers have been elected or
appointed to terms which will expire February 4, 1997:
First
Served as
Name Position Age Officer
---- -------- --- ----------
C. F. Knight* Chairman of the Board, President
and Chief Executive Officer 60 1972
A. E. Suter* Senior Vice Chairman and
Chief Operating Officer 61 1979
R. W. Staley* Vice Chairman Asia-Pacific 61 1975
W. J. Galvin Senior Vice President - Finance
and Chief Financial Officer 50 1984
W. W. Withers Senior Vice President,
Secretary and
General Counsel 56 1989
*Also chairman and/or member of certain committees of the Board of
Directors.
There are no family relationships among any of the executive officers
and directors.
Each of the above has served as an officer or in a supervisory
capacity with Emerson for the last five years.
7
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
----------------------------------------------------------------------
Matters
-------
The information regarding the market for the Company's common stock, quarterly
market price ranges and dividend payments set forth in Note 14 of Notes to
Consolidated Financial Statements on page 40 of the 1996 Annual Report is
hereby incorporated by reference. There were approximately 29,800
stockholders at September 30, 1996. On October 5, 1995, the Company issued
148,772 shares of common stock for all of the stock of an electrical power
systems and equipment services company. The shares were not registered based
on the exemption provided by Section 3(a)(10) of the 1993 Securities Act. The
terms and conditions of the transaction were approved by the California
Department of Corporations after a hearing upon the fairness of such terms and
conditions. On June 28, 1996, the Company issued 29,572 shares of common stock
(plus cash) for all of the stock of a turn-key systems integration company.
The shares were not registered based on the exemption provided by Regulation D
of the 1993 Securities Act. Both shareholders of the acquired company were
accredited investors.
Item 6. Selected Financial Data
--------------------------------
Years ended September 30
(Dollars in millions except per share amounts)
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
Net sales $ 11,149.9 10,012.9 8,607.2 8,173.8 7,706.0
Net earnings $ 1,018.5 907.7 788.5 708.1 662.9
Earnings
per common share $ 4.55 4.06 3.52 3.15 2.96
Cash dividends
per common share $ 1.96 1.78 1.56 1.44 1.38
Long-term debt $ 772.6 208.6 279.9 438.0 448.0
Total assets $ 10,481.0 9,399.0 8,215.0 7,814.5 6,627.0
Income before cumulative effect of change in accounting for postemployment
benefits ($21.3 million; $.10 per share) was $929.0 million in 1995. Net
earnings in 1995 includes non-recurring items which were substantially
offset by the accounting change.
Income before cumulative effect of change in accounting for postretirement
benefits ($115.9 million; $.52 per share) was $904.4 million in 1994. Net
earnings in 1994 includes non-recurring items which were substantially
offset by the accounting change. See Notes 2 and 7 of Notes to Consolidated
Financial Statements on pages 33, 35 and 36 of the 1996 Annual Report for
information regarding these items and the Company's acquisition and
divestiture activities.
8
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Item 7. Management's Discussion and Analysis of Financial Condition
--------------------------------------------------------------------
and Results of Operations
-------------------------
Narrative discussion appearing under "Results of Operations" and "Financial
Position, Capital Resources and Liquidity" on pages 22 through 26, and the
"Safe Harbor Statement" on the inside back cover in the 1996 Annual
Report are hereby incorporated by reference.
Item 8. Financial Statements and Supplementary Data
----------------------------------------------------
The consolidated financial statements of the Company and its subsidiaries
on pages 27 through 40 and the report thereon of KPMG Peat Marwick LLP
appearing on page 41 of the 1996 Annual Report are hereby incorporated
by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
--------------------------------------------------------------------
and Financial Disclosure
------------------------
None.
9
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
------------------------------------------------------------
Information regarding nominees and directors appearing under "Nominees and
Continuing Directors" in the Emerson Electric Co. Notice of Annual Meeting
of the Stockholders and Proxy Statement for the February 1997 annual
stockholders' meeting (the "1997 Proxy Statement") is hereby incorporated
by reference. Information regarding executive officers is set forth in
Part I of this report.
Item 11. Executive Compensation
--------------------------------
Information appearing under "Director Compensation" and "Executive
Compensation" in the 1997 Proxy Statement is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
-------------------------------------------------------------
Management
----------
The information regarding beneficial ownership of shares by nominees and
continuing directors and by all directors and executive officers as a group
appearing under "Nominees and Continuing Directors" in the 1997 Proxy
Statement is hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions
--------------------------------------------------------
Information appearing under "Certain Business Relationships" in the 1997
Proxy Statement is hereby incorporated by reference.
10
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
-----------------------------------------------------------------
Form 8-K
---------
A) Documents filed as a part of this report:
1. The consolidated financial statements of the Company and its
subsidiaries on pages 27 through 40 and the report
thereon of KPMG Peat Marwick LLP appearing on page 41 of
the 1996 Annual Report.
2. Financial Statement Schedules
All schedules are omitted because they are not required, not
applicable or the information is given in the financial
statements or notes thereto contained in the 1996 Annual Report.
3. 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).
4(a) Indenture dated as of April 17, 1991, between
Emerson Electric Co. and The Boatmen's National Bank
of St. Louis, Trustee, incorporated by reference to
Emerson Electric Co. Registration Statement on
Form S-3, File No. 33-62545, Exhibit 4.1.
No other long-term debt instruments are filed since
the total amount of securities authorized under any
such instrument does not exceed 10 percent of the
total assets of Emerson Electric Co. and its
subsidiaries on a consolidated basis. Emerson
Electric Co. agrees to furnish a copy of such
instruments to the Securities and Exchange
Commission upon request.
4(b) Rights Agreement dated as of November 1, 1988
between Emerson Electric Co. and Centerre Trust
Company of St. Louis, incorporated by reference to
Emerson Electric Co. Form 8-K, dated November 1,
1988, Exhibits 1 and 2.
11
<PAGE>
10(a)* 1974 Non-qualified Stock Option Plan, as amended,
incorporated by reference to Emerson Electric Co.
1991 Form 10-K, Exhibit 10(a) and Form 10-Q for the
quarter ended December 31, 1992, Exhibit 10(a).
10(b)* 1982 Incentive Stock Option Plan, as amended,
incorporated by reference to Emerson Electric Co.
1992 Form 10-K, Exhibit 10(b).
10(c)* Employment Agreement made as of October 1, 1975 and
amended January 9, 1987 between Emerson Electric Co.
and C. F. Knight, incorporated by reference to
Emerson Electric Co. 1987 Form 10-K, Exhibit 10(e).
10(d)* 1986 Stock Option Plan, as amended, incorporated by
reference to Emerson Electric Co. 1992 Form 10-K,
Exhibit 10(e) and Form 10-Q for the quarter ended
December 31, 1992, Exhibit 10(b).
10(e)* 1991 Stock Option Plan, as amended, incorporated by
reference to Emerson Electric Co. 1992 Form 10-K,
Exhibit 10(f) and Form 10-Q for the quarter ended
December 31, 1992, Exhibit 10(c).
10(f)* 1988 Incentive Shares plan, incorporated by
reference to Emerson Electric Co. 1988 Proxy
Statement dated December 18, 1987, Exhibit A, and
Form 10-Q for the quarter ended December 31, 1992,
Exhibits 10(d) and 10(e), and Amendments No. 3 and
No. 4 thereto, incorporated by reference to Emerson
Electric Co. 1993 Form 10-K, Exhibit 10(g).
10(g)* Third Amendment to the Emerson Electric Co. 1993
Incentive Shares Plan filed herewith.
10(h)* Restricted Shares Award Agreement with C. F. Knight
dated November 1, 1993, incorporated by reference to
Emerson Electric Co. 1993 Form 10-K, Exhibit 10(i).
10(i)* Emerson Electric Co. Directors' Continuing
Compensation Plan, incorporated by reference to
Emerson Electric Co. 1987 Form 10-K, Exhibit 10(g),
and Amendment filed herewith.
10(j)* Deferred Compensation Plan for Non-Employee Directors,
as amended, incorporated by reference to Emerson
Electric. Co. 1994 Form 10-K, Exhibit 10(k).
10(k)* Emerson Electric Co. Supplemental Executive
Retirement Plan, incorporated by reference to
Emerson Electric Co. 1989 Form 10-K, Exhibit 10(i).
12
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10(l)* Third Amendment to the Supplemental Executive
Savings Investment Plan, incorporated by reference
to Emerson Electric Co. Form 10-Q for the quarter ended
June 30, 1996, Exhibit 10(1).
10(m)* Annual Incentive Plan incorporated by reference to
Emerson Electric Co. 1995 Proxy Statement dated
December 14, 1994, Appendix A.
13 Portions of Emerson Electric Co. Annual Report to
Stockholders for the year ended September 30, 1996
incorporated by reference herein.
21 Subsidiaries of Emerson Electric Co.
23 Independent Auditors' Consent.
24 Power of Attorney.
27 Financial Data Schedule.
* Management contract or compensatory plan.
B) No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/ W. J. Galvin
-------------------------
W. J. Galvin
Senior Vice President -
Finance and Chief Financial
Officer (and Principal Accounting
Officer)
Date: December 19, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on December 19, 1996, by the
following persons on behalf of the registrant and in the capacities
indicated.
Signature Title
--------- -----
*
---------------------------------------- Chairman of the Board, President
C. F. Knight and Chief Executive Officer
and Director
/s/ W. J. Galvin
---------------------------------------- Senior Vice President -
W. J. Galvin Finance and Chief Financial
Officer (and Principal Accounting
Officer)
*
---------------------------------------- Director
L. L. Browning, Jr.
*
---------------------------------------- Director
A. A. Busch III
*
---------------------------------------- Director
D. C. Farrell
*
---------------------------------------- Director
J. A. Frates
14
<PAGE>
*
---------------------------------------- Director
R. B. Horton
*
---------------------------------------- Director
G. A. Lodge
*
---------------------------------------- Director
V. R. Loucks, Jr.
*
---------------------------------------- Director
R. B. Loynd
*
---------------------------------------- Director
R. L. Ridgway
*
---------------------------------------- Director
R. W. Staley
*
---------------------------------------- Director
A. E. Suter
*
---------------------------------------- Director
W. M. Van Cleve
*
---------------------------------------- Director
E. E. Whitacre, Jr.
*
---------------------------------------- Director
E. F. Williams, Jr.
* By /s/ W. J. Galvin
--------------------------------
W. J. Galvin
Attorney-in-fact
15
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibits are listed by numbers corresponding to the Exhibit Table of
Item 601 in Regulation S-K.
Exhibit No. Exhibit
---------- -------
10(g) Third Amendment to the Emerson Electric Co. 1993
Incentive Shares Plan
10(i) Amendment to the Emerson Electric Co. Directors'
Continuing Compensation Plan
13 Portions of Annual Report to Stockholders for
the year ended September 30, 1996, incorporated
by reference herein
21 Subsidiaries of Emerson Electric Co.
23 Independent Auditors' Consent
24 Power of Attorney
27 Financial Data Schedule
See Item 14(A)(3) for a list of exhibits incorporated by reference.
16
<PAGE> EXHIBIT 10(g)
THIRD AMENDMENT TO THE
EMERSON ELECTRIC CO.
1993 INCENTIVE SHARES PLAN
1. Purpose. The 1993 Incentive Shares Plan (the "Plan") of Emerson
Electric Co. (the "Company"), is a part of a continuing program of key
executive compensation authorized by the Board of Directors of the Company
("Board") on April 5, 1977. On that date the Board approved an initial
performance shares plan which anticipated that it would be supplemented by a
further similar plan or plans, and subsequently it was supplemented by the
Company's 1981 Performance Shares Bonus Plan, the 1985 Performance Shares Bonus
Plan, and the Incentive Shares Plan adopted in 1988. This Plan, a continuation
of the initial plan, the 1981 Plan, the 1985 Plan, and the 1988 Incentive
Shares Plan has, as its purpose, to benefit the Company by increasing
motivation on the part of its management personnel in senior executive
positions who are materially important to the development of the Company's
business, by creating an incentive for them to remain in the employ of the
Company and to work to the very best of their abilities for the achievement of
the Company's strategic growth objectives. This purpose is intended to be
accomplished under the Plan by granting Incentive Shares of the Company's
Common Stock ("Common Stock") to such key personnel (in addition to their
annual cash compensation, including extra salary payments) which, if
performance objectives and/or service requirements with the Company are
achieved, will permit them to share in the Company's success.
2. Participants. Participants in the Plan shall be full time
employees of the Company, its subsidiaries, or any other entities in which the
Company has a significant equity or other interest as determined by the
Committee (such other entities hereinafter referred to as "affiliates"), or of
any subsidiary of its subsidiaries or affiliates, who may, but need not be,
officers of the Company or of its subsidiaries, affiliates or divisions, who
are determined by the Compensation and Human Resources Committee (the
"Committee") of the Board, in its discretion, to be senior management personnel
important to the growth of the Company, and to whom the Committee shall make
any award under the Plan.
3. Shares Covered by the Plan. The total number of Shares covered
by the Plan shall be 2,500,000 shares of Common Stock as presently constituted,
plus up to 700,000 shares reserved but not used under the 1988 Incentive Shares
Plan. This number shall be adjusted to reflect subsequent stock dividends,
stock splits, spin-offs, reverse stock splits and similar matters affecting
outstanding shares of Common Stock. Shares not exceeding this number may be
awarded as Performance Shares or Restricted Shares, each as hereinafter
defined, in the discretion of the Committee. In the event any award of Shares
is cancelled on account of termination of a Participant's employment, failure
to meet performance objectives, or for any other reason, the Committee may
again award the Shares cancelled to an existing or new Participant, unless
dividends have been paid on such Shares, in which case such Shares may not
again be awarded under the Plan.
