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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to __________________
Commission file number 1-278
EMERSON ELECTRIC CO.
(Exact name of registrant as specified in its charter)
Missouri 43-0259330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8000 W. Florissant Ave.
P.O. Box 4100
St. Louis, Missouri 63136
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 553-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
Common stock outstanding at December 31, 1995: 224,036,674 shares.
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PART I. FINANCIAL INFORMATION FORM 10-Q
Item 1. Financial Statements.
EMERSON ELECTRIC CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(Dollars in millions except per share amounts; unaudited)
Three Months Ended
December 31,
---------------------
1995 1994
---------- --------
Net sales $ 2,565.8 2,284.6
---------- --------
Costs and expenses:
Cost of sales 1,650.4 1,492.6
Selling, general and administrative expenses 517.0 440.9
Interest expense 30.1 21.2
Gain on sale of business and other
non-recurring items - (34.3)
Other deductions, net 6.4 9.9
---------- --------
Total costs and expenses 2,203.9 1,930.3
---------- --------
Income before income taxes and cumulative
effect of change in accounting principle 361.9 354.3
Income taxes 131.4 129.6
---------- --------
Income before cumulative effect of change
in accounting principle 230.5 224.7
Cumulative effect of change in accounting principle;
$.10 per common share - (21.3)
---------- --------
Net earnings $ 230.5 203.4
========== ========
Earnings per common share $ 1.03 .91
========== ========
Cash dividends per common share $ .49 .43
========== ========
Average number of shares used in computing
earnings per common share (in thousands) 224,053 223,526
========== ========
See accompanying notes to consolidated financial statements.
___________________________________________________________________________
NOTE: Including the pretax impact of the cumulative
effect of accounting change, income before income
taxes would have been: $ 361.9 319.3
========== ========
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(Dollars in millions except per share amounts; unaudited)
December 31, September 30,
ASSETS 1995 1995
------ --------- -------
CURRENT ASSETS
Cash and equivalents $ 227.9 117.3
Receivables, less allowances of $48.5 and $45.2 1,852.2 1,757.6
Inventories 1,650.0 1,602.6
Other current assets 292.8 306.6
--------- -------
Total current assets 4,022.9 3,784.1
--------- -------
PROPERTY, PLANT AND EQUIPMENT, NET 2,174.5 2,134.9
--------- -------
OTHER ASSETS
Excess of cost over net assets of purchased
businesses 2,426.0 2,384.9
Other 1,109.8 1,095.1
--------- -------
Total other assets 3,535.8 3,480.0
--------- -------
$ 9,733.2 9,399.0
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings and current maturities
of long-term debt $ 1,430.8 1,387.1
Accounts payable 645.1 740.2
Accrued expenses 897.6 979.8
Income taxes 258.2 173.6
--------- -------
Total current liabilities 3,231.7 3,280.7
--------- -------
LONG-TERM DEBT 455.7 208.6
--------- -------
OTHER LIABILITIES 1,053.7 1,038.9
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STOCKHOLDERS' EQUITY
Preferred stock of $2.50 par value per share.
Authorized 5,400,000 shares; issued - none - -
Common stock of $1 par value per share.
