<PAGE>
UNITED STATES
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 March 31, 1999
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 March 31, 1999: 435,249,144 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 SIX MONTHS ENDED MARCH 31, 1999 AND 1998
(Dollars in millions except per share amounts; unaudited)
Three Months Six Months
-------------------- -------------------
1999 1998 1999 1998
--------- -------- -------- --------
Net sales $ 3,588.7 3,382.4 7,015.4 6,553.9
--------- -------- -------- --------
Costs and expenses:
Cost of sales 2,309.8 2,159.7 4,521.4 4,189.5
Selling, general and
administrative expenses 698.7 673.3 1,390.1 1,319.7
Interest expense 44.8 39.7 89.7 75.5
Other deductions, net 31.1 29.1 37.5 47.5
--------- -------- -------- --------
Total costs and expenses 3,084.4 2,901.8 6,038.7 5,632.2
--------- -------- -------- --------
Income before income taxes 504.3 480.6 976.7 921.7
Income taxes 178.4 173.0 348.4 331.8
--------- -------- -------- --------
Net earnings $ 325.9 307.6 628.3 589.9
========= ======== ======== ========
Basic earnings per common share $ .75 .70 1.44 1.34
========= ======== ======== ========
Diluted earnings per common share $ .74 .69 1.43 1.33
========= ======== ======== ========
Cash dividends per common share $ .325 .295 .65 .59
========= ======== ======== ========
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)
March 31, September 30,
ASSETS 1999 1998
------ --------- --------
CURRENT ASSETS
Cash and equivalents $ 305.6 209.7
Receivables, less allowances of $54.9 and $54.6 2,566.1 2,416.1
Inventories 1,926.2 1,996.5
Other current assets 392.3 379.0
--------- --------
Total current assets 5,190.2 5,001.3
--------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 3,048.2 3,011.6
--------- --------
OTHER ASSETS
Excess of cost over net assets of purchased
businesses 4,004.1 3,702.7
Other 1,013.3 944.2
--------- --------
Total other assets 5,017.4 4,646.9
--------- --------
$13,255.8 12,659.8
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings and current maturities
of long-term debt $ 2,046.0 1,524.4
Accounts payable 872.3 1,036.7
Accrued expenses 1,242.9 1,252.7
Income taxes 229.5 207.9
--------- --------
Total current liabilities 4,390.7 4,021.7
--------- --------
LONG-TERM DEBT 1,286.3 1,056.6
--------- --------
OTHER LIABILITIES 1,631.7 1,778.2
--------- --------
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 25.1 27.9
Retained earnings 7,400.7 7,056.5
Cumulative translation adjustments (250.4) (236.2)
Cost of common stock in treasury, 41,427,862
shares and 38,452,823 shares (1,466.6) (1,283.2)
--------- --------
Total stockholders' equity 5,947.1 5,803.3
--------- --------
$13,255.8 12,659.8
========= ========
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
SIX MONTHS ENDED MARCH 31, 1999 AND 1998
(Dollars in millions; unaudited)
1999 1998
OPERATING ACTIVITIES -------- --------
Net earnings $ 628.3 589.9
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 317.2 279.1
Changes in operating working capital (263.6) (288.7)
Other (35.6) 6.4
-------- --------
Net cash provided by operating activities 646.3 586.7
-------- --------
INVESTING ACTIVITIES
Capital expenditures (267.0) (265.2)
Purchases of businesses,net of cash and
equivalents acquired (536.5) (107.7)
Other, net (27.3) (1.0)
-------- --------
Net cash used in investing activities (830.8) (371.9)
-------- --------
FINANCING ACTIVITIES
Net increase in short-term borrowings 570.7 479.0
Proceeds from long-term debt 426.6 3.4
Principal payments on long-term debt (216.0) (7.6)
Dividends paid (284.1) (260.9)
Net purchases of treasury stock (216.6) (210.9)
-------- --------
Net cash provided by financing activities 280.6 3.0
-------- --------
Effect of exchange rate changes on cash and equivalents (.2) (12.4)
-------- --------
INCREASE IN CASH AND EQUIVALENTS 95.9 205.4
Beginning cash and equivalents 209.7 221.1
-------- --------
ENDING CASH AND EQUIVALENTS $ 305.6 426.5
======== ========
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, 1998.
