| Document and Entity Information | ||
| 6 Months Ended
Mar. 31, 2010 | Apr. 30, 2010
| |
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | 2010-03-31 | |
| Document Fiscal Year Focus | 2,010 | |
| Document Fiscal Period Focus | Q2 | |
| 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 Common Stock, Shares Outstanding | 753,169,778 |
| CONSOLIDATED STATEMENTS OF EARNINGS (USD $) | ||||
| In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | 6 Months Ended
Mar. 31, 2010 | 6 Months Ended
Mar. 31, 2009 |
| Net sales | $5,144 | $5,087 | $10,155 | $10,502 |
| Costs and expenses: | ||||
| Cost of sales | 3,144 | 3,250 | 6,252 | 6,669 |
| Selling, general and administrative expenses | 1,230 | 1,119 | 2,391 | 2,312 |
| Other deductions, net | 92 | 111 | 185 | 190 |
| Interest expense (net of interest income of $6, $5, $9 and $16, respectively) | 67 | 49 | 132 | 92 |
| Earnings from continuing operations before income taxes | 611 | 558 | 1,195 | 1,239 |
| Income taxes | 184 | 176 | 334 | 386 |
| Earnings from continuing operations | 427 | 382 | 861 | 853 |
| Discontinued operations, net of tax | (9) | (6) | ||
| Net earnings | 418 | 382 | 855 | 853 |
| Less: Noncontrolling interests in earnings of subsidiaries | 13 | 9 | 25 | 22 |
| Net earnings attributable to Emerson | 405 | 373 | 830 | 831 |
| Basic earnings per share attributable to Emerson: | ||||
| Earnings from continuing operations | 0.55 | 0.5 | 1.11 | 1.1 |
| Discontinued operations | -0.01 | -0.01 | ||
| Basic earnings per common share | 0.54 | 0.5 | 1.1 | 1.1 |
| Diluted earnings per share attributable to Emerson: | ||||
| Earnings from continuing operations | 0.54 | 0.49 | 1.1 | 1.09 |
| Discontinued operations | -0.01 | -0.01 | ||
| Diluted earnings per common share | 0.53 | 0.49 | 1.09 | 1.09 |
| Earnings attributable to Emerson: | ||||
| Earnings from continuing operations | 414 | 373 | 836 | 831 |
| Discontinued operations, net of tax | (9) | (6) | ||
| Net earnings attributable to Emerson | $405 | $373 | $830 | $831 |
| Cash dividends per common share | 0.335 | 0.33 | 0.67 | 0.66 |
| CONSOLIDATED STATEMENT OF EARNINGS (Parenthetical) (USD $) | ||||
| In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | 6 Months Ended
Mar. 31, 2010 | 6 Months Ended
Mar. 31, 2009 |
| Interest income | $6 | $5 | $9 | $16 |
| CONSOLIDATED BALANCE SHEETS (USD $) | ||
| In Millions | Mar. 31, 2010
| Sep. 30, 2009
|
| Current assets | ||
| Cash and equivalents | $2,159 | $1,560 |
| Receivables, less allowances of $99 and $93, respectively | 3,654 | 3,623 |
| Inventories | 2,075 | 1,855 |
| Other current assets | 620 | 615 |
| Total current assets | 8,508 | 7,653 |
| Property, plant and equipment, net | 3,367 | 3,500 |
| Other assets | ||
| Goodwill | 7,630 | 7,078 |
| Other | 2,215 | 1,532 |
| Total other assets | 9,845 | 8,610 |
| Assets, Total | 21,720 | 19,763 |
| Current liabilities | ||
| Short-term borrowings and current maturities of long-term debt | 1,269 | 577 |
| Accounts payable | 2,122 | 1,949 |
| Accrued expenses | 2,556 | 2,378 |
| Income taxes | 52 | 52 |
| Total current liabilities | 5,999 | 4,956 |
| Long-term debt | 4,581 | 3,998 |
| Other liabilities | 2,135 | 2,103 |
| Stockholders' equity | ||
| Preferred stock, $2.50 par value per share; authorized, 5,400,000 shares; issued, none | ||
| Common stock, $0.50 par value per share; authorized, 1,200,000,000 shares; issued, 953,354,012 shares; outstanding, 753,305,725 shares and 751,872,857 shares, respectively | 477 | 477 |
| Additional paid-in capital | 165 | 157 |
| Retained earnings | 15,040 | 14,714 |
| Accumulated other comprehensive income | (558) | (496) |
| Cost of common stock in treasury, 200,048,287 shares and 201,481,155 shares, respectively | (6,269) | (6,297) |
| Emerson stockholders' equity | 8,855 | 8,555 |
| Noncontrolling interests in subsidiaries | 150 | 151 |
