<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to __________________
Commission file number 1-278
EMERSON ELECTRIC CO.
(Exact name of registrant as specified in its charter)
Missouri 43-0259330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8000 W. Florissant Ave.
P.O. Box 4100
St. Louis, Missouri 63136
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 553-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
Common stock outstanding at June 30, 1997: 443,455,814 shares.
1
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PART I. FINANCIAL INFORMATION FORM 10-Q
Item 1. Financial Statements.
EMERSON ELECTRIC CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Dollars in millions except per share amounts; unaudited)
Three Months Nine Months
-------------------- -------------------
1997 1996 1997 1996
--------- -------- -------- --------
Net sales $ 3,208.4 2,896.8 9,142.5 8,282.4
--------- -------- -------- --------
Costs and expenses:
Cost of sales 2,067.0 1,859.8 5,859.8 5,331.3
Selling, general and
administrative expenses 621.8 567.1 1,817.3 1,628.1
Interest expense 30.0 32.2 87.3 96.2
Other deductions, net 18.0 15.9 55.5 40.7
--------- -------- -------- --------
Total costs and expenses 2,736.8 2,475.0 7,819.9 7,096.3
Income before income taxes 471.6 421.8 1,322.6 1,186.1
Income taxes 175.0 154.9 490.7 433.8
--------- -------- -------- --------
Net earnings $ 296.6 266.9 831.9 752.3
========= ======== ======== ========
Earnings per common share $ .67 .60 1.87 1.68
========= ======== ======== ========
Cash dividends per common share $ .27 .245 .81 .735
========= ======== ======== ========
Average number of shares used in
computing earnings per common
share (in thousands) 443,750 448,209 445,757 448,142
========= ======== ======== ========
See accompanying notes to consolidated financial statements.
2
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(Dollars in millions except per share amounts; unaudited)
June 30, September 30,
ASSETS 1997 1996
------ --------- -------
CURRENT ASSETS
Cash and equivalents $ 325.4 149.0
Receivables, less allowances of $58.6 and $50.3 2,284.6 1,979.8
Inventories 1,836.3 1,743.9
Other current assets 366.9 314.5
--------- --------
Total current assets 4,813.2 4,187.2
--------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 2,583.2 2,450.8
--------- --------
OTHER ASSETS
Excess of cost over net assets of purchased
businesses 2,842.9 2,779.2
Other 857.2 1,063.8
--------- --------
Total other assets 3,700.1 3,843.0
--------- --------
$11,096.5 10,481.0
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings and current maturities
of long-term debt $ 1,425.3 967.0
Accounts payable 751.7 791.3
Accrued expenses 1,130.9 1,063.3
Income taxes 164.0 199.5
--------- --------
Total current liabilities 3,471.9 3,021.1
--------- --------
LONG-TERM DEBT 654.7 772.6
--------- --------
OTHER LIABILITIES 1,449.7 1,333.9
--------- --------
STOCKHOLDERS' EQUITY
Preferred stock of $2.50 par value per share.
Authorized 5,400,000 shares; issued - none - -
Common stock of $.50 par value per share.
Authorized 1,200,000,000 shares; issued
476,677,006 shares 238.3 238.3
Additional paid in capital 2.5 12.3
Retained earnings 6,178.5 5,707.7
Cumulative translation adjustments (85.9) (29.2)
Cost of common stock in treasury, 33,221,192
shares and 29,237,152 shares (813.2) (575.7)
--------- --------
Total stockholders' equity 5,520.2 5,353.4
--------- --------
$11,096.5 10,481.0
========= ========
See accompanying notes to consolidated financial statements.
3
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Dollars in millions; unaudited)
1997 1996
--------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 877.7 682.2
INVESTING ACTIVITIES
Capital expenditures (373.1) (344.8)
Purchases of businesses, net of cash and
equivalents acquired (40.1) (167.8)
Other, net (11.1) 64.6
--------- -------
Net cash (used in) investing activities (424.3) (448.0)
--------- -------
FINANCING ACTIVITIES
Net increase in short-term borrowings 367.0 36.6
Proceeds from long-term debt 5.9 249.9
Principal payments on long-term debt (11.1) (20.3)
Dividends paid (361.1) (329.4)
Net purchases of treasury stock (264.4) (71.7)
--------- -------
Net cash (used in) financing activities (263.7) (134.9)
--------- -------
Effect of exchange rate changes on cash and equivalents (13.3) (3.5)
--------- -------
INCREASE IN CASH AND EQUIVALENTS 176.4 95.8
Beginning cash and equivalents 149.0 117.3
--------- -------
ENDING CASH AND EQUIVALENTS $ 325.4 213.1
========= =======
See accompanying notes to consolidated financial statements.