2. Other Financial Information
(Dollars in millions; unaudited)
March 31, September 30,
1999 1998
Inventories --------- -------
-----------
Finished products $ 816.5 858.6
Raw materials and work in process 1,109.7 1,137.9
--------- -------
$ 1,926.2 1,996.5
========= =======
Property, plant and equipment, net
----------------------------------
Property, plant and equipment, at cost $ 6,241.8 6,070.7
Less accumulated depreciation 3,193.6 3,059.1
--------- -------
$ 3,048.2 3,011.6
========= =======
Other assets, other
-------------------
Equity and other investments $ 241.5 187.9
Retirement plans 217.6 205.9
Leveraged leases 185.7 187.5
Other 368.5 362.9
--------- -------
$ 1,013.3 944.2
========= =======
Other liabilities
-----------------
Minority interest $ 453.6 619.9
Postretirement plans 311.4 292.7
Deferred taxes 306.6 306.6
Other 560.1 559.0
--------- -------
$ 1,631.7 1,778.2
========= =======
5
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
3. During the first quarter of 1999, the Company completed the
acquisition of the Westinghouse Process Control Division (PCD) from
CBS Corporation for approximately $257 million. PCD is a supplier of
process controls for the power generation, water and wastewater
treatment industries. In addition, in the first and second quarters,
the Company paid $234 million to acquire the remaining ownership
interest in Astec (BSR) Plc.
During the second quarter of 1999, the Company announced that
Caterpillar agreed to acquire the Company's joint venture interest
in F.G. Wilson. The completion of this transaction should occur
in the third quarter. In addition, the Company completed the
acquisition of MagneTek's alternator operations during the third
quarter of 1999.
Subsequent to quarter end, the Company entered into an agreement to
acquire Daniel Industries, Inc. through a cash tender offer of
approximately $460 million. The transaction is subject to regulatory
and other customary conditions. Daniel is a provider of measurement
and control products and services for the oil and gas industry.
4. In the quarter ended December 31, 1998, the Company adopted Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." This statement requires the reporting of changes in
stockholders' equity that do not result from transactions with
stockholders. As reflected in the financial statements,
nonstockholder changes in equity for the three months ended March 31,
1999 and 1998, were $242.4 million and $268.4 million, comprised of
net earnings of $325.9 million and $307.6 million and foreign
currency translation adjustments of $(83.5) million and $(39.2)
million, respectively. Nonstockholder changes in equity for the six
months ended March 31, 1999 and 1998, were $614.1 million and $565.7
million, comprised of net earnings of $628.3 million and $589.9
million and foreign currency translation adjustments of $(14.2)
million and $(24.2) million, respectively. The adoption of this
statement had no impact on the Company's results of operations or
financial condition.
5. The weighted average number of common shares outstanding (in
millions) was 434.3 and 440.8 for the three months ended March 31,
1999 and 1998, and 435.1 and 440.0 for the six months ended March 31,
1999 and 1998, respectively. The weighted average number of shares
outstanding assuming dilution (in millions) was 438.5 and 446.2 for
the three months ended March 31, 1999 and 1998, and 439.6 and 445.0
for the six months ended March 31, 1999 and 1998, respectively.
Dilutive shares primarily relate to stock plans.
6
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Items 2 and 3. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Results of Operations
Sales, net earnings and earnings per share for the second quarter and
first six months of fiscal 1999 were the highest for any quarter and
first six-month period in the Company's history.
Net sales were $3,588.7 million for the quarter ended March 31, 1999,
up 6.1 percent over net sales of $3,382.4 million for the quarter ended
March 31, 1998, and $7,015.4 million for the six months ended March 31,
1999, up 7.0 percent over net sales of $6,553.9 million for the same
period a year ago. Sales growth in the United States has been modest
after a strong performance last year. Europe has also softened relative
to a solid 1998, and the remaining international regions have stabilized
after a difficult 1998.
