<PAGE> UNITED STATES
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, 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock of $.50 par value per share New York Stock Exchange
Chicago Stock Exchange
Preferred Stock 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. [ ]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant as of close of business on October 29, 1999: $25,776 million.
Common stock outstanding at October 31, 1999: 432,429,882 shares.
Documents Incorporated by Reference
1. Portions of Emerson Electric Co. 1999 Annual Report to Stockholders
(Parts I and II).
2. Portions of Emerson Electric Co. Notice of 2000 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 subsequently
expanded its product lines 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 divisions of the Company are organized into the following business
segments based on the nature of the products and services provided:
Process Control; Industrial Automation; Electronics and Telecommunications;
Heating, Ventilating and Air Conditioning; and Appliance and Tools.
Sales, earnings before interest and income taxes, and total assets
attributable to each segment for the three years ended September 30, 1999, are
set forth in Note 12 of Notes to Consolidated Financial Statements on page 45
of the 1999 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
39 of the 1999 Annual Report, which note is hereby incorporated by reference.
PROCESS CONTROL
---------------
The Process Control segment provides a broad offering of instrumentation,
valves and control systems for measurement and control of fluid flow, and
integrated solutions for process and industrial applications. Products
include 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,
distributed control systems 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.
In addition, Emerson provides repair services for many of these products, as
well as engineered solutions and consulting services. Brand names of this
segment include Bettis, Brooks, Daniel, El-o-matic, Fisher, Fisher-Rosemount
Systems, Intellution, Micro Motion, Rosemount, Westinghouse Process Control
and Xomox. Products and services of this segment are provided to industrial
end-users for process and industrial applications and solutions.
INDUSTRIAL AUTOMATION
---------------------
The Industrial Automation segment provides industrial motors, drives, controls
and equipment for industrial automation markets. Emerson's products for
industrial automation include certain kinds of integral horsepower motors,
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gear drives, pump motors, alternators, and electronic variable speed drives.
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, and pressure, vacuum and temperature switches widely used in
the automation of equipment and industrial processes. Emerson also
manufactures electronic measurement, data acquisition and condition monitoring
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
industries. 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. Brand names of this segment include
Appleton, ASCO, Branson, Browning, Buehler, CAMCO, Chromalox, Control
Techniques, CSI, Joucomatic, Krautkramer, Leroy Somer, McGill, MORSE,
O-Z/Gedney, Sweco and USEM. Products of this segment are sold to industrial
distributors, original equipment manufacturers and end-users for automation
applications.
ELECTRONICS AND TELECOMMUNICATIONS
----------------------------------
The Electronics and Telecommunications segment provides power supplies and
power distribution, protection and conversion equipment for computer,
industrial and telecommunications markets. Emerson produces and services
electronic uninterruptible and primary power supplies, power conditioning,
conversion and distribution equipment, modular power systems, environmental
control systems and electronic components used in communications and
information processing applications. Emerson also provides electrical testing
services and manufactures a line of automatic transfer switches, remote
control switches and electric power and pump control systems for auxiliary
power applications. Brand names of this segment include ASCO Switch, Astec,
HIROSS, Liebert and Liebert Global Services. Products and services of this
segment are provided to distributors and end-users for computer, industrial
and telecommunications applications.
HEATING, VENTILATING AND AIR CONDITIONING
-----------------------------------------
The Heating, Ventilating and Air Conditioning segment provides a variety of
components and systems for refrigeration and comfort control markets. Emerson
manufactures and sells hermetic and semi-hermetic, reciprocating and scroll
compressors for refrigeration and air conditioning applications. The Company
also produces terminals for hermetically sealed compressors, automatic
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devices, monitoring equipment and pumps for gas and electric heating systems,
refrigeration and air conditioning equipment. Brand names of this segment
include Alco Controls, Copeland, Fusite, Therm-O-Disc and White-Rodgers.
Products of this segment are sold to distributors and original equipment
manufacturers for inclusion in end products and systems (ultimately sold
through commercial and residential building construction channels).
APPLIANCE AND TOOLS
-------------------
The Appliance and Tools segment provides motors, controls and other components
for appliances, refrigeration and comfort control applications, as well as
disposers, tools and storage products. Emerson manufactures and sells
hermetic motors 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. 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, including certain kinds
of wrenches, thread cutters, pipe cutters, reamers, vises, pipe and bolt
threading machines and sewer and drain cleaning equipment. Emerson also
manufactures power tool accessories such as drill, router and screwdriver
bits, and saw blades. 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 free-standing
and wall-mounted ventilated shelving and specialty storage products. Also
produced by Emerson for marketing by major retailers 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. Brand names
of this segment include Chromalox, ClosetMaid, Digital Appliance Controls,
Emerson, Gilmour, In-Sink-Erator, Mallory, METRO, RIDGID and Vermont American.
Products of this segment are sold to distributors and original equipment
manufacturers for inclusion in appliances, heating, ventilating, air
conditioning and refrigeration equipment and to distributors and retailers
for sale to consumers and the professional trades.
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 are well maintained.
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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 major requirements and is not significantly dependent on any one
supplier. The raw materials and various purchased components required for
its products have generally been available in sufficient quantities.
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 $2,160 million
and $2,084 million at September 30, 1999 and 1998, respectively. Nearly all
of the September 30, 1999 consolidated backlog amount is expected to be
shipped within one year. The estimated backlog by business segment at
September 30, 1999 and 1998, follows (dollars in millions):
1999 1998
------- -------
Process Control $ 567 449
Industrial Automation 461 563
Electronics and Telecommunications 412 349
Heating, Ventilating and Air Conditioning 333 382
Appliance and Tools 387 341
------- -------
Consolidated Order Backlog $ 2,160 2,084
======= =======
COMPETITION
-----------
Emerson's businesses are highly competitive, and Emerson competes on product
performance, quality, service or price across the industries and markets
served. A significant element of the Company's competitive strategy is its
objective to manufacture high quality products at the lowest relevant global
cost. Although no single company competes directly with Emerson in all of the
Company's product lines, various companies compete in one or more product
lines. Some of these companies have substantially greater sales and assets
than Emerson, and Emerson also competes with many smaller companies. The
number of Emerson's competitors varies by product line, and management
believes that Emerson has a market leadership position in many of these
product lines.
5
<PAGE>
RESEARCH AND DEVELOPMENT
------------------------
Costs associated with Company-sponsored research, new product development
and product improvement were $510.3 million in 1999, $491.3 million in 1998
and $445.1 million in 1997.
ENVIRONMENT
-----------
The Company's manufacturing locations generate waste, the treatment, storage,
transportation and disposal of which are subject to federal, state and/or
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.
EMPLOYEES
---------
Emerson and its subsidiaries had an average of approximately 116,900 employees
during 1999. Management believes that the Company's employee relations are
favorable. Some of the Company's employees are represented under collective
bargaining agreements, but none of these is considered significant.
DOMESTIC AND FOREIGN OPERATIONS
-------------------------------
International sales were $5,713 million in 1999, $5,345 million in 1998 and
$5,208 million in 1997, including U.S. exports of $960 million, $968 million
and $1,054 million in 1999, 1998 and 1997, 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 12 of Notes to Consolidated Financial Statements on page 45 of the
1999 Annual Report for further information with respect to foreign operations.
Item 2. Properties
-------------------
At September 30, 1999, Emerson had approximately 380 manufacturing locations
worldwide, of which approximately 200 were located outside the United States,
primarily in Europe and to a lesser extent in Asia-Pacific, Canada and Latin
America. The approximate number of manufacturing locations by business
segment are: Process Control, 90; Industrial Automation, 120; Electronics and
Telecommunications, 40; Heating, Ventilating and Air Conditioning, 60; and
Appliance and Tools, 70. The majority of the locations are owned, with
the remainder occupied under operating or capital leases. The Company
considers its facilities suitable and adequate for the purposes for which
they are used.
6
<PAGE>
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, 1999.
-------------------------------------------
Executive Officers of the Registrant
The following sets forth certain information as of December 1999 with respect
to Emerson's executive officers. These officers have been elected or
appointed to terms which will expire February 1, 2000:
First
Served as
Name Position Age Officer
---- -------- --- ----------
C. F. Knight* Chairman of the Board
and Chief Executive Officer 63 1972
G. W. Tamke* Vice Chairman and
Co-Chief Executive Officer 52 1989
J. G. Berges* President 52 1989
D. N. Farr Senior Executive Vice President
and Chief Operating Officer 44 1985
W. J. Galvin Senior Vice President-Finance
and Chief Financial Officer 53 1984
A. E. Suter* Chief Administrative Officer 64 1979
R. W. Staley* Chairman-Emerson Electric Asia-Pacific 64 1975
W. W. Withers Senior Vice President, Secretary
and General Counsel 59 1989
*Also chairman and/or member of certain committees of the Board of
Directors.
7
<PAGE>
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.
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 46 of the 1999 Annual Report is
hereby incorporated by reference. There were approximately 36,300
stockholders at September 30, 1999.
Item 6. Selected Financial Data
--------------------------------
Years ended September 30
(Dollars in millions except per share amounts)
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
Net sales $ 14,269.5 13,447.2 12,298.6 11,149.9 10,012.9
Net earnings $ 1,313.6 1,228.6 1,121.9 1,018.5 907.7
Basic earnings
per common share $ 3.03 2.80 2.52 2.27 2.03
Diluted earnings
per common share $ 3.00 2.77 2.50 2.25 2.01
Cash dividends
per common share $ 1.30 1.18 1.08 .98 .89
Long-term debt $ 1,317.1 1,056.6 570.7 772.6 208.6
Total assets $ 13,623.5 12,659.8 11,463.3 10,481.0 9,399.0
Income before cumulative effect of change in accounting for postemployment
benefits ($21.3 million, $.05 per share) was $929.0 million in 1995.
Net earnings in 1995 include non-recurring items which were substantially
offset by the accounting change.
See Note 2 of Notes to Consolidated Financial Statements on page 39
of the 1999 Annual Report for information regarding the Company's acquisition
and divestiture activities.
8
<PAGE>
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 28 through 32, and the
"Safe Harbor Statement" on page 52 of the 1999 Annual Report are hereby
incorporated by reference.
On December 14, 1999, the Company announced that it had reached a definitive
agreement to acquire Jordan Telecommunication Products, Inc., a global provider
of fiber optic conduit systems, CATV components, power protection systems,
cellular site structures, custom cables and connectors for wireline, wireless
and data communications equipment. Under the terms of the transaction,
Emerson will pay approximately $440 million in cash and assume approximately
$540 million in debt and other liabilities. The transaction is subject to
regulatory approval and other customary conditions.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
---------------------------------------------------------------------
Narrative discussion appearing under "Financial Instruments" on page 32 of the
1999 Annual Report is hereby incorporated by reference.
Item 8. Financial Statements and Supplementary Data
----------------------------------------------------
The consolidated financial statements of the Company and its subsidiaries
on pages 33 through 46 and the report thereon of KPMG LLP appearing on page
47 of the 1999 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 2000 annual
stockholders' meeting (the "2000 Proxy Statement") is hereby incorporated
by reference. Information regarding executive officers is set forth in
Part I of this report. Information appearing under "Section 16(a) Beneficial
Ownership Reporting Compliance" in the 2000 Proxy Statement is hereby
incorporated by reference.
Item 11. Executive Compensation
--------------------------------
Information appearing under "Director Compensation" and "Executive
Compensation" in the 2000 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 2000 Proxy
Statement is hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions
--------------------------------------------------------
Information appearing under "Certain Business Relationships" in the 2000
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 33 through 46 and the report
thereon of KPMG LLP appearing on page 47 of the 1999 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 1999 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. Form 10-Q for the quarter ended
March 31, 1997, Exhibit 3(a); Termination of
Designated Shares of Stock and Certificate of
Designation, Preferences and Rights of Series B
Junior Participating Preferred Stock, incorporated
by reference to Emerson Electric Co. 1998 Form 10-K,
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).
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.
4(b) Indenture dated as of December 10, 1998, between
Emerson Electric Co. and The Bank of New York,
Trustee, incorporated by reference to Emerson Electric
Co. 1998 Form 10-K, Exhibit 4(b).
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.
11
<PAGE>
4(c) Rights Agreement dated as of November 1, 1998,
between Emerson Electric Co. and ChaseMellon Shareholder
Services, L.L.C. incorporated by reference to
Emerson Electric Co. Form 8-A, dated October 6, 1998,
Exhibit 1.
10(a)* Employment Agreement made as of October 1, 1975, as
amended January 9, 1987, and as further amended
October 22, 1997, between Emerson Electric Co. and
C. F. Knight, incorporated by reference to Emerson
Electric Co. 1997 Form 10-K, Exhibit 10(c).
10(b)* 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(c)* 1991 Stock Option Plan, as amended and restated effective
October 1, 1997, incorporated by reference to Emerson
Electric Co. 1997 Form 10-K, Exhibit 10(e).
10(d)* 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(e)* Third Amendment to the Emerson Electric Co. 1993
Incentive Shares Plan, as restated, incorporated by
reference to Emerson Electric Co. 1996 Form 10-K,
Exhibit 10(g).
10(f)* Emerson Electric Co. Directors' Continuing
Compensation Plan, incorporated by reference to
Emerson Electric Co. 1987 Form 10-K, Exhibit 10(g),
and Amendment incorporated by reference to Emerson
Electric Co. 1996 Form 10-K, Exhibit 10(i).
10(g)* Deferred Compensation Plan for Non-Employee Directors,
as amended, incorporated by reference to Emerson
Electric. Co. 1994 Form 10-K, Exhibit 10(k).
10(h)* First Amendment to the Emerson Electric Co. Supplemental
Executive Retirement Plan, filed herewith.
10(i)* Fifth Amendment to the Supplemental Executive
Savings Investment Plan, incorporated by reference
to Emerson Electric Co. Form 10-Q for the quarter ended
March 31, 1999, Exhibit 10(j).
