<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to __________________
Commission file number 1-278
EMERSON ELECTRIC CO.
(Exact name of registrant as specified in its charter)
Missouri 43-0259330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8000 W. Florissant Ave.
P.O. Box 4100
St. Louis, Missouri 63136
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 553-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
Common stock outstanding at June 30, 2000: 427,160,437 shares.
1
<PAGE>
PART I. FINANCIAL INFORMATION FORM 10-Q
Item 1. Financial Statements.
EMERSON ELECTRIC CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 2000 AND 1999
(Dollars in millions except per share amounts; unaudited)
Three Months Nine Months
-------------------- -------------------
2000 1999 2000 1999
--------- -------- -------- --------
Net sales $ 4,041.8 3,634.0 11,479.8 10,649.4
--------- -------- -------- --------
Costs and expenses:
Cost of sales 2,605.1 2,340.0 7,408.2 6,861.4
Selling, general and
administrative expenses 767.3 695.5 2,212.5 2,085.6
Interest expense 83.2 48.9 204.2 138.6
Other deductions, net 12.1 15.4 46.2 52.9
--------- -------- -------- --------
Total costs and expenses 3,467.7 3,099.8 9,871.1 9,138.5
--------- -------- -------- --------
Income before income taxes 574.1 534.2 1,608.7 1,510.9
Income taxes 200.4 189.1 557.3 537.5
--------- -------- -------- --------
Net earnings $ 373.7 345.1 1,051.4 973.4
========= ======== ======== ========
Basic earnings per common share $ .88 .80 2.46 2.24
========= ======== ======== ========
Diluted earnings per common share $ .87 .79 2.44 2.22
========= ======== ======== ========
Cash dividends per common share $ .3575 .325 1.0725 .975
========= ======== ======== ========
See accompanying notes to consolidated financial statements.
____________________________________________________________________________
Note: Diluted earnings per
common share, excluding
goodwill amortization $ .96 .86 2.68 2.42
========= ======== ======== ========
2
<PAGE>
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(Dollars in millions except per share amounts; unaudited)
June 30, September 30,
ASSETS 2000 1999
------ --------- --------
CURRENT ASSETS
Cash and equivalents $ 402.5 266.1
Receivables, less allowances of $68.6 and $60.5 2,803.7 2,516.3
Inventories 2,011.4 1,921.1
Other current assets 446.6 420.9
--------- --------
Total current assets 5,664.2 5,124.4
--------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 3,140.6 3,154.4
--------- --------
OTHER ASSETS
Goodwill 5,410.4 4,263.0
Other 1,099.0 1,081.7
--------- --------
Total other assets 6,509.4 5,344.7
--------- --------
$15,314.2 13,623.5
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings and current maturities
of long-term debt $ 3,353.6 1,953.7
Accounts payable 1,028.5 1,068.8
Accrued expenses 1,338.9 1,304.8
Income taxes 294.3 263.1
--------- --------
Total current liabilities 6,015.3 4,590.4
--------- --------
LONG-TERM DEBT 1,752.9 1,317.1
--------- --------
OTHER LIABILITIES 1,265.8 1,535.5
--------- --------
STOCKHOLDERS' EQUITY
Preferred stock of $2.50 par value per share.
Authorized 5,400,000 shares; issued - none -- --
Common stock of $.50 par value per share.
Authorized 1,200,000,000 shares; issued
476,677,006 shares 238.3 238.3
Additional paid in capital 52.7 23.9
Retained earnings 8,394.7 7,803.7
Accumulated other nonstockholder
changes in equity (470.5) (271.6)
Cost of common stock in treasury, 49,516,569
shares and 43,632,708 shares (1,935.0) (1,613.8)
--------- --------
Total stockholders' equity 6,280.2 6,180.5
--------- --------
$15,314.2 13,623.5
========= ========
See accompanying notes to consolidated financial statements.