In the Commercial and Industrial segment, sales in the electronics
business increased significantly due to the contributions of Advanced
Power Systems and Hiross, recent acquisitions that expand Emerson's
position in the telecommunications equipment market. Despite softness
associated with recent low oil prices, the process business experienced a
strong increase in sales compared with the 1998 period, driven by the
Westinghouse Process Control acquisition. The industrial motors and
drives business experienced a modest sales decrease driven by weak
capital goods markets worldwide. The industrial components and equipment
business reported a slight increase in sales over a solid performance
last year due to recent acquisitions that broadened product offerings.
In the Appliance and Construction-Related segment, the heating,
ventilating and air conditioning business continued to achieve very
strong sales growth, driven by demand for residential and light
commercial air conditioning products in the United States and China.
Sales of the underlying tools business increased, benefiting from strong
demand for the ClosetMaid (TM) line of home storage products and
increased demand for In-Sink-Erator (TM) waste disposers. The fractional
motors and appliance components business reported a modest increase in
sales after a very strong 1998, driven by recent acquisitions and higher
demand in the United States.
Cost of sales for the second quarter was $2,309.8 million or 64.4 percent
of sales, compared with $2,159.7 million, or 63.9 percent of sales,
for the second quarter of 1998. Cost of sales for the six months ended
March 31, 1999, was $4,521.4 million or 64.5 percent of sales, compared
to $4,189.5 million or 63.9 percent of sales for the same period a year
ago. Selling, general and administrative expenses for the three months
ended March 31, 1999, were $698.7 million, or 19.4 percent of sales,
compared to $673.3 million, or 19.9 percent of sales for the same period
a year ago. For the first six months of 1999, selling, general and
administrative expenses were $1,390.1 million or 19.8 percent of sales,
compared to $1,319.7 million or 20.2 percent of sales for the same period
in 1998. Solid underlying profit improvement and rapid integration of
several lower-margin acquisitions enabled the Company to maintain profit
margins in line with 1998 results.
7
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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 second quarter as compared to the end of the prior
fiscal year follows:
March 31, September 30,
1999 1998
-------- --------
Working capital (in millions) $ 799.5 $ 979.6
Current ratio 1.2 to 1 1.2 to 1
Total debt to total capital 35.9% 30.8%
Net debt to net capital 33.7% 29.0%
The Company's interest coverage ratio (earnings before income taxes
and interest expense, divided by interest expense) was 11.9 times for the
six months ended March 31, 1999, compared to 13.2 times for the same
period one year earlier. The decrease in the interest coverage ratio
reflects higher average borrowings resulting from share repurchases
and acquisitions, partially offset by earnings growth. In the second
quarter of fiscal 1999, the Company issued $250 million of 5.85%, 10-year
notes and $250 million of 5.125%, 1-year notes. The notes were
simultaneously swapped to floating U.S. commercial paper rates.
Cash and equivalents increased by $95.9 million during the six months
ended March 31, 1999. Cash flow provided by operating activities of
$646.3 million and a net increase in borrowings of $781.3 million were
used primarily to fund purchases of businesses of $536.5 million, pay
dividends of $284.1 million, fund capital expenditures of $267.0 million,
and fund net purchases of treasury stock of $216.6 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.
Year 2000 readiness was discussed in the Company's 1998 Annual Report on
Form 10-K under the caption "Year 2000 Readiness." Subsequently, the
Company has completed the assessment phase. Remediation and testing
activities at the Company's divisions are at various stages, with more
than 80 percent of critical systems completed. Substantially all
computer applications and systems are expected to be Year 2000 compliant
by June 30, 1999.
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, 1998.
8
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Stockholders on February 2, 1999, a
matter described in the Notice of Annual Meeting of Stockholders dated
December 15, 1998, was voted upon.
The directors listed below were elected for terms ending in 2002 with
voting for each as follows:
DIRECTOR FOR WITHHELD
------------------- ----------- ----------
D. C. Farrell 354,369,225 23,069,282
J. A. Frates 354,328,065 23,110,442
C. F. Knight 354,562,745 22,875,762
R. B. Loynd 354,178,492 23,260,015
R. W. Staley 354,627,934 22,810,573
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 November 3,
1998, incorporated by reference to Emerson Electric Co. 1998
Form 10-K, Exhibit 3(b).
10(j) Fifth Amendment to the Supplemental Executive Savings
Investment Plan, filed herewith.