| Total equity | 9,005 | 8,706 |
| Total liabilities and stockholders' equity | $21,720 | $19,763 |
| CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
| In Millions, except Share data | Mar. 31, 2010
| Sep. 30, 2009
|
| Allowance for Doubtful Accounts Receivable, Current | $99 | $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 | 753,305,725 | 751,872,857 |
| Treasury Stock, Shares | 200,048,287 | 201,481,155 |
| CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
| In Millions | 6 Months Ended
Mar. 31, 2010 | 6 Months Ended
Mar. 31, 2009 |
| Operating activities | ||
| Net earnings | $855 | $853 |
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||
| Depreciation and amortization | 402 | 358 |
| Changes in operating working capital | 33 | (355) |
| Pension funding | (109) | (148) |
| Other | 138 | 110 |
| Net cash provided by operating activities | 1,319 | 818 |
| Investing activities | ||
| Capital expenditures | (178) | (272) |
| Purchases of businesses, net of cash and equivalents acquired | (1,340) | (433) |
| Other | 31 | 37 |
| Net cash used in investing activities | (1,487) | (668) |
| Financing activities | ||
| Net increase in short-term borrowings | 725 | 886 |
| Proceeds from long-term debt | 596 | 500 |
| Principal payments on long-term debt | (50) | (438) |
| Dividends paid | (504) | (502) |
| Purchases of treasury stock | (24) | (718) |
| Other | 49 | (43) |
| Net cash provided by (used in) financing activities | 792 | (315) |
| Effect of exchange rate changes on cash and equivalents | (25) | (105) |
| Increase (decrease) in cash and equivalents | 599 | (270) |
| Beginning cash and equivalents | 1,560 | 1,777 |
| Ending cash and equivalents | 2,159 | 1,507 |
| Changes in operating working capital | ||
| Receivables | (6) | 620 |
| Inventories | (163) | 46 |
| Other current assets | (17) | (24) |
| Accounts payable | 160 | (683) |
| Accrued expenses | (5) | (160) |
| Income taxes | 64 | (154) |
| Changes in operating working capital | $33 | ($355) |
| Basis of Presentation and Recently Issued Accounting Pronouncements | |
| 6 Months Ended
Mar. 31, 2010 | |
| 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. 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 Company's financial statements. As required, this change has been retrospectively applied to prior periods. In December 2008, the FASB issued updates to ASC 715, Compensation - Retirement Benefits. These updates are effective for 2010 annual reporting and expand disclosure about an entity's investment policies and strategies for assets held by defined benefit pension or postretirement plans, including information regarding major classes 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 Company's financial statements |
| Weighted Average Common Shares | |
| 6 Months Ended
Mar. 31, 2010 | |
| 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 of computing 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 security's respective dividend rate. This change had an inconsequential impact on EPS for all periods presented. Reconciliations of weighted average shares for basic and diluted earnings per common share follow (in millions). Earnings allocated to participating securities were inconsequential. ThreeMonthsEnded SixMonthsEnded March 31, March 31, 2009 2010 2009 2010 Basic shares outstanding 752.1 751.1 757.6 750.7 Dilutive shares 4.8 6.3 4.8 5.7 Diluted shares outstanding 756.9 757.4 762.4 756.4 |
| Equity | |
| 6 Months Ended
Mar. 31, 2010 | |