4. Performance Shares; Performance Period. The Committee, in its
discretion, may award all or any part of the Shares covered by the Plan as
units representing Performance Shares. Performance Shares shall not be issued
at the time of award, but the award of units shall represent the right to
receive payment (as determined by the Committee pursuant to Section 6 hereof)
<PAGE>
if specified performance objectives are achieved. The performance objectives
may be established from time to time by the Committee. Performance objectives
need not be the same in respect of all Participants and may be established
separately for the Company as a whole or for its various groups, divisions,
subsidiaries and affiliates, all as the Committee may determine, in its
discretion. The performance objectives may include growth in the Company's
earnings per share, increases in Company sales, increases in the sale or
profitability of a division, subsidiary or affiliate or any other growth
measure the Committee may adopt. Except as provided in Section 11, hereof the
performance period for which achievement of any performance objective shall be
determined shall not be less than three years.
Awards of Performance Shares may be conditioned on the Participant's
continued employment by the Company or a subsidiary or affiliate over the
performance period or in any other manner the Committee may determine.
5. Performance Share Awards. Performance Share Awards shall be
made pursuant to performance programs as follows:
(a) Performance Programs; Initial Grants. After the approval
of this Plan by the Board, the Committee shall establish one or more
performance programs each with a specified objective and a specified
performance period over which the specified objective is targeted for
achievement. Participants may be awarded Shares in any one or more of the
performance programs. Initial awards in any program shall be made to such
number of Participants as determined by the Committee. In making its
determination of who shall be Participants in any performance program the
Committee shall take into account such factors as the Participant's level
of responsibility, job performance, potential for growth, level and types
of compensation and such other factors as the Committee deems relevant.
(b) Subsequent Awards. During the term of the Plan additional
Performance Shares may be awarded (subject to the maximum number provided
for above) in the discretion of the Committee, either (i) to new
Participants in the Plan or (ii) if circumstances of significant promotion
or additional responsibility so warrant, to any one or more of the initial
Participants in the Plan. In respect of such additional awards the
Committee may make such adjustments therein as it may deem reasonable on
account of any lesser period of participation in the program by the holder
of any subsequent award.
(c) Notice of Awards. Upon the making of any award by the
Committee the Participant shall be advised of the number of Performance
Shares awarded and of the terms of the award.
6. Performance Share Payment. The payment amount which a holder of
Performance Shares shall be entitled to receive if the applicable targeted
performance objective is met shall be an amount equal to the market value of
one share of Common Stock on the date of the expiration of the applicable
performance period multiplied by the number of Performance Shares held. For
the purposes hereof market value as of any date shall be the value as of said
date as reasonably determined by the Committee.
Notwithstanding the provisions of the foregoing paragraph, the
Committee, in its discretion, may establish, at the time it establishes the
targeted performance objective, a minimum performance target and may provide
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<PAGE>
for payment on a reduced scale if the targeted performance objective is not
achieved but the minimum performance target is met or exceeded. The Committee
may not increase the amount of payment that would otherwise be paid upon
attainment of a performance objective.
Payment amounts may be paid in shares of Common Stock, in cash, or any
combination thereof as determined by the Committee; provided, however, that in
no event shall the aggregate number of shares of Common Stock issued in respect
of Performance Shares plus the number of Restricted Shares issued under the
Plan exceed the number specified in Section 3 (or as said number may be
adjusted as hereinabove provided).
7. Time of Payment. Subject to the provisions of the following
paragraphs of this Section 7, distribution of amounts to which a Participant is
entitled, because the applicable targeted performance objective is met, shall
be made as soon as practicable after the holder of the Performance Shares
becomes entitled thereto, unless payment of the Performance Shares is subject
to specified vesting conditions after attainment of the performance objective,
in which case payment shall be delayed until such vesting conditions have been
satisfied.
Prior to receipt of any award of Performance Shares under the Plan, a
Participant shall be advised of the award proposed to be made and at such time
may make an election to have distribution of any amount such Participant may be
entitled to receive in respect of such Shares (whether in cash, in Common
Stock, or a combination thereof) deferred until such year as the Participant
may elect, after the year in which the amount would otherwise be paid, up to
and including the year of retirement, and at the same time (prior to the time
the award is made) may elect to have such amount paid in such deferred annual
installments over such years as the Participant shall then specify. If a
Participant elects any such deferral, the following rules shall apply to the
deferred payment:
(a) Such election shall be irrevocable.
(b) The right to such deferred payment shall be fully vested
and nonforfeitable but shall be nonassignable, and any attempted transfer
or assignment, or any pledge or other hypothecation of such right, shall
be void and of no effect.
(c) In the event of the death during the deferral period of a
Participant who has elected a deferred payment, the unpaid balance of the
deferred amount owing to such Participant at the time of death shall be
distributed to the Participant's estate within six months of the date of
death, irrespective of whether or not the deferral period elected has
expired.
(d) Until payment is made to a Participant of the full deferred
payment to which such Participant is entitled, the Company will accrue for
the account of the Participant during the period of deferral an amount
equal to the dividends per share paid on Common Stock during such period
multiplied by the number of Shares still unpaid and held for such
Participant's account in accordance with the deferred payment election.
At the time the Participant is entitled to receive any amount under the
Plan, in accordance with the election, there shall also be paid to such
Participant the accrued dividend equivalent amount, either in a lump sum
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or in deferred annual installments as specified by such Participant at the
time of the original deferral election.
Notwithstanding any election of any Participant to receive payment
under the Plan on a deferred basis as above provided, the Committee, in its
sole discretion, may, at any time, in respect of all or any one or more
Participants who have made such election, terminate such election and make
immediate distribution of the amount to which the Participant is entitled; and
the Committee, in its discretion, may amend the foregoing provisions hereof
relating to the election of deferred payments and the rules applicable thereto
if, in its judgment, the tax benefits intended by such provisions and rules
will not be adversely affected.
8. Conditions to Payments. Except as otherwise herein provided or
determined by the Committee, a Participant, in order to be entitled to receive
any payment on Performance Shares awarded, must be in the employ of the Company
or a subsidiary or affiliate of the Company (or a subsidiary of a subsidiary or
affiliate) on the expiration of the relevant performance period and must have
been continuously in the employ of the Company or a subsidiary or affiliate (or
a subsidiary of a subsidiary or affiliate) from the time of the award of the
Performance Shares except for leaves of absence which may be approved by the
Committee. No vested interest in any payment under the Shares shall accrue
during the term of the performance period and no payment in respect of the
Shares shall be required to be made to any Participant whose employment with
the Company or a subsidiary or affiliate (or a subsidiary of a subsidiary or
affiliate) is terminated, with or without cause, prior to the time such
Participant is entitled to receive a distribution hereunder; provided, however,
(a) that if a Participant in the Plan retires upon the attainment of age 65
prior to the time such Participant is to receive distribution on any
Performance Shares awarded, the amount of payment to such Participant shall be
pro-rated in such manner as the Committee shall reasonably determine, and
(b) that the Committee, in its absolute discretion, may make such pro-rata or
other payment (or no payment), as it may determine, to a Participant whose
employment terminates (on account of death, disability or otherwise) prior to
the time the Participant is entitled to receive distribution on Performance
Shares and prior to the Participant's retirement at age 65. If termination is
on account of death, the Committee may make payment of any distribution it
authorizes to the Participant's surviving spouse, heirs or estate, as the
Committee may determine.
9. Other Incentive Shares. In addition to Performance Shares the
Committee may grant to eligible Participants shares covered by the Plan which
are not subject to performance programs or performance objectives. Such other
share grants shall be Restricted Shares, forfeitable if the holder resigns or
is discharged from the employ of the Company (or a subsidiary or affiliate, or
a subsidiary of a subsidiary or affiliate, as the case may be) during a
Restriction Period specified by the Committee, which shall be not less than
three years from the date of the award. Such shares shall be forfeitable on
such other terms and conditions as may be specified by the Committee in an
award agreement which shall be signed by the Participant at the time of the
award. After the grant of any such award the Committee, in its discretion, may
waive any of the terms and conditions thereof and may reduce the Restriction
Period applicable thereto; provided, however, that the Committee shall not
reduce such period to less than three years; and provided further, however,
that in the event any Change of Control (as hereinafter defined) shall occur
the Restriction Period applicable to all Restricted Shares then outstanding
4
<PAGE>
shall be accelerated and be deemed to be satisfied so that the holders of such
Restricted Shares shall immediately, and without any action by the Committee,
hold said Shares fully vested and without any continuing restrictions thereon,
excepting, however, such restrictions, if any, as may then be applicable under
state or federal securities laws.
10. Committee Membership; Authority. The Plan shall be administered
by the members of the Committee so long as it qualifies under the plan
administration requirements of Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "1934 Act"), as in effect from time to time. The
Committee shall have plenary authority to interpret the Plan, to determine
awards and the terms thereof, to establish any rules or regulations relating to
the Plan which it determines to be appropriate, and to make any other
determination which it believes necessary or advisable for the proper
administration of the Plan. Its decisions in matters relating to the Plan
shall be final and conclusive on the Company and all Participants. In the
event the Committee, by reason of changes in its membership, shall no longer be
so qualified, the Board shall appoint a new committee to administer the Plan,
whose members shall cause the committee to qualify under the plan
administration requirements of Rule 16b-3.
11. Determination of Achievement of Objectives. The Committee, in
regard to any performance program adopted by it, shall determine whether any
performance objective of any program has been met. In making this
determination, the Committee shall apply the accounting results, as audited at
the end of any fiscal year by the Company's independent certified accountants,
but shall adjust such results for unusual, nonrecurring or extraordinary items
to the extent such adjustments were preestablished by the Committee under
Section 4. Prior to making a Performance Share payment, the Committee shall
certify in writing the achievement of the applicable performance objective(s)
and the amount of payments to be made to each Participant.
In the event of a Change in Control (as hereinafter defined)
Participants then holding awards of Performance Shares shall be entitled to
receive such Shares (or equivalent value), free of any conditions and as if the
specified performance periods had elapsed and the performance objectives
relating thereto had been fully achieved; and in this event the holders of
Performance Shares shall be entitled to full payment therefor, 50% in Common
Stock and 50% in cash, or in such other combination of stock and cash as
determined by the Committee. For the purpose hereof the date of the expiration
of the applicable performance period shall be deemed to be the date as of which
any Change of Control shall occur.
12. Amendment of Plan. The Committee shall have the authority to
make amendments and revisions of this Plan, provided that no amendments or
revisions of the Plan shall be made without the consent of the stockholders of
the Company if such amendment or revision would materially
(a) increase the benefits accruing to Participants under the
Plan, or
(b) increase the number of Shares which may be granted or
securities which may be issued under the Plan, or
(c) modify the requirements as to eligibility for participation
in the Plan.
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For the purpose of the preceding sentence, no revision shall be deemed
to effect any material increase in the benefits accruing to Participants under
the Plan unless, under rules, regulations or letter opinions of the Securities
and Exchange Commission, such amendment would cause the exemption provisions of
Rule 16b-3 under the 1934 Act to be inapplicable to the Plan.
13. Payments in Common Stock; Source of Stock. It is anticipated
that any shares of Common Stock delivered pursuant to the terms of the Plan
will be Treasury shares of the Company acquired prior to or during the term of
the Plan. The Committee, however, may instead utilize authorized but unissued
shares of Common Stock; and, subject to the approval of this Plan by the
stockholders of the Company, the Board and officers of the Company are
authorized to take such action as may be necessary to provide for the issuance
of any or all of the shares which may be necessary to satisfy the Company's
obligations hereunder and to cause said shares to be listed on the New York and
any other stock exchanges on which the Common Stock may at such time be listed.
Shares of Common Stock delivered to Participants hereunder in
satisfaction of Performance Share rights, and other Incentive Shares after the
release of any conditions applicable thereto may nonetheless thereafter be
restricted stock under the Securities Act of 1933, as presently amended, (the
"1933 Act") and the certificates for such Shares may have a legend imprinted
thereon restricting the resale, hypothecation or further transfer of said
shares except in a registered offering or pursuant to an available exemption
from registration.
14. Additional Provisions. The following additional terms and
provisions apply to the Plan:
(a) The award of Performance Shares to a Participant in the
Plan shall create no rights in such Participant as a shareholder of the
Company until such time and to the extent that the Participant is
delivered Shares of Common Stock in satisfaction of such Participant's
Performance Share units. Holders of other Incentive Shares granted
hereunder shall have such rights as are expressly provided for herein and
in the terms of the award.
(b) No adjustment shall be made in the Shares awarded on
account of cash dividends which may be paid, or other rights which may be
issued to, the holders of Common Stock during the term of the Plan except
as stated in subparagraph (c) below.
(c) In the event of stock dividends, stock splits, spin-offs,
reverse stock splits or similar matters affecting outstanding shares of
Common Stock during the term of the Plan, appropriate revision shall be
made (i) in the targeted growth objectives of performance programs, and
(ii) in the Shares awarded to reflect the effect of such stock dividend,
stock split, spin-off, reverse stock split or similar matter on the
interests of the Participants in the Plan.
(d) No Participant in the Plan shall have any right as a
Participant in the Plan to continue in the employ of the Company or of any
of its subsidiaries for any period of time, or any right to a continuation
of such Participant's present or any other rate of compensation; and such
rights and powers as the Company now has or which it may have in the
future to dismiss or discharge any Participant from employment or to
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<PAGE>
change the assignments of any Participant are expressly reserved to the
Company.
(e) The Committee may require the Company to withhold from any
payment due to a Participant (under this Plan or otherwise) any amount
necessary to satisfy income tax withholding requirements in respect of any
payment due under this Plan; and for this purpose withhold cash and the
Shares deliverable in respect of Performance Shares. Alternatively, the
Committee may require the Participant to pay to the Company such cash
amount or additional cash amount as may be necessary to satisfy
withholding requirements in which case such Participant shall be entitled
to receive delivery of all Shares due hereunder. Notwithstanding anything
to the contrary contained herein, upon vesting of the Restricted Shares to
a Participant, the Company shall withhold sufficient shares to satisfy its
withholding obligations for federal, state and local income taxes on such
payment.