12 Computation of Ratio of Earnings to Fixed Charges
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 March 31, 1999.
9
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
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: May 14, 1999 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)
10
Exhibit 10(j)
FIFTH AMENDMENT TO THE
EMERSON ELECTRIC CO.
SUPPLEMENTAL EXECUTIVE
SAVINGS INVESTMENT PLAN
-----------------------
WHEREAS, Emerson Electric Co. ("Company") previously adopted the
Supplemental Executive Savings Investment Plan ("Plan") effective as of August
1, 1989, in order to attract and retain selected executives; and
WHEREAS, the Company desires to amend and restate the Plan effective
as of January 1, 1999;
NOW, THEREFORE, effective as of January 1, 1999, the Plan is amended
and restated to read as follows:
SECTION I
---------
DEFINITIONS
-----------
A. "Account" means the book entry account established for each Participant
under Section IV.
B. "Basic ESIP Contribution" means the Participant's contribution to the
ESIP with respect to which the Participant's Employer makes a matching
contribution.
C. "Beneficiary" means the Beneficiary designated to receive a death
benefit under the Plan.
D. "Change of Control" means any of the following: (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 Exchange 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 promulgated under the Exchange Act)
of twenty percent (20%) or more of the then-outstanding shares of common stock
of the Company or the combined voting power of the Company's then-outstanding
voting securities entitled to vote generally in the election of directors; (ii)
individuals who, as of August 1, 1989, constituted the Board of Directors of
the Company (the "Board" and, as of the date the "Incumbent Board") cease for
any reason to constitute at least the majority of the Board, provided that any
person who becomes a director subsequent to said date 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
promulgated under the Exchange 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 do not, immediately thereafter, own more than fifty percent (50%)
of, respectively, the common stock and the combined voting power entitled to
vote generally in the election of 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.
E. "Code" means the Internal Revenue Code of 1986, as amended.
F. "Committee" means the Compensation and Human Resources Committee of the
Board of Directors of the Company.
G. "Company" means Emerson Electric Co., a Missouri Corporation.
H. "Compensation" means, for any calendar year, all cash pay for such year
received by an Employee from the Employer plus amounts contributed through a
salary reduction arrangement to a qualified Plan which meets the requirements
of Section 401(k) of the Code or to a cafeteria plan which meets the
requirements of Section 125 of the Code, excluding any reimbursed item, any
payment under any Emerson Electric Co. Performance Share Bonus Plan or
Incentive Shares Plan, any payment for a stock appreciation right, any payment
deferred for more than one year and any severance pay. Compensation shall also
include amounts deferred by the Employee under this Plan.
I. "Employee" means any person employed by an Employer.
J. "Employer" means the Company and any of its subsidiaries or affiliates
which has, with the consent of the Board of Directors of the Company, adopted
the Plan.
K. "Employment" means employment with an Employer.
L. "ESIP" means the Emerson Electric Co. Employee Savings Investment Plan.
M. "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
N. "Participant" means an Employee eligible to participate in the Plan
pursuant to Section II.
O. "Plan" means this Emerson Electric Co. Supplemental Executive Savings
Investment Plan.
P. "Reporting Person" means an Employee who is required to file reports
with the Securities and Exchange Commission pursuant to Section 16(a) of the
Exchange Act.
Q. "Total and Permanent Disability" shall have the same meaning as set
forth in the ESIP.
R. "Years of Service" means the most recent consecutive full years of
Employment (commencing with the first day of an individual's Employment and
each anniversary thereof).
SECTION II
----------
ELIGIBILITY
-----------
Participation in the Plan shall be limited each calendar year to those
Employees who have been selected by the Committee from time to time and who
have completed a form provided by the Committee.
SECTION III
-----------
DEFERRAL OF COMPENSATION
------------------------
A. Any Participant who elects to make either the maximum pre-tax
contribution to the ESIP for the calendar year permitted by Section 402(g) of
the Code, or the maximum contribution to the ESIP for the ESIP plan year
permitted by Sections 401(a)(17) or 415 of the Code, may elect to defer up to
the excess of five percent (5%) of his Compensation over his Basic ESIP
Contribution for such calendar year.
B. In addition to deferrals permitted under Paragraph A, each Participant
may elect to defer up to fifteen percent (15%) of his Compensation for a
calendar year.