| Equity | 3. The change in stockholders' equity balances for the six months ended March 31, 2010 follows (in millions): Emerson Stockholders' Equity Noncontrolling Interests in Subsidiaries Total Equity September 30, 2009 $ 8,555 151 8,706 Net earnings 830 25 855 Other comprehensive income (62) 1 (61) Cash dividends (504) (25) (529) Net treasury stock purchases and other 36 (2) 34 March 31, 2010 $ 8,855 150 9,005 Comprehensive income (loss), net of applicable income taxes, for the three and six months ended March 31, 2010 is summarized as follows (in millions): ThreeMonthsEnded SixMonthsEnded March 31, March 31, 2009 2010 2009 2010 Net earnings $ 382 418 853 855 Foreign currency translation (119 ) (101 ) (523 ) (94 ) Cash flow hedges and other 43 9 (54 ) 33 306 326 276 794 Less: Noncontrolling interests 7 13 16 26 Amount attributable to Emerson $ 299 313 260 768 The change in foreign currency translation during the first half of 2010 is primarily due to the weakening of the U.S. dollar. The amount attributable to noncontrolling interests in subsidiaries consisted of earnings and foreign currency translation. |
| Pension Expense | |
| 6 Months Ended
Mar. 31, 2010 | |
| Pension Expense | 4. Net periodic pension expense is summarized as follows (in millions): ThreeMonthsEnded March 31, SixMonthsEnded March 31, 2009 2010 2009 2010 Service cost $ 17 19 35 38 Interest cost 56 56 112 111 Expected return on plan assets (71 ) (77 ) (143 ) (153 ) Net amortization 20 34 41 69 $ 22 32 45 65 Net postretirement healthcare expense is summarized as follows (in millions): ThreeMonthsEnded March 31, SixMonthsEnded March 31, 2009 2010 2009 2010 Service cost $ 1 1 2 2 Interest cost 7 6 14 12 Net amortization 2 1 4 1 $ 10 8 20 15 |
| Other Deductions, Net | |
| 6 Months Ended
Mar. 31, 2010 | |
| Other Deductions, Net | 5. Other deductions, net are summarized as follows (in millions): ThreeMonthsEnded March 31, SixMonthsEnded March 31, 2009 2010 2009 2010 Other deductions, net Rationalization of operations $ 64 36 107 74 Amortization of intangibles 24 45 47 80 Other 48 10 65 34 (Gains)/losses, net (25 ) 1 (29 ) (3 ) $ 111 92 190 185 Other deductions, net decreased for the three and six months ended March 31, 2010, primarily due to lower rationalization expense, lower losses on foreign exchange transactions and lower bad debt expense which were partially offset by higher amortization expense on acquired intangible assets. During the second quarter of 2009, the Company received $41 million from the sale of an asset and recognized a gain of $25 million ($17 million after-tax). |
| Rationalization of Operations | |
| 6 Months Ended
Mar. 31, 2010 | |
| Rationalization of Operations | 6. Rationalization of operations expense reflects costs associated with the Company's 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 six months ended March 31, 2010 follows (in millions): September30, March31, 2009 Expense Paid/Utilized 2010 Severance and benefits $ 112 48 82 78 Lease/contract terminations 7 3 4 6 Fixed asset write-downs - 5 5 - Vacant facility and other shutdown costs 2 7 7 2 Start-up and moving costs 1 11 11 1 $ 122 74 109 87 Rationalization of operations by segment is summarized as follows (in millions): ThreeMonthsEnded March 31, SixMonthsEnded March 31, 2009 2010 2009 2010 Process Management $ 6 9 8 16 Industrial Automation 9 15 12 33 Network Power 30 9 50 16 Climate Technologies 8 2 22 5 Appliance and Tools 11 1 15 4 $ 64 36 107 74 The Company expects to incur full year rationalization costs of approximately $145 million to $170 million, which includes the $74 million shown above, as well as costs to complete actions initiated before the end of the second quarter and actions anticipated to be approved and initiated during the remainder of the year. The Company has incurred significant costs over the last year to rationalize its businesses to the level appropriate for current economic conditions, as well as improve its cost structure for future growth. Costs incurred during the first half of 2010 included shutdown costs due to workforce reductions and/or the consolidation of facilities in all the Company's business segments. Start-up and moving costs, and vacant facilities and other costs were not material for any segment. Actions during the first six months of 2010 involved the elimination of 1,800 positions and included Process Management reducing worldwide forcecount and consolidating some North American production; Industrial Automation consolidating production and sales facilities within Europe and North America; 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 Appliance and Tools outsourcing freight operations. |