(f) "Change of Control" as used in this Plan shall mean:
(i) The purchase or other acquisition (other than from the
Company) by any person, entity or group of persons,
within the meaning of Section 13(d) or 14(d) of the
1934 Act, (excluding, for this purpose, the Company or
its subsidiaries or any employee benefit plan of the
Company or its subsidiaries), of beneficial ownership
(within the meaning of Rule 13d-3 under the 1934 Act)
of 20% or more of either the then-outstanding shares
of Common Stock or the combined voting power of the
Company's then-outstanding voting securities entitled
to vote generally in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the
Board (as of the date hereof, the "Incumbent Board")
cease for any reason to constitute at least a majority
of the Board, provided that any person who becomes a
director subsequent to the date hereof whose election,
or nomination for election by the Company's
stockholders, was approved by a vote of at least a
majority of the directors then comprising the
Incumbent Board (other than an individual whose
initial assumption of office is in connection with an
actual or threatened election contest relating to the
election of directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A under the
1934 Act) shall be, for purposes of this section,
considered as though such person were a member of the
Incumbent Board; or
(iii) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case
with respect to which persons who were the
stockholders of the Company immediately prior to such
reorganization, merger or consolidation would not,
immediately thereafter, own more than 50% of,
respectively, the common stock and the combined voting
power entitled to vote generally in the election of
7
<PAGE>
directors of the reorganized, merged or consolidated
corporation's then-outstanding voting securities, or
of a liquidation or dissolution of the Company or of
the sale of all or substantially all of the assets of
the Company.
15. Term of Plan; Approval by Stockholders. The term of the Plan
shall be for the period from the date of its approval by the Board until such
time as the Board, in its discretion, elects to terminate the Plan or replace
the Plan with a successor Plan. During the term of the Plan awards of
Performance Shares may be made under performance programs with performance
periods extending beyond the end of the term of the Plan and other Incentive
Shares may be granted with conditions or restrictions extending beyond the end
of the term of the Plan; but no new award of any Incentive Shares shall be made
after the end of the term of the Plan. Restrictions in respect of Incentive
Shares granted during the term of the Plan shall continue in effect after the
termination of the Plan until they shall be satisfied or forfeited in
accordance with their terms. This Plan shall be submitted for approval by the
stockholders of the Company and unless so approved within one year from the
date of approval of the Plan by the Board, this Plan shall not be effective for
any purpose. Prior to the approval of the Plan by the stockholders of the
Company, the Committee may make awards of Performance Shares or Restricted
Shares to Participants but all such awards shall be conditioned upon
stockholder approval of the Plan and if such approval is not obtained within
the time herein provided such awards shall be void and of no effect.
16. Non-Assignability. Rights under the Plan and in respect of
Shares granted under the Plan are not transferable and may not be assigned or
pledged by any Participant at any time, and no recognition shall be required to
be given by the Company to any attempted assignment of any rights hereunder or
of any attempted assignment of the Shares. This non-assignability shall not
apply to any shares of the Common Stock delivered to Participants hereunder
after such Shares shall be fully vested in the holder thereof, except as
follows:
(a) Shares of Common Stock issued in payment of Performance
Shares to any Participant who is subject to Section 16 of the 1934 Act may
not be assigned for a period of six (6) months after issuance.
(b) The resale of shares of Common Stock may be restricted by
reason of the 1933 Act as set forth in Section 13 hereof.
If payment of Shares to a Participant is accelerated prior to vesting pursuant
to Section 4, and if the Participant is subject to Section 16 of the 1934 Act,
such Shares shall be non-transferable for a period of six (6) months after they
became fully vested.
17. Plan a Part of Continuing Compensation Program. This Plan is a
part of a continuing program of incentive compensation for senior managerial
personnel of the Company and is expected to be supplemented or continued in
effect after the term hereof by an additional plan or plans as approved by the
Board or stockholders of the Company.
18. Separability of Provisions. With respect to Participants subject
to Section 16 of the 1934 Act, this Plan and transactions hereunder are
intended to comply with all applicable provisions of Rule 16b-3 or its
successors. To the extent that any provision of the Plan or action of the
8
<PAGE>
Committee fails to so comply, it shall be deemed null and void to the extent
permitted by law and deemed advisable by the Committee.
* * *
The foregoing is the full text of the Third Amendment to the Emerson
Electric Co. 1993 Incentive Shares Plan, as approved by the Compensation and
Human Resources Committee of the Board of Directors of Emerson Electric Co.
effective as of the date the Plan was originally adopted.
9
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Financial Review Exhibit 13
RESULTS OF OPERATIONS
NET SALES
Sales for 1996 were a record $11.1 billion, an increase of $1.1 billion or 11.4
percent from 1995. More than half the sales increase was attributable to strong
international demand and moderate domestic growth with the remainder due to
acquisitions. International sales increased approximately $480 million due to
solid growth in Europe, continued rapid growth in Asia-Pacific and
acquisitions, partially offset by unfavorable foreign currency translation.
Domestic sales increased approximately $655 million, benefiting from solid
gains in the heating, ventilating and air conditioning business, very strong
gains in the electronics business, acquisitions and slight price increases. New
product sales, from products introduced in the past five years, increased
approximately $815 million or 32 percent to a record $3.4 billion, representing
30 percent of sales. See note 2 for additional discussion of the Company's
acquisitions.
In 1995, sales were $10.0 billion, up $1.4 billion or 16.3 percent from 1994.
This sales comparison reflected strong demand, impact of acquisitions and
favorable exchange rates. Excluding the impact of acquisitions and currency,
international sales increased nearly $500 million in 1995, or 15 percent,
reflecting strong sales volume in all international regions. Domestic sales
increased approximately $265 million, primarily due to moderate volume growth
and slight price increases. New product sales increased 21.7 percent in 1995 to
$2.6 billion, representing nearly 26 percent of sales.
INTERNATIONAL SALES
International sales, including U.S. exports, increased 11 percent to a record
$4.9 billion in 1996, representing approximately 44 percent of the Company's
total sales. Sales by non-U.S. subsidiaries were $4.0 billion in 1996, up $364
million or 10 percent from 1995. International sales increased more than 7
percent excluding acquisitions and the unfavorable impact of currency. All
major geographic regions except Canada reported solid sales growth, highlighted
by very strong performance in Asia-Pacific and Latin America. U.S. exports
increased $117 million, or 15 percent to a record $885 million, led by
continued strong sales gains in the process and heating, ventilating and air
conditioning businesses.
In 1995, international sales, including U.S. exports, increased 35 percent to
$4.4 billion. All major international regions achieved double-digit sales
growth, highlighted by strong demand in Europe and rapid growth in Asia-
Pacific. International sales benefited from strong worldwide markets,
favorable currency translation and acquisitions. Sales by non-U.S. subsidiaries
were $3.6 billion in 1995, up $964 million or 36 percent from 1994. Excluding
the impacts of acquisition and divestiture activity and currency, non-U.S.
subsidiary sales increased 11 percent due to strong growth in all regions. U.S.
exports increased $179 million, or 30 percent, to $768 million in 1995,
reflecting strong export sales in the heating, ventilating and air conditioning
and process businesses.
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INDUSTRY SEGMENT SALES
Sales in the Commercial and Industrial segment were $6.6 billion, up $623
million or 10.4 percent from 1995, reflecting strong international demand,
modest domestic growth and acquisitions. The process business reported very
strong sales gains due to excellent international demand and product line
acquisitions. The electronics business experienced excellent sales growth,
reflecting very strong domestic markets, the success of new products, and
recent acquisitions that enhanced service offerings. The industrial motors and
drives business achieved very strong sales growth benefiting from strong
performances by F.G. Wilson and Control Techniques. The industrial components
and equipment business reported modest sales gains reflecting solid
international demand.
Sales in the Appliance and Construction-Related segment were $4.5 billion, up
$514 million or 12.8 percent from 1995 due to solid international growth,
moderate domestic demand and Vermont American which the Company began
consolidating into its financial statements in 1996. The heating, ventilating
and air conditioning business reported strong sales gains driven by worldwide
demand and acceptance of new Copeland Compliant Scroll products. Sales of the
underlying tools business increased moderately, reflecting higher Sears demand
and the continued acceptance of new products. The fractional motors and
appliance components business increased modestly due to a strong domestic
household appliance industry during the second half of the fiscal year.
In 1995, sales in the Commercial and Industrial segment increased $1.1 billion,
or 21.5 percent from 1994. Underlying sales (excluding acquisitions and
divestitures) increased approximately 13 percent, reflecting robust
international demand, solid domestic growth, new products and favorable
exchange rates. The underlying industrial motors and drives business achieved
robust growth due to strong domestic and international capital goods demand,
while total industrial motors and drives sales were further aided by the
acquisitions of F.G. Wilson and Control Techniques. The industrial components
and equipment business realized a very strong sales increase due to worldwide
strength in the capital goods market. The process business also reported very
strong sales growth due to strengthening international demand for measurement,
distributed control system and control valve products. Strong sales growth in
the electronics business resulted from new product acceptance and strong
domestic market demand.
In 1995, sales in the Appliance and Construction-Related segment increased $341
million or 9.3 percent from 1994, primarily reflecting strong underlying
international growth. Very strong sales growth by the heating, ventilating and
air conditioning business reflected strong international demand, further
acceptance of new products and market penetration gains. The tools business
reported strong sales growth due to domestic demand for hand tools, global
demand for professional plumbing tools and an acquisition. The appliance
components business reported strong sales growth due to international appliance
market strength and an acquisition. Sales growth in the fractional motors
business benefited from strength in the domestic market during the first half
of the fiscal year.
TOTAL COSTS AND EXPENSES
Cost of sales for 1996 was $7.2 billion, an increase of 10.6 percent, due
primarily to increased sales volume. In 1995, cost of sales was $6.5 billion,
compared to $5.6 billion in 1994, an increase of 16.7 percent. Cost of sales as
a percent of net sales was 64.3 percent in 1996 com-
23
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pared to 64.7 percent and 64.5 percent in 1995 and 1994, respectively. Gross
profit margins have remained at high levels as a result of the Company's
ongoing commitment to cost reduction efforts and productivity improvement
programs.
Selling, general and administrative (SG&A) expenses were $2.2 billion, $1.9
billion and $1.7 billion in 1996, 1995 and 1994, respectively. As a percent of
net sales, SG&A expenses were 19.6 percent in 1996 compared to 19.3 percent and
19.5 percent in 1995 and 1994, respectively. The increase in SG&A expenses as a
percent of net sales in 1996 reflects increased investment in new product
development and other revenue growth programs and acquisitions, partially
offset by ongoing cost reduction efforts. The decrease in SG&A expenses as a
percent of net sales in 1995 was due primarily to higher volume and ongoing
cost reduction efforts, partially offset by investment in new product
development and other revenue growth programs. The Company continued its
commitment to new product development by increasing engineering and development
expense 13 percent to a record $399 million in 1996, compared to $354 million
and $298 million in 1995 and 1994, respectively.
Interest expense increased to $127 million in 1996 from $111 million in 1995
due to acquisitions. In 1995, interest expense increased from $89 million
primarily due to the additional debt issued to finance the F.G. Wilson and
Control Techniques acquisitions.
The fourth quarter of 1996 included a $78 million gain from the disposition of
Emerson's interest in the S-B Power Tool joint venture ("S-B"). The impact of
this gain was substantially offset by costs arising from divestiture of
operations, write-off of discontinued product line assets and relocation of
several production facilities. The first quarter of 1995 included a $41 million
preferential distribution from S-B and other non-recurring items. The first
quarter of 1994 included a gain on sale of the Aerospace unit of Rosemount Inc.
of $242 million and other non-recurring items of $50 million. See note 2 for
additional information. Other deductions, net, was $57 million in 1996,
compared to $63 million and $50 million in 1995 and 1994, respectively.
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECTS OF ACCOUNTING CHANGES
Income before income taxes and cumulative effects of accounting changes
increased $149 million, or 10.2 percent, to $1,609 million in 1996. Excluding
non-recurring items, income before income taxes increased approximately 13
percent in 1996, reflecting worldwide sales volume, improved margins and
acquisitions, partially offset by higher interest expense.
Income before interest expense, income taxes and accounting changes in the
Commercial and Industrial segment increased $90 million, or 10.8 percent, to
$926 million in 1996. This improvement is primarily a result of underlying
strength in international markets, modest domestic growth and acquisitions.
Income of the segment was 14.0 percent and 13.9 percent of net sales in 1996
and 1995.
Income in the Appliance and Construction-Related segment increased $91 million,
or 13.3 percent, to $775 million in 1996. As a percent of net sales, income of
the segment was 17.2 percent in 1996 and 17.1 percent in 1995. These results
reflect solid underlying growth, acquisitions and ongoing cost reduction
efforts.
Excluding non-recurring items, income before income taxes and cumulative
effects of accounting changes increased approximately 15 percent in 1995,
reflecting increased worldwide sales volume, acquisitions and improved
international margins, partially offset by higher interest expense. Income
before interest expense, income taxes and accounting changes in the Commercial
and Industrial segment increased $161 million, or 23.9 percent, to $836 million
in 1995. This improvement was primarily a result of underlying strength in
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<PAGE>
international markets, solid domestic growth and the F.G. Wilson and Control
Techniques acquisitions. Income of the segment was 13.9 percent and 13.6
percent of net sales in 1995 and 1994, respectively, reflecting the increase in
volume and ongoing cost reduction efforts. Income in the Appliance and
Construction-Related segment increased $82 million, or 13.6 percent, to $684
million in 1995. As a percent of net sales, income of the segment was 17.1
percent in 1995 and 16.4 percent in 1994. These results reflect the increase in
international sales volume and effect of prior year non-recurring items. See
note 13 for additional information by industry segment and geographic area.