C. Such deferrals may be made on either a pre-tax basis, an after-tax
basis, or a combination of pre-tax and after-tax bases, as selected by the
Participant, and must be made by filing a written notice with the Committee.
Notwithstanding the preceding, a deferral under Paragraph A must be either one
hundred percent (100%) pre-tax or one hundred percent (100%) after-tax and a
deferral under Paragraph B must be either one hundred percent (100%) pre-tax or
one hundred percent (100%) after-tax.
D. An election to defer Compensation and the manner in which such deferrals
are to be made must be made by the December 1 prior to the calendar year for
which such Compensation would otherwise be earned.
E. The maximum amount which may be deferred for any calendar year for any
Participant is twenty percent (20%) of his Compensation, minus his contribution
for such calendar year to the ESIP.
SECTION IV
----------
ESTABLISHMENT OF ACCOUNTS
-------------------------
A. The Committee will establish an Account for the benefit of each
Participant. As of each payroll date, the Account of each Participant will be
credited with the amount by which the Participant elected to defer his
Compensation pursuant to Section III.
B. The Account will also be credited, as of each payroll date, with fifty
percent (50%) (but not in excess of 2.5% of a Participant's Compensation minus
the matching amounts contributed by the Company for such Participant to the
ESIP on account of the Participant's Basic ESIP Contribution for such calendar
year) of the amount by which the Participant elected to defer his Compensation
pursuant to Section III(a).
C. The Account will be reduced by any payments made under Section VIII.
SECTION V
---------
INVESTMENT INDICES
------------------
The value of each Participant's Account shall be measured as follows: (a) all
amounts invested in the Plan prior to January 1, 1998 shall be measured against
the underlying investment funds of the ESIP in the proportions reflected in the
Company's records for such Participant's Account; and (b) all amounts invested
in the Plan on or after January 1, 1998 shall be measured against the
underlying investment funds of the ESIP in the proportions that the
Participant's ESIP accounts are invested in the underlying funds of the ESIP.
SECTION VI
----------
CREDITING OF INVESTMENT GAINS AND LOSSES
----------------------------------------
As of the end of each calendar quarter, the Committee shall credit or debit
each Participant's Account, as the case may be, with the appropriate amount of
gain or loss assuming such Account had been invested in the underlying funds in
the ESIP in the manner set forth under Section V.
SECTION VII
-----------
VESTING
-------
A. A Participant shall be fully vested in the portion of his Account
attributable to amounts credited under Section IV.A. A Participant shall be
vested in the portion of his Account attributable to amounts credited under
Section IV.B pursuant to the following schedule:
Years of Service Percent Vesting
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 100%
B. Notwithstanding the foregoing, the Participant shall be fully vested in
his Accounts in the event of any of the following: (i) retirement with the
approval of the Committee on or after attainment of age fifty-five (55); (ii)
death or Total and Permanent Disability of the Participant; (iii) termination
of the Plan; or (iv) a Change of Control.
SECTION VIII
------------
PAYMENT OF BENEFITS
-------------------
A. A Participant shall be paid, within sixty (60) days following his
termination of Employment, a single lump cash sum equal to the vested portion
of his Account based upon the last valuation under Section V coincident with or
immediately preceding such termination of Employment; provided, however, that a
Participant may elect prior to the calendar year in which his termination of
Employment occurs, to receive his vested Account in ten (10) or fewer
substantially equal annual installments in lieu of a lump sum. Such
installments, if elected, shall commence on or before March 1 of the calendar
year following the Participant's termination. If the Participant is a
Reporting Person and makes the installment election permitted above, such
election is subject to the approval of the Committee.
In the event of the Participant's death, his Beneficiary shall be paid, within
sixty (60) days following such death, the vested portion of the Participant's
unpaid Account (if any) based upon the value as of the last valuation under
Section V coincident with or immediately preceding the Participant's death.
Notwithstanding the preceding, the Committee, in its discretion, may
(i) value the Participant's Account as of any other date for purposes
of determining the amount of payment; and
(ii) direct that the Participant (or the Participant's Beneficiary)
shall be paid all or a portion of the vested portion of his Account
as of any other date designated by the Committee.