3
<PAGE>
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2000 AND 1999
(Dollars in millions; unaudited)
2000 1999
OPERATING ACTIVITIES -------- --------
Net earnings $1,051.4 973.4
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 506.5 481.2
Changes in operating working capital (309.6) (232.1)
Other (102.3) (103.8)
-------- --------
Net cash provided by operating activities 1,146.0 1,118.7
-------- --------
INVESTING ACTIVITIES
Capital expenditures (455.6) (409.0)
Purchases of businesses, net of cash and
equivalents acquired (1,909.8)(1,123.8)
Divestiture of business interests and other, net 63.5 127.5
-------- --------
Net cash used in investing activities (2,301.9)(1,405.3)
-------- --------
FINANCING ACTIVITIES
Net increase in short-term borrowings 1,472.0 859.1
Proceeds from long-term debt 708.5 472.0
Principal payments on long-term debt (25.4) (222.4)
Dividends paid (460.5) (425.3)
Net purchases of treasury stock (384.1) (279.7)
-------- --------
Net cash provided by financing activities 1,310.5 403.7
-------- --------
Effect of exchange rate changes on cash and equivalents (18.2) 6.0
-------- --------
INCREASE IN CASH AND EQUIVALENTS 136.4 123.1
Beginning cash and equivalents 266.1 209.7
-------- --------
ENDING CASH AND EQUIVALENTS $ 402.5 332.8
======== ========
See accompanying notes to consolidated financial statements.
4
<PAGE>
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Notes to Consolidated Financial Statements
1. The accompanying unaudited consolidated financial statements, in
the opinion of management, include all adjustments necessary for
a fair presentation of the results for the interim periods presented.
These adjustments consist of normal recurring accruals. The
consolidated financial statements are presented in accordance
with the requirements of Form 10-Q and consequently do not include
all the disclosures required by generally accepted accounting
principles. For further information refer to the consolidated
financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended September 30, 1999.
2. Other Financial Information
(Dollars in millions; unaudited)
June 30, September 30,
2000 1999
Inventories --------- -------
-----------
Finished products $ 838.8 871.5
Raw materials and work in process 1,172.6 1,049.6
--------- -------
$ 2,011.4 1,921.1
========= =======
Property, plant and equipment, net
----------------------------------
Property, plant and equipment, at cost $ 6,322.0 6,377.8
Less accumulated depreciation 3,181.4 3,223.4
--------- -------
$ 3,140.6 3,154.4
========= =======
Other assets, other
-------------------
Equity and other investments $ 231.9 235.1
Retirement plans 297.2 271.3
Leveraged leases 181.6 185.5
Other 388.3 389.8
--------- -------
$ 1,099.0 1,081.7
========= =======
Other liabilities
-----------------
Minority interest $ 103.2 297.2
Postretirement plans, excl. current portion 310.7 313.1
Deferred taxes 318.0 333.9
Other 533.9 591.3
--------- -------
$ 1,265.8 1,535.5
========= =======
5
<PAGE>
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
3. Business Segment Information
Summarized information about the Company's operations by business
segment for the three and nine months ended June 30, 2000 and 1999,
follows (dollars in millions):
Sales Earnings
----------------- --------------
Three months ended June 30, 2000 1999 2000 1999
--------------------------- -------- ------- ------ ------
Process Control $ 744.1 709.8 63.4 73.6
Industrial Automation 860.3 823.2 119.2 112.4
Electronics and Telecommunications 976.7 510.4 131.7 63.1
HVAC 681.6 635.5 109.0 100.2
Appliance and Tools 867.3 775.7 140.2 133.1
-------- ------- ------ ------
4,130.0 3,454.6 563.5 482.4
Divested businesses 11.2 283.6 1.8 23.3
Differences in accounting
methods, interest income,
corporate and other 92.0 77.4
Eliminations/Interest expense (99.4) (104.2) (83.2) (48.9)
-------- ------- ------ ------
Net sales/Income
before income taxes $4,041.8 3,634.0 574.1 534.2
======== ======= ====== ======
Sales Earnings
------------------ ----------------
Nine months ended June 30, 2000 1999 2000 1999
-------------------------- --------- -------- ------- -------
Process Control $ 2,186.8 2,065.9 175.6 217.6
Industrial Automation 2,571.2 2,453.6 345.9 326.9
Electronics and Telecommunications 2,290.1 1,450.9 300.7 148.2
HVAC 1,893.3 1,810.6 294.7 276.0
Appliance and Tools 2,538.9 2,353.0 431.1 405.6
--------- -------- ------- -------
11,480.3 10,134.0 1,548.0 1,374.3
Divested businesses 282.7 809.3 20.4 63.8
Differences in accounting
methods, interest income,
corporate and other 244.5 211.4
Eliminations/Interest expense (283.2) (293.9) (204.2) (138.6)
--------- -------- ------- -------
Net sales/Income
before income taxes $11,479.8 10,649.4 1,608.7 1,510.9
========= ======== ======= =======
Divested businesses include F.G. Wilson, BI Technologies, Krautkramer,
Vermont American and a smaller business. Intersegment sales of the
Appliance and Tools segment for the three months ended June 30, 2000 and
1999, respectively, were $84.6 million and $81.4 million. Intersegment
sales of the Appliance and Tools segment for the nine months ended
June 30, 2000 and 1999, respectively, were $238.7 million and $233.9
million. Differences in accounting methods, interest income, corporate
and other for the three months ended June 30, 2000 and 1999, respectively,
6
<PAGE>
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
include accounting method differences of $48.1 million and $39.4 million,
and interest income, corporate and other of $43.9 million and $38.0
million. Differences in accounting methods, interest income, corporate
and other for the nine months ended June 30, 2000 and 1999, respectively,
include accounting method differences of $140.8 million and $121.9
million, and interest income, corporate and other of $103.7 million and
$89.5 million.