10(j)* Annual Incentive Plan incorporated by reference to
Emerson Electric Co. 1995 Proxy Statement dated
December 14, 1994, Appendix A.
12
<PAGE>
10(k)* 1997 Incentive Shares Plan, incorporated by reference to
Emerson Electric Co. 1997 Proxy Statement dated
December 6, 1996, Exhibit A.
10(l)* 1998 Stock Option Plan, incorporated by reference to Emerson
Electric Co. 1998 Proxy Statement dated December 12, 1997,
Appendix A.
12 Ratio of Earnings to Fixed Charges
13 Portions of Emerson Electric Co. Annual Report to
Stockholders for the year ended September 30, 1999,
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, 1999.
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 17, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on December 17, 1999, by the
following persons on behalf of the registrant and in the capacities
indicated.
Signature Title
--------- -----
*
---------------------------------------- Chairman of the Board
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
J. G. Berges
*
---------------------------------------- Director
L. L. Browning, Jr.
*
---------------------------------------- Director
A. A. Busch, III
*
---------------------------------------- Director
D. C. Farrell
14
<PAGE>
*
---------------------------------------- Director
J. A. Frates
*
---------------------------------------- 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
G. W. Tamke
*
---------------------------------------- Director
W. M. Van Cleve
*
---------------------------------------- Director
E. E. Whitacre, 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(h) First Amendment to the Emerson Electric Co. Supplemental
Executive Retirement Plan
12 Ratio of Earnings to Fixed Charges
13 Portions of Annual Report to Stockholders for
the year ended September 30, 1999, 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
Exhibit 10(h)
FIRST AMENDMENT TO THE
EMERSON ELECTRIC CO.
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
WHEREAS, Emerson Electric Co. previously adopted the
Emerson Electric Co. Supplemental Executive Retirement Plan to provide for the
payment of a competitive retirement income and thereby attract and retain
selected executives; and
WHEREAS, Emerson Electric Co. desires to amend the
Supplemental Executive Retirement Plan effective October 4, 1999;
NOW, THEREFORE, effective as of October 4, 1999, the
Emerson Electric Co. Supplemental Executive Retirement Plan is amended to read
as follows:
SECTION I
DEFINITIONS
A. "Beneficiary" means the Beneficiary designated by the
Participant to receive a death benefit under the Plan.
B. "Change of Control" means any of the following: (a) 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 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; (b) individuals who,
as of the date hereof, constitute the Incumbent Board cease for any reason to
constitute at least the majority of the Board of Directors of the Company,
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
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 (c) 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 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.
C. "Code" means the Internal Revenue Code of 1986, as amended.
D. "Committee" means the Compensation and Human Resources
Committee of the Board of Directors of the Company.
E. "Company" means Emerson Electric Co., a Missouri corporation.
F. "Employee" means an Employee of an Employer.
G. "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.
H. "Employment" means employment with an Employer.
I. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
J. "Incumbent Board" means the individuals who, as of the date
of adoption of this Plan, constitute the Board of Directors of the Company.
K. "Normal Retirement Benefit" means the normal retirement
benefit to which a Participant is entitled under Section 5-1 of Appendix 10 of
the Retirement Plan, computed without regard to the limitations of Section 18.6
of the Retirement Plan and without regard to the limitation on the amount of
compensation which may be taken into account under Section 401(a)(17) of the
Code and by adding to compensation for each calendar year the amount which
the Participant elected to defer under the Supplemental Executive Savings
Investment Plan for such year.
L. "Normal Retirement Benefit Under the Retirement Plan" means
the Normal Retirement Benefit to which a Participant is entitled under Section
5-1 of Appendix 10 of the Retirement Plan as limited by Section 18.6 of the
Retirement Plan and by the amount of compensation which may be taken into
account under Section 401(a)(17) of the Code.
M. "Participant" means an Employee eligible to participate in
the Plan pursuant to Section II.
N. "Plan" means this Emerson Electric Co. Supplemental Executive
Retirement Plan.
O. "Retirement Plan" means the Emerson Electric Co. Retirement
Plan.
P. "Surviving Spouse" means the surviving spouse of a deceased
Participant to whom such Participant had been married for at least one full
year as of the date of the Participant's death.
Q. "Survivor Benefit" means a monthly benefit for the life of
the Surviving Spouse equal to 50% of the monthly benefit to which the
Participant would be entitled computed as if the Participant commenced
receiving benefits on the date of his death in the form of a straight life
annuity of equivalent actuarial value to the benefit accrued under Section III-
A using the same actuarial assumptions as are used in computing equivalent
actuarial values under the Retirement Plan.
SECTION II
ELIGIBILITY
Participation in the Plan shall be limited to those Employees whom
the Committee selects by written notice to the Participant.
SECTION III
BENEFITS
A. A Participant who terminates Employment with a vested benefit
under the Retirement Plan shall receive a monthly benefit under the Plan which,
when expressed as a straight life annuity with sixty monthly payments
guaranteed, is equal to his Normal Retirement Benefit reduced by his Normal
Retirement Benefit Under the Retirement Plan.
B. Notwithstanding Section III-A the Committee, in its
discretion, may direct that a different level of benefit shall be payable to
any Participant.
SECTION IV
TIME AND FORM OF PAYMENTS
A. Except as otherwise provided in Section VI, the benefit
payable under Section III shall commence on the first day of the month
coincident with or next following the later of (a) the date the Participant
attains age 65 or (b) the date the Participant terminates Employment. The
benefit shall be payable for the life of the Participant with sixty monthly
payments guaranteed. If the Participant dies prior to receiving sixty monthly
payments, the unpaid installments shall be paid to his Beneficiary.
B. Notwithstanding Section IV-A, the Committee may, in its
discretion, direct that a benefit, of equivalent actuarial value to the benefit
described in Section III-A (or of another value established by the Committee
under Section III-B), shall be payable to any Participant in such form and
payable at such times as the Committee shall determine. All equivalent
actuarial values shall be determined by using the same actuarial assumptions as
are used in computing equivalent actuarial values under the Retirement Plan.
SECTION V
PRE-RETIREMENT DEATH BENEFIT
If a Participant dies in Employment leaving a Surviving Spouse, such
Spouse shall receive the Survivor Benefit.
SECTION VI
CHANGE OF CONTROL
Notwithstanding anything else contained in the Plan, in the event of
a Change of Control, all accrual of benefits under this Plan shall cease and
each Participant shall become fully vested in his accrued benefits as of the
date of the Change of Control, even if he is not fully vested under the
Retirement Plan. Each Participant shall be paid, at the Participant's
election, (a) upon the Change of Control or (b) upon the Participant's
termination of Employment occurring after the Change of Control. If the
Participant elects to receive payment upon the Change of Control, payment shall
be made in the form of a lump sum distribution which is the actuarial
equivalent of such accrued benefits (using the same actuarial assumptions as
are used in computing equivalent actuarial values under the Retirement Plan).
If the Participant elects to receive payment upon the termination of
Employment occurring after the Change of Control, the Participant shall make an
additional election to receive payment in the form of either a lump sum
distribution or the form of benefit provided under Section IV. At the
commencement of participation in the Plan, each Participant shall make an
irrevocable election as to the timing and form of any payments due under this
Section VI.
SECTION VII
FORFEITURE OF BENEFITS
If any Participant entitled to a benefit under the Plan is discharged
for cause, or enters into competition with the Company, or interferes with the
relations between the Company and any customer, or engages in any activity that
would result in any decrease of, or loss in, sales by the Company, the rights
of such Participant to a benefit under the Plan, including the rights of a
Surviving Spouse to a benefit, will be forfeited, unless the Committee
determines that such activity is not detrimental to the best interests of the
Company. However, if the individual ceases such activity and notifies the
Committee of this action, then the Participant's right to receive a benefit,
and any right of a Surviving Spouse to a benefit, may be restored within 60
days of said notification, unless the Committee in its sole discretion
determines that the prior activity has caused serious injury to the Company,
which determination shall be final and conclusive.
SECTION VIII
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. No member of the Committee shall make any decision or take any
action covering exclusively his own benefits under the Plan, but all such
matters shall be decided by a majority of the remaining members of the
Committee or, in the event of inability to obtain a majority, by the Board of
Directors of the Company.
E. A Participant who believes that he is being denied a benefit
to which he 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.
F. Upon receipt of a claim the Committee shall advise the
Claimant that a reply will be forthcoming within 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 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:
1. the specific reason or reasons for denial,
2. the specific references to pertinent Plan provisions on
which the denial is based,
3. 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,
4. appropriate information as to the steps to be taken if
the Claimant wishes to submit the claim for review, and
5. the time limits for requesting a review under Subsection
G and for the review under Subsection H.
G. Within sixty 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 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 shall be barred and estopped from challenging the Committee's
determination.
H. Within sixty days after the Chief Executive Officer's receipt
of a request for review, he 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 120 days after
receipt of the request for review.
SECTION IX
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
therefor 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.
1. The Vice President-Law of the Company shall be the agent
for service of legal process.
2. The Company shall constitute the Plan Administrator.
F. Unfunded Plan. The Plan shall be unfunded. All payments to a
Participant 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 Company.
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, Emerson Electric Co. has caused this
Amendment to be executed by one of its duly authorized officers this 4th day
of October, 1999.
EMERSON ELECTRIC CO.
By /s/ J. A. Harmon
----------------
Senior Vice President
---------------------
EXHIBIT 12
EMERSON ELECTRIC CO. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------
1995 1996 1997 1998 1999
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes <F1> $ 1,457.2<F2> 1,611.3 1,821.7 2,002.3 2,064.0
Fixed charges 168.4 182.2 176.5 218.2 258.1
------------- ------------ ---------- ------------ ------------
Earnings, as defined $ 1,625.6 1,793.5 1,998.2 2,220.5 2,322.1
============= ============ ========== ============ ============
Fixed charges:
Interest expense $ 123.0 132.3 124.2 161.4 199.0
One-third of all rents 45.4 49.9 52.3 56.8 59.1
------------- ------------ ---------- ------------ ------------
Total fixed charges $ 168.4 182.2 176.5 218.2 258.1
============= ============ ========== ============ ============
Ratio of Earnings to Fixed Charges 9.7x 9.8x 11.3x 10.2x 9.0x
============= ============ ========== ============ ============
<FN>
<F1>
Represents income before income taxes, cumulative effects of changes in accounting principles, and minority
interests in the income of consolidated subsidiaries with fixed charges.
<F2>
Includes non-recurring items of $34.3 million in 1995. Excluding these items, the ratio of earnings to fixed
charges would have been 9.4x in 1995.
</FN>
</TABLE>
<PAGE> EXHIBIT 13
28
FINANCIAL REVIEW
RESULTS OF OPERATIONS
Net Sales
Sales for 1999 were a record $14.3 billion, an increase of $822 million, or 6.1
percent, from 1998. The solid sales increase reflected modest underlying sales
growth and the contribution of acquisitions. All businesses reported sales
increases. United States sales increased approximately $455 million, or 6
percent, while international sales increased approximately $368 million, or 7
percent. Underlying sales growth in the consumer-related businesses continued at
a moderate pace in the U.S. and internationally, led by strong growth in the
Heating, Ventilating and Air Conditioning (HVAC) business. Underlying sales of
the capital goods-related businesses were flat in 1999. Strong sales growth in
the Electronics and Telecommunications business was offset by global weakness in
the Industrial Automation and Process Control businesses. New product sales,
from products introduced in the past five years, increased approximately $570
million, or 13 percent, to a record $5.0 billion, representing 35 percent of
sales. Acquisitions completed throughout fiscal 1999 are expected to have total
sales of nearly $800 million in fiscal 2000.
In 1998, sales were $13.4 billion, up $1.1 billion, or 9.3 percent, from 1997.
The strong sales growth reflected underlying gains from all businesses and the
contribution of acquisitions. This growth was achieved despite the impact of a
stronger dollar that reduced reported sales growth by more than 2 percent.
Slightly more than half of the sales increase was attributable to solid
underlying U.S. growth and modest international demand. U.S. sales increased
approximately $1.0 billion, or 14 percent, benefiting from very strong gains in
Electronics and Telecommunications and HVAC and acquisitions. International
sales increased approximately $137 million, or 3 percent. Demand was solid
throughout the year in the United States and Europe, which account for more than
three-quarters of consolidated revenue. New product sales increased
approximately $490 million, or 13 percent, to $4.4 billion, representing 33
percent of sales.
International Sales
International sales, including U.S. exports, increased approximately 7 percent
to a record $5.7 billion in 1999, representing 40 percent of the Company's total
sales. Underlying growth in Europe, Asia and other regions more than offset the
impact of weakness in Latin America. Sales by non-U.S. subsidiaries were $4.8
billion in 1999, up 9 percent from 1998. U.S. exports decreased 1 percent to
$960 million, primarily reflecting weakness in Latin America and Japan.
International subsidiary sales increased approximately 2 percent excluding
acquisitions and divestitures.
In 1998, international sales increased 3 percent to $5.3 billion, representing
40 percent of total sales. Solid demand in Europe and the strong growth in other
regions of the world, led by Latin America, more than offset the impact of
significant weakness in Asian economies. Sales by non-U.S. subsidiaries were
$4.4 billion in 1998, up 5 percent from 1997. U.S. exports decreased 8 percent
to $968 million in 1998 compared with 1997, reflecting weakness in Asia.
International subsidiary sales increased approximately 6 percent excluding
acquisitions and the unfavorable impact of currency translation of approximately
$250 million.
<PAGE>
29
Business Segment Sales - 1999 vs. 1998
The Process Control business increased sales 7 percent to $2.9 billion in 1999.