B. Notwithstanding the preceding, in the event of a Change of Control, all
future deferrals shall cease and each Participant shall be paid a single lump
cash sum equal to the vested portion of his Account as of the last day of the
month coincident with or immediately preceding the Change of Control. Such
payment shall be made, at such Participant's election, (i) upon the Change of
Control, or (ii) upon the Participant's termination of Employment after the
Change of Control. If the Participant is a Reporting Person, such election
(and any change in such election) is subject to the approval of the Committee.
C. A Participant may, at any time upon thirty (30) days' written notice to
the Committee, elect to be paid all or any portion of the aggregate amounts of
his after-tax deferrals under the Plan, reduced by (i) any prior payments of
such deferrals and (ii) any reduction in value of the Participant's Accounts
under Section V. If the Participant is a Reporting Person, such election is
subject to the approval of the Committee and must be made at least six (6)
months after the date of the Participant's most recent election, with respect
to any plan of the Company, that effected a "discretionary transaction" that
was an "acquisition," as those terms are defined in Rule 16b-3 under the
Exchange Act.
D. The Committee may direct, upon the request of a Participant and a
showing of an emergency beyond the Participant's control which results in
severe financial hardship, that all or a portion of the value of such
Participant's Account be distributed to him. If the Participant is a Reporting
Person, such request must be made at least six (6) months after the date of the
Participant's most recent election, with respect to any plan of the Company,
that effected a "discretionary transaction" that was an "acquisition," as those
terms are defined in Rule 16b-3 under the Exchange Act.
SECTION IX
----------
ADMINISTRATION AND CLAIMS PROCEDURE
-----------------------------------
A. The Committee shall construe, interpret and administer all provisions of
the Plan and a decision of a majority of the members of the Committee shall
govern.
B. A decision of the Committee may be made by a written document signed by
a majority of the members of the Committee or by a meeting of the Committee.
The Committee may authorize any of its members to sign documents or papers on
its behalf.
C. The Committee may appoint such agents, who need not be members of the
Committee, as it may deem necessary for the effective exercise of its duties,
and may, to the extent not inconsistent herewith, delegate to such agents any
powers and duties, both ministerial and discretionary, as the Committee may
deem expedient and appropriate.
D. A Participant who believes that he or she is being denied a benefit to
which he or she is entitled (hereinafter referred to as "Claimant") may file a
written request for such benefit with the Committee setting forth his claim.
The request must be addressed to: Compensation and Human Resources Committee,
Emerson Electric Co., 8000 West Florissant, St. Louis, Missouri 63136.
E. Upon receipt of a claim the Committee shall advise the Claimant that a
reply will be forthcoming within ninety (90) days and shall in fact deliver
such reply in writing within such period. The Committee may, however, extend
the reply period for an additional ninety (90) days for reasonable cause. If
the claim is denied in whole or in part, the Committee will adopt a written
opinion using language calculated to be understood by the Claimant setting
forth:
(i) the specific reason or reasons for denial,
(ii) the specific references to pertinent Plan provisions on which the
denial is based,
(iii) a description of any additional material or information necessary
for the Claimant to perfect the claim and an explanation why such
material or such information is necessary,
(iv) appropriate information as to the steps to be taken if the
Claimant wishes to submit the claim for review, and
(v) the time limits for requesting a review under Subsections F and G.
F. Within sixty (60) days after the receipt by the Claimant of the written
opinion described above, the Claimant may request in writing that the Chief
Executive Officer of the Company review the determination of the Committee.
Such request must be addressed to: Chief Executive Officer, Emerson Electric
Co., 8000 West Florissant, St. Louis, Missouri 63136. The Claimant or his or
her duly authorized representative may, but need not, review the pertinent
documents and submit issues and comments in writing for consideration by the
Chief Executive Officer. If the Claimant does not request a review of the
Committee's determination by the Chief Executive Officer within such sixty-day
period, he or she shall be barred and estopped from challenging the Committee's
determination.