INCOME TAXES
Income taxes before accounting changes were $590 million, $531 million and $523
million in 1996, 1995 and 1994, respectively. The effective income tax rate was
36.7 percent in 1996, compared to 36.4 percent in 1995 and 36.7 percent in
1994, reflecting acquisition and divestiture activity. The higher 1994 rate was
primarily due to $95 million of income taxes on the divestiture of the
Aerospace unit of Rosemount, Inc.
CUMULATIVE EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES
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 in the
first quarter of 1995 as a cumulative effect of change in accounting principle
which decreased 1995 net earnings and earnings per common share by $21.3
million and $.10, respectively. The adoption of the statement does not have a
material impact on the Company's ongoing results of operations.
Effective October 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." This statement
requires that other postretirement benefits (primarily health care) be accrued
over the service lives of employees. The Company recognized the transition
obligation arising from service prior to adoption in the first quarter of 1994
as a cumulative effect of change in accounting principle which decreased 1994
net earnings and earnings per common share by $115.9 million and $.52,
respectively. The impact of the accounting changes was substantially offset by
other non-recurring items in 1995 and 1994.
NET EARNINGS AND RETURN ON EQUITY
Net earnings for 1996 were a record $1.0 billion, up 12.2 percent from $908
million in 1995. Net earnings as a percent of sales was 9.1 percent in 1996 and
1995. Earnings per common share were a record $4.55 in 1996, up 12.1 percent
from $4.06 in 1995. In 1996 and 1995, acquisitions made a small contribution to
earnings per share. Emerson achieved a return on average stockholders' equity
of 19.9 percent compared to 19.7 percent and 19.1 percent in 1995 and 1994,
respectively. Net earnings for 1995 were up 15.1 percent from $789 million in
1994. Earnings per common share were up 15.3 percent from $3.52 in 1994.
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
The Company continues to generate substantial cash from operations and remains
in a strong financial position with resources available for reinvestment in
existing businesses, strategic acquisitions and managing the capital structure
on a short and long-term basis. The Company selectively uses derivative
financial instruments to manage interest costs and minimize currency exchange
risk. See notes 1, 3, 4 and 5 for additional information.
25
<PAGE>
CASH FLOW
Emerson generated record operating cash flow of $1,317 million in 1996,
compared to $1,142 million and $1,097 million in 1995 and 1994, respectively.
Operating working capital was approximately 18 percent of sales in 1996, 1995
and 1994. Accounts receivable increased from September 30, 1995 due to
stronger operations and acquisitions.
Capital expenditures were $514 million in 1996, up approximately 22 percent
from $421 million in 1995. Significant investments were made for the
construction of new facilities in Europe and Asia and expansion in the U.S. to
support doubling of the Company's worldwide production capacity of Copeland
Compliant Scroll compressors. Capital expenditures increased approximately 27
percent in 1995 from $332 million in 1994. Emphasis continues to be placed on
programs designed to improve productivity by incorporating advanced processes
and technology into existing facilities, cost reduction projects and new
products.
Dividends were a record $439 million ($1.96 per share) in 1996, compared with
$398 million ($1.78 per share) in 1995 and $350 million ($1.56 per share) in
1994. In November 1996, the Board of Directors voted to increase the quarterly
cash dividend 10.2 percent to an annualized rate of $2.16 per share.
Cash paid in connection with Emerson's purchase acquisitions was $300 million,
$236 million and $58 million in 1996, 1995 and 1994, respectively. See note 2
for additional information.
LEVERAGE/CAPITALIZATION
Total debt increased to $1.7 billion from $1.6 billion in 1995, reflecting the
impact of acquisitions. In 1995, total debt increased to $1.6 billion from $1.2
billion reflecting the acquisitions of F.G. Wilson and Control Techniques. The
Company issued $250 million of 6.3%, 10-year notes in 1996 which were used to
reduce outstanding U.S. commercial paper. See notes 2, 3 and 4 for additional
information.
The total debt to capital ratio was 24.5 percent at year-end 1996, compared to
24.7 percent in 1995 and 21.7 percent in 1994. At September 30, 1996, net debt
(total debt less cash and equivalents and short-term investments) was 22.9
percent of net capital, compared to 23.3 percent in 1995 and 20.0 percent in
1994. The Company's interest coverage ratio (income before income taxes, non-
recurring items and interest expense divided by interest expense) was 13.7
times in 1996 compared to 13.9 times in 1995 and 15.0 times in 1994.
At year-end 1996, the Company and its subsidiaries maintained lines of credit
amounting to $1.3 billion to support commercial paper and had available non-
U.S. bank credit facilities of $505 million to support non-U.S. operations.
Lines of credit totaling $660 million are effective until 2001 with the
remainder through various dates in 1997. These lines of credit and bank credit
facilities assure the availability of funds at prevailing interest rates. In
addition, as of September 30, 1996, the Company could issue up to $750 million
of additional debt securities under its shelf registration with the Securities
and Exchange Commission.
In November 1996, the Board of Directors of the Company approved a share
repurchase program. The Board also declared a two-for-one split of the
Company's common stock, subject to shareholder approval to increase authorized
common stock and decrease the par value. See note 12 for additional
information.
26
<PAGE>
Consolidated Statements of Earnings
EMERSON ELECTRIC CO. AND SUBSIDIARIES
Years ended September 30
(Dollars in millions except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- -------
<S> <C> <C> <C>
Net sales $11,149.9 10,012.9 8,607.2
--------- -------- -------
Costs and expenses:
Cost of sales 7,165.0 6,480.4 5,553.0
Selling, general and administrative expenses 2,192.0 1,933.2 1,679.6
Interest expense 126.9 110.6 88.5
Gain on sale of business and other non-recurring items - (34.3) (192.0)
Other deductions, net 57.0 63.1 50.3
--------- -------- -------
Total costs and expenses 9,540.9 8,553.0 7,179.4
--------- -------- -------
Income before income taxes and cumulative
effects of changes in accounting principles 1,609.0 1,459.9 1,427.8
Income taxes 590.5 530.9 523.4
--------- -------- -------
Income before cumulative effects of changes in accounting principles 1,018.5 929.0 904.4
Cumulative effects of changes in accounting principles;
$.10 and $.52 per common share, respectively - (21.3) (115.9)
--------- -------- -------
Net earnings $ 1,018.5 907.7 788.5
========= ======== =======
Earnings per common share $ 4.55 4.06 3.52
========= ======== =======
See accompanying notes to consolidated financial statements.
- --------------------------------------------------------------------------------------------------------------------------
NOTE: Including the pretax impact of the cumulative effects of accounting
changes, income before income taxes would have been: $ 1,609.0 1,424.9 1,237.8
========= ======== =======
</TABLE>
27
<PAGE>
Consolidated Balance Sheets
EMERSON ELECTRIC CO. AND SUBSIDIARIES
September 30
(Dollars in millions except per share amounts)
<TABLE>
<CAPTION>
ASSETS
1996 1995
--------- -------
<S> <C> <C>
Current assets
Cash and equivalents $ 149.0 117.3
Receivables, less allowances of $50.3 in 1996
and $45.2 in 1995 1,979.8 1,757.6
Inventories:
Finished products 720.7 587.2
Raw materials and work in process 1,023.2 1,015.4
--------- -------
Total inventories 1,743.9 1,602.6
Other current assets 314.5 306.6
--------- -------
Total current assets 4,187.2 3,784.1
--------- -------
Property, plant and equipment
Land 166.2 153.4
Buildings 1,043.2 945.8
Machinery and equipment 3,391.1 2,950.5
Construction in progress 265.1 180.8
--------- -------
4,865.6 4,230.5
Less accumulated depreciation 2,414.8 2,095.6
--------- -------
Property, plant and equipment, net 2,450.8 2,134.9
--------- -------
Other assets
Excess of cost over net assets of purchased businesses,
less accumulated amortization of $443.7 in 1996 and $304.4 in 1995 2,779.2 2,384.9
Other 1,063.8 1,095.1
--------- -------
Total other assets 3,843.0 3,480.0
--------- -------
$10,481.0 9,399.0
========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
--------- -------
<S> <C> <C>
Current liabilities
Short-term borrowings and current
maturities of long-term debt $ 967.0 1,387.1
Accounts payable 791.3 740.2
Accrued expenses 1,063.3 979.8
Income taxes 199.5 173.6
--------- -------
Total current liabilities 3,021.1 3,280.7
--------- -------
Long-term debt 772.6 208.6
--------- -------
Other liabilities 1,333.9 1,038.9
--------- -------
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 in
1996 and 1995 238.3 238.3
Additional paid-in capital 12.3 15.0
Retained earnings 5,707.7 5,128.3
Cumulative translation adjustments (29.2) 17.0
--------- -------
5,929.1 5,398.6
Less cost of common stock in treasury, 14,618,576
shares in 1996 and 14,439,861 shares in 1995 575.7 527.8
--------- -------
Total stockholders' equity 5,353.4 4,870.8
--------- -------
$10,481.0 9,399.0
========= =======
</TABLE>
29
<PAGE>
Consolidated Statements of Stockholders' Equity
EMERSON ELECTRIC CO. AND SUBSIDIARIES
Years ended September 30
(Dollars in millions except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Common stock $ 238.3 238.3 238.3
-------- ------- -------
Additional paid-in capital
Beginning balance 15.0 - 4.1
Stock plans .1 (4.7) (3.5)
Treasury stock issued for acquisitions and other (2.8) 19.7 (.6)
-------- ------- -------
Ending balance 12.3 15.0 -
-------- ------- -------
Retained earnings
Beginning balance 5,128.3 4,619.1 4,182.5
Net earnings 1,018.5 907.7 788.5
Cash dividends (per share: 1996, $1.96;
1995, $1.78; 1994, $1.56) (439.1) (398.5) (349.9)
Stock plans - - (2.0)
-------- ------- -------
Ending balance 5,707.7 5,128.3 4,619.1
-------- ------- -------
Cumulative translation adjustments
Beginning balance 17.0 8.7 (69.1)
Translation adjustments (46.2) 8.3 77.8
-------- ------- -------
Ending balance (29.2) 17.0 8.7
-------- ------- -------
Treasury stock
Beginning balance (527.8) (524.3) (440.7)
Acquired (99.5) (81.1) (116.5)
Issued under stock plans 14.2 17.5 26.5
Issued for acquisitions and other 37.4 60.1 6.4
-------- ------- -------
Ending balance (575.7) (527.8) (524.3)
-------- ------- -------
Total stockholders' equity $5,353.4 4,870.8 4,341.8
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
Consolidated Statements of Cash Flows
EMERSON ELECTRIC CO. AND SUBSIDIARIES
Years ended September 30
(Dollars in millions)
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Operating activities
Net earnings $1,018.5 907.7 788.5
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 464.6 408.9 364.5
Changes in operating working capital (131.6) (190.9) (82.4)
Other (34.2) 16.7 26.2
-------- ------- -------
Net cash provided by operating activities 1,317.3 1,142.4 1,096.8
-------- ------- -------
Investing activities
Capital expenditures (513.5) (420.7) (332.3)
Purchases of businesses, net of cash and equivalents acquired (299.8) (235.5) (58.1)
Divestiture of business interests and other, net 272.3 28.9 204.7
-------- ------- -------
Net cash used in investing activities (541.0) (627.3) (185.7)
-------- ------- -------
Financing activities
Net increase (decrease) in short-term borrowings
with maturities of 90 days or less (358.0) 177.7 (239.7)
Proceeds from short-term borrowings 3.5 0.1 227.6
Principal payments on short-term borrowings (9.3) (28.8) (266.8)
Proceeds from long-term debt 249.9 2.4 4.6
Principal payments on long-term debt (77.0) (217.2) (175.0)
Net purchases of treasury stock (120.3) (51.3) (110.8)
Dividends paid (439.1) (398.5) (349.9)
-------- ------- -------
Net cash used in financing activities (750.3) (515.6) (910.0)
-------- ------- -------
Effect of exchange rate changes on cash and equivalents 5.7 4.5 10.3
-------- ------- -------
Increase in cash and equivalents 31.7 4.0 11.4
Beginning cash and equivalents 117.3 113.3 101.9
-------- ------- -------
Ending cash and equivalents $ 149.0 117.3 113.3
======== ======= =======
Changes in operating working capital
Receivables $ (124.3) (85.2) (93.2)
Inventories (18.0) (100.2) (88.5)
Other current assets 7.8 (32.1) 26.2
Accounts payable 43.7 47.2 96.0
Accrued expenses (16.5) (47.3) (23.7)
Income taxes (24.3) 26.7 .8
-------- ------- -------
$ (131.6) (190.9) (82.4)
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
Notes To Consolidated Financial Statements
EMERSON ELECTRIC CO. AND SUBSIDIARIES
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its controlled affiliates. All significant intercompany transactions, profits
and balances are eliminated in consolidation. Other investments of 20 to 50
percent are accounted for by the equity method. Investments of less than 20
percent are carried at cost.
Foreign Currency Translation
The functional currency of nearly all of the Company's non-U.S. subsidiaries is
the local currency. Adjustments resulting from the translation of financial
statements are reflected as a separate component of stockholders' equity.
Cash Equivalents
Cash equivalents consist of highly liquid investments with original maturities
of three months or less.
Inventories
Inventories are stated at the lower of cost or market. The majority of
inventory values are based upon standard costs which approximate average costs,
while the remainder are principally valued on a first-in, first-out basis.
Standard costs are revised at the beginning of the fiscal year and variances
incurred during the year are allocated between inventories and cost of sales.
Property, Plant and Equipment
The Company records investments in land, buildings, and machinery and equipment
at cost. Depreciation is computed principally using the straight-line method
over estimated service lives. Service lives for principal assets are 30 to 40
years for buildings and 8 to 12 years for machinery and equipment.
Excess of Cost Over Net Assets of Purchased Businesses
Assets and liabilities related to business combinations accounted for as
purchase transactions are recorded at their respective fair values. Excess of
cost over net assets of purchased businesses is amortized on a straight-line
basis to other deductions over the periods estimated to be benefited, not
exceeding 40 years.
Revenue Recognition
The Company recognizes nearly all of its revenues through the sale of
manufactured products as shipped.