4
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Notes to Consolidated Financial Statements
1. The accompanying unaudited consolidated financial statements, in
the opinion of management, include all adjustments necessary for
a fair presentation of the results for the interim periods presented.
These adjustments consist of normal recurring accruals. 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, 1996.
2. During the second quarter of fiscal 1997, Emerson began consolidating
the results of Astec (BSR) Plc into the Company's financial
statements. The increases in total assets and liabilities reflect
this consolidation.
3. On March 10, 1997, the Company consummated a two-for-one stock split,
and stockholders of record February 21, 1997, received one additional
share of common stock for each share held. The accompanying
financial statements have been restated to give effect to the split.
4. Other Financial Information
(Dollars in millions; unaudited)
June 30, September 30,
Inventories 1997 1996
----------- --------- -------
Finished products $ 762.6 720.7
Raw materials and work in process 1,073.7 1,023.2
--------- -------
$ 1,836.3 1,743.9
========= =======
June 30, September 30,
Property, plant and equipment, net 1997 1996
---------------------------------- --------- -------
Property, plant and equipment, at cost $ 5,274.8 4,865.6
Less accumulated depreciation 2,691.6 2,414.8
--------- -------
$ 2,583.2 2,450.8
========= =======
5. During the fourth quarter of fiscal 1997, the Company purchased
InterMetro Industries and entered into a preliminary agreement to
acquire Clairson International Corporation. These companies
produce free-standing and wall-mounted ventilated shelving and
specialty storage products. Emerson currently owns a controlling
interest in Clairson through Vermont American Corporation, the
Company's joint venture with Robert Bosch GmbH. InterMetro and
Clairson have combined annual sales of more than $300 million.
5
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Results of Operations
Sales, net earnings and earnings per share for the third quarter and
first nine months of fiscal 1997 were the highest for any quarter and
first nine-month period in the Company's history.
Net sales were $3,208.4 million for the quarter ended June 30, 1997,
up 10.8 percent over net sales of $2,896.8 million for the quarter ended
June 30, 1996, and $9,142.5 million for the nine months ended June 30,
1997, up 10.4 percent over net sales of $8,282.4 million for the same
period a year ago. The third quarter results reflect strong
international and modest domestic demand, the impact of acquisitions and
consolidation of Astec (BSR) Plc. All businesses reported underlying
sales growth this quarter. Excluding the negative impact of currency,
strong underlying international sales were achieved through robust export
sales and continued strength in faster growth regions such as
Asia-Pacific and Latin America.
In the Commercial and Industrial segment, the underlying electronics
business continued its very strong performance due, in part, to the
success of new products and strength in both domestic and international
markets. Sales of the process business reflected improving domestic
demand and strong international sales growth partially offset by
negative currency translation. Moderate gains in the industrial motors
and drives business resulted from 1996 acquisitions and improved
international demand. The industrial components and equipment
business achieved moderate sales gains due to good worldwide demand
partially offset by weak European currencies.
In the Appliance and Construction-Related segment, the underlying
tools business achieved solid sales growth as a result of improved
domestic demand. The heating, ventilating and air-conditioning business
reported slight sales growth as continued strong demand in international
markets was offset by slowing domestic demand resulting from cool
spring weather. Modest gains in the motors and appliance components
business reflected improved demand in domestic markets.