This solid sales increase was driven by the strong growth of the PlantWeb
initiative, and the Westinghouse Process Control and Daniel Industries
acquisitions. Underlying sales decreased, reflecting the impact of weak oil
prices on U.S. and Asian demand for process-related equipment, which more than
offset modest growth in Europe. Sales of the Industrial Automation business were
$3.4 billion in 1999. Despite widespread softness in end markets, the Industrial
Automation business realized a small increase in sales due to the contribution
of acquisitions. The global weakness in capital spending, largely due to weak
oil pricing earlier this year, has had a substantial impact on this business.
These results exclude the impact of the F.G. Wilson divestiture. The Electronics
and Telecommunications business increased sales 32 percent, to $2.1 billion in
1999. This outstanding performance, particularly in the U.S. and Europe, was
achieved due to rapid growth in power protection and environmental equipment, as
well as in the service business that monitors and maintains this equipment. This
business also benefited from a significant recovery in the market for power
supply products, driven by recovery in Asia and robust growth in the computing
and telecommunications infrastructure. The increase in the Electronics and
Telecommunications business sales was also aided by the 1998 acquisitions of
Nortel's Advanced Power Systems operations and Hiross environmental systems in
Europe. Sales of the HVAC business were $2.4 billion in 1999, an increase of 11
percent from 1998. Underlying sales of the HVAC business increased
substantially, driven by a dramatic recovery in residential and light commercial
construction in China, a warm summer in the United States, and continued market
adoption of scroll technology. Sales of the Appliance and Tools business were
$3.5 billion in 1999, compared with $3.4 billion in 1998. Underlying sales of
the Appliance and Tools business grew slightly, with the results varying by
geography and product area. In the United States, strong construction activity
drove growth in several consumer-related areas, while European sales declined
due to weakness in appliance products. During 1999, this business also made
substantial gains in sales to home centers, such as The Home Depot and Lowe's,
which are experiencing dramatic growth. Also in 1999, the Company contributed
its Louisville Ladder operations into a joint venture with Grupo Imsa SA of
Mexico and obtained an equity interest in the venture.
Business Segment Sales - 1998 vs. 1997
The Process Control business increased sales to $2.7 billion in 1998 from $2.6
billion in 1997. Excluding the effects of currency translation, this business
reported moderate sales growth as demand was balanced across the major
geographic regions it serves. Sales of the Industrial Automation business were
$3.3 billion in 1998, an increase of 9 percent from 1997. The Industrial
Automation business increase was the result of modest underlying sales growth on
a fixed rate basis, the majority-owned joint venture formed with General
Signal's Electrical Group in September 1997, and the Computational Systems, Inc.
acquisition. The Electronics and Telecommunications business increased sales 30
percent to $1.6 billion in 1998. This business showed very strong underlying
sales growth, reflecting broad strength across product lines and service
offerings. In addition, sales of the business benefited from the acquisition of
Hiross, an Italian manufacturer of precision environmental control and site
monitoring products. Sales of the HVAC business were $2.1 billion in 1998. The
HVAC business reported modest sales growth, as very strong demand in the U.S.
and Europe was partially offset by the impact of weak Asian economies on U.S.
export sales. Sales of the Appliance and Tools business were up 12 percent to
$3.4 billion in 1998. Sales of the underlying Appliance and Tools business grew
solidly, benefiting from solid demand in the U.S. and Europe. The increase in
sales also reflected the 1997 acquisition of InterMetro Industries.
<PAGE>
30
Total Costs and Expenses
Cost of sales for 1999 was $9.2 billion, an increase of 7.0 percent, due
primarily to increased sales volume. In 1998, cost of sales was $8.6 billion,
compared with $7.9 billion in 1997, an increase of 9.3 percent. Cost of sales as
a percent of net sales was 64.4 percent in 1999 compared to 63.9 percent and
64.0 percent in 1998 and 1997, respectively. The 1999 gross profit margin was
impacted by the effect of recent acquisitions, partially offset by the Company's
ongoing commitment to cost reduction and containment efforts and productivity
improvement programs.
Selling, general and administrative (SG&A) expenses were $2.8 billion, $2.7
billion, and $2.5 billion in 1999, 1998, and 1997, respectively. As a percent of
net sales, SG&A expenses were 19.4 percent in 1999, and 19.9 percent in 1998 and
1997. The decrease in SG&A as a percent of net sales was the result of ongoing
cost reduction efforts, partially offset by new product development and other
revenue growth programs and acquisitions. The Company continued its commitment
to new product development by increasing engineering and development expense 4
percent to a record $510 million in 1999, compared to $491 million in 1998 and
$445 million in 1997.
Interest expense increased to $190 million in 1999 from $152 million in 1998,
reflecting higher average borrowings resulting from acquisitions and share
repurchases. In 1998, interest expense increased from $121 million in 1997,
reflecting higher average borrowings.
Other deductions, net, including amortization of intangibles, were $95 million
in 1999, compared with $100 million and $78 million in 1998 and 1997,
respectively. Fiscal 1999 included a gain of $64 million from the disposition of
the Company's interest in F.G. Wilson. The fourth quarter of 1997 included a
gain of approximately $80 million from the formation of the joint venture
between Emerson's Appleton Electric division and General Signal's Electrical
Group. These gains were offset by other non-recurring items. See note 2 for
additional information.
Income Before Income Taxes
Income before income taxes increased $97 million, or 5.1 percent, to $2.0
billion in 1999, reflecting increased sales and improvement in underlying
margins, partially offset by increased interest expense. The base company
(excluding acquisitions and divestitures) realized an outstanding performance in
1999, increasing underlying operating margins approximately 0.5 points. This
improvement was offset by the acquisition of businesses with lower margins.
Earnings before interest and income taxes in the Process Control business were
$313 million in 1999, a decrease from 1998, reflecting weak demand associated
with lower oil prices and higher expenditures for cost reduction efforts and
productivity improvement programs. The Industrial Automation business income
increased $17 million to $448 million in 1999, driven by cost containment
measures that mitigated the impact of a challenging economic environment. Income
of the Electronics and Telecommunications business increased $87 million, or 58
percent, to $237 million in 1999, due to strong sales growth and the acquisition
of the Advanced Power Systems business. Income of the HVAC business increased
$45 million, or 14 percent, to $361 million in 1999, reflecting strong sales
growth in both U.S. and international markets. The Appliance and Tools business
income increased $16 million to $577 million in 1999, reflecting varying results
by geography and product area.
Income before income taxes increased $140 million, or 7.8 percent, to $1.9
billion in 1998, reflecting increased sales and improvement in underlying
margins, partially offset by increased interest expense. Earnings before
interest and income taxes in the Process Control business increased $24 million,
or 8 percent, to $343 million in 1998, due to moderate worldwide sales growth.
Income of the Industrial Automation business was $431 million in 1998, a
decrease from 1997, due to non-recurring costs in this business. Income of the
Electronics and Telecommunications business increased $34 million, or 29
percent, from 1997 to 1998, reflecting strong underlying sales growth. The HVAC
business increased income to $316 million in 1998, due to modest sales growth.
Income of the Appliance and Tools business increased $81 million, or 17 percent,
to $561 million in 1998, reflecting solid U.S. demand and acquisitions. See note
12 for additional information by business segment and geographic area.
<PAGE>
31
Income Taxes
Income taxes were $707 million, $695 million and $662 million in 1999, 1998 and
1997, respectively. The effective income tax rate was 35.0 percent in 1999,
compared with 36.1 percent in 1998 and 37.1 percent in 1997, reflecting the
continued implementation of global tax planning strategies and the impact of
acquisitions and divestitures.
Net Earnings and Return on Equity
Net earnings for 1999 were a record $1.3 billion, up 6.9 percent from $1.2
billion in 1998. Net earnings as a percent of sales was 9.2 percent in 1999
compared with 9.1 percent in 1998. Diluted earnings per common share were a
record $3.00 in 1999, up 8.3 percent from $2.77 in 1998. Earnings per share
excluding goodwill amortization, a metric that management believes is more
indicative of cash operating performance, were $3.27 in 1999, up 9.4 percent
from $2.99 in the prior year. Emerson achieved a return on average stockholders'
equity of 21.9 percent in 1999 and 1998 compared to 20.8 percent in 1997. Net
earnings for 1998 were up 9.5 percent from $1.1 billion in 1997. Diluted
earnings per common share in 1998 increased 10.8 percent from $2.50 in 1997.
Earnings per share excluding goodwill amortization in 1998 were up 11.2 percent
from $2.69 in the prior year.
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.
Cash Flow
Emerson generated record operating cash flow of $1.8 billion in 1999, an
increase of 10 percent compared to 1998. Operating cash flows were $1.7 billion
and $1.5 billion in 1998 and 1997, respectively. Operating working capital was
approximately 16 percent of sales in 1999, and 17 percent of sales in 1998 and
1997.
Capital expenditures were $592 million, $603 million and $575 million in 1999,
1998 and 1997, respectively. These expenditures increase the Company's global
capacity to leverage opportunities within the heating, ventilating and air
conditioning industries, as well as improve manufacturing productivity in a
number of our businesses. In 1999, construction of a ninth scroll production
facility was completed. This plant, located in China, will become operational in
early fiscal 2000. Cash paid in connection with Emerson's purchase acquisitions
was $1,202 million, $573 million and $319 million in 1999, 1998 and 1997,
respectively.
Dividends were a record $566 million ($1.30 per share) in 1999, compared with
$521 million ($1.18 per share) in 1998 and $481 million ($1.08 per share) in
1997. In November 1999, the Board of Directors voted to increase the quarterly
cash dividend 10 percent to an annualized rate of $1.43 per share.
Leverage/Capitalization
Total debt increased to $3.3 billion in 1999, from $2.6 billion in 1998 and $2.0
billion in 1997, reflecting the impact of acquisitions and the Company's share
repurchase program. The repurchase program, initiated in fiscal 1997, authorizes
the repurchase of up to 40 million shares of the Company's outstanding common
stock, with nearly 23 million shares repurchased through September 30, 1999. Net
purchases of treasury stock totaled $324 million and $499 million in 1999 and
1998, respectively. See notes 2, 3 and 4 for additional information.
The total debt-to-capital ratio was 34.6 percent at year-end 1999, compared with
30.8 percent in 1998 and 27.1 percent in 1997. At September 30, 1999, net debt
(total debt less cash and equivalents and short-term investments) was 32.7
percent of net capital, compared with 29.0 percent in 1998 and 24.9 percent in
1997. The Company's interest coverage ratio (income before income taxes, non-
recurring items and interest expense divided by interest expense) was 11.7 times
in 1999, compared with 13.7 times in 1998 and 15.8 times in 1997, as a result of
higher average borrowings in 1999, partially offset by increased earnings.
<PAGE>
32
At year-end 1999, the Company and its subsidiaries maintained lines of credit
amounting to $2.4 billion to support commercial paper and had available non-U.S.
bank credit facilities of $630 million to support non-U.S. operations. Lines of
credit totaling $900 million are effective until 2003, with the remainder
through June 2000. These lines of credit and bank credit facilities assure the
availability of funds at prevailing interest rates. In addition, as of September
30, 1999, the Company could issue up to $2 billion of additional debt securities
under its shelf registration with the Securities and Exchange Commission.
Financial Instruments
The Company is exposed to market risk related to changes in interest rates and
European and other foreign currency exchange rates, and selectively uses
derivative financial instruments, including forwards, swaps and purchased
options, to manage these risks. The Company does not hold derivatives for
trading purposes. The value of market risk sensitive derivative and other
financial instruments is subject to change as a result of movements in market
rates and prices. Sensitivity analysis is one technique used to evaluate these
impacts. Based on a hypothetical ten-percent increase in interest rates or ten-
percent weakening in the U.S. dollar across all currencies, the potential losses
in future earnings, fair value and cash flows are immaterial. This methodology
has limitations; for example, a weaker U.S. dollar would benefit future earnings
through favorable translation of non-U.S. operating results. See notes 1, 3, 4
and 5.
Year 2000 Readiness
The Company developed a comprehensive Year 2000 plan that includes assessment,
hardware and software remediation, and testing. The Company's divisions have
completed all phases of the plan, which addressed internal computer applications
and information systems, products, facilities and equipment, as well as products
and services provided by third parties. Numerous third parties were contacted to
assess and monitor their compliance and remediation efforts, with particular
emphasis placed on more than 3,000 key suppliers. The estimated costs of the
Year 2000 compliance program are not material to the Company's operating results
or financial condition.
The Company has supplemented existing emergency recovery plans to mitigate the
impact of any unsuccessful remediation or third-party failures. These
contingency plans include the identification of alternative suppliers, possible
increases in inventory levels, and other backup procedures. In addition, the
Company has established global, regional and divisional command centers to
address Year 2000-related issues that may arise and respond, as appropriate, to
minimize the potential impact. Management believes that the diversity of the
Company's operations and systems reduces overall exposure and expects that the
consequences of any unsuccessful remediation will not be significant. However,
there can be no assurance that the Company's efforts or those of other entities
will be successful, or that any potential failure would not have a material
adverse effect on the Company's operating results or financial condition.
