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, 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
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, 1996: 223,512,604 shares.
1
<PAGE>
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, 1996 AND 1995
(Dollars in millions except per share amounts; unaudited)
Three Months Ended
December 31,
---------------------
1996 1995
---------- --------
Net sales $ 2,830.6 2,565.8
---------- --------
Costs and expenses:
Cost of sales 1,805.4 1,650.4
Selling, general and administrative expenses 583.3 517.0
Interest expense 27.5 30.1
Other deductions, net 9.1 6.4
---------- --------
Total costs and expenses 2,425.3 2,203.9
---------- --------
Income before income taxes 405.3 361.9
Income taxes 150.4 131.4
---------- --------
Net earnings $ 254.9 230.5
========== ========
Earnings per common share $ 1.14 1.03
========== ========
Cash dividends per common share $ .54 .49
========== ========
Average number of shares used in computing
earnings per common share (in thousands) 223,704 224,053
========== ========
See accompanying notes to consolidated financial statements.
2
<PAGE> EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(Dollars in millions except per share amounts; unaudited)
December 31, September 30,
ASSETS 1996 1996
------ --------- -------
CURRENT ASSETS
Cash and equivalents $ 181.9 149.0
Receivables, less allowances of $51.7 and $50.3 2,016.4 1,979.8
Inventories 1,816.9 1,743.9
Other current assets 314.2 314.5
--------- -------
Total current assets 4,329.4 4,187.2
--------- -------
PROPERTY, PLANT AND EQUIPMENT, NET 2,490.6 2,450.8
--------- -------
OTHER ASSETS
Excess of cost over net assets of purchased
businesses 2,865.4 2,779.2
Other 1,011.0 1,063.8
--------- -------
Total other assets 3,876.4 3,843.0
--------- --------
$10,696.4 10,481.0
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings and current maturities
of long-term debt $ 1,201.3 967.0
Accounts payable 620.6 791.3
Accrued expenses 1,035.6 1,063.3
Income taxes 259.0 199.5
--------- -------
Total current liabilities 3,116.5 3,021.1
--------- -------
LONG-TERM DEBT 773.2 772.6
--------- -------
OTHER LIABILITIES 1,311.8 1,333.9
--------- -------
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 238.3 238.3
Additional paid in capital 6.2 12.3
Retained earnings 5,841.7 5,707.7
Cumulative translation adjustments 27.4 (29.2)
Cost of common stock in treasury, 14,825,899
shares and 14,618,576 shares (618.7) (575.7)
--------- -------
Total stockholders' equity 5,494.9 5,353.4
--------- --------
$10,696.4 10,481.0
========= ========
See accompanying notes to consolidated financial statements.
3
<PAGE> EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(Dollars in millions; unaudited)
1996 1995
--------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 184.1 140.2
INVESTING ACTIVITIES
Capital expenditures (113.7) (106.4)
Purchases of businesses, net of cash and
equivalents acquired (14.6) (47.8)
Other, net (65.9) (14.0)
--------- -------
Net cash used in investing activities (194.2) (168.2)
--------- -------
FINANCING ACTIVITIES
Net increase in short-term borrowings 221.8 54.5
Proceeds from long-term debt 5.5 249.2
Principal payments on long-term debt (5.7) (8.7)
Dividends paid (120.9) (109.8)
Net purchases of treasury stock (59.5) (44.7)
--------- -------
Net cash provided by financing activities 41.2 140.5
--------- -------
Effect of exchange rate changes on cash and equivalents 1.8 (1.9)
--------- -------
INCREASE IN CASH AND EQUIVALENTS 32.9 110.6
Beginning cash and equivalents 149.0 117.3
--------- -------
ENDING CASH AND EQUIVALENTS $ 181.9 227.9
========= =======
See accompanying notes to consolidated financial statements.
4
<PAGE>
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 only 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. Other Financial Information
(Dollars in millions; unaudited)
December 31, September 30,
Inventories 1996 1996
----------- --------- -------
Finished products $ 766.3 720.7
Raw materials and work in process 1,050.6 1,023.2
--------- -------
$ 1,816.9 1,743.9
========= =======
December 31, September 30,
Property, plant and equipment, net 1996 1996
---------------------------------- --------- -------
Property, plant and equipment, at cost $ 5,001.7 4,865.6
Less accumulated depreciation 2,511.1 2,414.8
--------- -------
$ 2,490.6 2,450.8
========= =======
3. In February 1997, stockholders approved an increase in authorized
common stock, which will allow the Company to execute the two-
for-one stock split announced in November. Stockholders of
record February 21, 1997, will receive one additional share of
common stock for each share held, to be distributed March 10, 1997.