Authorized 400,000,000 shares; issued
238,338,503 shares 238.3 238.3
Additional paid in capital 13.2 15.0
Retained earnings 5,249.1 5,128.3
Cumulative translation adjustments 20.9 17.0
Cost of common stock in treasury, 14,301,829
shares and 14,439,861 shares (529.4) (527.8)
--------- -------
Total stockholders' equity 4,992.1 4,870.8
--------- -------
$ 9,733.2 9,399.0
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See accompanying notes to consolidated financial statements.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(Dollars in millions; unaudited)
1995 1994
--------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 140.2 170.7
INVESTING ACTIVITIES
Capital expenditures (106.4) (77.7)
Purchases of businesses, net of cash and
equivalents acquired (47.8) (75.2)
Proceeds from divestiture of business - 7.7
Other (14.0) 49.6
--------- -------
Net cash used in investing activities (168.2) (95.6)
--------- -------
FINANCING ACTIVITIES
Net increase in short-term borrowings
with maturities of 90 days or less 55.5 307.5
Principal payments on short-term borrowings (1.0) (27.6)
Proceeds from long-term debt 249.2 -
Principal payments on long-term debt (8.7) (121.9)
Dividends paid (109.8) (96.2)
Other (44.7) (46.4)
--------- -------
Net cash provided by financing activities 140.5 15.4
--------- -------
Effect of exchange rate changes on cash and equivalents (1.9) (3.8)
--------- -------
INCREASE IN CASH AND EQUIVALENTS 110.6 86.7
Beginning cash and equivalents 117.3 113.3
--------- -------
ENDING CASH AND EQUIVALENTS $ 227.9 200.0
========= =======
See accompanying notes to consolidated financial statements.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Notes to Consolidated Financial Statements
1. The accompanying unaudited consolidated financial statements, in
the opinion of management, include all adjustments necessary for
a fair presentation of the results for the interim periods
presented. The consolidated financial statements are presented in
accordance with the requirements of Form 10-Q and consequently do
not include all the disclosures required by generally accepted
accounting principles. For further information refer to the
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended September 30,
1995.
2. Other Financial Information
(Dollars in millions; unaudited)
December 31, September 30,
Inventories 1995 1995
----------- --------- -------
Finished products $ 632.6 587.2
Raw materials and work in process 1,017.4 1,015.4
--------- -------
$ 1,650.0 1,602.6
========= =======
December 31, September 30,
Property, plant and equipment, net 1995 1995
---------------------------------- --------- -------
Property, plant and equipment, at cost $ 4,341.9 4,230.5
Less accumulated depreciation 2,167.4 2,095.6
--------- -------
$ 2,174.5 2,134.9
========= =======
3. The Company has effectively guaranteed 50 percent of the
indebtedness of a joint venture. For further information,
refer to the Company's 1995 Annual Report on Form 10-K.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Results of Operations
Sales, net earnings and earnings per share for the first quarter of
fiscal 1996 were the highest for any first quarter in the Company's
history.
Net sales for the quarter ended December 31, 1995 were $2,565.8 million,
an increase of 12.3 percent over net sales of $2,284.6 million for the
quarter ended December 31, 1994, reflecting double-digit sales growth for
the Commercial and Industrial segment, modest Appliance and Construction-
Related segment sales growth and the contribution of fiscal 1995
acquisitions. These results reflect continued strength in the
international markets and sluggish domestic market demand. Excluding the
positive impact of currency, underlying international sales including
exports reported double-digit sales growth. With the exception of
North America, all major geographic regions experienced strong sales
growth.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
The Commercial and Industrial segment achieved a double-digit sales
increase compared to the first quarter of the prior year. The industrial
motors and drives business reported the largest sales gains for the
quarter due to strong international capital goods demand and the
acquisitions of F.G. Wilson and Control Techniques. The process business
reported double-digit sales growth as a result of strong domestic and
international market demand for measurement, distributed control systems
and control valve product lines. This business continues to report
robust growth in orders. The electronics business also experienced
double-digit sales growth due to strong domestic demand and recent
acquisitions. Sales of the industrial components and equipment business
increased modestly.
The Appliance and Construction-Related segment reported modest sales
growth compared to the first quarter of 1995. Strong sales by the
heating, ventilating and air conditioning business reflected
strengthening domestic end-markets, continued strong international
demand, further acceptance of new products and market penetration.
Sales of the fractional motor business increased slightly while sales of
the tools and appliance components businesses decreased modestly as
international sales gains were offset by a soft domestic market.
Cost of sales for the first quarter was $1,650.4 million or 64.3
percent of sales, compared with $1,492.6 million, or 65.3 percent of
sales, for the first quarter of 1995. Selling, general and
administrative expenses for the three months ended December 31, 1995
were $517.0 million, or 20.2 percent of sales, compared to $440.9
million, or 19.3 percent of sales for the same period a year ago.
