Emerson Electric (EMR) 10-Q 3 Feb 10 2010 Q1 Quarterly report Financial data

CONSOLIDATED STATEMENTS OF EARN

CONSOLIDATED STATEMENTS OF EARNINGS (USD $)
In Millions, except Per Share data	3 Months Ended Dec. 31, 2009	3 Months Ended Dec. 31, 2008
Net sales	$5,011	$5,415
Costs and expenses:
Cost of sales	3,108	3,419
Selling, general and administrative expenses	1,161	1,193
Other deductions, net	93	79
Interest expense (net of interest income of $3 and $11 respectively)	65	43
Earnings from continuing operations before income taxes	584	681
Income taxes	150	210
Earnings from continuing operations	434	471
Discontinued operations, net of tax	3	0
Net earnings	437	471
Less: Noncontrolling interests in earnings of subsidiaries	12	13
Net earnings attributable to common stockholders	425	458
Basic earnings per share attributable to common stockholders:
Earnings from continuing operations	0.56	0.6
Discontinued operations	$0	$0
Basic earnings per common share	0.56	0.6
Diluted earnings per share attributable to common stockholders:
Earnings from continuing operations	0.56	0.6
Discontinued operations	$0	$0
Diluted earnings per common share	0.56	0.6
Earnings attributable to common stockholders:
Earnings from continuing operations	422	458
Discontinued operations, net of tax	3	0
Net earnings attributable to common stockholders	$425	$458
Cash dividends per common share	0.335	0.33

1_CONSOLIDATED STATEMENTS OF EA

CONSOLIDATED STATEMENTS OF EARNINGS (Parenthetical) (USD $)
In Millions	3 Months Ended Dec. 31, 2009	3 Months Ended Dec. 31, 2008
Consolidated Statements of Earnings (Parenthetical) [Abstract]
Interest income	$3	$11

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)
In Millions	Dec. 31, 2009	Sep. 30, 2009
Current assets
Cash and equivalents	$1,840	$1,560
Receivables, less allowances of $105 and $93, respectively	3,650	3,623
Inventories	1,956	1,855
Other current assets	617	615
Total current assets	8,063	7,653
Property, plant and equipment, net	3,475	3,500
Other assets
Goodwill	7,647	7,078
Other	2,304	1,532
Total other assets	9,951	8,610
Assets, Total	21,489	19,763
Current liabilities
Short-term borrowings and current maturities of long-term debt	1,240	577
Accounts payable	1,991	1,949
Accrued expenses	2,474	2,378
Income taxes	100	52
Total current liabilities	5,805	4,956
Long-term debt	4,558	3,998
Other liabilities	2,188	2,103
Stockholders' equity
Preferred stock, $2.50 par value per share; authorized, 5,400,000 shares; issued, none	0	0
Common stock, $0.50 par value per share; authorized, 1,200,000,000 shares; issued, 953,354,012 shares; outstanding, 752,445,327 shares and 751,872,857 shares, respectively	477	477
Additional paid-in capital	173	157
Retained earnings	14,888	14,714
Accumulated other comprehensive income	(466)	(496)
Cost of common stock in treasury, 200,908,685 shares and 201,481,155 shares, respectively	(6,281)	(6,297)
Common stockholders' equity	8,791	8,555
Noncontrolling interests in subsidiaries	147	151
Total equity	8,938	8,706
Total Liabilities and Equity	$21,489	$19,763

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Millions, except Share data	Dec. 31, 2009	Sep. 30, 2009
Consolidated Balance Sheets (Parenthetical) [Abstract]
Allowance for Doubtful Accounts Receivable, Current	$105	$93
Preferred Stock, Par or Stated Value Per Share	2.5	2.5
Preferred Stock, Shares Authorized	5,400,000	5,400,000
Preferred Stock, Shares Issued	0	0
Common Stock, Par or Stated Value Per Share	0.5	0.5
Common Stock, Shares Authorized	1,200,000,000	1,200,000,000
Common Stock, Shares Issued	953,354,012	953,354,012
Common Stock, Shares Outstanding	752,445,327	751,872,857
Treasury Stock, Shares	200,908,685	201,481,155