Assuming retroactive application of the split, pro forma earnings
per share would have been $.57 and $.51 for the three months ended
December 31, 1996 and 1995, respectively. The accompanying financial
statements have not been restated to reflect the split since it has
not yet been consummated.
5
<PAGE>
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 first quarter of
fiscal 1997 were the highest for any first quarter in the Company's
history.
Net sales for the quarter ended December 31, 1996 were $2,830.6 million,
an increase of 10.3 percent over net sales of $2,565.8 million for the
quarter ended December 31, 1995. All businesses reported higher sales
reflecting solid international and moderate domestic demand, and the
contribution of 1996 acquisitions. Excluding the negative impact of
currency, underlying international sales showed good improvement due to
very strong export sales and continued strength in Asia-Pacific and Latin
America.
In the Commercial and Industrial segment, sales of the electronics
business were very strong, driven by contributions from all geographic
areas and product lines, and the business continues to report robust
growth in orders. The process business reported modest sales growth as
very strong export sales were offset by sluggish domestic demand.
Industrial motors and drives achieved modest sales growth benefiting from
strong international demand, which was partially offset by currency.
The industrial components and equipment business reported modest sales
growth due to very strong export sales partially offset by weak European
demand.
In the Appliance and Construction-Related segment, the underlying tools
business achieved robust sales growth due to higher than expected Sears
demand during the holiday season. The heating, ventilating and air-
conditioning business reported a modest increase, limited by inventory
adjustments among international customers and weakening European
currencies. Moderate gains in the fractional motors and appliance
components business reflected slowing in the domestic appliance markets,
which were at fairly healthy levels last quarter.
Cost of sales for the first quarter was $1,805.4 million or 63.8
percent of sales, compared with $1,650.4 million, or 64.3 percent of
sales, for the first quarter of 1996. Selling, general and
administrative expenses for the three months ended December 31, 1996
were $583.3 million, or 20.6 percent of sales, compared to $517.0
million, or 20.2 percent of sales for the same period a year ago.
Operating profit margins benefited from continuing cost reduction efforts
and productivity improvement programs.
6
<PAGE>
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 first quarter as compared to the end of the prior
fiscal year follows:
December 31, September 30,
1996 1996
-------- --------
Working capital (in millions) $1,212.9 1,166.1
Current ratio 1.4 to 1 1.4 to 1
Total debt to total capital 26.4% 24.5%
Net debt to net capital 24.6% 22.9%
The Company's interest coverage ratio (earnings before income taxes and
interest expense, divided by interest expense) was 15.8 times for the
quarter ended December 31, 1996 compared to 13.0 times for the same
period one year earlier. The increase in the interest coverage ratio
reflects earnings growth and a reduction in interest rates. In the
first quarter of fiscal 1997, the Company entered into a five year
interest rate swap which fixed the rate on $250 million of commercial
paper at 6.1 percent.
Cash and equivalents increased by $32.9 million during the three months
ended December 31, 1996. Cash flow provided by operating activities of
$184.1 million and an increase in borrowings of $221.6 million were used
primarily to fund capital expenditures of $113.7 million and pay
dividends of $120.9 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
<PAGE>
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, 1996.
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, 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 THREE MONTHS ENDED DECEMBER 31, 1996 FILED WITH THE COMPANY'S
1997 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-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 181,900
<SECURITIES> 0
<RECEIVABLES> 2,068,100
<ALLOWANCES> 51,700
<INVENTORY> 1,816,900
<CURRENT-ASSETS> 4,329,400
<PP&E> 5,001,700
<DEPRECIATION> 2,511,100
<TOTAL-ASSETS> 10,696,400
<CURRENT-LIABILITIES> 3,116,500
<BONDS> 773,200
<COMMON> 238,300
0
0
<OTHER-SE> 5,256,600
<TOTAL-LIABILITY-AND-EQUITY> 10,696,400
<SALES> 2,830,600
<TOTAL-REVENUES> 2,830,600
<CGS> 1,805,400
<TOTAL-COSTS> 1,805,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,500
<INCOME-PRETAX> 405,300
<INCOME-TAX> 150,400
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 254,900
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 0
</TABLE>