4. During the second quarter of fiscal 2000, the Company acquired Jordan
Telecommunication Products, Inc. (renamed Emerson Telecommunication
Products) for approximately $985 million. Emerson Telecom is 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.
Also in the second quarter, the Company acquired Knaack, a
manufacturer of professional tool storage equipment, and acquired
and divested other smaller businesses.
In the third quarter, the Company acquired Ericsson Energy Systems
(renamed Emerson Energy Systems), a global provider of power supplies,
power systems, switching equipment, climate control and energy
management systems, and site monitoring services to the tele-
communications industry, for approximately $725 million. Annual
1999 sales of all companies acquired in 2000 total more than $1
billion.
As of the third quarter, Vermont American (VA) is no longer consolidated
in the Company's results pending divestiture to the joint venture
partner, Robert Bosch GmbH. During the third quarter, the Company
received $86 million from the disposition of its interest in the
Krautkramer non-destructive testing business resulting in a pre-tax gain
of approximately $80 million ($46 million net of income taxes). The
Company also incurred costs for the rationalization of operations and
other items that substantially offset this gain. VA, BI Technologies
and Krautkramer represent total annual 1999 sales of nearly $600 million.
5. As reflected in the financial statements, nonstockholder changes in
equity for the three months ended June 30, 2000 and 1999, were $288.1
million and $296.3 million, comprised of net earnings of $373.7 million
and $345.1 million and foreign currency translation adjustments of
$(85.6) million and $(48.8) million, respectively. Nonstockholder
changes in equity for the nine months ended June 30, 2000 and 1999,
were $852.5 million and $910.4 million, comprised of net earnings of
$1,051.4 million and $973.4 million and foreign currency translation
adjustments of $(198.9) million and $(63.0) million, respectively.
6. The weighted average number of common shares outstanding (in millions)
was 425.7 and 432.7 for the three months ended June 30, 2000 and 1999,
and 427.8 and 434.3 for the nine months ended June 30, 2000 and 1999,
respectively. The weighted average number of shares outstanding
assuming dilution (in millions) was 429.7 and 437.5 for the three
months ended June 30, 2000 and 1999, and 431.7 and 438.9 for the nine
months ended June 30, 2000 and 1999, respectively. Dilutive shares
primarily relate to stock plans.
7
<PAGE>
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Items 2 and 3. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Results of Operations
Sales, net earnings and earnings per share for the third quarter and
first nine months of fiscal 2000 were the highest for any quarter and
first nine-month period in the Company's history.
Net sales were $4,041.8 million for the quarter ended June 30, 2000,
up 11.2 percent over net sales of $3,634.0 million for the quarter ended
June 30, 1999, and $11,479.8 million for the nine months ended June 30,
2000, up 7.8 percent over net sales of $10,649.4 million for the same
period a year ago. The third quarter results reflect strong domestic
and international growth, and the contribution of acquisitions.
The process control business registered a 5 percent increase in sales,
with the contribution of recent acquisitions more than offsetting market
weakness and the impact of currency exchange.
The industrial automation business experienced a 5 percent increase in
sales. Solid underlying sales growth was driven by strong increases in
the European, Asian and Latin American regions, and the Leroy Somer
division, which produces alternators for backup and distributed power
applications.
Sales in electronics and telecommunications business including
acquisitions increased 91 percent. Approximately one-third of the
increase was due to robust underlying growth in all businesses.
Reported sales in the heating, ventilating and air conditioning business
grew 7 percent, driven by strong underlying sales growth, with an
exceptionally large increase in Asia. Asia is an important market for the
Company's scroll compressor technology, and the Company recently dedicated
its newest scroll operation in Suzhou, China.
The appliance and tools business reported a 12 percent sales increase,
driven by strong growth in the tools operations. RIDGID(R) plumbing and
stationary power tools, ClosetMaid(TM) and Metro(R) storage products and
In-Sink-Erator(R) waste disposer products all achieved very strong
underlying growth. The combination of these leading brands and the
Company's relationships with key sales channels such as The Home Depot are
delivering this growth.