G. Within sixty (60) days after the Chief Executive Officer's receipt of a
request for review, the Chief Executive Officer will review the Committee's
determination. After considering all materials presented by the Claimant, the
Chief Executive Officer will render a written opinion, written in a manner
calculated to be understood by the Claimant, setting forth the specific reasons
for the decision and containing specific references to the pertinent Plan
provisions on which the decision is based. If special circumstances require
that the sixty-day time period be extended, the Chief Executive Officer will so
notify the Claimant and will render the decision as soon as possible but not
later than one hundred twenty (120) days after receipt of the request for
review.
SECTION X
---------
MISCELLANEOUS
-------------
A. Plan Year. The Plan Year shall be the calendar year.
B. Spendthrift. No Participant or beneficiary shall have the right to
assign, transfer, encumber or otherwise subject to lien any of the benefits
payable or to be payable under this Plan.
C. Incapacity. If, in the opinion of the Committee, a person to whom a
benefit is payable is unable to care for his affairs because of illness,
accident or any other reason, any payment due the person, unless prior claim
therefore shall have been made by a duly qualified guardian or other duly
appointed and qualified representative of such person, may be paid to some
member of the person's family, or to some party who, in the opinion of the
Committee, has incurred expense for such person. Any such payment shall be a
payment for the account of such person and shall be a complete discharge of any
liability.
D. Employee Rights. The Employer, in adopting this Plan, shall not be held
to create or vest in any Employee or any other person any benefits other than
the benefits specifically provided herein, or to confer upon any Employee the
right to remain in the service of the Employer.
E. Service of Process and Plan Administrator.
(i) The Vice President-Law of the Company shall be the agent for
service of legal process.
(ii) The Company shall constitute the Plan Administrator.
F. Unfunded Plan. The Plan shall be unfunded. All payments to a
Participant (or the Participant's Beneficiary) under the Plan shall be made
from the general assets of the Employer. The rights of any Participant to
payment shall be those of an unsecured general creditor of the Employer.
G. Company Rights. The Company reserves the right to amend or terminate
the Plan. Each Employer may terminate its participation in the Plan at any
time.
H. Reemployment. If a Participant is receiving benefits under the Plan and
is re-employed by an Employer, benefits shall cease until he is no longer
employed by an Employer.
I. Governing Law. The Plan shall be governed and construed according to the
laws of the State of Missouri.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly
authorized officer this 2nd day of February, 1999.
EMERSON ELECTRIC CO.
Name: J. A. Harmon
------------
By: /s/ J. A. Harmon
----------------
Title: Senior Vice President
---------------------
EXHIBIT 12
EMERSON ELECTRIC CO. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
YEAR THREE MONTHS SIX MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, MARCH 31,
1998 1998 1999
------------- ------------ ----------
Earnings:
Income before income taxes $ 2,002.3 481.9 998.6
Fixed charges 218.2 61.5 122.8
------------- ------------ ----------
Earnings, as defined $ 2,220.5 543.4 1,121.4
============= ============ ==========
Fixed charges:
Interest expense $ 161.4 47.3 94.4
One-third of all rents 56.8 14.2 28.4
------------- ------------ ----------
Total fixed charges $ 218.2 61.5 122.8
============= ============ ==========
Ratio of Earnings to Fixed Charges 10.2x 8.8x 9.1x
============= ============ ==========
<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 SIX MONTHS ENDED MARCH 31, 1999, FILED WITH THE
COMPANY'S 1999 SECOND QUARTER FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 305,600
<SECURITIES> 0
<RECEIVABLES> 2,621,000
<ALLOWANCES> 54,900
<INVENTORY> 1,926,200
<CURRENT-ASSETS> 5,190,200
<PP&E> 6,241,800
<DEPRECIATION> 3,193,600
<TOTAL-ASSETS> 13,255,800
<CURRENT-LIABILITIES> 4,390,700
<BONDS> 1,286,300
0
0
<COMMON> 238,300
<OTHER-SE> 5,708,800
<TOTAL-LIABILITY-AND-EQUITY> 13,255,800
<SALES> 7,015,400
<TOTAL-REVENUES> 7,015,400
<CGS> 4,521,400
<TOTAL-COSTS> 4,521,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 89,700
<INCOME-PRETAX> 976,700
<INCOME-TAX> 348,400
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 628,300
<EPS-PRIMARY> 1.44
<EPS-DILUTED> 1.43
</TABLE>