Consolidated profit margins improved from the high levels of the
prior year as a result of ongoing commitments to cost reduction
efforts and productivity improvement programs across the Company.
Margin improvement was achieved despite the Company's continued
investment in its defined growth programs. During the quarter, the
Company benefited from improvement in international operating
efficiencies.
Earnings in the first quarter of fiscal 1995 included a $41.3 million
preferential distribution from the S-B Power Tool joint venture which
was substantially offset by other non-recurring items and the adoption of
SFAS No. 112 ($21.3 million, net of $13.7 million in related income tax
benefits).
Financial Condition
A comparison of key elements of the Company's financial condition at
the end of the first quarter as compared to the end of the prior
fiscal year follows:
December 31, September 30,
1995 1995
-------- --------
Working capital (in millions) $791.2 503.4
Current ratio 1.2 to 1 1.2 to 1
Total debt to total capital 27.4% 24.7%
Net debt to net capital 24.9% 23.3%
6
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
The Company's interest coverage ratio (earnings before income taxes,
non-recurring items and interest expense, divided by interest expense)
was 13.0 times for the quarter ended December 31, 1995 compared to 16.1
times for the same period one year earlier. The decrease in the interest
coverage ratio and increases in the debt to capital ratios reflect
additional debt related to prior year acquisitions. In the first
quarter, the Company issued $250 million of 6.3%, 10-year notes which
were used to reduce outstanding U.S. commercial paper.
Cash flow provided by operating activities was $140.2 million for the
three months ended December 31, 1995 versus $170.7 million for the same
period in the prior year. These results reflect increases in receivables
and inventories associated with continued sales growth and international
mix. Cash flow provided by operating activities and an increase in
borrowings of $295.0 million were used primarily to fund capital
expenditures of $106.4 million and pay dividends of $109.8 million.
In the first quarter of fiscal 1995, $271.1 million of notes were issued
to the sellers to finance the F.G. Wilson acquisition.
The Company is in a strong financial position and has the resources
available for reinvestment in existing businesses, strategic acquisitions
and managing the capital structure.
7
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits (Listed by numbers corresponding to the Exhibit Table
of Item 601 in Regulation S-K).
3(a) Restated Articles of Incorporation of Emerson Electric Co.,
incorporated by reference to Emerson Electric Co. 1989 Form
10-K, Exhibit 3(a).
3(b) Bylaws of Emerson Electric Co., as amended through May 3,
1994, incorporated by reference to Emerson Electric Co. 1994
Form 10-K, Exhibit 3(b).
27 Financial Data Schedule.
(b) Reports on Form 8-K. The Company did not file any reports on
Form 8-K during the quarter ended December 31, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
EMERSON ELECTRIC CO.
Date: February 13, 1996 By /s/ Walter J. Galvin
-----------------------
Walter J. Galvin
Senior Vice President - Finance
and Chief Financial Officer
(on behalf of the registrant and
as Chief Financial Officer)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE EMERSON
ELECTRIC CO. CONSOLIDATED STATEMENT OF EARNINGS AND CONSOLIDATED BALANCE SHEET
AS OF AND FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 FILED WITH THE COMPANY'S
1996 FIRST QUARTER FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 227,900
<SECURITIES> 0
<RECEIVABLES> 1,900,700
<ALLOWANCES> 48,500
<INVENTORY> 1,650,000
<CURRENT-ASSETS> 4,022,900
<PP&E> 4,341,900
<DEPRECIATION> 2,167,400
<TOTAL-ASSETS> 9,733,200
<CURRENT-LIABILITIES> 3,231,700
<BONDS> 455,700
<COMMON> 238,300
0
0
<OTHER-SE> 4,753,800
<TOTAL-LIABILITY-AND-EQUITY> 9,733,200
<SALES> 2,565,800
<TOTAL-REVENUES> 2,565,800
<CGS> 1,650,400
<TOTAL-COSTS> 1,650,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,100
<INCOME-PRETAX> 361,900
<INCOME-TAX> 131,400
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 230,500
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 0
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