Financial Instruments
The net amount to be paid or received under interest rate swap agreements is
accrued over the life of the agreements as a separate component of interest
expense. Gains and losses on currency option and forward exchange contracts are
generally recognized in income with the underlying hedged transactions.
Currency fluctuations on non-U.S. dollar obligations that have been designated
as hedges of non-U.S. net asset exposures are included in cumulative
translation adjustments.
Income Taxes
No provision is made for U.S. income taxes on the undistributed earnings of
non-U.S. subsidiaries (approximately $645 million at September 30, 1996),
primarily because retention of a significant portion of these earnings is
considered essential for continuing operations. In those cases where
distributions have been made, additional income taxes, if any, have been
minimal due to available foreign tax credits.
Earnings Per Common Share
Earnings per common share is computed by dividing net earnings by the weighted
average number of common shares outstanding during the applicable periods. The
weighted average number of common shares outstanding was 224,047,485 shares,
223,753,018 shares, and 224,232,225 shares in 1996, 1995 and 1994,
respectively.
Financial Statement Presentation
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts and related disclosures. Actual
results could differ from those estimates. Certain prior year amounts have been
reclassified to conform to the current year presentation.
32
<PAGE>
(2) ACQUISITIONS AND DIVESTITURES
Cash paid in connection with the Company's purchase acquisitions, which include
several smaller businesses, follows (dollars in millions):
<TABLE>
<CAPTION>
1996 1995 1994
------ ----- ----
<S> <C> <C> <C>
Fair value of assets acquired............................. $402.1 855.7 96.7
Less liabilities assumed.................................. 79.3 227.0 38.6
Less notes and common stock issued to sellers............. 23.0 393.2 -
------ ----- ----
Cash paid (net of cash and equivalents acquired)......... $299.8 235.5 58.1
====== ===== ====
</TABLE>
Emerson began consolidating Vermont American Corporation ("V.A."), the
Company's joint venture with Robert Bosch GmbH ("Bosch"), in the second quarter
of 1996 as a result of an agreement in which Emerson acquired control over the
venture. At September 30, 1996, Emerson had guaranteed V.A.'s indebtedness of
approximately $340 million. If required to perform under the guarantee, the
Company will be indemnified for up to approximately $130 million by Bosch. In
addition, the Company purchased Kop-Flex, Inc., a manufacturer of flexible
couplings, and Dieterich Standard, a manufacturer of flow measurement sensors,
along with several smaller businesses in 1996.
The Company purchased United Kingdom-based manufacturer F.G. Wilson
(Engineering) Ltd. in the first quarter of 1995 for approximately $274 million.
During 1996, Caterpillar Inc. took an equity position in F.G. Wilson which will
enhance its ability to serve the growing demand for temporary and standby
power. Emerson completed the acquisition of the remaining shares of Control
Techniques, plc, a United Kingdom-based manufacturer of variable speed drives
used for motor applications, in the second quarter of 1995 for approximately
$227 million.
In the fourth quarter of 1996, Emerson received $200 million from the
disposition of its fifty-percent interest in the S-B Power Tool Company joint
venture ("S-B"). The transaction resulted in a pretax gain of $78 million which
was substantially offset by costs arising from divestiture of operations,
write-off of discontinued product line assets and relocation of several
production facilities. Earnings in the first quarter of fiscal 1995 included a
$41.3 million preferential distribution from S-B.
On December 14, 1993, the Company sold the Aerospace unit of its Rosemount Inc.
subsidiary for $301 million ($206 million net of income taxes). The transaction
resulted in a pretax gain of $242 million.
The results of operations of these businesses have been included in the
Company's consolidated results of operations since the respective dates of the
acquisitions and prior to the dates of divestiture. The 1996 increases in total
assets, long-term debt and other liabilities reflect acquisitions.
(3) SHORT-TERM BORROWINGS AND LINES OF CREDIT
Short-term borrowings consist of commercial paper, notes issued to sellers in
connection with business combinations and non-U.S. bank borrowings as follows
(dollars in millions):
<TABLE>
<CAPTION>
United States Non-U.S.
--------------- ---------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Borrowings at year end...................... $479.0 860.6 475.5 458.0
Weighted average interest rate at year end.. 5.6% 6.0% 4.1% 5.0%
</TABLE>
The 1995 F.G. Wilson and Control Techniques acquisitions were partially
financed by issuing notes to the sellers totaling 203 million British pounds.
The Company had swapped 141 million British pounds with a weighted average
interest rate of 6.0 and 6.9 percent to $221 million and $223 million at U.S.
commercial paper rates at September 30, 1996 and 1995, respectively. The
remaining British pound obligations have been designated as a partial hedge of
the Company's U.K. net asset exposure.
The Company and its subsidiaries maintained lines of credit amounting to $1,320
million with various banks at September 30, 1996, to support commercial paper
and to assure availability of funds at prevailing market interest rates. Lines
of credit totaling $660 million are effective until 2001 with the remainder
through various dates in 1997. There were no borrowings against U.S. lines of
credit in the last three years. The Company's non-U.S. subsidiaries maintained
bank credit facilities in various currencies approximating $655 million ($505
million unused) at September 30, 1996. In some instances, borrowings against
these credit facilities have been guaranteed by the Company to assure
availability of funds at favorable interest rates. In addition, as of September
30, 1996, the Company could issue up to $750 million of additional debt
securities under its shelf registration with the Securities and Exchange
Commission.
33
<PAGE>
(4) LONG-TERM DEBT
Long-term debt is summarized as follows (dollars in millions):
<TABLE>
<CAPTION>
1996 1995
------ -----
<S> <C> <C>
Commercial paper with a weighted average interest rate of
5.4 percent at September 30, 1996............................................. $336.3 -
6.3% notes due 2006............................................................ 250.0 -
7-7/8% Eurodollar notes due 1998.............................................. 100.0 100.0
Medium-term notes swapped to a weighted average effective
interest rate of 5.3 percent.................................................. 53.5
8% convertible subordinated debentures due 1997 through 2011................... 26.8 38.5
Lease obligations payable in installments through 2009 with a weighted
average interest rate of 6.4 percent at September 30, 1996.................... 29.5 25.1
Other, principally notes payable in installments through 2006 with a weighted
average interest rate of 5.4 percent at September 30, 1996.................... 42.5 60.0
------ -----
785.1 277.1
Less current maturities........................................................ 12.5 68.5
------ -----
Total......................................................................... $772.6 208.6
====== =====
</TABLE>
The Company has the ability to refinance commercial paper on a long-term basis
through its credit lines and the obligation is included in long-term debt.
Commercial paper totaling $250 million has been swapped to a weighted average
fixed interest rate of 5.2 percent through 1997.
The 7-7/8% Eurodollar notes and $55 million of U.S. commercial paper have
effectively been exchanged for non-U.S. dollar obligations due in 1998. The
non-U.S. dollar obligations have an effective weighted average interest rate of
4.3 percent and 5.0 percent at September 30, 1996 and 1995, respectively, and
are composed of 136 million Dutch guilders, 5 billion Japanese yen and 27
million Swiss francs. These non-U.S. dollar obligations have been designated as
a partial hedge of the Company's non-U.S. dollar net asset exposure.
Long-term debt maturing during each of the four years after 1997 is $130.0
million, $7.5 million, $2.8 million and $342.6 million, respectively. Total
interest paid related to short-term borrowings and long-term debt was
approximately $120 million, $121 million and $90 million in 1996, 1995 and
1994, respectively.
(5) FINANCIAL INSTRUMENTS
The Company selectively uses derivative financial instruments to manage
interest costs and minimize currency exchange risk. The Company does not hold
derivatives for trading purposes. No credit loss is anticipated as the
counterparties to these agreements are major financial institutions with high
credit ratings.
As part of its currency hedging strategy, the Company utilizes option and
forward exchange contracts to minimize the impact of currency fluctuations on
transactions, cash flows and firm commitments. The Company and its subsidiaries
had approximately $280 million and $390 million of contracts outstanding at
September 30, 1996 and 1995, respectively. These contracts for the sale or
purchase of European and other currencies generally mature within one year, and
deferred gains and losses are not material.
Fair values of the Company's financial instruments are estimated by reference
to quoted prices from market sources and financial institutions, as well as
other valuation techniques. At September 30, 1996 and 1995, respectively, the
market value of the Company's convertible debentures was $89 million and $102
million, compared to the related carrying value of $26.8 million and $38.5
million. Common stock has been reserved for the conversion of these debentures
(see note 8). The fair values of derivative financial instruments were not
material at September 30, 1996, and the estimated fair value of each of the
Company's other classes of financial instruments approximated the related
carrying value at September 30, 1996 and 1995.
34
<PAGE>
(6) RETIREMENT PLANS
The Company sponsors retirement plans covering substantially all employees.
Benefits are provided to employees under defined benefit pay-related and flat-
dollar plans which are primarily noncontributory. Annual contributions to
retirement plans equal or exceed the minimum funding requirements of the
Employee Retirement Income Security Act or applicable local regulations.
The Company also sponsors defined contribution plans and participates in
multiemployer plans for certain union employees. Benefits are determined and
funded annually based on terms of the plans or as stipulated in collective
bargaining agreements.
Retirement plan expense for the years ended September 30, 1996, 1995 and 1994,
follows (dollars in millions):
<TABLE>
<CAPTION>
U.S. Plans Non-U.S. Plans
------------------------ -----------------------
1996 1995 1994 1996 1995 1994
------- ------ ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Defined benefit plans:
Service cost (benefits earned during the period).. $ 30.1 28.0 27.9 8.3 7.7 7.2
Interest cost..................................... 88.1 80.8 75.6 15.9 15.2 13.3
Actual return on plan assets...................... (185.0) (221.6) (26.3) (25.4) (18.4) (8.9)
Net amortization and deferral..................... 60.1 113.5 (76.8) 9.2 5.1 (3.3)
------- ------ ----- ----- ----- ----
Net periodic pension expense (income)........... (6.7) .7 .4 8.0 9.6 8.3
Defined contribution and multiemployer plans....... 43.4 39.4 39.5 7.4 7.5 6.5
------- ------ ----- ----- ----- ----
Total retirement plan expense..................... $ 36.7 40.1 39.9 15.4 17.1 14.8
======= ====== ===== ===== ===== ====
</TABLE>
The actuarial present value of benefit obligations and the funded status of the
Company's defined benefit pension plans as of September 30, 1996 and 1995,
follow (dollars in millions):
<TABLE>
<CAPTION>
U.S. Plans Non-U.S. Plans
--------------------- ----------------
1996 1995 1996 1995
-------- ------- ----- -----
<S> <C> <C> <C> <C>
Accumulated benefit obligation........................................ $ 991.9 903.9 196.5 187.3
======== ======= ===== =====
Vested benefits included in accumulated benefit obligation............ $ 931.0 847.5 165.9 157.0
======== ======= ===== =====
Projected benefit obligation.......................................... $1,173.4 1,068.2 229.0 216.8
Plan assets at fair value (primarily corporate equity
and fixed income securities)......................................... 1,410.5 1,238.0 183.3 158.6
-------- ------- ----- -----
Plan assets in excess of (less than) projected benefit obligation.. 237.1 169.8 (45.7) (58.2)
Unamortized transition amount......................................... (43.6) (50.9) (2.2) (1.5)
Unrecognized net loss (gain).......................................... (96.5) (42.8) (17.4) (9.0)
Unrecognized prior service costs...................................... 20.6 20.9 1.2 1.3
-------- ------- ----- -----
Pension asset (liability) recognized in the balance sheet............ $ 117.6 97.0 (64.1) (67.4)
======== ======= ===== =====
</TABLE>
For 1996, the assumed discount rate, rate of increase in compensation levels
and expected long-term rate of return on plan assets used in the actuarial
calculations were, respectively, 8.0 percent, 5.0 percent and 10.5 percent for
U.S. plans; and an average of 7.5 percent, 4.1 percent and 8.8 percent for non-
U.S. plans. For 1995, the assumed discount rate, rate of increase in
compensation levels and expected long-term rate of return on plan assets were,
respectively, 8.0 percent, 5.0 percent and 10.5 percent for U.S. plans; and an
average of 7.6 percent, 4.2 percent and 8.8 percent for non-U.S. plans.
(7) POSTRETIREMENT PLANS AND POSTEMPLOYMENT BENEFITS
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 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 of 1994 as a cumulative effect of change in
accounting principle of $115.9 million (net of $74.1 million in related income
tax benefits). In addition, prior to adoption the Company had recorded OPEB
liabilities of approximately $100 million in accordance with Accounting
Principles Board Opinion No. 16. The adoption of the statement does not have a
material impact on the Company's ongoing results of operations.
35
<PAGE>
Net postretirement plan expense for the years ended September 30, 1996, 1995
and 1994 follows (dollars in millions):
<TABLE>
<CAPTION>
1996 1995 1994
----- ---- ----
<S> <C> <C> <C>
Service cost............................................ $ 4.0 4.1 5.6
Interest cost........................................... 18.4 19.6 21.7
Net amortization and deferral........................... (4.4) (3.5) -
----- ---- ----
$18.0 20.2 27.3
===== ==== ====
</TABLE>
The actuarial present value of accumulated postretirement benefit obligations
as of September 30, 1996 and 1995 follows (dollars in millions):
<TABLE>
<CAPTION>
1996 1995
------ -----
<S> <C> <C>
Retirees.................................................................... $152.1 168.2
Fully eligible active plan participants..................................... 17.2 15.9
Other active plan participants.............................................. 68.4 64.4
------ -----
Accumulated postretirement benefit obligation............................. 237.7 248.5
Unrecognized net gain....................................................... 61.1 48.1
Unrecognized prior service benefit.......................................... 11.0 12.4
------ -----
Postretirement benefit liability recognized in the balance sheet.......... $309.8 309.0
====== =====
</TABLE>
The assumed discount rate used in measuring the obligation as of September 30,
1996 was 7.75 percent; the initial assumed health care cost trend rate was 8.5
percent, declining to 5.0 percent in the year 2004. The assumed discount rate
used in measuring the obligation as of September 30, 1995 was 7.75 percent; the
initial assumed health care cost trend rate was 9.0 percent, declining to 5.0
percent in the year 2004. A one-percentage-point increase in the assumed health
care cost trend rate for each year would increase the obligation as of
September 30, 1996 by approximately 5 percent and increase the 1996
postretirement plan expense by approximately 6 percent.