<PAGE>
33
CONSOLIDATED STATEMENTS OF EARNINGS
Emerson Electric Co. and Subsidiaries
<TABLE>
<CAPTION>
Years ended September 30
(Dollars in millions except per share amounts)
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Net sales $14,269.5 13,447.2 12,298.6
--------- -------- --------
Costs and expenses:
Cost of sales 9,193.8 8,595.6 7,865.6
Selling, general and administrative expenses 2,770.2 2,676.7 2,450.9
Interest expense 189.7 151.7 120.9
Other deductions, net 94.9 99.7 77.6
--------- -------- --------
Total costs and expenses 12,248.6 11,523.7 10,515.0
--------- -------- --------
Income before income taxes 2,020.9 1,923.5 1,783.6
Income taxes 707.3 694.9 661.7
--------- -------- --------
Net earnings $ 1,313.6 1,228.6 1,121.9
========= ======== ========
Basic earnings per common share $ 3.03 2.80 2.52
========= ======== ========
Diluted earnings per common share $ 3.00 2.77 2.50
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
34
CONSOLIDATED BALANCE SHEETS
Emerson Electric Co. and Subsidiaries
<TABLE>
<CAPTION>
September 30
(Dollars in millions except per share amounts)
Assets
1999 1998
--------- --------
<S> <C> <C>
Current assets
Cash and equivalents $ 266.1 209.7
Receivables, less allowances of $60.5 in 1999
and $54.6 in 1998 2,516.3 2,416.1
Inventories:
Finished products 871.5 858.6
Raw materials and work in process 1,049.6 1,137.9
--------- --------
Total inventories 1,921.1 1,996.5
Other current assets 420.9 379.0
--------- --------
Total current assets 5,124.4 5,001.3
--------- --------
Property, plant and equipment
Land 216.5 173.4
Buildings 1,287.1 1,205.5
Machinery and equipment 4,497.2 4,373.5
Construction in progress 377.0 318.3
--------- --------
6,377.8 6,070.7
Less accumulated depreciation 3,223.4 3,059.1
--------- --------
Property, plant and equipment, net 3,154.4 3,011.6
--------- --------
Other assets
Goodwill, less accumulated amortization of $714.4 in 1999
and $617.5 in 1998 4,263.0 3,702.7
Other 1,081.7 944.2
--------- --------
Total other assets 5,344.7 4,646.9
--------- --------
$13,623.5 12,659.8
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
35
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
1999 1998
--------- ---------
<S> <C> <C>
Current liabilities
Short-term borrowings and current
maturities of long-term debt $ 1,953.7 1,524.4
Accounts payable 1,068.8 1,036.7
Accrued expenses 1,304.8 1,252.7
Income taxes 263.1 207.9
--------- ---------
Total current liabilities 4,590.4 4,021.7
--------- ---------
Long-term debt 1,317.1 1,056.6
--------- ---------
Other liabilities 1,535.5 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 in
1999 and 1998 238.3 238.3
Additional paid-in capital 23.9 27.9
Retained earnings 7,803.7 7,056.5
Accumulated other nonstockholder changes in equity (271.6) (236.2)
--------- ---------
7,794.3 7,086.5
Less cost of common stock in treasury, 43,632,708
shares in 1999 and 38,452,823 shares in 1998 1,613.8 1,283.2
--------- ---------
Total stockholders' equity 6,180.5 5,803.3
--------- ---------
$13,623.5 12,659.8
========= =========
</TABLE>
<PAGE>
36
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Emerson Electric Co. and Subsidiaries
<TABLE>
<CAPTION>
Years ended September 30
(Dollars in millions except per share amounts)
1999 1998 1997
--------- -------- -------
<S> <C> <C> <C>
Common stock $ 238.3 238.3 238.3
--------- -------- -------
Additional paid-in capital
Beginning balance 27.9 3.3 12.3
Stock plans (3.5) (43.4) (2.8)
Treasury stock issued for acquisitions and other (.5) 68.0 (6.2)
--------- -------- -------
Ending balance 23.9 27.9 3.3
--------- -------- -------
Retained earnings
Beginning balance 7,056.5 6,348.9 5,707.7
Net earnings 1,313.6 1,228.6 1,121.9
Cash dividends (per share: 1999, $1.30;
1998, $1.18; 1997, $1.08) (566.4) (521.0) (480.7)
--------- -------- -------
Ending balance 7,803.7 7,056.5 6,348.9
--------- -------- -------
Accumulated other nonstockholder changes in equity
Beginning balance (236.2) (205.9) (29.2)
Translation adjustments (35.4) (30.3) (176.7)
--------- -------- -------
Ending balance (271.6) (236.2) (205.9)
--------- -------- -------
Treasury stock
Beginning balance (1,283.2) (963.9) (575.7)
Acquired (361.2) (498.4) (427.2)
Issued under stock plans 27.9 108.5 18.3
Issued for acquisitions and other 2.7 70.6 20.7
--------- -------- -------
Ending balance (1,613.8) (1,283.2) (963.9)
--------- -------- -------
Total stockholders' equity $ 6,180.5 5,803.3 5,420.7
========= ======== =======
Nonstockholder changes in equity
(Net earnings and Translation adjustments) $ 1,278.2 1,198.3 945.2
========= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
37
CONSOLIDATED STATEMENTS OF CASH FLOWS
Emerson Electric Co. and Subsidiaries
<TABLE>
<CAPTION>
Years ended September 30
(Dollars in millions)
1999 1998 1997
--------- ------- -------
<S> <C> <C> <C>
Operating activities
Net earnings $ 1,313.6 1,228.6 1,121.9
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 637.5 562.5 511.6
Changes in operating working capital 35.7 (81.0) (42.6)
Gains on divestitures, pension funding and other (176.3) (58.5) (92.3)
--------- ------- -------
Net cash provided by operating activities 1,810.5 1,651.6 1,498.6
--------- ------- -------
Investing activities
Capital expenditures (591.6) (602.6) (575.4)
Purchases of businesses, net of cash and equivalents acquired (1,202.0) (572.9) (319.2)
Divestiture of businesses and other, net 215.5 76.2 34.0
--------- ------- -------
Net cash used in investing activities (1,578.1) (1,099.3) (860.6)
--------- ------- -------
Financing activities
Net increase in short-term borrowings 503.5 145.4 321.8
Proceeds from long-term debt 470.9 452.0 5.8
Principal payments on long-term debt (257.0) (132.5) (13.1)
Net purchases of treasury stock (323.7) (499.4) (376.6)
Dividends paid (566.4) (521.0) (480.7)
--------- ------- -------
Net cash used in financing activities (172.7) (555.5) (542.8)
--------- ------- -------
Effect of exchange rate changes on cash and equivalents (3.3) (8.2) (23.1)
--------- ------- -------
Increase (decrease) in cash and equivalents 56.4 (11.4) 72.1
Beginning cash and equivalents 209.7 221.1 149.0
--------- ------- -------
Ending cash and equivalents $ 266.1 209.7 221.1
========= ======= =======
Changes in operating working capital
Receivables $ (23.1) (76.1) (117.3)
Inventories 69.0 (27.7) (64.4)
Other current assets (12.2) 19.7 (19.5)
Accounts payable (25.4) .9 28.0
Accrued expenses (31.5) (2.8) 88.6
Income taxes 58.9 5.0 42.0
--------- ------- -------
$ 35.7 (81.0) (42.6)
========= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Emerson Electric Co. and Subsidiaries
(Dollars in millions except per share amounts)
(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.
Goodwill
Assets and liabilities related to business combinations accounted for as
purchase transactions are recorded at their respective fair values. Goodwill is
amortized on a straight-line basis to other deductions over the periods
estimated to be benefited, not exceeding 40 years. Long-lived assets are
reviewed for impairment whenever events and changes in business circumstances
indicate the carrying value of the assets may not be recoverable. Impairment
losses are recognized if expected future cash flows of the related assets are
less than their carrying values.
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 agreement as a separate component of interest
expense. Gains and losses on purchased currency option and forward exchange
contracts that qualify for deferral accounting are recognized in income with the
underlying hedged transactions; otherwise, the contracts are recorded in the
balance sheet, and changes in fair value are recognized immediately in other
deductions, net. Currency fluctuations on non-U.S. dollar obligations that have
been designated as hedges of non-U.S. net asset exposures are included in
accumulated other nonstockholder changes in equity.
Income Taxes
No provision is made for U.S. income taxes on the undistributed earnings of non-
U.S. subsidiaries (approximately $1,140 at September 30, 1999), primarily
because retention of a significant portion of these earnings is considered
essential for continuing operations. In those cases in which distributions have
been made, additional income taxes, if any, have been minimal due to available
foreign tax credits.
Nonstockholder Changes in Equity
In 1999, the Company adopted Statement of Financial Accounting Standards No.
130, which requires the reporting of changes in stockholders' equity that do not
result from transactions with stockholders. Nonstockholder changes in equity
are comprised of net earnings and foreign currency translation adjustments. The
adoption of this statement had no impact on the Company's results of operations
or financial condition.
<PAGE>
39
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.
(2) Acquisitions and Divestitures
Cash paid in connection with the Company's purchase acquisitions, which include
several smaller businesses, follows:
1999 1998 1997
-------- ----- -----
Fair value of assets acquired...................... $1,475.7 947.0 359.4
Less liabilities assumed........................... 271.4 214.5 38.2
Less notes and common stock issued to sellers...... 2.3 159.6 2.0
-------- ----- -----
Cash paid (net of cash and equivalents acquired).. $1,202.0 572.9 319.2
======== ===== =====
During the first quarter of 1999, the Company purchased the Westinghouse Process
Control Division ("WPC") from CBS Corporation for approximately $260. WPC is a
supplier of process controls for the power generation, water and wastewater
treatment industries. In addition, in the first and second quarters of 1999, the
Company paid $230 to acquire the remaining ownership interest in Astec (BSR)
Plc. In the third quarter of 1999, the Company acquired Daniel Industries, Inc.
through a cash tender offer of approximately $435 plus assumed debt. Daniel is a
provider of measurement and control products and services for the oil and gas
industry. In addition, the Company acquired MagneTek's alternator operations;
Kato Engineering, an alternator business; and a number of smaller businesses in
1999. The companies acquired in 1999 had annualized sales of approximately $760.
During 1999, the Company received $226 from the disposition of its interest in
F.G. Wilson, resulting in a pretax gain of $64 ($30 net of income taxes). The
Company also incurred costs for the rationalization of other operations that
more than offset this gain. In addition, the Company will receive a percentage
of future F.G. Wilson revenue and expects a maximum of $100 by 2002. F.G. Wilson
had sales of approximately $410 in 1998.
During the first quarter of 1998, the Company purchased Computational Systems,
Inc. ("CSI") for approximately $160, primarily in common stock. CSI is a
supplier of condition monitoring and diagnostic products and services for motors
and other rotational equipment. During the fourth quarter of 1998, Astec (BSR)
Plc, a subsidiary of Emerson, purchased the Advanced Power Systems ("APS")
business from Northern Telecom Limited for approximately $325. APS manufactures
power conversion products for a wide variety of telecommunications applications.
In addition, the Company purchased Plaset SpA, a European manufacturer of
appliance drain pumps, and acquired a majority interest in Hiross, an Italian
manufacturer of precision environmental control and site monitoring products.
Several smaller businesses were also purchased in 1998. The companies acquired
in 1998 had annualized sales of approximately $775.
During the second quarter of 1997, Emerson acquired a majority interest in Astec
(BSR) Plc through additional share purchases and began consolidating its
results. Astec had annual sales of approximately $600 in calendar 1996. During
the fourth quarter of 1997, the Company purchased InterMetro Industries for
approximately $275 and acquired Clairson International Corporation. These two
companies produce free-standing and wall-mounted ventilated shelving and
specialty storage products. Emerson previously owned a controlling interest in
Clairson. InterMetro and Clairson had combined annual sales of more than $300.
Several smaller businesses were also purchased or sold in 1997.
In addition, in the fourth quarter of 1997, the Company and General Signal
Corporation formed a joint venture combining Emerson's Appleton Electric
operations and General Signal's Electrical Group. Emerson holds a controlling
interest in this venture, and the transaction resulted in a pretax gain of
approximately $80, which was substantially offset by costs arising from
relocation of several production facilities, asset impairments and litigation.
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.
(3) Short-term Borrowings and Lines of Credit
Short-term borrowings and current maturities of long-term debt are summarized as
follows:
1999 1998
-------- -------
Commercial paper......................................... $1,358.3 992.7
Payable to banks......................................... 83.6 258.3
Other.................................................... 511.8 273.4
-------- -------
Total................................................... $1,953.7 1,524.4
======== =======
Weighted average interest rate at year end............... 5.2% 5.3%
======== =======
<PAGE>
40
In 1999, the Company issued $250 of 5.125%, one-year notes that were
simultaneously swapped to floating interest rates at a cost less than the
Company's U.S. commercial paper, with an effective interest rate of 5.3 percent
at September 30, 1999. In 1998, the Company entered into an interest rate
agreement which capped the rate on $250 of commercial paper at 6.0 percent
through September 1999. In 1997, the Company entered into a five-year interest
rate swap which fixed the rate on $250 of commercial paper at 6.1 percent. The
Company had 151 million and 152 million of British pound notes with interest
rates of 5.3 and 7.5 percent swapped to $256 and $257 at U.S. commercial paper
rates at September 30, 1999 and 1998, respectively.
The Company and its subsidiaries maintained lines of credit amounting to $2,375
with various banks at September 30, 1999, to support commercial paper and to
assure availability of funds at prevailing market interest rates. Lines of
credit totaling $900 are effective until 2003 with the remainder through June
2000. 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 $700 ($630 unused) at September 30, 1999. 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, 1999, the Company could issue up to $2,000 of
additional debt securities under its shelf registration with the Securities and
Exchange Commission.
(4) Long-term Debt
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Commercial paper with a weighted average interest rate of
5.6 percent at September 30, 1999.............................. $ 254.0 252.6
6.3% notes due 2006............................................. 250.0 250.0
5 1/2% notes due 2008........................................... 250.0 250.0
5% notes due 2008............................................... 175.0 -
5.85% notes due 2009............................................ 250.0 -
Term loan with a weighted average interest rate of 6.0 percent
at September 30, 1998.......................................... - 200.0
Other........................................................... 147.2 117.9
-------- -------
1,326.2 1,070.5
Less current maturities......................................... 9.1 13.9
-------- -------
Total.......................................................... $1,317.1 1,056.6
======== =======
</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. In
1999, the Company issued $250 of 5.85%, ten-year notes that were simultaneously
swapped to U.S. commercial paper rates, with an effective interest rate of 5.4
percent at September 30, 1999.
