UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-Q/A
Amendment No. 1 to the
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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 December 31, 2000: 429,035,896 shares.
1
Explanatory Note:
This amendment to the Form 10-Q for the quarterly period ended December 31,
2000, is filed to remove "diluted earnings per common share, excluding
goodwill amortization" from the Consolidated Statements of Earnings, and
to report divested businesses within the business segments in Note 3 of
Notes to Consolidated Financial Statements, along with the corresponding
narrative discussion of business segments appearing under "Results of
Operations" in Item 2.
PART I. FINANCIAL INFORMATION FORM 10-Q
Item 1. Financial Statements.
EMERSON ELECTRIC CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999
(Dollars in millions except per share amounts; unaudited)
Three Months
---------------------
2000 1999
-------- --------
Net sales $3,919.5 3,543.3
-------- --------
Costs and expenses:
Cost of sales 2,531.5 2,288.8
Selling, general and administrative expenses 774.0 701.9
Interest expense 83.6 52.0
Other (income) deductions, net (13.7) 4.6
-------- --------
Total costs and expenses 3,375.4 3,047.3
-------- --------
Income before income taxes 544.1 496.0
Income taxes 186.7 171.1
-------- --------
Net earnings $ 357.4 324.9
======== ========
Basic earnings per common share $ .84 .75
======== ========
Diluted earnings per common share $ .83 .75
======== ========
Cash dividends per common share $ .3825 .3575
======== ========
See accompanying notes to consolidated financial statements.
2
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(Dollars in millions except per share amounts; unaudited)
December 31, September 30,
ASSETS 2000 2000
------ --------- --------
CURRENT ASSETS
Cash and equivalents $ 359.7 280.8
Receivables, less allowances of $63.6 and $58.5 2,742.9 2,705.6
Inventories 2,217.6 2,052.7
Other current assets 465.5 443.6
--------- --------
Total current assets 5,785.7 5,482.7
--------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 3,263.2 3,243.4
--------- --------
OTHER ASSETS
Goodwill 5,300.2 5,320.0
Other 1,164.8 1,118.2
--------- --------
Total other assets 6,465.0 6,438.2
--------- --------
$15,513.9 15,164.3
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings and current maturities
of long-term debt $ 2,447.1 2,352.7
Accounts payable 1,185.2 1,210.6
Accrued expenses 1,397.6 1,390.6
Income taxes 371.5 264.9
--------- --------
Total current liabilities 5,401.4 5,218.8
--------- --------
LONG-TERM DEBT 2,278.7 2,247.7
--------- --------
OTHER LIABILITIES 1,269.4 1,295.0
--------- --------
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 10.8 53.0
Retained earnings 8,806.2 8,612.9
Accumulated other nonstockholder
changes in equity (623.5) (578.6)
Cost of common stock in treasury, 47,641,110
shares and 49,200,165 shares (1,867.4) (1,922.8)
--------- --------
Total stockholders' equity 6,564.4 6,402.8
--------- --------
$15,513.9 15,164.3
========= ========
See accompanying notes to consolidated financial statements.
3
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999
(Dollars in millions; unaudited)
2000 1999
-------- --------
OPERATING ACTIVITIES
Net earnings $ 357.4 324.9
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 171.4 163.5
Changes in operating working capital (199.5) (169.2)
Gain on divestiture of business and other (52.2) (16.0)
-------- --------
Net cash provided by operating activities 277.1 303.2
-------- --------
INVESTING ACTIVITIES
Capital expenditures (150.3) (125.6)
Purchases of businesses, net of cash and
equivalents acquired (55.3) (4.6)
Divestiture of business and other, net 52.2 (1.9)
-------- --------
Net cash used in investing activities (153.4) (132.1)
-------- --------
FINANCING ACTIVITIES
Net increase in short-term borrowings 86.2 147.9
Proceeds from long-term debt 44.8 81.5
Principal payments on long-term debt (11.4) (7.5)
Dividends paid (164.0) (154.5)
Treasury stock, net 3.1 (159.3)
-------- --------
Net cash used in financing activities (41.3) (91.9)
-------- --------
Effect of exchange rate changes on cash and equivalents (3.5) (5.8)
-------- --------
INCREASE IN CASH AND EQUIVALENTS 78.9 73.4
Beginning cash and equivalents 280.8 266.1
-------- --------
ENDING CASH AND EQUIVALENTS $ 359.7 339.5
======== ========
See accompanying notes to consolidated financial statements.
4
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, 2000.