Effective October 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," which establishes accounting standards for workers' compensation,
disability and severance benefits. The Company recognized the obligation in the
first quarter of 1995 as a cumulative effect of change in accounting principle
of $21.3 million (net of $13.7 million in related income tax benefits). The
adoption of the statement does not have a material impact on the Company's
ongoing results of operations.
(8) COMMON STOCK
The Company has various stock option plans which permit certain officers and
employees to purchase common stock at specified prices. At September 30, 1996,
2,003,854 options were available for grant under these plans. Changes in the
number of shares subject to option during 1996, 1995 and 1994 follow (shares in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------------- ---------------- ----------------
Average Average Average
Price Shares Price Shares Price Shares
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year...................... $44.78 2,241 $43.61 2,030 $34.51 1,595
Options granted...................... 77.08 396 58.23 408 56.63 806
Assumed options of acquired company.. - - 16.31 208 - -
Options exercised.................... 39.20 (331) 35.29 (356) 30.79 (338)
Options canceled..................... 60.40 (45) 55.79 (49) 53.16 (33)
----- ----- -----
End of year............................ 50.94 2,261 44.78 2,241 43.61 2,030
----- ----- -----
Exercisable at year end................ 1,307 1,185 1,019
===== ===== =====
</TABLE>
36
<PAGE>
The 1993 Incentive Shares Plan authorizes the distribution of a maximum of 3
million shares of common stock to key management personnel. At September 30,
1996, 322,000 incentive shares had been issued, and 1,450,870 rights to receive
common shares had been awarded, contingent upon accomplishing certain
objectives by 1997.
At September 30, 1996, 8,004,499 shares of common stock were reserved,
including 7,011,494 shares for issuance under the Company's stock plans and
993,005 shares for conversion of the outstanding 8% convertible subordinated
debentures at a price of $26.97 per share. During 1996, 1,208,924 treasury
shares were acquired and 1,030,209 treasury shares were issued.
Approximately 2.5 million preferred shares are reserved for issuance under a
Preferred Share Purchase Rights Plan. Under certain conditions involving
acquisition of or an offer for 20 percent or more of the Company's common
stock, all holders of Rights, except an acquiring entity, would be entitled (i)
to purchase, at an exercise price of $120, common stock of the Company or an
acquiring entity with a value twice the exercise price, or (ii) at the option
of the Board, to exchange each Right for one share of common stock. The Rights
remain in existence until November 1, 1998, unless earlier redeemed (at one
cent per Right), exercised or exchanged under the terms of the plan.
(9) INCOME TAXES
The principal components of income tax expense follow (dollars in millions):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Federal:
Current.................................................. $393.0 301.5 383.1
Deferred................................................. 7.4 46.3 8.9
State and local............................................ 53.0 49.8 57.5
Non-U.S.................................................... 137.1 133.3 73.9
------ ------ ------
Income tax expense....................................... $590.5 530.9 523.4
====== ====== ======
</TABLE>
The federal corporate statutory rate is reconciled to the Company's effective
income tax rate as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Federal corporate statutory rate............................ 35.0% 35.0% 35.0%
State and local taxes, less federal tax benefit............ 2.1 2.2 2.4
Other...................................................... (.4) (.8) (.7)
----- ----- -----
Effective income tax rate................................... 36.7% 36.4% 36.7%
===== ===== =====
</TABLE>
The principal components of deferred tax assets (liabilities) follow (dollars
in millions):
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
Property, plant and equipment and intangibles............... $(281.7) (242.5)
Leveraged leases............................................ (194.9) (196.4)
Pension..................................................... (53.5) (42.7)
Accrued liabilities......................................... 226.0 207.3
Postretirement and postemployment benefits.................. 130.4 132.7
Employee compensation and benefits.......................... 101.8 86.9
Other....................................................... 75.0 61.3
------- -------
Total deferred tax assets (liabilities).................... $ 3.1 6.6
======= =======
</TABLE>
At September 30, 1996 and 1995, respectively, net current deferred tax assets
were $230.0 million and $232.8 million, and net noncurrent deferred tax
liabilities were $226.9 million and $226.2 million. Total income taxes paid
were approximately $575 million, $485 million and $535 million in 1996, 1995
and 1994, respectively.
37
<PAGE>
(10) OTHER FINANCIAL DATA
Items charged to earnings during the years ended September 30, 1996, 1995 and
1994, included the following (dollars in millions):
<TABLE>
<CAPTION>
1996 1995 1994
------ ----- -----
<S> <C> <C> <C>
Research, new product development and product
improvement costs........................................ $398.7 354.2 298.2
Rent expense.............................................. 144.8 129.2 113.1
Amortization of intangibles............................... 104.1 86.5 72.2
</TABLE>
The Company leases computers, transportation equipment and various other
property under operating lease agreements. The minimum annual rentals under
noncancelable long-term leases, exclusive of maintenance, taxes, insurance and
other operating costs, will approximate $74 million in 1997 and decline
substantially thereafter.
Other assets at September 30, 1996 and 1995, included the following (dollars in
millions):
<TABLE>
<CAPTION>
1996 1995
------ -----
<S> <C> <C>
Equity investments........................................ $276.2 415.8
Investment in leveraged leases............................ 194.0 198.4
</TABLE>
The market value of the Company's equity investments in publicly traded
companies exceeded the related carrying value by approximately $215 million and
$149 million at September 30, 1996 and 1995, respectively.
Selected accrued expenses at September 30, 1996 and 1995, follow (dollars in
millions):
<TABLE>
<CAPTION>
1996 1995
------ -----
<S> <C> <C>
Employee compensation..................................... $259.9 236.0
Insurance, including self-insurance....................... 118.5 110.8
Taxes, excluding income taxes............................. 104.1 98.2
Warranty.................................................. 81.5 86.1
Pension and profit-sharing plans.......................... 57.3 51.7
Interest.................................................. 26.6 26.6
</TABLE>
(11) CONTINGENT LIABILITIES AND COMMITMENTS
At September 30, 1996, there were no known contingent liabilities (including
guarantees, pending litigation, taxes and other claims) that management
believes will be material in relation to the Company's financial position, nor
were there any material commitments outside the normal course of business.
(12) SUBSEQUENT EVENTS
On November 12, 1996, Emerson's Board of Directors approved a share repurchase
program authorizing the repurchase of up to 20 million shares, approximately 9
percent of the Company's outstanding common stock. The Company plans to
implement the program through consistent open market purchases of shares over
the next four to five years. In the event of a significant investment
opportunity, the Company may slow the pace of repurchase activity. The Board
also declared a two-for-one split of the Company's common stock, payable to
stockholders of record on February 21, 1997. The split is subject to
stockholder approval to increase authorized common stock from 400 million to
1.2 billion shares and decrease the par value from $1 to $.50 per share.
38
<PAGE>
(13) INDUSTRY SEGMENT INFORMATION
The Company is engaged principally in the worldwide design, manufacture and
sale of a broad range of electrical, electromechanical and electronic products
and systems. The products manufactured by the Company are classified into the
following industry segments: Commercial and Industrial Components and Systems;
and Appliance and Construction-Related Components. The Commercial and
Industrial segment includes process control instrumentation, valves and
systems; industrial motors and drives; industrial machinery, equipment and
components; and electronics. Products of this segment are sold to commercial
and industrial distributors and end-users for manufacturing and commercial
applications. The Appliance and Construction-Related segment consists of
fractional motors and appliance components; heating, ventilating and air
conditioning components; and tools. This segment includes components sold to
distributors and original equipment manufacturers for inclusion in end products
and systems (ultimately sold through commercial and residential building
construction channels); and construction-related products which retain their
identity and are sold through distributors to consumers and the professional
trades. Summarized information about the Company's operations in each industry
segment and geographic area follows (dollars in millions):
Industry Segments
(See note 2)
<TABLE>
<CAPTION>
Net Sales to Income Before Income
Unaffiliated Customers Taxes and Accounting Changes Total Assets
------------------------- ----------------------------- --------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and Industrial........... $ 6,635 6,012 4,947 926 836 675 6,422 6,076 5,009
Appliance and Construction-
Related............................ 4,515 4,001 3,660 775 684 602 3,495 2,794 2,711
Corporate and other items*.......... - - - 35 51 240 564 529 495
Interest expense.................... - - - (127) (111) (89) - - -
------- ------- ------- ------- ------- ------- ------- ------- -------
Total.............................. $11,150 10,013 8,607 1,609 1,460 1,428 10,481 9,399 8,215
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Depreciation and Capital
Amortization Expense Expenditures
-------------------------- ----------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Commercial and Industrial............................... $280 254 215 236 214 161
Appliance and Construction-Related...................... 179 149 145 246 195 156
Corporate and other items............................... 6 6 5 32 12 15
---- ---- ---- ---- ---- ----
Total................................................ $465 409 365 514 421 332
==== ==== ==== ==== ==== ====
</TABLE>
Geographic Areas
(By origin)
<TABLE>
<CAPTION>
Net Sales to Income Before Income
Unaffiliated Customers Taxes and Accounting Changes Total Assets
--------------------------- ---------------------------- ------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States....................... $ 7,168 6,395 5,953 1,238 1,107 1,014 6,102 5,119 4,910
Europe.............................. 2,919 2,668 1,933 316 275 173 3,029 2,983 2,140
Other Areas......................... 1,063 950 721 147 138 90 1,001 953 840
Corporate and other items*.......... - - - 35 51 240 564 529 495
Interest expense.................... - - - (127) (111) (89) - - -
Eliminations........................ - - - - - - (215) (185) (170)
------- ------ ------ ------ ------ ------ ------ ------ ------
Total............................ $11,150 10,013 8,607 1,609 1,460 1,428 10,481 9,399 8,215
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
* Income includes $242 million gain on sale of the Aerospace unit of Rosemount
Inc. in 1994.
39
<PAGE>
(14) QUARTERLY FINANCIAL INFORMATION (Unaudited)
(Dollars in millions except per share amounts)
<TABLE>
<CAPTION>
Financial Results
Net Sales Gross Profit Net Earnings
------------------- ----------------- -------------
1996 1995 1996 1995 1996 1995
--------- -------- -------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
First Quarter...... $ 2,565.8 2,284.6 915.4 792.0 230.5 203.4
Second Quarter..... 2,819.8 2,514.1 998.7 878.9 254.9 227.1
Third Quarter...... 2,896.8 2,629.7 1,037.0 922.7 266.9 239.5
Fourth Quarter..... 2,867.5 2,584.5 1,033.8 938.9 266.2 237.7
--------- -------- ------- ------- ------- -----
Fiscal Year... $11,149.9 10,012.9 3,984.9 3,532.5 1,018.5 907.7
========= ======== ======= ======= ======= =====
</TABLE>
<TABLE>
<CAPTION>
Earnings Per Dividends Per
Common Share Common Share
------------------- -------------------
1996 1995 1996 1995
------ ----- ------ -----
<S> <C> <C> <C> <C>
First Quarter...... $1.03 .91 .49 .43
Second Quarter..... 1.14 1.02 .49 .43
Third Quarter...... 1.19 1.07 .49 .43
Fourth Quarter..... 1.19 1.06 .49 .49
----- ---- ---- ----
Fiscal Year... $4.55 4.06 1.96 1.78
===== ==== ==== ====
</TABLE>
Income before cumulative effects of changes in accounting principles was $224.7
million ($1.01 per common share) in the first quarter of 1995 reflecting non-
recurring items. See notes 2 and 7 for information regarding non-recurring
items and the Company's acquisition and divestiture activities.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Stock Prices
Price Range Per Common Share
--------------------------------------------
1996 1995
-------------------- -----------------
High Low High Low
-------- ------- ------ ------
<S> <C> <C> <C> <C>
First Quarter................ $ 81 3/4 68 5/8 64 1/4 57 1/4
Second Quarter............... 86 3/4 77 3/4 67 1/8 61 1/2
Third Quarter................ 90 3/8 77 1/2 72 64 1/8
Fourth Quarter............... 91 5/8 78 3/4 75 3/8 69 3/4
Fiscal Year............. $ 91 5/8 68 5/8 75 3/8 57 1/4
</TABLE>
Emerson Electric Co. common stock (Symbol EMR) is listed on the New York Stock
Exchange and Chicago Stock Exchange.
40
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Emerson Electric Co.:
We have audited the accompanying consolidated balance sheets of Emerson
Electric Co. and subsidiaries as of September 30, 1996 and 1995, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the years in the three-year period ended September 30, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Emerson Electric
Co. and subsidiaries as of September 30, 1996 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended September 30, 1996, in conformity with generally accepted
accounting principles.
As discussed in note 7 to the consolidated financial statements, effective
October 1, 1993, the Company changed its method of accounting for
postretirement benefits other than pensions and effective October 1, 1994, the
Company changed its method of accounting for postemployment benefits.
/s/ KPMG PEAT MARWICK LLP
St. Louis, Missouri
November 12, 1996
41
<PAGE>
Safe Harbor Statement
This Annual Report contains various forward-looking statements and includes
assumptions concerning Emerson's operations, future results and prospects.
These forward-looking statements are based on current expectations and are
subject to risk and uncertainties. In connection with the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, Emerson
provides the following cautionary statement identifying important economic,
political and technology factors which, among others, could cause the actual
results or events to differ materially from those set forth in or implied by
the forward-looking statements and related assumptions.