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions	3 Months Ended Dec. 31, 2009	3 Months Ended Dec. 31, 2008
Operating activities
Net earnings	$437	$471
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	196	176
Changes in operating working capital	15	(316)
Other	39	(12)
Net cash provided by operating activities	687	319
Investing activities
Capital expenditures	(89)	(132)
Purchases of businesses, net of cash and equivalents acquired	(1,301)	(271)
Other	38	(12)
Net cash used in investing activities	(1,352)	(415)
Financing activities
Net increase in short-term borrowings	662	968
Proceeds from long-term debt	596	2
Principal payments on long-term debt	(36)	(186)
Dividends paid	(251)	(252)
Purchases of treasury stock	0	(433)
Other	(15)	(35)
Net cash provided by financing activities	956	64
Effect of exchange rate changes on cash and equivalents	(11)	(77)
Increase (decrease) in cash and equivalents	280	(109)
Beginning cash and equivalents	1,560	1,777
Ending cash and equivalents	1,840	1,668
Changes in operating working capital
Receivables	57	439
Inventories	(22)	(164)
Other current assets	(21)	(85)
Accounts payable	(28)	(424)
Accrued expenses	(87)	(142)
Income taxes	116	60
Changes in operating working capital	$15	($316)

Basis of Presentation and Recen

Basis of Presentation and Recently Issued Accounting Pronouncements
	3 Months Ended Dec. 31, 2009 USD / shares
Basis of Presentation and Recently Issued Accounting Pronouncements [Abstract]
Basis of Presentation and Recently Issued Accounting Pronouncements	1. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary for a fair presentation of operating results for the interim periods presented.Adjustments consist of normal and recurring accruals.The consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all disclosures required for annual financial statements presented in conformity with U.S. generally accepted accounting principles (GAAP).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, 2009.Certain prior year amounts have been recast to conform to the current year presentation.The Company has evaluated subsequent events through February 3, 2010. Effective October 1, 2009, the Company adopted ASC 805, Business Combinations, which requires that assets acquired, liabilities assumed and contractual contingencies be measured at fair value as of the acquisition date and all acquisition costs be expensed as incurred. Effective October 1, 2009, the Company adopted updates to ASC 810, Consolidation.The updates require an entity to separately disclose noncontrolling interests in subsidiaries as a separate component of equity in the balance sheet and as a separate line item in the income statement.Adoption did not have a material impact on the Companys financial statements. Asrequired, this change has been retrospectively applied to the prior period. In December 2008, the FASB issued updates to ASC 715, Compensation - Retirement Benefits.These updates are effective for fiscal 2010 annual reporting and expand disclosure about an entitys investment policies and strategies for assets held by defined benefit pension or postretirement plans, including information regarding major categories of plan assets, inputs and valuation techniques used to measure the fair value of assets, and significant concentrations of risk within the plans.Adoption is not expected to have a material impact on the Companys financial statements.

Weighted Average Common Shares

Weighted Average Common Shares
	3 Months Ended Dec. 31, 2009 USD / shares
Weighted Average Common Shares [Abstract]
Weighted Average Common Shares	2. In the first quarter 2010, the Company adopted updates to ASC 260, Earnings Per Share, regarding the two-class method ofcomputing earnings per share (EPS).This method requires earnings to be allocated to participating securities (for Emerson, certain employee stock awards) in the EPS computation based on each securitys respective dividend rate.This change had an inconsequential impact on EPS for all periods presented. Reconciliations of weighted average common shares for basic and diluted earnings per common share follow (shares in millions).Earnings allocated to participating securities were inconsequential. ThreeMonthsEnded December 31, 2008 2009 Basic shares outstanding 763.2 750.3 Dilutive shares 4.7 5.2 Diluted shares outstanding 767.9 755.5