| Other Financial Information | |
| 6 Months Ended
Mar. 31, 2010 | |
| Other Financial Information | 7. Other Financial Information(in millions): September30, March 31, 2009 2010 Inventories Finished products $ 697 787 Raw materials and work in process 1,158 1,288 $ 1,855 2,075 Property, plant and equipment, net Property, plant and equipment, at cost $ 8,894 8,900 Less: Accumulated depreciation (5,394 ) (5,533 ) $ 3,500 3,367 Goodwill by business segment Process Management $ 2,242 2,259 Industrial Automation 1,304 1,352 Network Power 2,454 2,948 Climate Technologies 473 465 Appliance and Tools 605 606 $ 7,078 7,630 Changes in goodwill since September 30, 2009 are primarily due to acquisitions, particularly in the Network Power ($511 million) and Industrial Automation ($79 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 1,204 Capitalized software 214 210 LANDesk discontinued operations - 407 Other 388 394 $ 1,532 2,215 Intellectual property and customer relationships of companies acquired in fiscal 2010 totaled approximately $357 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 $ 536 637 Customer advanced payments $ 315 356 Product warranty liability $ 199 201 September30, March 31, 2009 2010 Other liabilities Pension plans $ 613 542 Postretirement plans, excluding current portion 460 458 Deferred income taxes 406 474 Other 624 661 $ 2,103 2,135 |
| Segment Reporting | |
| 6 Months Ended
Mar. 31, 2010 | |
| Segment Reporting | 8. Summarized information about the Company's results of operations by business segment follows (in millions): Three months ended March 31, Sales Earnings 2009 2010 2009 2010 Process Management $ 1,505 1,428 257 241 Industrial Automation 960 867 102 94 Network Power 1,304 1,351 108 157 Climate Technologies 733 908 69 163 Appliance and Tools 727 760 61 133 5,229 5,314 597 788 Differences in accounting methods 47 49 Corporate and other (37 ) (159 ) Eliminations/Interest (142 ) (170 ) (49 ) (67 ) $ 5,087 5,144 558 611 Six months ended March 31, Sales Earnings 2009 2010 2009 2010 Process Management $ 3,031 2,810 556 457 Industrial Automation 2,063 1,743 266 179 Network Power 2,765 2,732 260 363 Climate Technologies 1,425 1,692 123 276 Appliance and Tools 1,498 1,491 140 244 10,782 10,468 1,345 1,519 Differences in accounting methods 97 95 Corporate and other (111 ) (287 ) Eliminations/Interest (280 ) (313 ) (92 ) (132 ) $ 10,502 10,155 1,239 1,195 Intersegment sales of the Appliance and Tools segment for the three months ended March 31, 2010 and 2009 were $147 million and $122 million, respectively, and $267 million and $234 million, respectively, for the six months ended March 31, 2010 and 2009. The increase in Corporate and other for 2010 primarily reflects higher incentive stock compensation expense of $72 million for the quarter and $110 million year-to-date related to an increase in the Company's stock price and the overlap of two incentive stock compensation plans, $25 million lower one- time gains in both periods versus2009, and lower commodity mark-to-market gains of $9 million for the quarter and $13 million year-to-date. |
| Financial Instruments | |
| 6 Months Ended
Mar. 31, 2010 | |