Long-term debt maturing during each of the four years after 2000 is $24, $23,
$262 and $4, respectively. Total interest paid related to short-term borrowings
and long-term debt was approximately $185, $138 and $108 in 1999, 1998 and 1997,
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 purchased 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 $405 and $335 of contracts outstanding at
September 30, 1999 and 1998, 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, 1999 and 1998, the Company had
outstanding 8% convertible subordinated debentures due through 2011 with a
market value of $40 and $44, compared to the related carrying value of $9 and
$10, respectively. Common stock has been reserved for the conversion of these
debentures (see note 9). The fair values of derivative financial instruments
were not material at September 30, 1999 and 1998, and the estimated fair value
of each of the Company's other classes of financial instruments approximated the
related carrying value at September 30, 1999 and 1998.
<PAGE>
41
(6) Retirement Plans
Retirement plan expense includes the following components:
<TABLE>
<CAPTION>
U.S. Plans Non-U.S. Plans
----------------------------- ----------------------------
1999 1998 1997 1999 1998 1997
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Defined benefit plans:
Service cost (benefits earned during the period).. $ 38.6 33.2 31.7 9.1 7.9 8.0
Interest cost..................................... 112.5 106.1 94.3 16.9 16.4 16.3
Expected return on plan assets.................... (161.4) (152.2) (134.6) (19.0) (17.0) (16.0)
Net amortization.................................. 1.6 (2.3) (3.6) 0.2 (.7) (.1)
Settlement gains.................................. - - - - - (2.0)
------- ------- ------- ------- ------- -------
Net periodic pension (income) expense........... (8.7) (15.2) (12.2) 7.2 6.6 6.2
Defined contribution and multiemployer plans....... 59.4 54.6 48.5 8.5 9.4 8.1
------- ------- ------- ------- ------- -------
Total retirement plan expense..................... $ 50.7 39.4 36.3 15.7 16.0 14.3
======= ======= ======= ======= ======= =======
</TABLE>
The reconciliations of the actuarial present value of the projected benefit
obligations and of the fair value of plan assets follow:
<TABLE>
<CAPTION>
U.S. Plans Non-U.S. Plans
------------------ ----------------
1999 1998 1999 1998
-------- -------- ------ ------
<S> <C> <C> <C> <C>
Benefit obligation, beginning................................... $1,437.9 1,248.4 263.2 231.1
Service cost.................................................... 38.6 25.2 8.0 7.3
Interest cost................................................... 112.5 80.3 15.2 14.3
Actuarial (gains) losses........................................ (42.8) 100.1 25.1 13.1
Benefits paid................................................... (63.5) (44.4) (11.1) (11.3)
Acquisitions/divestitures, net.................................. 61.1 28.3 14.2 -
Foreign currency and other...................................... 2.0 - (8.3) 8.7
-------- -------- ------ ------
Benefit obligation, ending...................................... $1,545.8 1,437.9 306.3 263.2
======== ======== ====== ======
Fair value of plan assets, beginning............................ $1,513.8 1,544.1 232.6 205.3
Actual return on plan assets.................................... 78.3 (20.9) 20.1 26.9
Employer contributions.......................................... 75.5 6.0 6.4 6.2
Benefits paid................................................... (63.5) (44.4) (11.1) (11.3)
Acquisitions/divestitures, net.................................. 29.7 29.0 15.2 -
Foreign currency and other...................................... 1.2 - (3.5) 5.5
-------- -------- ------ ------
Fair value of plan assets, ending............................... $1,635.0 1,513.8 259.7 232.6
======== ======== ====== ======
Plan assets in excess of (less than) benefit obligation......... $ 89.2 75.9 (46.6) (30.6)
Unamortized transition amount................................... (22.0) (29.2) (1.6) (2.0)
Unrecognized net loss (gain).................................... 127.5 89.3 (10.8) (32.4)
Unrecognized prior service costs................................ 20.4 23.7 2.9 1.6
Adjustment for fourth quarter contributions..................... .6 1.7 .5 -
-------- -------- ------ ------
Net pension asset (liability) recognized in the balance sheet.. $ 215.7 161.4 (55.6) (63.4)
======== ======== ====== ======
Weighted average assumptions:
Discount rate.................................................. 7.75% 7.50% 6.1% 6.8%
Expected return on plan assets................................. 10.50% 10.50% 8.5% 8.6%
Rate of compensation increase.................................. 4.25% 4.00% 3.3% 3.7%
</TABLE>
At September 30, 1999 and 1998, the pension assets recognized in the balance
sheet were $271.3 and $205.9 and the pension liabilities recognized in the
balance sheet were $111.2 and $107.9, respectively. The projected benefit
obligation, accumulated benefit obligation, and fair value of plan assets for
the retirement plans with accumulated benefit obligations in excess of plan
assets were $380.6, $353.5, and $208.6, respectively, as of September 30, 1999,
and $301.0, $284.6, and $160.9, respectively, as of September 30, 1998.
<PAGE>
42
In 1998, the Company changed the measurement date for the defined benefit
pension plans from September 30 to June 30 to improve administrative
efficiencies and the timeliness and accuracy of its financial reporting and
planning process. The effect of the change on retirement plan expense was
immaterial. The fair value of plan assets decreased approximately $145 in the
quarter ended September 30, 1998, reflecting the impact of the equity market
decline; this change was offset by an increase in the unrecognized net loss. The
1998 reconciliations of benefit obligations and of the fair value of plan assets
include nine months of activity.
(7) Postretirement Plans
The Company sponsors unfunded postretirement benefit plans (primarily health
care) for U.S. retirees and their dependents. Net postretirement plan expense
for the years ended September 30, 1999, 1998 and 1997, follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Service cost........................................................... $ 4.5 4.1 3.6
Interest cost.......................................................... 21.6 20.2 19.0
Net amortization....................................................... (3.1) (3.6) (4.2)
------ ------ ------
Net postretirement plan expense....................................... $ 23.0 20.7 18.4
====== ====== ======
</TABLE>
The reconciliations of the actuarial present value of accumulated postretirement
benefit obligations follow:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Benefit obligation, beginning.......................................... $279.6 260.0
Service cost........................................................... 4.5 4.1
Interest cost.......................................................... 21.6 20.2
Actuarial losses....................................................... 6.0 12.8
Benefits paid.......................................................... (20.4) (20.3)
Acquisitions/divestitures and other.................................... 21.8 2.8
------ ------
Benefit obligation, ending............................................. 313.1 279.6
Unrecognized net gain.................................................. 17.8 25.0
Unrecognized prior service benefit..................................... 5.9 8.2
------ ------
Postretirement benefit liability recognized in the balance sheet...... $336.8 312.8
====== ======
</TABLE>
The assumed discount rates used in measuring the obligations as of September 30,
1999 and 1998, were 7.5 percent and 7.25 percent, respectively. The assumed
health care cost trend rate for 2000 was 6.5 percent, declining to 4.5 percent
in the year 2004. A one-percentage-point increase or decrease in the assumed
health care cost trend rate for each year would increase or decrease the
obligation as of September 30, 1999, and the 1999 postretirement plan expense by
less than 5 percent.
(8) Earnings Per Common Share
Basic earnings per common share consider only the weighted average of common
shares outstanding while diluted earnings per common share consider the dilutive
effects of stock options, incentive shares and convertible securities.
Reconciliations of basic earnings per common share and diluted earnings per
common share follow (shares in millions):
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------- ------------------------------- -------------------------------
Weighted Earnings Weighted Earnings Weighted Earnings
Average Per Average Per Average Per
Earnings Shares Share Earnings Shares Share Earnings Shares Share
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic............. $1,313.6 433.8 $ 3.03 $1,228.6 439.2 $ 2.80 $1,121.9 445.0 $ 2.52
======== ======== ========
Convertible debt.. .5 .7 .6 .9 .9 1.3
Stock plans....... 3.9 4.0 3.2
-------- -------- -------- -------- -------- --------
Diluted........... $1,314.1 438.4 $ 3.00 $1,229.2 444.1 $ 2.77 $1,122.8 449.5 $ 2.50
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
43
(9) Common Stock
The Company has various stock option plans that permit certain officers and
employees to purchase common stock at specified prices. Options are granted at
100 percent of the market value of the Company's common stock on the date of
grant, generally vest one-third each year and expire ten years from the date of
grant. At September 30, 1999, 5.4 million options were available for grant
under these plans. Changes in the number of shares subject to option during
1999, 1998 and 1997, follow (shares in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- -------------------- --------------------
Average Average Average
Price Shares Price Shares Price Shares
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year........................................ $39.02 6,608 $34.77 6,698 $25.47 4,523
Options granted......................................... 54.95 3,026 57.71 974 45.09 3,398
Assumed options of acquired company..................... 34.02 71 26.08 330 - -
Options exercised....................................... 29.29 (1,025) 25.91 (1,198) 22.55 (794)
Options canceled........................................ 55.25 (176) 45.23 (196) 41.02 (429)
------ ------ ------
End of year.............................................. 45.48 8,504 39.02 6,608 34.77 6,698
====== ====== ======
Exercisable at year end.................................. 3,952 3,479 2,727
====== ====== ======
</TABLE>
Summarized information regarding stock options outstanding and exercisable at
September 30, 1999, follows (shares in thousands):
<TABLE>
<CAPTION>
Outstanding Exercisable
------------------------------------- ----------------------
Range of Average Average Average
Exercise Prices Shares Contractual Life Price Shares Price
- --------------- ------ ---------------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
up to $25............................................... 554 1.8 years $16.91 554 $16.91
$26 to 43............................................... 1,495 5.0 31.15 1,442 31.00
$44 to 65............................................... 6,455 8.2 51.25 1,956 46.96
------ ------
Total............................................... 8,504 7.3 45.48 3,952 36.92
====== ======
</TABLE>
The Company's Incentive Shares Plans authorize the distribution of common stock
to key management personnel. At September 30, 1999, 1,916,549 shares are
outstanding with restriction periods of three to ten years, including 59,500
shares issued in 1999. In addition, 2,292,440 rights to receive common shares
have been awarded, including 57,147 shares awarded in 1999, which are contingent
upon accomplishing certain objectives by 2001. At September 30, 1999,
approximately 6 million shares remained available for award under these plans.
The Company applies Accounting Principles Board Opinion No. 25 in accounting for
its stock plans. The compensation expense charged against income for the
Company's incentive shares plans was immaterial. Had compensation expense for
the Company's stock plans been determined in accordance with Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," net earnings and diluted earnings per common share, respectively,
would have been $1,293 and $2.95 per share in 1999, $1,215 and $2.74 per share
in 1998, and $1,110 and $2.47 per share in 1997. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions used for grants: risk-
free interest rate of 4.7 percent, 5.7 percent and 6.4 percent, dividend yield
of 2.1 percent, 2.0 percent and 2.4 percent, expected volatility of 17 percent,
16 percent and 16 percent for 1999, 1998 and 1997, respectively, and expected
life of 5 years for all years. The weighted average fair value of options
granted was $10.38, $12.01 and $9.46 for 1999, 1998 and 1997, respectively.
At September 30, 1999, 22,834,153 shares of common stock were reserved,
including 22,201,609 shares for issuance under the Company's stock plans and
632,544 shares for conversion of the outstanding 8% convertible subordinated
debentures at a price of $13.49 per share. During 1999, 6,097,200 treasury
shares were acquired, and 917,315 treasury shares were issued.
Approximately 1.2 million preferred shares are reserved for issuance under a
Preferred Stock 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 $260, 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, 2008, unless earlier redeemed (at one-half
cent per Right), exercised or exchanged under the terms of the plan.
<PAGE>
44
(10) Income Taxes
Income before income taxes consists of the following:
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
United States...................................................................................... $1,567.7 1,496.4 1,357.1
Non-U.S............................................................................................ 453.2 427.1 426.5
-------- ------- -------
Income before income taxes........................................................................ $2,020.9 1,923.5 1,783.6
======== ======= =======
The principal components of income tax expense follow:
1999 1998 1997
-------- ------- -------
Federal:
Current........................................................................................... $ 417.3 453.4 447.8
Deferred.......................................................................................... 77.5 35.9 10.1
State and local.................................................................................... 49.8 51.4 48.2
Non-U.S............................................................................................ 162.7 154.2 155.6
-------- ------- -------
Income tax expense................................................................................ $ 707.3 694.9 661.7
======== ======= =======
The federal corporate statutory rate is reconciled to the Company's effective income tax rate as
follows:
1999 1998 1997
-------- ------- -------
Federal corporate statutory rate................................................................... 35.0% 35.0% 35.0%
State and local taxes, less federal tax benefit................................................... 1.6 1.7 1.8
Foreign Sales Corporation benefit and other....................................................... (1.6) (.6) .3
-------- ------- -------
Effective income tax rate.......................................................................... 35.0% 36.1% 37.1%
======== ======= =======
The principal components of deferred tax assets (liabilities) follow:
1999 1998
--------- -------
Property, plant and equipment and intangibles...................................................... $ (357.0) (344.1)
Leveraged leases................................................................................... (181.0) (185.4)
Pension............................................................................................ (92.9) (69.3)
Accrued liabilities................................................................................ 249.5 255.9
Postretirement and postemployment benefits......................................................... 145.1 129.1
Employee compensation and benefits................................................................. 109.1 99.4
Other.............................................................................................. 81.6 84.0
-------- -------
Total deferred tax assets (liabilities)........................................................... $ (45.6) (30.4)
======== =======
</TABLE>
At September 30, 1999 and 1998, respectively, net current deferred tax assets
were $261.7 and $248.3, and net noncurrent deferred tax liabilities were $307.3
and $278.7. Total income taxes paid were approximately $580, $665 and $645 in
1999, 1998 and 1997, respectively.
(11) Contingent Liabilities and Commitments
At September 30, 1999, 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.