2. Other Financial Information
(Dollars in millions; unaudited)
December 31, September 30,
2000 2000
-------- --------
Inventories
-----------
Finished products $ 875.7 861.8
Raw materials and work in process 1,341.9 1,190.9
-------- --------
$2,217.6 2,052.7
======== ========
Property, plant and equipment, net
----------------------------------
Property, plant and equipment, at cost $6,524.7 6,411.6
Less accumulated depreciation 3,261.5 3,168.2
-------- --------
$3,263.2 3,243.4
======== ========
Other assets, other
-------------------
Equity and other investments $ 226.4 227.0
Retirement plans 321.1 311.2
Leveraged leases 178.9 179.4
Other 438.4 400.6
-------- --------
$1,164.8 1,118.2
======== ========
Other liabilities
-----------------
Minority interest $ 105.5 104.4
Postretirement plans, excl. current portion 310.1 311.3
Deferred taxes 379.7 360.6
Other 474.1 518.7
-------- --------
$1,269.4 1,295.0
======== ========
5
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 months ended December 31, 2000 and 1999, follows (dollars
in millions):
Sales Earnings
---------------- -------------
2000 1999 2000 1999
-------- ------- ----- -----
Process Control $ 761.0 729.5 67.4 57.5
Industrial Automation 766.1 807.7 106.5 111.9
Electronics and Telecommunications 1,086.6 590.7 147.6 70.9
HVAC 519.7 540.9 74.7 79.0
Appliance and Tools 880.5 965.8 135.6 146.3
-------- ------- ----- -----
4,013.9 3,634.6 531.8 465.6
Differences in accounting methods 48.1 44.5
Interest income, corporate and other 47.8 37.9
Eliminations/Interest expense (94.4) (91.3) (83.6) (52.0)
-------- ------- ----- -----
Net sales/Income before income taxes $3,919.5 3,543.3 544.1 496.0
======== ======= ===== =====
Divested businesses (Krautkramer, Sweco, Vermont American, and other
smaller businesses) are included in the applicable segments.
Intersegment sales of the Appliance and Tools segment for the three
months ended December 31, 2000 and 1999, respectively, were $75 million
and $70 million.
4. Effective October 1, 2000, the Company adopted Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," (FAS 133) as amended, which requires that all derivative
instruments be reported on the balance sheet at fair value and
establishes criteria for designation and effectiveness of hedging
relationships. The adoption of FAS 133 did not have a material effect on
the Company's operating results or financial condition.
5. During the first quarter, the Company received $75 million from the
divestiture of the Sweco specialty separation business resulting in a
pre-tax gain of $60 million.
6. As reflected in the financial statements, nonstockholder changes in
equity for the three months ended December 31, 2000 and 1999, were $312.5
million and $282.5 million, comprised of net earnings of $357.4 million
and $324.9 million and foreign currency translation adjustments and
other, net of $(44.9) million and $(42.4) million, respectively.
7. The weighted average number of common shares outstanding (in millions)
was 427.1 and 430.4 for the three months ended December 31, 2000 and
1999, respectively. The weighted average number of shares outstanding
assuming dilution (in millions) was 431.6 and 434.5 for the three months
ended December 31, 2000 and 1999, respectively. Dilutive shares
primarily relate to stock plans.
6
EMERSON ELECTRIC CO. AND SUBSIDIARIES Form 10-Q
Items 2 and 3. Management's Discussion and Analysis of Results of Operations
and Financial Condition.
Sales, net earnings and earnings per share for the first quarter of fiscal
2001 were the highest for any first quarter in the Company's history.
Net sales for the quarter ended December 31, 2000, were $3,919.5 million, an
increase of 10.6 percent over net sales of $3,543.3 million for the quarter
ended December 31, 1999. Underlying sales increased nearly 8 percent,
excluding the impact of acquisitions, divestitures, and a 4 percentage point
unfavorable impact from currency, reflecting the Company's effort to
reposition into faster growth areas and the success of growth initiatives.
Underlying domestic sales showed moderate growth while underlying
international destination sales had a very strong increase, driven by very
strong growth in Europe and robust growth in both Asia and Latin America.
The process control business reported a 4 percent increase in sales driven by
underlying growth exceeding 6 percent - the strongest core increase the
business has recorded in over two years. The increase was led by project
wins associated with PlantWeb field-based automation architecture and
Fieldbus-based instruments. These results reflect strong growth in Europe
and Asia and moderate growth in the United States.
Underlying sales in the industrial automation business increased moderately,
but significantly unfavorable currency translation and the impact of the
Krautkramer divestiture led to a 5 percent decline in reported sales. Strong
growth in Europe and Asia was dampened by a softer U.S. industrial
environment.
Sales in the electronics and telecommunications business increased 84
percent, driven by the Jordan Telecommunication Products (now Emerson
Telecommunications Products) and Ericsson Energy Systems (now Emerson Energy
Systems) acquisitions. Organic sales, restated for these acquisitions,
increased nearly 30 percent, driven by very strong growth in the United
States and major international markets, with sales in Asia nearly doubling.