| Financial Instruments | 9. Following is a discussion regarding the Company's use of financial instruments. Hedging Activities As of March 31, 2010, the notional value of foreign currency hedge positions totaled approximately $1.5 billion and commodity hedges outstanding included a combined total of approximately 72 million pounds of copper and aluminum. The majority of hedging gains and losses deferred as of March 31, 2010 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 three and six months ended March 31, 2010 and 2009 (in millions). All derivatives receiving deferral accounting are cash flow hedges. Derivatives Receiving Deferral Accounting Gain (Loss) Reclassified into Earnings Three Months Ended March 31, Six Months Ended March 31, 2009 2010 2009 2010 Location Foreign currency Sales $ (9 ) (1) (15 ) (4) Foreign currency Cost of sales (11 ) - (19 ) (1) Commodity Cost of sales (39 ) 17 (59 ) 21 $ (59 ) 16 (93 ) 16 Gain (Loss) Recognized in Three Months Ended March 31, Six Months Ended March 31, Other Comprehensive Income 2009 2010 2009 2010 Foreign currency $ (18 ) 11 (93 ) 28 Commodity 20 19 (87 ) 41 $ 2 30 (180 ) 69 Derivatives Not Receiving Deferral Accounting Gain (Loss) Recognized in Earnings Three Months Ended March 31, Six Months Ended March 31, 2009 2010 2009 2010 Location Foreign currency Other income (deductions) $ (14 ) 62 (24 ) 72 Commodity Cost of sales (1 ) - (9 ) 1 $ (15 ) 62 (33 ) 73 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 year-to-date and no amounts were excluded from the assessment of hedge effectiveness. Fair Value Measurements Valuations for all of Emerson's derivatives fall within Level 2 of the GAAP valuation hierarchy. Fair values of derivative contracts outstanding as of September 30, 2009 and March 31, 2010 follow (in millions): September 30, 2009 March 31, 2010 Assets Liabilities Assets Liabilities Derivatives Receiving Deferral Accounting Foreign currency $15 (33 ) 28 (14) Commodity $ 30 (4 ) 45 - Derivatives Not Receiving Deferral Accounting Foreign currency $ 6 (7 ) 11 - Commodity $ 2 (2 ) 3 (1) At March 31, 2010, commodity contracts and foreign currency contracts were reported in current assets. The Company held $19 million of collateral posted by counterparties in the normal course of business as of March 31, 2010. The maximum collateral the Company could have been required to post as of March 31, 2010 was $5 million. As of M |
| Acquisitions and Divestitures | |
| 6 Months Ended
Mar. 31, 2010 | |
| 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 that significantly enhance companies' datacenter solutions capability, which strongly positions Emerson 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 three and six months ended March 31, 2010 are included in discontinued operations, with assets totaling approximately $0.5 billion and liabilities of approximately $0.2 billion. Given the timing of these acquisitions, the purchase price allocations for SSB, Avocent and LANDesk are preliminary, and may 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 Avocent's valuation of the business prepared in early 2009 and the Company's preliminary assessment. The Company has been approached regarding the possible acquisition of the appliance motors and commercial and industrial motors businesses, which are included in the Appliance and Tools business segment. The Company has engaged an investment advisor to evaluate strategic options and to consider other potential acquirers. This evaluation is in process and no decision has been made as to whether these businesses will be sold. On April 23, 2010, Emerson made an indicative proposal to the Board of Directors of Chloride Group PLC, a provider of uninterruptible power supply systems, which could lead to an offer to acquire Chloride for 275 pence per share in cash, or approximately 723 million ($1.1 billion). Chloride rejected the indicative proposal. Emerson plans to directly engage Chloride shareholders regarding the merits of the proposal. |