Such factors include the following: (i) changes in the current and future
business environment, including interest rates and capital and consumer
spending; (ii) competitive factors and competitor responses to Emerson's
initiatives; (iii) successful development and market introductions of
anticipated new products; (iv) changes in government laws and regulations,
including taxes; (v) unstable governments and business conditions in emerging
economies: (vi) successful penetration of emerging economies; (vii)
continuation of the favorable environment to make acquisitions, domestic and
foreign, including regulatory requirements and market values of candidates.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF EMERSON ELECTRIC CO.
SEPTEMBER 30, 1996
Jurisdiction
of
Legal Name Incorporation
- ---------- -------------
ADI Control Techniques Drives, Inc. California
Alco Controls S.A. de C.V. Mexico
Applied Concepts, Inc. Pennsylvania
Branson Ultrasonic S.A. Switzerland
Buehler Ltd. Illinois
Buehler Holdings Delaware
Buehler-Met AG Switzerland
Buehler-Met Handelgesellschaff M.B.H. Austria
Wirtz-Buehler Corporation Delaware
Commercial Cam Co., Inc. Delaware
Compania de Motores Domesticos S.A.de C.V. Mexico
Control Techniques Iberia S.A. Spain
Controles Electromecanicos De Mexico Mexico
Con-Tek Valves, Inc. Georgia
Copeland Electric Corporation Delaware
Digital Appliance Controls, Inc. Delaware
Digital Appliance Controls Manufacturing
(Singapore) Pte Ltd. Singapore
DACM SDN BHD Malaysia
Digital Appliance Controls (UK) Limited U.K.
EECO, Inc. Delaware
Appleton Electric Company Delaware
Conameter Corporation USA
Copeland Corporation Delaware
CDP International, Inc. Delaware
Computer Process Controls, Inc. Georgia
Copeland Access +, Inc. Delaware
Copeland de Mexico S.A. de C.V. Mexico
Copeland International, Inc. Ohio
Copeland Redevelopment Corporation Missouri
El-O-Matic USA, Inc. USA
Electro-Test, Inc. USA
Emerson Electric (U.S.) Holding Corporation Delaware
Asco GmbH Germany
Asco GmbH & Co. Germany
Automatic Switch Company Delaware
Asco Investment Corp. New Jersey
Angar Scientific Company,Inc. New Jersey
Asco Controls A.G. Switzerland
Asco Controls B.V. Netherland
Asco Mideast B.V. Netherlands
Asco GmbH Hungary
Asco/Joucomatic SP. Z.O.O. Poland
Asco Electrical Products Co., Inc. New Jersey
Ascomation Pty. Ltd. Australia
<PAGE>
Ascomation (NZ) Limited New Zealand
Asco Sweden AB Sweden
Asco (Japan) Company Ltd. Japan
Asco Services, Inc. New Jersey
Ascomatica S.A. de C.V. Mexico
Ascoval Industria E Commercio Ltda. Brazil
Hanover Advertising Services, Inc. New Jersey
Joucomatic Controls, Inc. N. Carolina
Branson Ultrasonics Corporation Delaware
Branson Korea Co., Inc. Korea
Branson Ultrasonics S.A. Sweden
Branson Ultrasonidos S.A.E. Spain
Branson Ultrasons S.A. France
Krautkramer France S.A. France
Chromalox GmbH Germany
Copeland GmbH Germany
Copeland France S.A. France
Copeland Corporation Limited U.K.
Copeland Italia S.a.R.l. Italy
Copeland Iberica CIB S.A. Spain
Copeland Refrigeration Europe S.A. Belgium
Copeland S.A. Belgium
El-O-Matic GmbH Germany
Emerson Electric GmbH Germany
Emerson Electric GmbH & Co. Germany
Emerson Electric Overseas Finance Corp. Delaware
Emerson Electric de Colombia, LTDA Colombia
Motores U.S. de Mexico, S.A. Mexico
U.S.E.M. de Mexico S.A.de C.V. Mexico
Emerson Technologies Verwaltungs-GmbH Germany
Emerson Technologies GmbH & Co. Germany
Fisher-Rosemount GmbH Germany
Fisher-Rosemount GmbH & Co. Germany
Fisher-Rosemount Hungary Ltd. Hungary
Francel S.A. France
Krautkramer GmbH Germany
Krautkramer GmbH & Co. Germany
Liebert GmbH Germany
Liebert A.G. Switzerland
Reglerwerk Dresden GmbH Germany
Ridge Tool GmbH Germany
Ridge Tool GmbH & Co. Germany
Rosemount Inc. Minnesota
Dieterich Standard, Inc. Delaware
Dieterich Technology Holding Corp. Delaware
Fisher-Rosemount AS (Norway) Norway
Fisher-Rosemount Espana, S.A. Spain
Fisher-Rosemount Holding AG Switzerland
Fisher-Rosemount AG Switzerland
Rosemount Spo Czech
Fisher-Rosemount A/S Denmark
Fisher-Rosemount Ges. M.B.H. Austria
Rosemount Poland Ltd. Poland
Fisher-Rosemount Instruments Pty. Ltd. Australia
Emerson Electric Co. Pty Ltd. Australia
2
<PAGE>
Fisher-Rosemount Instruments Ltd. New Zealand
Fisher-Rosemount Instruments Taiwan, Ltd. Taiwan, Ltd.
Fisher-Rosemount Japan Co. Ltd. Japan
Fisher-Rosemount Middle East, Inc. Delaware
Kay-Ray/Sensall, Inc. Delaware
P I Components Corp. Texas
Rosemount AB Sweden
Rosemount Analytical Inc. Delaware
Rosemount China Inc. Minnesota
Rosemount Korea, Ltd. Korea
Rosemount Mexicana S.A. de C.V. Mexico
Rosemount Nuclear Instruments Delaware
Rosemount S.A.R.L. France
Rosemount Portugal Instrumentos Lta. Portugal
Tekmar Company Ohio
PEPT Investment Corporation Delaware
Skil Europe Corporation Delaware
Tauandromeda Beteiligungs GmbH Germany
Wirtz-Buehler GmbH Germany
Xomox Corporation Ohio
Fisher-Rosemount do Brasil
Industria e Comerco Ltda. Brazil
Fisher-Rosemount S.A. de C.V. Mexico
Flow Technology, Inc. (Taiwan) Ohio
Flow Technology S.A. de C.V. Mexico
Inversiones Xomox Venezuela
Naegelen S.A. France
Xomox A.G. Switzerland
Xomox Chihuhua S.A. de C.V. Mexico
Xomox Corporation de Venezuela,C.A. Venezuela
Xomox Korea Ltd. Korea
Xomox South America S.A. Uruguay
Xomox Uruguay S.A. Uruguay
Xomox International GmbH Germany
Fisher-Gulde GmbH Germany
Fisher-Gulde GmbH & Co. Germany
Xomox International GmbH & Co. Germany
Emerson Power Transmission Corporation Delaware
Emerson Chain, Inc. Delaware
Emerson Electronic Motion Controls, Inc. Minnesota
Liebert Corporation Ohio
Control Concepts Corporation Delaware
Emerson Computer Power (Thailand) Company Limited Thailand
Emerson Computer Power B.V. Netherlands
Emersub XXV, Inc. Delaware
Computersite-Preparations, Inc. Ohio
Liebert Asia Ltd. Hong Kong
Liebert Corporation Australia Pty, Ltd. Australia
Liebert Far East Pte. Ltd. Singapore
Atlas Air (S.E.A.) Pte. Ltd. Singapore
Liebert (Malaysia) Sdn.Bhd. Malaysia
Liebert Hong Kong Ltd. Hong Kong
Liebert International B.V. Netherlands
Liebert Tecnologia Ltda. Brazil
Micro Motion, Inc. Colorado
3
<PAGE>
Ridge Tool Company Ohio
Emerson Electric SRL Italy
Ridge Tool (Australia) Pty., Ltd. Australia
Ridge Tool Manufacturing Company Delaware
Ridgid Werkzeuge AG Switzerland
Therm-O-Disc, Incorporated Ohio
Componentes Avanzados de Mexico, S.A. de C.V. Mexico
Controles de Temperatura S.A. de C.V. Mexico
E.G.P. Corporation Delaware
Electronic Control Systems, Inc. W. Virginia
Fairmount Building and Investment Corp. USA
Emerson Electric (Asia) Limited Hong Kong
Branson Ultrasonics (Asia Pacific) Co. Ltd. Hong Kong
Emerson Electric (South Asia/Pacific) Pte. Ltd. Singapore
Emerson Electric II, C.A. Venezuela
Emerson Electric, C.A. Venezuela
Emerson Electric de Mexico S.A. de C.V. Mexico
Ascotech, S.A. de C.V. Mexico
Motores Reynosa, S.A. de C.V. Mexico
Emerson Electric Foreign Sales Corporation Virgin Islands
Emerson Electric International, Inc. Delaware
Emerson Electric Ireland Ltd. Bermuda
Emerson Electric (Mauritius) Ltd. India
Emerson Electric Company India Private. Ltd. India
Emerson Electric Nederland B.V. Netherlands
Branson Ultrasonics B.V. Netherlands
Brooks Instrument B.V. Netherlands
Capax Electrische Apparatenfabriek B.V. Netherlands
Crouzet Appliance Controls D.O.O. Slovenia
Emerson Electric Slovakia Limited Slovakia
Vuma a.s. Czech Republic
Emerson Electric, SpoL, s.r.o. Czech Republic
Fusite, B.V. Netherlands
Fisher-Rosemount B.V. Netherlands
New-Tech Cuijk B.V. Netherlands
Skil AG Switzerland
Emerson Electric Puerto Rico, Inc. Delaware
Emerson Puerto Rico, Inc. Delaware
Emerson Electric (Taiwan) Company Limited Taiwan
Emerson Finance Co. Delaware
Emersub XIX, Inc. Delaware
Emerson Capital Funding, Inc. Delaware
Emerson Middle East, Inc. Delaware
Emerson Sice S.p.A. Italy
C.E. Set S.r.l. Italy
Branson Ultrasuoni S.P.A. Italy
Fisher-Rosemount Italia S.R.L. Italy
Xomox Italia S.R.L. Italy
Emerson Pacific Pte. Ltd. Singapore
Emersub XXXVI Delaware
Control Techniques plc U.K.
Control Techniques (Holding) GmbH Germany
Control Techniques GmbH Germany
INAG Gmbh Germany
Reta Anlagenbau Gmbh Germany
Reta Elektronic GmbH Germany
4
<PAGE>
Control Techniques (USA) Inc. U.S.A
Control Techniques Drives, Inc. U.S.A.
Control Techniques Drives Limited Canada
Control Techniques Asia-Pacific Pte Limited Singapore
Control Techniques Drives (Malaysia) Sdn Bhd Malaysia
Control Techniques Singapore Pte Limited Singapore
Control Techniques (Thailand) Limited Thailand
PT Kontroltek Indopratama Indonesia
Control Techniques Australia Pty Ltd. Australia
Control Techniques Bermuda Limited Bermuda
Control Techniques Drives Limited U.K.
Technodrives Limited U.K.
Control Techniques Dynamics Limited U.K.
Evershed Powerotor Limited U.K.
Moore Reed & Company Limited U.K.
Control Techniques Italia srl Italy
Control Techniques Precision Systems Limited U.K.
Control Techniques SpA Italy
Electric Drives Limited Ireland
K.T.K. (Newtown) Limited U.K.
Control Techniques Worldwide BV Netherlands
ASI Control Techniques A/B Norway
Control Technika Kft Hungary
Control Techniques Automation BV Netherlands
Control Techniques BV Netherlands
Control Techniques BV/SA Belgium
Control Techniques Denmark A/S Denmark
Control Techniques Endustriyel
Kontrol Sistemerli Sanayi ve Ticaret A.S. Turkey
Control Techniques GesmbH Austria
Control Techniques India Limited India
Control Techniques Elpro Automation Ltd. India
Control Techniques Vietnam Limited Vietnam
Control Techniques VUES s.r.o.(Czech Repub.) Czech Republic
CTS Control Techniques Antrebsregelungen GmbH Switzerland
Siliconics (Pty) Ltd. S. Africa
Siliconics (Natal) (Pty) Ltd. S. Africa
Emersub XXXVIII, Inc. (Vacant) Delaware
Emersub XL, Inc. Delaware
Emersub XLI, Inc. (Vacant) Delaware
Emersub XLIII, Inc. Ohio
Emersub XLV, Inc. Delaware
Valycontrol, S.A. de C.V. Mexico
Filcore, Inc. Texas
Emersub XLVI, Inc. Delaware
Emersub XLVIII, Inc. Delaware
Emersub L, Inc. Delaware
Emersub LI, Inc. Delaware
Emersub LII, Inc. Delaware
Emersub LIII, Inc. Delaware
Emersub LIV, Inc. (Vacant) Delaware
EMR Holdings, Inc. Delaware
Branson de Mexico, S.A. de C.V. Mexico
Emerson Electric (China) Holdings Ltd. China
Beijing Rosemount Far East Instrument Co., Ltd. China
Emerson Electric (Tianjin) Co., Ltd. China
Emerson Engineering System (Shanghai) Co., Limited China
5
<PAGE>
Emerson Fusite Electric (Shenzhen) Co. Ltd. China
Emerson Machinery Equipment (Shenzhen)Co. Ltd. China
Emerson White-Rodgers Electric (Xiamen) Co. Ltd. China
Emerson Trading Co. (Shanghai) Co. Ltd. China
Hangzhou LiShi Ridge Co. Ltd. China
Rosemount Shanghai Co. Ltd. China
Shanghai Branson Ultrasonics Co. Ltd. China
Shenyang Copeland Refrigeration Co., Ltd. China
Tianjin Fisher Controls Valve Co., Ltd. China
Zhejiang-Emerson Motor Company, Ltd. China
Emerson Electric Canada Ltd. Canada
Appleton Electric Limited Canada
Ascolectric Limited Canada
Fisher Controls Inc. (Controles Fisher Inc.) Canada
Rosemount Instruments Ltd. Canada
Sweco Canada, Inc. Canada
Therm-O-Disc (Canada) Limited Canada
Xomox Canada Ltd. Canada
Emerson Electric do Brasil Ltda. Brazil
Emerson Electric Hungary Ltd. Hungary
Emerson Electric Iberica S.A. Spain
Emerson Electric Korea Ltd. Korea
Emerson Electric (M) SDN BHD Malaysia
Emerson Electric Mauritius Mauritius
Emerson Electric Company (India) Private Limited India
Emerson Electric (Thailand) Limited Thailand
Emerson Europe S.A. France
Crouzet Appliance Controls S.A. France
Crouzet Appliance Controls SpA Italy
Ferco S.A. France
Fisher Controls S.A. France
Joucomatic S.A. France
Fluidocontrol S.A. Spain
Joucomatic Controls Ltd. New Zealand
Joucomatic Controls Pty. Limited Australia
Joucomatic Controls Ltd. U.K.