Equity

Equity
	3 Months Ended Dec. 31, 2009 USD / shares
Equity [Abstract]
Equity	3. The change in equity balances is shown below (dollars in millions): Fiscal 2010 Common Stockholders Equity Noncontrolling Interests in Subsidiaries Total Equity September 30, 2009 $ 8,555 151 8,706 Net earnings 425 12 437 Other comprehensive income 30 1 31 Cash dividends (251 ) (17 ) (268 ) Net treasury stock purchases and other 32 - 32 December 31, 2009 $ 8,791 147 8,938 Comprehensive income (loss), net of applicable income taxes, is summarized as follows (dollars in millions): ThreeMonthsEnded December31, 2008 2009 Net earnings $ 471 437 Foreign currency translation (404 ) 7 Cash flow hedges and other (97 ) 24 (30 ) 468 Less: Noncontrolling interests 9 13 Amount attributable to common stockholders $ (39 ) 455 The change in foreign currency translation during the first quarter of 2010 is primarily due to the weakening of the U.S. dollar.For the three months ended December 31, 2009 and 2008, comprehensive income attributable to noncontrolling interests in subsidiaries consisted of earnings and foreign currency translation.

Pension Expense

Pension Expense
	3 Months Ended Dec. 31, 2009 USD / shares
Pension Expense [Abstract]
Pension Expense	4. Net periodic pension and net postretirement plan expenses are summarized as follows (dollars in millions): Three Months Ended December 31, Pensions Postretirement Plans 2008 2009 2008 2009 Service Cost $ 18 19 1 1 Interest Cost 56 55 7 6 Expected return on plan assets (72 ) (76 ) Net amortization 21 35 2 - $ 23 33 10 7

Other Deductions, Net

Other Deductions, Net
	3 Months Ended Dec. 31, 2009 USD / shares
Other Deductions, Net [Abstract]
Other Deductions, net	5. Other deductions, net are summarized as follows (dollars in millions): ThreeMonthsEnded December31, 2008 2009 Other deductions, net Rationalization of operations $ 43 38 Amortization of intangibles 23 35 Other 17 24 Gains (4 ) (4 ) $ 79 93 Other deductions, net increased for the three months ended December 31, 2009, primarily due to higher amortization expense on acquired intangible assets.Other increased during the first quarter of fiscal 2010 due to the expensing of acquisition-related costs under ASC 805 which in previous years would have been capitalized.

Rationalization of Operations

Rationalization of Operations
	3 Months Ended Dec. 31, 2009 USD / shares
Rationalization of Operations [Abstract]
Rationalization of Operations	6. Rationalization of operations expense reflects costs associated with the Companys efforts to continuously improve operational efficiency and expand globally, in order to remain competitive on a worldwide basis.The change in the liability for rationalization costs during the three months ended December 31, 2009 follows (dollars in millions): September30, December31, 2009 Expense Paid/Utilized 2009 Severance and benefits $ 112 31 31 112 Lease/contract terminations 7 - 2 5 Fixed asset write-downs - 1 1 - Vacant facility and other shutdown costs 2 2 2 2 Start-up and moving costs 1 4 4 1 $ 122 38 40 120 Rationalization of operations by segment is summarized as follows (dollars in millions): ThreeMonthsEnded December31, 2008 2009 Process Management $ 2 7 Industrial Automation 3 18 Network Power 20 7 Climate Technologies 14 3 Appliance and Tools 4 3 $ 43 38 The Company expects to incur full year rationalization costs of approximately $150 million to $175 million, which includes the $38 million shown above, as well as costs to complete actions initiated before the end of the first quarter and actions anticipated to be approved and initiated during the remainder of the year.Costs incurred during the first quarter of 2010 included all the Companys business segments incurring shutdown costs due to workforce reductions and/or the consolidation of facilities.Start-up and moving costs, fixed asset write-downs and vacant facilities and other costs were not material for any segment.Actions during the first quarter of 2010 involved the elimination of 800 positions and included Process Management reducing worldwide forcecount and consolidating some North American production; Industrial Automation consolidating production and sales facilities within Europe; Network Power reducing worldwide forcecount, consolidating North American production and shifting some production and engineering capabilities from North America and Europe to Asia; Climate Technologies consolidating or downsizing production facilities in North America and Europe; and Applianceand Tools outsourcing freight operations.