Cost of sales for the third quarter was $2,605.1 million or 64.5 percent
of sales, compared with $2,340.0 million, or 64.4 percent of sales,
for the third quarter of 1999. Cost of sales for the nine months ended
June 30, 2000, was $7,408.2 million or 64.5 percent of sales, compared
to $6,861.4 million or 64.4 percent of sales for the same period a year
ago. Selling, general and administrative expenses for the three months
ended June 30, 2000, were $767.3 million, or 18.9 percent of sales,
compared to $695.5 million, or 19.1 percent of sales for the same period
a year ago. For the first nine months of 2000, selling, general and
administrative expenses were $2,212.5 million or 19.3 percent of sales,
8
<PAGE>
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
compared to $2,085.6 million or 19.6 percent of sales for the same period
in 1999.
Earnings before interest and income taxes for the third quarter increased
12.7 percent. Solid underlying profit improvement enabled the Company to
increase profit margins 0.1 point over strong 1999 results. Earnings
before interest and income taxes in the process control business decreased
in the third quarter of 2000, resulting from a modest decline in
underlying sales due to continued weakness in capital spending and higher
rationalization of operations costs. Earnings before interest and income
taxes of the electronics and telecommunications business increased 109
percent compared to the third quarter of 1999, reflecting very strong
underlying sales growth and the recent Emerson Telecommunication Products
and Emerson Energy Systems acquisitions.
Financial Condition
A comparison of key elements of the Company's financial condition at
the end of the third quarter as compared to the end of the prior
fiscal year follows:
June 30, September 30,
2000 1999
-------- --------
Working capital (in millions) $ (351.1) $ 534.0
Current ratio 0.9 to 1 1.1 to 1
Total debt to total capital 44.8% 34.6%
Net debt to net capital 42.8% 32.7%
The Company's interest coverage ratio (earnings before income taxes
and interest expense, divided by interest expense) was 8.9 times for the
nine months ended June 30, 2000, compared to 11.9 times for the same
period one year earlier. The decreases in working capital and the
interest coverage ratio reflect higher average borrowings resulting from
acquisitions and share repurchases, partially offset by earnings growth.
In the third quarter of fiscal 2000, the Company issued $600 million of
7 7/8%, 5-year bonds that were simultaneously swapped to floating U.S.
commercial paper rates. Also in the third quarter, the Company issued
$300 million of floating rate, 1-year notes.
Cash and equivalents increased by $136.5 million during the nine months
ended June 30, 2000. Cash flow provided by operating activities of
$1,146.0 million and a net increase in borrowings of $2,155.1 million
were used primarily to fund purchases of businesses of $1,909.8 million,
pay dividends of $460.5 million, fund capital expenditures of $455.6
million, and fund net purchases of treasury stock of $384.1 million.
The Company is in a strong financial position, continues to generate
strong operating cash flows, and has the resources available for
reinvestment in existing businesses, strategic acquisitions and managing
the capital structure on a short- and long-term basis.
9
<PAGE>
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Statements in this report that are not strictly historical may be
"forward-looking" statements which involve risks and uncertainties.
These include economic and currency conditions, market demand, pricing,
and competitive and technological factors, among others which are set
forth in the Company's Annual Report on Form 10-K for the year ended
September 30, 1999.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits (Listed by numbers corresponding to the Exhibit Table
of Item 601 in Regulation S-K).
3(a) Restated Articles of Incorporation of Emerson Electric Co.,
incorporated by reference to Emerson Electric Co. Form 10-Q
for the quarter ended March 31, 1997, Exhibit 3(a).
3(b) Bylaws of Emerson Electric Co., as amended through November 3,
1998, incorporated by reference to Emerson Electric Co. 1998
Form 10-K, Exhibit 3(b).
10(b) Amendment No. 3 to the 1986 Stock Option Plan, filed herewith.
10(c) Amendment No. 1 to the 1991 Stock Option Plan, filed herewith.
10(l) Amendment No. 1 to the 1998 Stock Option Plan, filed herewith.
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
(b) Reports on Form 8-K. The Company did not file any reports on
Form 8-K during the quarter ended June 30, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
EMERSON ELECTRIC CO.
Date: August 11, 2000 By /s/ Walter J. Galvin
-----------------------
Walter J. Galvin
Executive Vice President
and Chief Financial Officer
(on behalf of the registrant and
as Chief Financial Officer)
10