Cost of sales for the third quarter was $2,067.0 million or 64.4
percent of sales, compared with $1,859.8 million, or 64.2 percent of
sales, for the third quarter of 1996. Cost of sales for the nine months
ended June 30, 1997, was $5,859.8 million or 64.1 percent of sales,
compared to $5,331.3 million or 64.4 percent of sales for the same period
a year ago. Selling, general and administrative expenses for the three
months ended June 30, 1997, were $621.8 million, or 19.4 percent of
sales, compared to $567.1 million, or 19.6 percent of sales for the same
period a year ago. For the first nine months of 1997, selling, general
and administrative expenses were $1,817.3 million or 19.9 percent of
sales, compared to $1,628.1 million or 19.6 percent of sales for the same
period in 1996. Underlying operating margins showed strong improvement,
resulting in continued high profitability levels despite the inclusion
of lower margin businesses.
6
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Financial Condition
A comparison of key elements of the Company's financial condition at
the end of the third quarter as compared to the end of the prior
fiscal year follows:
June 30, September 30,
1997 1996
-------- --------
Working capital (in millions) $1,341.3 1,166.1
Current ratio 1.4 to 1 1.4 to 1
Total debt to total capital 27.4% 24.5%
Net debt to net capital 24.1% 22.9%
The Company's interest coverage ratio (earnings before income taxes
and interest expense, divided by interest expense) was 16.1 times for the
nine months ended June 30, 1997, compared to 13.3 times for the same
period one year earlier. The increase in interest coverage ratio
reflects earnings growth and a reduction in interest rates.
Cash flow provided by operating activities was $877.7 million for the
nine months ended June 30, 1997, versus $682.2 million for the same
period in the prior year. Receivables increased primarily due to
sales growth and minor seasonality. Cash and equivalents increased
by $176.4 million during the nine months ended June 30, 1997. Cash
flow provided by operating activities and an increase in borrowings
of $361.8 million were used primarily to fund capital expenditures
of $373.1 million, pay dividends of $361.1 million, and fund net
purchases of treasury stock of $264.4 million.
The Company is in a strong financial position, continues to generate
strong operating cash flows, and has the resources available for
reinvestment in existing businesses, strategic acquisitions and managing
the capital structure on a short and long-term basis.
Statements in this report that are not strictly historical may be
"forward-looking" statements which involve risks and uncertainties.
These include economic and currency conditions, market demand, pricing,
and competitive and technological factors, among others which are set
forth in the Company's Annual Report on Form 10-K for the year ended
September 30, 1996.
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. Form 10-Q
for the quarter ended March 31, 1997, Exhibit 3(a).
3(b) Bylaws of Emerson Electric Co., as amended through May 3,
1994, incorporated by reference to Emerson Electric Co. 1994
Form 10-K, Exhibit 3(b).
27 Financial Data Schedule.
(b) Reports on Form 8-K. The Company did not file any reports on
Form 8-K during the quarter ended June 30, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
EMERSON ELECTRIC CO.
Date: August 13, 1997 By /s/ Walter J. Galvin
-----------------------
Walter J. Galvin
Senior Vice President - Finance
and Chief Financial Officer
(on behalf of the registrant and
as Chief Financial Officer)
8
<TABLE> <S> <C>
<ARTICLE> 5 EXHIBIT 27
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE EMERSON
ELECTRIC CO. CONSOLIDATED STATEMENT OF EARNINGS AND CONSOLIDATED BALANCE SHEET
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 1997 FILED WITH THE COMPANY'S
1997 THIRD QUARTER FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 325,400
<SECURITIES> 0
<RECEIVABLES> 2,343,200
<ALLOWANCES> 58,600
<INVENTORY> 1,836,300
<CURRENT-ASSETS> 4,813,200
<PP&E> 5,274,800
<DEPRECIATION> 2,691,600
<TOTAL-ASSETS> 11,096,500
<CURRENT-LIABILITIES> 3,471,900
<BONDS> 654,700
<COMMON> 238,300
0
0
<OTHER-SE> 5,281,900
<TOTAL-LIABILITY-AND-EQUITY> 11,096,500
<SALES> 9,142,500
<TOTAL-REVENUES> 9,142,500
<CGS> 5,859,800
<TOTAL-COSTS> 5,859,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,300
<INCOME-PRETAX> 1,322,600
<INCOME-TAX> 490,700
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 831,900
<EPS-PRIMARY> 1.87
<EPS-DILUTED> 0
</TABLE>