Other Financial Information

Other Financial Information
	3 Months Ended Dec. 31, 2009 USD / shares
Other Financial Information [Abstract]
Other Financial Information	7. Other Financial Information(dollars in millions): September30, December31, 2009 2009 Inventories Finished products $ 697 725 Raw materials and work in process 1,158 1,231 $ 1,855 1,956 Property, plant and equipment, net Property, plant and equipment, at cost $ 8,894 8,992 Less:Accumulated depreciation (5,394 ) (5,517 ) $ 3,500 3,475 Goodwill by business segment Process Management $ 2,242 2,261 Industrial Automation 1,304 1,404 Network Power 2,454 2,901 Climate Technologies 473 476 Appliance and Tools 605 605 $ 7,078 7,647 Changes in goodwill since September 30, 2009, are primarily due to acquisitions, particularly in the Network Power ($462 million) and Industrial Automation ($89 million) segments, as well as foreign currency translation.Valuations of assets are in-process and purchase price allocations for acquisitions are subject to change. Other assets, other Intellectual property and customer relationships $ 930 1,243 Capitalized software 214 212 Pension plans 3 5 LANDesk discontinued operations - 457 Other 385 387 $ 1,532 2,304 Intellectual property and customer relationships of companies acquired in fiscal 2010 totaled approximately $344 million, primarily in the Network Power and Industrial Automation segments.See Note 10 for further information regarding the assets held for sale related to LANDesk. Accrued expenses include the following: Employee compensation $ 536 554 Customer advanced payments $ 315 346 Product warranty liability $ 199 206 Other liabilities Pension plans $ 613 629 Postretirement plans, excluding current portion 460 461 Deferred income taxes 406 496 Other 624 602 $ 2,103 2,188

Segment Reporting

Segment Reporting
	3 Months Ended Dec. 31, 2009 USD / shares
Segment Reporting [Abstract]
Segment Reporting	8. Summarized information about the Companys results of operations by business segment follows (dollars in millions): Three months ended December 31, Sales Earnings 2008 2009 2008 2009 Process Management $ 1,526 1,382 299 216 Industrial Automation 1,103 876 164 85 Network Power 1,461 1,381 152 206 Climate Technologies 692 784 54 113 Appliance and Tools 771 731 79 111 5,553 5,154 748 731 Differences in accounting methods 50 46 Corporate and other (74 ) (128 ) Eliminations/Interest (138 ) (143 ) (43 ) (65 ) $ 5,415 5,011 681 584 Intersegment sales of the Appliance and Tools segment for the three months ended December 31, 2009 and 2008, were $120 million and $112 million, respectively.The increase in Corporate and other for 2010 primarily reflects higher stock compensation expense of $38 million related to the overlap of two incentive stock compensation plans and an increase in the Companys stock price.