The breadth of geographic, customer, technology and services coverage has
buffered this business from the weakness evident in the telecom and
computing-related markets.
The heating, ventilating and air conditioning business experienced a 4
percent decline in sales, due to unfavorable currency translation and a
slight decline in underlying sales. Europe, Asia, and Latin America each
registered strong gains in underlying sales, but the cool northeastern U.S.
summer in 2000 reduced the need for replenishing inventory ahead of the 2001
cooling season.
The appliance and tools business reported a 9 percent decrease in sales.
Excluding the impact of the Vermont American divestiture, sales of the
appliance and tools business increased 1 percent, with moderate tools and
storage solutions gains offsetting the weak North America appliance market.
Our storage solutions businesses - which include the popular ClosetMaid and
METRO-branded products - realized strong growth, as did In-Sink-Erator waste
disposers. Our strong partnerships with key retailers, including The Home
Depot and Sears, have been integral to this success. Appliance sales were
affected by the overall reduction in unit shipments during the quarter.
7
EMERSON ELECTRIC CO. AND SUBSIDIARIES Form 10-Q
Cost of sales for the first quarter of fiscal 2001 and 2000 was $2,531.4
million, and $2,288.8 million, respectively. Cost of sales as a percent of
net sales was 64.6 percent in the first quarter of each fiscal period.
Selling, general and administrative expenses for the three months ended
December 31, 2000, were $774.0 million, or 19.7 percent of sales, compared to
$701.9 million, or 19.8 percent of sales, for the same period a year ago.
The consolidated operating margin increased 0.1 point reflecting a 0.5 point
improvement in underlying operating margins, partially offset by the addition
of lower margin acquisitions and business mix.
Earnings before interest and income taxes increased 14.5 percent. Other
(income) deductions, net increased $18 million. This change reflects a $60
million pre-tax gain from the sale of Sweco which was substantially offset by
higher costs for the rationalization of operations and lower royalty income.
The operating earnings for the first quarter of 2001 were also negatively
impacted by the translation effect of the stronger U.S. dollar. Earnings
before interest and income taxes in the process control business increased 17
percent in the first quarter of 2000, primarily due to solid underlying sales
growth and improved operating margins. Earnings of the electronics and
telecommunications business increased by 108 percent compared to the first
quarter, reflecting robust sales growth driven by the network power
businesses, acquisitions and improved margins. Reported earnings of the
appliance and tools business declined 7 percent, due to the divestiture of
Vermont American, the appliance and motors sales weakness as well as mix in
the tools area.
Financial Condition
A comparison of key elements of the Company's financial condition at the end
of the first quarter as compared to the end of the prior fiscal year follows:
December 31, September 30,
2000 2000
--------- ---------
Working capital (in millions) $ 384.3 $ 263.9
Current ratio 1.1 to 1 1.1 to 1
Total debt to total capital 41.9% 41.8%
Net debt to net capital 39.9% 40.2%
The Company's interest coverage ratio (earnings before income taxes and
interest expense, divided by interest expense) was 7.5 times for the three
months ended December 31, 2000, compared to 10.5 times for the same period
one year earlier. The decrease in the interest coverage ratio reflects
higher average borrowings resulting from acquisitions and higher interest
rates, partially offset by earnings growth. In the first quarter of fiscal
2001, the Company terminated the swap of $400 million of 7 7/8% 5-year bonds
originally swapped to floating U.S. commercial paper rates. Also in the
first quarter, the Company entered into an interest rate swap agreement,
which fixed the rate on $250 million of commercial paper at 6.0 percent
through December 2010. Additionally, the Company increased its shelf
registration with the Securities and Exchange Commission to $2 billion.
8
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Cash and equivalents increased by $78.9 million during the three months ended
December 31, 2000. Cash flow provided by operating activities of $277.1
million, a net increase in borrowings of $119.6 million, and the cash flow
provided by divestiture of business and other, net of $52.2 million were used
primarily to fund purchases of businesses of $55.3 million, pay dividends of
$164.0 million and fund capital expenditures of $150.3 million. Operating
cash flow for the quarter declined 9 percent relative to the first quarter of
fiscal 2000, reflecting the slowing of consumer-related businesses, which
created a short-term buildup of inventory. Additional working capital was
also required to support the continued rapid growth in network power
products.
The Company is in a strong financial position and has the resources available
for reinvestment in existing businesses, strategic acquisitions and managing
the capital structure on a short- and long-term basis.
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, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to this report to be signed on its
behalf by the undersigned thereunto duly authorized.
EMERSON ELECTRIC CO.
Date: July 3, 2001 By /s/ W. J. Galvin
-----------------------
Walter J. Galvin
Executive Vice President
and Chief Financial Officer
(on behalf of the registrant and
as Chief Financial Officer)
9