<PAGE>
45
(12) Business 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. In 1999, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which establishes standards for reporting operating segments and
related disclosures. The divisions of the Company are primarily organized based
on the nature of the products and services provided. The Process Control segment
includes measurement and analytical instrumentation, valves, control systems,
and factory automation software. The Industrial Automation segment includes
integral horsepower industrial motors, variable-speed and index drives,
mechanical power transmission equipment, predictive maintenance systems,
ultrasonic welding and cleaning, solids separation, fluid control, materials
testing, and heating and lighting equipment. The Electronics and
Telecommunications segment consists of uninterruptible power supplies, power
conditioning equipment, environmental control systems, site monitoring systems,
and electrical switching equipment. The Heating, Ventilating and Air
Conditioning (HVAC) segment consists of compressors, hermetic terminals,
thermostats, and valves. The Appliance and Tools segment includes fractional
horsepower motors, controls, and heating elements, as well as hand, plumbing and
bench power tools and accessories, and disposers. Summarized information about
the Company's operations by business segment and by geographic area follows:
<TABLE>
<CAPTION>
Business Segments Earnings Before Interest
(See note 2) Sales and Income Taxes Total Assets
------------------------ ------------------------ --------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------- ------ ------ ------- ----- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Process Control....................... $ 2,878 2,684 2,645 313 343 319 3,489 2,643 2,654
Industrial Automation................. 3,380 3,346 3,084 448 431 438 3,269 3,067 2,721
Electronics and Telecommunications.... 2,136 1,617 1,246 237 150 116 1,510 1,328 823
HVAC.................................. 2,385 2,149 2,122 361 316 312 1,819 1,698 1,568
Appliance and Tools................... 3,533 3,440 3,060 577 561 480 2,641 2,589 2,410
------- ------ ------ ------- ----- ------ ------- ------ ------
14,312 13,236 12,157 1,936 1,801 1,665 12,728 11,325 10,176
Divested businesses................... 343 557 464 29 45 50 - 531 450
Differences in accounting methods..... 161 156 138
Interest income, corporate and other.. 85 74 52 896 804 837
Sales eliminations/Interest expense... (385) (346) (322) (190) (152) (121)
------- ------ ------ ------- ----- ------ ------- ------ ------
Total................................ $14,270 13,447 12,299 2,021 1,924 1,784 13,624 12,660 11,463
======= ====== ====== ======= ===== ====== ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
Depreciation and
Intersegment Sales Amortization Expense Capital Expenditures
--------------------- -------------------- -----------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
----- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Process Control....................... $ 4 2 1 166 147 146 78 83 85
Industrial Automation................. 28 25 17 144 130 115 99 115 116
Electronics and Telecommunications.... 11 16 3 59 35 28 54 42 31
HVAC.................................. 30 27 26 97 86 81 177 147 155
Appliance and Tools................... 312 275 273 155 143 124 159 162 149
Divested businesses................... - 1 2 8 14 12 17 39 21
Corporate and other................... 9 8 6 8 15 18
----- --- --- --- --- --- --- --- ---
Total................................ $ 385 346 322 638 563 512 592 603 575
===== === === === === === === === ===
</TABLE>
The primary income measure used for assessing performance and making operating
decisions is earnings before interest and income taxes. Intersegment sales
approximate market prices. Accounting method differences between segment
reporting and the consolidated financial statements primarily include management
fees allocated to segments based on a percentage of sales and the accounting for
pension and other retirement plans. Corporate assets primarily include cash and
equivalents, investments, pensions, deferred charges, and certain fixed assets.
Divested businesses include F.G. Wilson and other smaller businesses.
<TABLE>
<CAPTION>
Geographic Sales by Destination Property, Plant and Equipment
---------------------- -----------------------------
1999 1998 1997 1999 1998 1997
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
United States.................................... $ 8,557 8,102 7,091 2,312 2,120 1,980
Europe........................................... 3,064 2,869 2,647 527 627 534
Asia............................................. 1,211 1,096 1,328 205 169 138
Latin America.................................... 458 484 402 88 77 65
Other regions.................................... 980 896 831 22 19 18
------- ------ ------ ------ ------ ------
Total........................................... $14,270 13,447 12,299 3,154 3,012 2,735
======= ====== ====== ====== ====== ======
</TABLE>
<PAGE>
46
(13) Other Financial Data
Items reported in earnings during the years ended September 30, 1999, 1998 and
1997, included the following:
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------ ------
<S> <C> <C> <C>
Depreciation and other amortization...................................................................... $ 508.1 459.4 421.0
Goodwill amortization.................................................................................... 129.4 103.1 90.6
Research, new product development and product improvement costs.......................................... 510.3 491.3 445.1
Rent expense............................................................................................. 177.4 170.4 156.9
Interest revenue......................................................................................... 16.1 25.1 18.4
Other assets, other are summarized as follows: 1999 1998
-------- ------
Equity and other investments............................................................................ $ 235.1 187.9
Retirement plans........................................................................................ 271.3 205.9
Leveraged leases........................................................................................ 185.5 187.5
Other................................................................................................... 389.8 362.9
-------- ------
Total................................................................................................ $1,081.7 944.2
======== ======
Other liabilities are summarized as follows: 1999 1998
-------- ------
Minority interest....................................................................................... $ 297.2 619.9
Postretirement plans, excluding current portion......................................................... 313.1 292.7
Deferred taxes.......................................................................................... 333.9 306.6
Other................................................................................................... 591.3 559.0
-------- -------
Total................................................................................................ $1,535.5 1,778.2
======== =======
</TABLE>
Accrued expenses include employee compensation of $316.8 and $295.2 at September
30, 1999 and 1998, respectively. 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 $83 in
2000 and decline substantially thereafter.
(14) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Financial Results Net Sales Gross Profit Net Earnings
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
First Quarter.................................... $ 3,426.7 3,171.5 1,215.1 1,141.7 302.4 282.3
Second Quarter................................... 3,588.7 3,382.4 1,278.9 1,222.7 325.9 307.6
Third Quarter.................................... 3,634.0 3,465.2 1,294.0 1,254.1 345.1 324.8
Fourth Quarter................................... 3,620.1 3,428.1 1,287.7 1,233.1 340.2 313.9
--------- -------- -------- -------- ------- -------
Fiscal Year..................................... $14,269.5 13,447.2 5,075.7 4,851.6 1,313.6 1,228.6
========= ======== ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Basic Earnings per Diluted Earnings per Dividends per
Common Share Common Share Common Share
------------------ -------------------- --------------
1999 1998 1999 1998 1999 1998
------ ------ ------ ------ ---- ----
<S> <C> <C> <C> <C> <C> <C>
First Quarter.................................... $ .69 .64 .69 .64 .325 .295
Second Quarter................................... .75 .70 .74 .69 .325 .295
Third Quarter.................................... .80 .74 .79 .73 .325 .295
Fourth Quarter................................... .79 .72 .78 .71 .325 .295
------ ------ ------ ------ ---- ----
Fiscal Year..................................... $ 3.03 2.80 3.00 2.77 1.30 1.18
====== ====== ====== ====== ==== ====
</TABLE>
See Note 2 for information regarding non-recurring items and the Company's
acquisition and divestiture activities.
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Stock Prices
(per common share) 1999 1998
-------------------- -------------------
High Low High Low
--------- ------- -------- -------
<S> <C> <C> <C> <C>
First Quarter.......................................................... $66 15/16 58 5/16 58 1/4 49 3/4
Second Quarter......................................................... 65 51 7/8 66 1/4 55 1/2
Third Quarter.......................................................... 71 7/16 51 7/16 67 7/16 58 9/16
Fourth Quarter......................................................... 65 7/8 59 1/8 63 3/4 54 1/2
Fiscal Year........................................................... $71 7/16 51 7/16 67 7/16 49 3/4
</TABLE>
Emerson Electric Co. common stock (symbol EMR) is listed on the New York Stock
Exchange and Chicago Stock Exchange.
<PAGE>
47
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, 1999 and 1998, 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, 1999. 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, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended September 30, 1999, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
St. Louis, Missouri
November 1, 1999
<PAGE>
52
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, are subject to
risk and uncertainties and Emerson undertakes no obligation to update any such
statement to reflect later developments. 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 technological factors, among others, the absence of which 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) continuation of the current and
projected future business environment, including interest rates and capital and
consumer spending; (ii) competitive factors and competitor responses to Emerson
initiatives; (iii) successful development and market introductions of
anticipated new products; (iv) stability of government laws and regulations,
including taxes; (v) stable 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 and
(viii) timely resolution of the Year 2000 issues by the Company, its customers
and suppliers.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF EMERSON ELECTRIC CO.
SEPTEMBER 30, 1999
Jurisdiction
of
Legal Name Incorporation
- ---------- -------------
ADI Control Techniques Drives, Inc. California
Alco Controls S.A. de C.V. Mexico
Applied Concepts, Inc. Pennsylvania
Astec International Holdings Limited UK
Astec America Inc. Delaware
AAI Export Inc. Barbados
BI Technologies Corporation Delaware
BI Technologies S.A. de C.V. Mexico
ENI Technology Inc. Delaware
Emersub LXXV, Inc. Delaware
Astec America de Mexico, S.A. de C.V. Mexico
Astec Electronics (Malaysia) Sdn Bhd Malaysia
Astec Germany GmbH Germany
Astec International Limited Hong Kong
Astec Advanced Power Systems B.V. Netherlands
Astec Advanced Power Systems Ltd. Canada
Astec Advanced Power Systems Ltda. Brazil
Astec Advanced Power Systems (Malaysia) Sdn Bhd Malaysia
Astec Advanced Power Systems (Penang) Sdn Bhd Malaysia
Astec Agencies Limited Hong Kong
Astec Custom Power (Hong Kong) Limited Hong Kong
Astec Custom Power (Philippines) Inc. Philippines
Astec Custom Power (Singapore) Pte Ltd Singapore
Astec Electronics Company Limited China
Astec Electronics (Luoding) Co. Ltd. China
Astec Japan Limited Japan
Astec Pekan Sdn Bhd Malaysia
Astec Power Supply (Shenzhen) Co. Ltd. China
BI Technologies Corporation Sdn Bhd Malaysia