Financial Instruments

Financial Instruments
	3 Months Ended Dec. 31, 2009 USD / shares
Financial Instruments [Abstract]
Financial Instruments	9. Following is a discussion regarding the Companys use of financial instruments. Hedging Activities As of December 31, 2009, the notional value of foreign currency hedge positions totaled approximately $1.5 billion and commodity hedges outstanding included a total of approximately 54 million pounds of copper and aluminum.The majority of hedging gains and losses deferred as of December 31, 2009 will generally be recognized over the next 12 months as the underlying forecasted transactions occur. Shown below are amounts recognized in earnings and other comprehensive income for the quarter ended December 31, 2009 (dollars in millions): Derivatives ReceivingDeferral Accounting Gain (Loss) Reclassified intoEarnings Location Gain (Loss) Recognized inOther Comprehensive Income Cash Flow Hedges Three Months Ended 12/31/09 Three Months Ended 12/31/09 Foreign currency $ (3 ) Sales $ 1 Foreign currency (1 ) Cost of sales 16 Commodity 4 Cost of sales 22 $ - $ 39 Derivatives Not ReceivingDeferral Accounting Gain (Loss)Recognized inEarnings Foreign currency $ 10 Other income (deductions) Commodity 1 Cost of sales $ 11 Hedging gains or losses are expected to be largely offset by losses or gains on the related underlying exposures.Hedge ineffectiveness was immaterial for the quarter and no amounts were excluded from the assessment of hedge effectiveness. Fair Value Measurements Valuations for all of Emersons derivatives fall within Level 2 of the GAAP valuation hierarchy. Fair values of derivative contracts outstanding as of September 30, 2009 and December 31, 2009 follow: September 30, 2009 December 31, 2009 Assets Liabilities Assets Liabilities Derivatives Receiving Deferral Accounting Foreign currency $ 15 (33 ) 21 (19 ) Commodity $ 30 (4 ) 44 (1 ) Derivatives Not Receiving Deferral Accounting Foreign currency $ 6 (7 ) 7 (1 ) Commodity $ 2 (2 ) 4 (2 ) At December 31, 2009, commodity contracts and foreign currency contracts were reported in current assets.The Company held $21 million of collateral posted by counterparties in the normal course of business as of December 31, 2009.The maximum collateral the Company could have been required to post as of December 31, 2009 was $8 million.As of December 31, 2009, the fair value of long-term debt was $5,381 million, which exceeded the carrying value by $256 million. Valuation measurements for the recoverability analysis of goodwill and certain other intangible and long-lived assets fall within Level 3 of the valuation hierarchy.No fair value adjustments were recorded during the period related to these assets.

Acquisitions and Divestitures

Acquisitions and Divestitures
	3 Months Ended Dec. 31, 2009 USD / shares
Acquisitions and Divestitures [Abstract]
Acquisitions and Divestitures	10. On November 6, 2009, the Company acquired SSB Group GmbH (SSB), a designer and manufacturer of electrical pitch systems and control technology used in wind turbine generators, for approximately $145 million in cash.SSB had annual revenues in 2009 of approximately $115 million and is reported in the Industrial Automation business segment. On December 11, 2009, the Company acquired Avocent Corporation, a leader in delivering information technology solutions which significantly enhances the Companys datacenter solutions capability and strongly positions the Company for the growing importance of energy management in datacenters worldwide for $1.2 billion in cash.Avocent, excluding its LANDesk business, had annual revenues of $390 million in 2009 and is reported in the Network Power business segment.In connection with the acquisition, the Company immediately began pursuing the sale of the LANDesk business unit which is not a strategic fit with Emerson, and expects to complete the sale in 2010.LANDesk sells management and security software suites and had annual revenues of $150 million in 2009.LANDesk results for the first quarter are included in discontinued operations, and assets total approximately $0.5 billion and liabilities are approximately $0.1 billion. Given the timing of these acquisitions, the purchase price allocations for SSB Group, Avocent and LANDesk are preliminary, and will be adjusted based on valuations to be completed during 2010 (see Note 7).The preliminary purchase price allocation to LANDesk was made by reference to Avocents valuation of the business prepared in early 2009 and the Companys preliminary assessment.

Document Information

Document Information
	3 Months Ended Dec. 31, 2009 USD / shares
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2009-12-31

Entity Information

Entity Information (USD $)
	3 Months Ended Dec. 31, 2009
Entity Information [Line Items]
Entity Registrant Name	EMERSON ELECTRIC CO
Entity Central Index Key	0000032604
Current Fiscal Year End Date	--09-30
Entity Filer Category	Large Accelerated Filer
Entity Listings [Line Items]
Entity Common Stock, Shares Outstanding	752,445,327