Joucomatic GmbH Steuergeraete Germany
Joucomatic S.p.A. Italy
Joucomatic N.V. Belgium
Sotrac S.r.l. Italy
Ridgid France S.A. France
Leroy-Somer S.A. France
Bertrand-Polico S.A. France
Constructions Electriques
de Beaucourt S.A. France
Electronique du Sud-Ouest S.A. France
Andre Cocard S.A.R.L. France
Atelier de Bobinage de
Moteurs Electriques S.A.R.L France
Ets. Belzon & Richardot S.A.R.L. France
Construction Electriques
du Nord S.A. France
Lorraine Services Electrique
Electronique Electromecanique
S.A.R.L. (LS 3E) France
M.I.S. Kerebel Provence S.A.R.L. France
M.I.S. Poitouraine S.A.R.L. France
6
<PAGE>
M.I.S. Societe Peaucelle D'installations
et Reparations Electriques S.A.R.L. France
Marcel Oury S.A.R.L. France
Mezierres S.A. France
Establissements J. Michel S.A. France
Maintenance Industrie
Service S.A.R.L. France
Maintenance Industrie
Services Rennes S.a.r.L. France
Maintenance Industrie
Services Rhone-Alpes S.A.R.L. France
Maintenance Industrie
Services Toulouse S.a.r.L. France
M.L.S. Holice Spol. S.r.o. Czech Republic
Navarre Services S.A.R.L. France
Ouest Electro Service S.A.R.L. France
Poteau Moderne du Sud-Ouest S.A. France
Radiel Bobinage S.A.R.L. France
Societe Nouvelle Paillet
Services S.A.R.L. France
Societe Nouvelle Silvain S.A.R.L. France
Societe DeReparation Electro-
Mecanique S.A.R.L. France
Viet Services S.A.R.L. France
Etablissements Sevenier S.A. France
Etablissements Trepeau S.A. France
Girard Transmissions S.A. France
IMI Kft Hungary
La Francaise de Manutention S.A. France
Leroy-Somer AB Sweden
Leroy-Somer N.V. Belgium
Leroy-Somer Denmark A/S Denmark
Leroy-Somer Elektroantriebe GmbH Austria
Leroy-Somer Elektromotoren GmbH Germany
Leroy-Somer Finland OY Finland
Leroy-Somer Iberica S.A. Spain
Leroy-Somer Italiana S.p.A. Italy
Leroy-Somer Ltd. U.K.
Leroy-Somer Motores E Sistemas
Electromecanicos Ltda. Portugal
Leroy-Somer Nederland BV Netherlands
Leroy-Somer Norge A/S Norway
Leroy-Somer (SEA) Pte. Ltd. Singapore
Leroy-Somer Suisse S.A. Switzerland
MLS Industries Inc. Delaware
Yorba Linda International Inc. Delaware
Maintenance Industrielle de Vierzon S.A. France
MOTADOUR S.A. France
Moteurs Leroy-Somer S.A. France
Moteurs Patay S.A. France
Societe Anonyme de Mecanique
et D'outillage du Vivarais S.A. France
Societe Confolentaise de Metalurgie S.A. France
Societe de Mecanique et D'Electrom-
thermie des Pays de L'Adour S.A. France
Societe Commerciale des Ateliers de
Constructions Electriques D'Orleans S.A. France
7
<PAGE>
Societe de Reparation de Moteurs (SOREM) France
Emerson Holding Company Limited U.K.
Copeland Ltd. N. Ireland
El-O-Matic Limited U.K.
Emerson Electric (U.K.) Limited U.K.
Fisher-Rosemount Limited U.K.
Xomox U.K. Limited U.K.
Switched Reluctance Drives Ltd. (SRDL) U.K.
Reluctance Motors Ltd. U.K.
F.G. Wilson L.L.C. U.S.A.
F.G. Wilson (Engineering) Limited U.K.
Everton Engineering (N.I.) Limited U.K.
F.G. Wilson Australia PTY Limited Australia
F.G. Wilson Engineering (Dublin) Limited U.K.
F.G. Wilson (Engineering) HK Limited Hong Kong
F.G. Wilson Engineering Vertriebs-GmbH Germany
F.G. Wilson Inc. Delaware
F.G. Wilson (Proprietary) Limited S. Africa
F.G. Wilson S.A. France
F.G. Wilson Singapore Pte Limited Singapore
Genrent Limited U.K.
F-R Technologias de Flujo, S.A. de C.V. Mexico
Fisher-Rosemount N.V./S.A. Belgium
Senpro N.V. Belgium
Fisher-Rosemount Hungary Ltd. Hungary
Fisher-Rosemount Manufacture Ltd. Hungary
Motoreductores U.S., S.A. de C.V. Mexico
Rotores S.A. de C.V. Mexico
Etirex S.A. France
Fisher Controls International, Inc. Delaware
Exac Corporation California
Fisher Controles Industria E Commecio Ltda. Brazil
Fisher-Rosemount Do Brasil Ltda. Brazil
Fisher-Rosemount Asia Pacific Ltd. Delaware
Fisher Controls De Mexico, S.A. de C.V. Mexico
Fisher-Rosemount China Limited Hong Kong
Fisher-Rosemount PTE. Ltd. Singapore
Fisher Controls PTY. Limited Australia
Fisher Service Company Delaware
Fisher-Rosemount Systems, Inc. Delaware
Fisher-Rosemount de Venezuela S.A. Venezuela
H.D. Baumann Inc. Delaware
Nippon Fisher Company Ltd. Japan
Fisco Ltd.(Fisco Kabushiki Kaisha) Japan
Fusite Corporation Ohio
Emerson Japan, Ltd. Japan
Taiyo Emerson Ltd. Japan Japan
High Voltage Maintenance Corporation Ohio
Innoven III Corporation Delaware
Intellution, Inc. Massachusetts
Intellution GmbH Germany
Intellution International (I), Inc. Massachusetts
Intellution K.K. (Japan) Incorporated Japan
Intellution SARL France
Intellution U.K. Corporation Massachusetts
Intellution Limited U.K.
8
<PAGE>
Kop-Flex, Inc. Delaware
Kop-Flex Canada Limited Canada
Kop-Flex International, Inc. Virgin Islands
Krautkramer Branson Incorporated Connecticut
Stresstel Corporation California
Lipe Rollway Corporation Delaware
Lipe Rollway International Ltd. Delaware
Lipe-Rollway de Mexico, S.A. Mexico
Lipe-Rollway Deutschland GmbH Germany
Lipe-Rollway N.V. Belgium
Lipe-Rollway Technology, Inc. New York
Rollway Bearing Ltd. Delaware
Lipe-Rollway Australia Pty. Ltd. Australia
Louisville Ladder Corp. Missouri
McGill Manufacturing Company Indiana
McGill International Inc. Taiwan
Metaloy, Inc. Massachusetts
Motores Hermeticos del Sur, S.A. de C.V. Mexico
Ridge Tool Europe NV Belgium
Ridgid Scandinavia A/S Denmark
Ridge Tool Europe S.A. Belgium
Ridgid Vaerktoj A/S Denmark
Ridgid Ferramentas E. Maquinas, Ltda. Brazil
Samsung-Emerson Electric Co. Ltd. (SEECO) Korea
SWECO Europe, S.A. Belgium
Termocontroles de Juarez S.A. de C.V. Mexico
Transmisiones de Potencia Emerson S.A. de C.V. Mexico
Vermont American Corporation Delaware
Clairson Enterprises, Inc. Delaware
Clairson International Corp. Florida
Clairson, Inc. Delaware
Clairson de Mexico Mexico
Credo Tool Company Delaware
Carbide Blast Joints, Inc. Texas
DML Industrial Products, Inc. N. Carolina
Vermont American Corporation, Fountain Inn Delaware
Primark DML, Inc. N. Carolina
VAC Data Management, Inc. Delaware
VAC Services LP Kentucky
Gilmour Enterprises, Inc. Delaware
Gilmour Manufacturing Company Pennsylvania
Gilmour, Inc. Delaware
Vermont American (Australia) Ltd. Nevada
Vermont American Canada Inc. Canada
VA Export, Ltd. Virgin Islands
VA Holding Delaware
Vermont Westa Werkzeugbau GmbH Germany
Western Forge Corporation Delaware
Wiegand S.A. de C.V. Mexico
9
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors
Emerson Electric Co.:
We consent to incorporation by reference in Registration Statement
Nos. 33-60055, 33-57161, 33-38805, 33-34948, 33-34633, 33-57985,
33-60399, 33-11521, 33-2739, 2-76653, 2-63717, 2-52671, on Form S-8
and Registration Statement Nos. 33-62545 and 33-39109 on Form S-3
of Emerson Electric Co. of our report dated November 12, 1996, relating
to the consolidated balance sheets of Emerson Electric Co. and subsidiaries
as of September 30, 1996 and 1995, and the related consolidated statements
of earnings, stockholders' equity, and cash flows for each of the years
in the three-year period ended September 30, 1996, which report is
incorporated by reference in the September 30, 1996 annual report on Form
10-K of Emerson Electric Co. Our report refers to changes in accounting
for postemployment benefits and postretirement benefits other than pensions.
St. Louis, Missouri KPMG PEAT MARWICK LLP
December 19, 1996
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned members of the Board of Directors and
Executive Officers of Emerson Electric Co., a Missouri corporation
with principal offices at 8000 West Florissant Avenue, St. Louis,
Missouri 63136, hereby appoint W. J. Galvin as their Attorney-in-
Fact for the purpose of signing Emerson Electric Co.'s Securities
and Exchange Commission Form 10-K (and any and all amendments
thereto) for the fiscal year ended September 30, 1996.
Dated: December 19, 1996.
-----------------
Signature Title
--------- -----
/s/C. F. Knight Chairman of the Board, President and
- ----------------------------- Chief Executive Officer and Director
C. F. Knight
/s/W. J. Galvin Senior Vice President-
- ----------------------------- Finance and Chief Financial
W. J. Galvin Officer (and Principal Accounting
Officer)
/s/L. L. Browning, Jr. Director
- -----------------------------
L. L. Browning, Jr.
/s/A. A. Busch, III Director
- -----------------------------
A. A. Busch, III
/s/D. C. Farrell Director
- -----------------------------
D. C. Farrell
/s/J. A. Frates Director
- -----------------------------
J. A. Frates
<PAGE>
/s/R. B. Horton Director
- -----------------------------
R. B. Horton
/s/G. A. Lodge Director
- -----------------------------
G. A. Lodge
/s/V. R. Loucks, Jr. Director
- -----------------------------
V. R. Loucks, Jr.
/s/R. B. Loynd Director
- -----------------------------
R. B. Loynd
/s/R. L. Ridgway Director
- -----------------------------
R. L. Ridgway
/s/R. W. Staley Director
- -----------------------------
R. W. Staley
/s/A. E. Suter Director
- -----------------------------
A. E. Suter
/s/W. M. Van Cleve Director
- -----------------------------
W. M. Van Cleve
/s/E. E. Whitacre, Jr. Director
- -----------------------------
E. E. Whitacre, Jr.
/s/E. F. Williams, Jr. Director
- -----------------------------
E. F. Williams, Jr.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1996
EMERSON ELECTRIC CO. CONSOLIDATED STATEMENT OF EARNINGS AND CONSOLIDATED
BALANCE SHEET FILED WITH THE COMPANY'S 1996 FORM 10-K AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 149,000
<SECURITIES> 0
<RECEIVABLES> 2,030,100
<ALLOWANCES> 50,300
<INVENTORY> 1,743,900
<CURRENT-ASSETS> 4,187,200
<PP&E> 4,865,600
<DEPRECIATION> 2,414,800
<TOTAL-ASSETS> 10,481,000
<CURRENT-LIABILITIES> 3,021,100
<BONDS> 772,600
<COMMON> 238,300
0
0
<OTHER-SE> 5,115,100
<TOTAL-LIABILITY-AND-EQUITY> 10,481,000
<SALES> 11,149,900
<TOTAL-REVENUES> 11,149,900
<CGS> 7,165,000
<TOTAL-COSTS> 7,165,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 126,900
<INCOME-PRETAX> 1,609,000
<INCOME-TAX> 590,500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,018,500
<EPS-PRIMARY> 4.55
<EPS-DILUTED> 0
</TABLE>
<PAGE> EXHIBIT 10(i)
AMENDMENT TO THE EMERSON ELECTRIC CO.
CONTINUING COMPENSATION PLAN FOR
NONMANAGEMENT DIRECTORS
-----------------------
WHEREAS, Emerson Electric Co. ("Company") adopted the Emerson Electric Co.
Continuing Compensation Plan for nonmanagement Directors ("Plan"); and
WHEREAS, the Company desires to amend the Plan effective as of February 6,
1996;
The first clause of Section III.2 is deleted and replaced with the
following:
"The Benefit Rate will be paid for the life of the director commencing with
the first day of the month coincident with or next following the later of his or
her termination of service as a director, or his or her attainment of age 72;"
IN WITNESS WHEREOF, the foregoing amendment was adopted by the Board of
Directors on February 6, 1996.