BI Technologies Pte Ltd. Singapore
ENI Taiwan Limited Taiwan
Astec Power Inc. BVI
BI Technologies GmbH Germany
BI Technologies S.r.l. Italy
BI Technologies Japan Limited Japan
ENI Japan Limited Japan
Stourbridge Holdings (UK) Limited UK
BI Technologies Limited UK
Brandenburg Limited UK
Mirroware Manufacturing Limited UK
Astec Europe Ltd. UK
Astec International PLC UK
Astec France S.A.R.L. France
BI Technologies S.A.R.L. France
Branson Ultrasonic S.A. Switzerland
Brooks Instrument Canada Limited Canada
Buehler Ltd. Illinois
Buehler Holdings Delaware
Wirtz-Buehler Corporation Delaware
Clairson International Corp. Florida
Clairson, Inc. Delaware
Clairson de Mexico, S.A. de C.V. Mexico
Clairson (Hong Kong) Limited Hong Kong
Commercial Cam Co., Inc. Delaware
Compania de Motores Domesticos S.A. de C.V. Mexico
Computational Systems, Incorporated Tennessee
CSI Services, Inc. Tennessee
CSI Technology, Inc. Delaware
CTL Japan Japan
Canada Systems de Mexico Mexico
Computational Systems, Inc. Europe Belgium
Data Analysis Products, N.V. Belgium
Controles Electromecanicos de Mexico S.A. de C.V. Mexico
Control Techniques (USA) Inc. Delaware
Control Techniques Drives, Inc. Delaware
Control Techniques Drives Limited Canada
Control Techniques Iberia S.A. Spain
Daniel Industries, Inc. Delaware
Bettis Corporation Delaware
Bettis Canada Ltd. Canada
Bettis Electric Actuator Corporation Delaware
Bettis Foreign Sales Corp. Barbados
Bettis France SARL France
Bettis GmbH Germany
Bettis Holdings, Ltd. UK
Bettis UK Ltd. UK
Prime Actuator Control Systems Ltd. UK
Prime Actuator Control Systems UK Ltd. UK
Dantorque A/S Denmark
Dantorque UK Ltd. UK
Hytork Controls, Inc. Delaware
Prime Actuator Control Systems, Inc. Delaware
Shafer Valve Company Ohio
Shafer Valve Company of Houston Texas
Shafer Valve Company de Mexico Mexico
Daniel Automation Company Delaware
Daniel de Mexico, S.A. de C.V. Mexico
Daniel Industrial, Inc. Delaware
Daniel En-Fab Systems, Inc. Delaware
Daniel International Ltd. UK
Daniel Europe Ltd. UK
Spectra-Tek International Limited UK
Daniel Asia Pacific Ltd. Singapore
Greenfield (UK) Ltd. UK
Wagon Greenfield Sdn. Bhd. Malaysia
Spectra-Tek Holdings Ltd. UK
Spectra-Tek UK Ltd. UK
Daniel Measurement and Control, Inc. Delaware
Daniel Industries Canada Inc. Canada
Daniel Measurement Services, Inc. Delaware
Metco Services, Ltd. UK
Daniel Valve Company Delaware
Oilfield Fabricating & Machine, Inc. Texas
Danmasa S.A. de C.V. Mexico
Hytork International plc UK
Hytork Controls, Inc. Florida
Hytork Controls Ltd. UK
Hytork Controls (Australia) Pty. Ltd. Australia
Hytork LLC Delaware
Hytork Services Limited UK
Valcon Limited UK
Digital Appliance Controls Manufacturing (Singapore) Pte Ltd. Singapore
DACM SDN BHD Malaysia
EECO, Inc. Delaware
Apple JV Holding Corp. Delaware
EGS Electrical Group LLC Delaware
Appleton Electric LLC Delaware
Appleton Electric, S.A. de C.V. Mexico
Appleton Holding Corp. Delaware
EGS Electrical Group Canada Ltd. Canada
Easy Heat Ltd. Canada
EGS Holding S.A.R.L. France
ATX S.A. France
Easy Heat, Inc. Delaware
GSEG LLC Delaware
O-Z Gedney LLC Delaware
Easy Heat Holding B.V. Netherlands
Easy Heat Europe B.V. Netherlands
Easy Heat Polska Sp. z.o.o. Poland
Conameter Corporation New Jersey
Copeland Corporation Delaware
CDP International, Inc. Delaware
Computer Process Controls, Inc. Georgia
Copeland Access +, Inc. Delaware
CopelandBitzer L.P. Delaware
CopelandBitzer Management LLC Delaware
Copeland de Mexico S.A. de C.V. Mexico
Copeland Redevelopment Corporation Missouri
Newcope, Inc. Delaware
Electro-Test, Inc. California
El-O-Matic USA, Inc. Delaware
Emerson Electric (U.S.) Holding Corporation Delaware
Automatic Switch Company Delaware
Asco Investment Corp. New Jersey
Angar Scientific Company, Inc. New Jersey
Asco Controls A.G. Switzerland
Asco Controls B.V. Netherlands
Asco Mideast B.V. Netherlands
Asco Magnesszelep Kft. Hungary
Asco/Joucomatic SP. z.o.o. Poland
Asco/Joucomatic Czech Republic Czech Republic
Asco/Joucomatic Zuid Afrika B.V. Netherlands
Asco Electrical Products Co., Inc. New Jersey
Ascomation Pty. Ltd. Australia
Ascomation (NZ) Limited New Zealand
Asco Sweden AB Sweden
Asco (Japan) Company Ltd. Japan
Asco Services, Inc. New Jersey
ASCO Valve Enterprises LLC Delaware
ASCO Valve Investment, Inc. Delaware
ASCO Valve, L.P. Delaware
ASCO Valve Manufacturing, Inc. Delaware
ASCO Valve Sales, Inc. Delaware
Ascomatica S.A. de C.V. Mexico
Ascoval Industria E Commercio Ltda. Brazil
Firetrol, Inc. North Carolina
Joucomatic Controls, Inc. North Carolina
Branson Ultrasonics Corporation Delaware
American Technology, Inc. Connecticut
Amtech S.a.r.L. France
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
Camco Vertriebs-GmbH Germany
Camco Vertriebs-GmbH & Co. Germany
Chromalox GmbH Germany
Copeland GmbH Germany
Copeland France S.A. France
Copeland Corporation Limited UK
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. de C.V. Mexico
U.S.E.M. de Mexico S.A. de C.V. Mexico
Emerson Technologies Verwaltungs GmbH Germany
AmTech American Technologies GmbH & Co. Germany
Emerson Technologies GmbH & Co. Germany
Fisher-Rosemount GmbH Germany
Fisher-Rosemount GmbH & Co. Germany
Heraeus Sensor GmbH Germany
KVT Technologies, GmbH Germany
KVT Technologies GmbH & Co. Germany
Krautkramer GmbH Germany
Krautkramer GmbH & Co. Germany
Liebert GmbH Germany
Liebert A.G. Switzerland
PEPT Investment Corporation Delaware
Skil Europe Corporation Delaware
Reglerwerk Dresden GmbH Germany
Ridge Tool GmbH Germany
Ridge Tool GmbH & Co. Germany
RIDGID Peddinghaus Werkzeug GmbH Germany
Rosemount Inc. Minnesota
Dieterich Standard, Inc. Delaware
Dieterich Technology Holding Corp. Delaware
Fisher-Rosemount AB Sweden
Fisher-Rosemount AS (Norway) Norway
Fisher-Rosemount, S.A. Spain
Rosemount Portugal Instrumentos Lda. Portugal
Fisher-Rosemount Holding AG Switzerland
Fisher-Rosemount AG Switzerland
Fisher Rosemount Proses Kontrol
Ticaret Limited Sirketi Turkey
Fisher-Rosemount Sro Czech Republic
Fisher-Rosemount A/S Denmark
Fisher-Rosemount Ges. M.B.H. Austria
Westinghouse Electric GES m.b.H. Austria
Rosemount Poland Ltd. Poland
Westinghouse Electric Poland Sp. z.o.o. Poland
Westinghouse Process Control (Asia) S.A. Switzerland
Fisher-Rosemount Instruments Pty. Ltd. Australia
Emerson Electric Australia Co. Pty. Ltd. Australia
Fisher-Rosemount Ltd. New Zealand
Fisher-Rosemount Japan Co. Ltd. Japan
Fisher-Rosemount Korea Ltd. Korea
Fisher-Rosemount Middle East, Inc. Delaware
Fisher-Rosemount Singapore Private Limited Singapore
Fisher-Rosemount Manufacturing (M) SDN BHD Malaysia
Rosemount Shanghai International Trade
Co. Ltd. China
Westinghouse Electric (Singapore) Ltd. Singapore
Fisher-Rosemount Taiwan, Ltd. Taiwan
Rosemount Instruments Corporation BVI
P I Components Corp. Texas
Rosemount Analytical Inc. Delaware
Rosemount China Inc. Minnesota
Rosemount Nuclear Instruments, Inc. Delaware
Rosemount Shanghai Co. Ltd. China
Tekmar Company Ohio
Wirtz-Buehler GmbH Germany
Xomox Corporation Ohio
Fisher-Rosemount do Brasil
Industria e Comercio Ltda. Brazil
Fisher-Rosemount S.A. de C.V. Mexico
Flow Technology, Inc. (Taiwan) Ohio
Flow Technology S.A. de C.V. Mexico
Xomox France S.A. France
Xomox A.G. Switzerland
Xomox Chihuahua S.A. de C.V. Mexico
Xomox Corporation de Venezuela, C.A. Venezuela
Xomox South America S.A. Uruguay
Xomox Uruguay S.A. Uruguay
Xomox International GmbH Germany
Xomox International GmbH & Co. Germany
Pfannenschmidt GmbH Germany
Emerson Power Transmission Corporation Delaware
Emerson Chain, Inc. Delaware
Emerson Motion Control, Inc. Minnesota
Emerson Power Transmission Drives and
Components, Inc. Delaware
Emerson Power Transmission Ithaca, Inc. Delaware
McGill Manufacturing Company, Inc. Indiana
Emerson Power Transmission Bearings, Inc. Delaware
Emerson Power Transmissions
Manufacturing, L.P. Missouri
Emersub LXXII, Inc. Delaware
McGill International, Inc. Taiwan
Environmental Remediation Management, Inc. Delaware
Krautkramer-Branson, Incorporated Connecticut
Liebert Corporation Ohio
Control Concepts Corporation Delaware
Computersite-Preparations, Inc. Ohio
Global Energy Services, Inc. Delaware
Liebert Asia Ltd. Hong Kong
Wuhan Liebert Computer Power Support System
Limited China
Liebert Corporation Australia Pty, Ltd. Australia
Atlas Air Australia Pty. Ltd. Australia
Rougemont Enterprises Pte. Ltd. Singapore
Liebert Far East Pte. Ltd. Singapore
Atlas Air (S.E.A.) Pte Ltd. Singapore
Liebert (Malaysia) Sdn. Bhd. Malaysia
Liebert Field Services, Inc. Delaware
Liebert Global Services, Inc. Delaware
Liebert International B.V. Netherlands
Liebert North America, Inc. Delaware
Liebert Property Holdings, LLC Delaware
Liebert Tecnologia Ltda. Brazil
Liebert (Thailand) Co. Ltd. Thailand
Northeast Electrical Testing, Inc. Delaware
Micro Motion, Inc. Colorado
Ridge Tool Company Ohio
Emerson Electric SRL Italy
Ridge Tool (Australia) Pty., Ltd. Australia
Ridge Tool Manufacturing Company Delaware
Ridge Tool Pattern Company Delaware
Ridge Werkzeuge AG Switzerland
Ridgid, Inc. Delaware
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. West Virginia
Fairmont Building and Investment Corp. West Virginia
Emermex S.A. de C.V. Mexico
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 Foreign Sales Corporation Virgin Islands
Emerson Electric International, Inc. Delaware
Emerson Electric Ireland Ltd. Bermuda
Emersub Treasury Ireland Ireland
Emerson Electric (Mauritius) Ltd. India
Emerson Electric Company India Private Ltd. India
Westinghouse Electric Private Ltd. (India) India
Westinghouse Electric Private Ltd. (Mauritius) India
Emerson Electric Nederland B.V. Netherlands
Branson Ultrasonics B.V. Netherlands
Beckman Industrial B.V. Netherlands
Brooks Instrument B.V. Netherlands
Emerson Computer Power B.V. Netherlands
Capax Electrische Apparatenfabriek B.V. Netherlands
Crouzet Appliance Controls D.O.O. Slovenia
Emerson Electric RG Russia
Emerson Electric Slovakia Limited Slovakia
Vuma a.s. Czech Republic
Emerson Electric, SpoL, s.r.o. Czech Republic
Fisher-Rosemount B.V. Netherlands
Fisher-Rosemount Manufacturing B.V. Netherlands
Fisher-Rosemount Temperature B.V. Netherlands
Fusite, B.V. Netherlands
New-Tech Cuijk B.V. Netherlands
El-O-Matic B.V. Netherlands
El-O-Matic Valve Actuators (F.E.) Pte. Ltd. Singapore
El-O-Matic S.A. (Proprietary) Ltd. South Africa
Va-con (Pty.) Ltd. South Africa
Therm-O-Disc Europe B.V. Netherlands
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 Global Finance Company Missouri
Emerson Middle East, Inc. Delaware
Emerson Pacific Pte. Ltd. Singapore
Emerson Sice S.p.A. Italy
Branson Ultrasuoni S.P.A. Italy
C.E. Set S.R.L. Italy
CODI S.p.A. Italy
Plaset, S.p.A. Italy
Fisher-Rosemount Italia S.R.L. Italy
Hiross Holding AG Austria
Hiross International Corporation BV Netherlands
Hiross Management SA Switzerland
Hiross S.p.A. Italy
Hiross AG Switzerland
Hiross Ltd. UK
Hiross SA France
Hiross Austria GmbH Austria
Hiross Hungaria Kft Hungary
Hiross Batliboi Ltd. India
Hiross Deutschland GmbH Germany
Hiross Flexible Space System S.r.l. Italy
Mecanotronic GmbH Austria
Suvretta S.p.A. Italy
Sirai Elettromeccanica s.r.l. Italy
Sirai Deutschland GmbH Germany
Xomox Italia S.R.L. Italy
Emersub XLIII, Inc. Ohio
Emersub XLV, Inc. Delaware
Valycontrol, S.A. de C.V. Mexico
Filcore, Inc. Texas
Emersub XLVI, Inc. Nevada
Wilson Investment 2, Inc. Delaware
Copesub, Inc. Delaware
Alliance Compressors LLC Delaware
Emersub LII, Inc. Delaware
Emersub LIV, Inc. Delaware
Emersub LXVI, Inc. Nevada
Emersub LXXIII, Inc. Illinois
Emersub LXXVI, Inc. Delaware
Lipe-Rollway Corporation New York
Lipe-Rollway International Ltd. Delaware
Lipe-Rollway Australia Pty. Ltd. Australia
Lipe-Rollway de Mexico, S.A. de C.V. Mexico
Lipe-Rollway Deutschland GmbH Germany
Lipe-Rollway N.V. Belgium
Emersub LXXVIII, Inc. Delaware
Emersub LXXIX, Inc. Delaware
Emersub LXXX, Inc. Delaware
Emersub LXXXIV, Inc. Delaware
Emersub LXXXV, Inc. Delaware
Emersub LXXXVI, Inc. Delaware
Emersub LXXXVII, Inc. Delaware
Emersub LXXXVIII, Inc. Delaware
Emsub, Inc. Delaware
EMR Foundation, Inc. Delaware
EMR Holdings, Inc. Delaware
Branson de Mexico, S.A. de C.V. Mexico
Copeland Compresores Hermeticos, S.A. de C.V. Mexico
Copeland Korea, Inc. Korea
Digital Appliance Controls, S.A. de C.V. Mexico
EMR Manufacturing (M) Sdn Bhd Malaysia
Emerson Argentina S.A. Argentina
Emerson Electric Canada Limited Canada
Ascolectric Limited Canada
Ascolectric Brantford Ltd. Canada
Fisher Controls Inc. (Controles Fisher Inc.) Canada
Fisher-Rosemount Instruments Ltd. Canada
KVT Technologies, Inc. Canada
Tech-Met Canada Limited Canada
Thermo-O-Disc (Canada) Limited Canada
Xomox Canada Ltd. Canada
Emerson Electric Chile Ltda. Chile
Emerson Electric (China) Holdings Ltd. China
Beijing Rosemount Far East Instrument Co., Ltd. China
Clairson (Jiangmen) Storage Limited China
Emerson Electric (Suzhou) Co. Ltd. China
Emerson Electric (Tianjin) Co., Ltd. China
Emerson Engineering System (Shanghai) Co., Limited China
Emerson Electric (Shenzhen) Co., Limited China
Emerson Machinery & Equipment (Shenzhen) Co. Ltd. China
Emerson Trading (Shanghai) Co. Ltd. China
Emerson Fusite Electric (Shenzhen) Co. Ltd. China
Emerson White-Rodgers Electric (Xiamen) Co., Ltd. China
Ridge Tool (Hangzhou) Co., Ltd. China
Shanghai Branson Ultrasonics Co., Ltd. China
Shenyang Copeland Refrigeration Co., Ltd. China
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 do Brasil Ltda. Brazil
Copeland do Brasil Ltda. Brazil
Emerson Electric Hungary Ltd. Hungary
Emerson Electric Korea Ltd. Korea
Emerson Electric (M) SDN BHD Malaysia
Emerson Electric Poland Sp. z.o.o. Poland
Emerson Electric (Thailand) Limited Thailand
Emerson Europe S.A. France
Asco Joucomatic S.A. France
Asco Joucomatic GmbH Germany
Asco Joucomatic GmbH & Co. Germany
Joucomatic Controls Pty. Limited Australia
Asco Joucomatic S.p.A. Italy
Asco Joucomatic N.V. Belgium
Fluidocontrol S.A. Spain
Sotrac S.r.l. Italy
Crouzet Appliance Controls S.A. France
Crouzet Appliance Controls SpA Italy
Francel S.A. France
CD GAZ Systemes S.A. France
Leroy-Somer S.A. France
Bertrand Polico S.A. France
Comercial Leroy-Somer Ltda. Chile
Constructions Electriques DeBeaucourt S.A.S. France
Electronique du Sud-Quest S.A. France
Atelier de Bobinage de Moteurs Electriques
S.a.r.L. France
Diffusion Mecanique Electricite S.A. France
Electro Maintenance Courbon S.A. France
Etablissements Belzon & Richardot S.A.R.L. France
Etablissements de Cocard S.A. France
Etablissements J. Michel S.A.R.L. France
Etablissements Suder et Fils S.A.R.L. France
Houssin S.A.R.L. France
Leroy-Somer Canada Ltd. Canada
Lorraine Services Electrique Electronique
Electromecanique S.a.r.l. France
M.I.S. Kerebel Provence S.A.R.L. France
M.I.S. Poitouraine S.A.R.L. France
M.I.S. SPIRE S.A.R.L. France
M.L.S. Holice Spol. s.r.o. Czech Republic
Maintenance Industrie Service S.a.r.L. France
Maintenance Industrie Service Flandres SARL 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
Marcel Oury S.A.R.L. France
MEZIERES S.A.R.L. France
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
Sud Bobinage 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 A/S Denmark
Leroy-Somer A/S Norway
Leroy-Somer BV Netherlands
Leroy-Somer Elektroantriebe GmbH Austria
Leroy-Somer Elektromotoren GmbH Germany
Leroy-Somer Ltd. UK
Leroy-Somer Maroc S.A. Morocco
Leroy-Somer Motores E Sistemas Electromecanicos
Ltda. Portugal
Leroy-Somer N.V. Belgium
Leroy-Somer OY Finland
Leroy-Somer Pty. Ltd. South Africa
Leroy-Somer (Pty) Ltd. Australia
Leroy-Somer S.A. Switzerland
Leroy-Somer S.A. Spain
Leroy-Somer (SEA) Pte. Ltd. Singapore
Leroy-Somer S.p.A. Italy
Maintenance Industrielle de Vierzon S.A. France
MLS Industries Inc. Delaware
Yorba Linda International Inc. Delaware
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 Commerciale des Ateliers de Constructions
Electriques Dorleans S.A. France
Societe Confolentaise de Metalurgie S.A. France
Societe de Mecanique et D'Electrothermie des
Pays de L'Adour S.A. France
Liebert France S.A. France
Ridgid France S.A. France
Emerson Holding AG Switzerland
Fisher-Rosemount Europe Middle East & Africa GmbH Switzerland
Fisher-Rosemount Systems GmbH Switzerland
Emerson Laminaciones de Acero de Monterrey, S.A. de C.V. Mexico
Emersub Mexico, Inc. Nevada
Emersub 1 LLC Delaware
Intermetro de Mexico, S. de R.L. de C.V. Mexico
Emersub XXXVI, Inc. Delaware
Digital Appliance Controls (UK) Limited UK
Control Techniques Ltd. UK
Control Techniques (Holding) GmbH Germany
Control Techniques GmbH Germany
INAG Industrielle Antriebs-systeme
GmbH Germany
Reta Anlagenbau GmbH Germany
Reta Elektronic GmbH Germany
Control Techniques Asia-Pacific Pte. Ltd. Singapore
Control Techniques Drives (Malaysia)
Sdn Bhd Malaysia
Control Techniques Singapore Pte
Limited Singapore
Control Techniques (Thailand) Limited Thailand
PT Kontrol Teknik Indonesia Indonesia
Control Techniques Australia Pty Ltd. Australia
Control Techniques Bermuda Limited Bermuda
Control Techniques Drives Limited UK
K.T.K. (Newton) Limited UK
Control Techniques Dynamics Limited UK
Evershed Powerotor Limited UK
Moore Reed & Company Limited UK
Control Techniques Italia srl Italy
Control Techniques Precision Systems
Limited UK
Control Techniques SKS Oy Finland
Dynamec KY Finland
Mechatronics OY Finland
Sofftpoint KY Finland
Control Techniques SpA Italy
Control Techniques Sweden AB Sweden
Control Techniques Worldwide BV Netherlands
Control Technika Kft. Hungary
Control Techniques Automation BV Netherlands
Control Techniques BV Netherlands
Control Techniques Brno s.r.o. Czech Republic
Control Techniques China Pte. Ltd. Hong Kong
Control Techniques Denmark A/S Denmark
Control Techniques Elpro Automation Limited India
Control Techniques Endustriyel Control
Sistemieri Sanayii Ve Ticaret A.S. Turkey
Control Techniques GesbmH Austria
Control Techniques India Limited India
Control Techniques Norway A/S Norway
Control Techniques NV/SA Belgium
Control Techniques Vietnam Limited Vietnam
CTS Control Techniques Antriebsregelungen
GmbH Switzerland
DrivesShop Limited UK
Electric Drives Limited Ireland
Electric Drives Manufacturing Limited Ireland
Foray 600 Limited UK
Foray 606 Limited UK
Siliconics (Pty) Ltd. South Africa
Emerson Holding Company Limited UK
Asco Joucomatic Ltd. UK
Joucomatic Controls Ltd. UK
Computational Systems, Limited UK
Copeland Ltd. N. Ireland
El-O-Matic Limited UK
Emerson Electric (U.K.) Limited UK
Liebert Ltd. UK
Liebert Swindon Ltd. UK
Fisher-Rosemount Limited UK
Emerson U.K. Trustees Limited UK
Farris Engineering Ltd. UK
Fisher-Rosemount Manufacturing Ltd. UK
Fisher Governor Company Ltd. UK
Westinghouse Process Control UK Ltd. UK
Xomox Limited UK
Pactrol Control Limited UK
Switched Reluctance Drives Ltd. (SDRL) UK
SR Drives Manufacturing Ltd. UK
Reluctance Motors Ltd. UK
F-R Technologias de Flujo, S.A. de C.V. Mexico
Fisher-Rosemount del Peru S.A.C. Peru
Fisher-Rosemount Hungary Ltd. Hungary
Fisher-Rosemount Manufacture Ltd. Hungary
Liebert Europe Espana S.A. Spain
Motoreductores U.S., S.A. de C.V. Mexico
P.T. Emerson Electric Indonesia Indonesia
Rey-Lam, S. de R.L. de C.V. Mexico
Rotores S.A. de C.V. Mexico
Termotec de Chihuahua S.A. de C.V. Mexico
Wilson Investment 1, Inc. Delaware
Etirex S.A. France
Fisher Controls International, Inc. Delaware
Exac Corporation California
Fisher Controles Industria E Commercio Ltda. Brazil
Fisher-Rosemount Do Brasil Ltda. Brazil
Fisher Controls De Mexico, S.A. de C.V. Mexico
Fisher-Rosemount China Limited Hong Kong
Tianjin Fisher Controls Valve Co. Ltd. China
Fisher Controls Pty. Limited Australia
Fisher Service Company Delaware
Fisher-Rosemount Systems, Inc. Delaware
Orion CEM, Inc. Delaware
Westinghouse Process Control, Inc. Delaware
Westinghouse International Process Control Corp. Delaware
Fisher-Rosemount de Venezuela S.A. Venezuela
Fro-Mex, S.A. de C.V Mexico
H.D. Baumann Inc. Delaware
Mountain Controls Group Co. West Virginia
Nippon Fisher Company Ltd. Japan
Fisco Ltd. (Fisco Kabushiki Kaisha) Japan
Fisher Rosemount, Inc. Delaware
Fisher-Rosemount N.V./S.A. Belgium
Senpro N.V. Belgium
Fisher-Rosemount S.A. France
Fusite Corporation Ohio
Emerson Japan, Ltd. Japan
F-R Intex Co. Ltd. Japan
Taiyo Emerson Ltd. Japan Japan
Fusite Land Company Delaware
High Voltage Maintenance Corporation Ohio
Humboldt Hermetic Motor Corp. Delaware
Innoven III Corporation Delaware
Intellution, Inc. Massachusetts
Intellution Australia Pty Ltd. Australia
Intellution GmbH Germany
Intellution Korea Limited Korea
Intellution K.K. (Japan) Incorporated Japan
Intellution Limited UK
Intellution SARL France
Intellution South Asia Pte. Ltd. Singapore
Wizdom Controls, Inc. Delaware
Kato Engineering, Inc. Delaware
Kop-Flex, Inc. Delaware
Kop-Flex Canada Limited Canada
Louisville Ladder Holding Corp.-Nevada Nevada
Louisville Holding Corp.- Delaware Delaware
MagneTek China Limited Cayman Islands
MagneTek Fuzhou Generator Company Limited China
Metaloy, Inc. Massachusetts
Metropolitan International, Inc. Nevada
InterMetro Industries Corporation Nevada
InterMetro Industries Corporation Delaware
Metro Industries, Inc. Nevada
Metropolitan Wire (Canada) Ltd. Canada
Metropolitan Wire Corporation Pennsylvania
Motores Hermeticos del Sur, S.A. de C.V. Mexico
PC & E, Inc. Missouri
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
SWECO Europe, S.A. Belgium
Termocontroles de Juarez S.A. de C.V. Mexico
The Sulton Company, Inc. Delaware
Transmisiones de Potencia Emerson S.A. de C.V. Mexico
Vermont American Corporation Delaware
Carbbits, Inc. South Carolina
Credo Tool Company Delaware
Carbide Blast Joints, Inc. Texas
DML Industrial Products, Inc. North Carolina
Vermont American Corporation, Fountain Inn Delaware
Primark DML, Inc. North Carolina
VAC Data Management, Inc. Delaware
VAC Services LP Kentucky
Gilmour Enterprises, Inc. Delaware
Gilmour Manufacturing Company Pennsylvania
Gilmour, Inc. Delaware
VA Export, Ltd. Virgin Islands
VA Holding Company Delaware
VA (Hong Kong) Limited Hong Kong
Vermont American Asia-Pacific, Inc. Delaware
Vermont American (Australia) Ltd. Nevada
Vermont American Canada Inc. Canada
Vermont American Tool Company Delaware
Vermont Westa Werkzeugbau GmbH Germany
Wer Canada Inc. Canada
Western Forge Corporation Delaware
White-Rodgers Limited Canada
Wiegand S.A. de C.V. Mexico
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors
Emerson Electric Co.:
We consent to incorporation by reference in Registration Statement
Nos. 333-46919, 333-72591, 333-44163, 33-57161, 33-38805, 33-34948
33-34633, 33-57985, 33-60399 and 33-2739 on Form S-8 and Registration
Statement Nos. 333-84673, 333-66865, 33-62545 and 33-39109 on Form S-3
of Emerson Electric Co. of our report dated November 1, 1999,
relating to the consolidated balance sheets of Emerson Electric Co.
and subsidiaries as of September 30, 1999 and 1998, 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,
1999, which report is incorporated by reference in the September 30, 1999
annual report on Form 10-K of Emerson Electric Co.
/s/ KPMG LLP
St. Louis, Missouri
December 17, 1999
<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, 1999.
Dated: October 5, 1999.
-----------------
Signature Title
--------- -----
/s/C. F. Knight Chairman of the Board and Chief Executive
- ----------------------------- Officer and Director
C. F. Knight
/s/W. J. Galvin Senior Vice President of Finance and Chief
- ----------------------------- Financial Officer
W. J. Galvin
/s/J. G. Berges Director
- -----------------------------
J. G. Berges
/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
<PAGE>
/s/J. A. Frates Director
- -----------------------------
J. A. Frates
/s/R. B. Horton Director
- -----------------------------
R. B. Horton
/s/G. A. Lodge Director
- -----------------------------
G. A. Lodge
/s/R. B. Loynd Director
- -----------------------------
R. B. Loynd
/s/V. R. Loucks, Jr. Director
- -----------------------------
V. R. Loucks, Jr.
/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/G. W. Tamke Director
- -----------------------------
G. W. Tamke
/s/W. M. Van Cleve Director
- -----------------------------
W. M. Van Cleve
/s/E. E. Whitacre, Jr. Director
- -----------------------------
E. E. Whitacre, Jr.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1999
EMERSON ELECTRIC CO. CONSOLIDATED STATEMENT OF EARNINGS AND CONSOLIDATED
BALANCE SHEET FILED WITH THE COMPANY'S 1999 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-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 266,100
<SECURITIES> 0
<RECEIVABLES> 2,576,800
<ALLOWANCES> 60,500
<INVENTORY> 1,921,100
<CURRENT-ASSETS> 5,124,400
<PP&E> 6,377,800
<DEPRECIATION> 3,223,400
<TOTAL-ASSETS> 13,623,500
<CURRENT-LIABILITIES> 4,590,400
<BONDS> 1,317,100
<COMMON> 238,300
0
0
<OTHER-SE> 5,942,200
<TOTAL-LIABILITY-AND-EQUITY> 13,623,500
<SALES> 14,269,500
<TOTAL-REVENUES> 14,269,500
<CGS> 9,193,800
<TOTAL-COSTS> 9,193,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 189,700
<INCOME-PRETAX> 2,020,900
<INCOME-TAX> 707,300
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,313,600
<EPS-BASIC> 3.03
<EPS-DILUTED> 3.00
</TABLE>
