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 March 31, 1995
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 March 31, 1995: 223,405,079 shares.
1
PART I. FINANCIAL INFORMATION FORM 10-Q
Item 1. Financial Statements.
EMERSON ELECTRIC CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1995 AND 1994
(Dollars in millions except per share amounts; unaudited)
Three Months Six Months
-------------------- -------------------
1995 1994 1995 1994
--------- -------- -------- --------
Net sales $ 2,514.1 2,116.5 4,798.7 4,126.0
--------- -------- -------- --------
Costs and expenses:
Cost of sales 1,635.2 1,370.8 3,127.8 2,674.2
Selling, general and
administrative expenses 476.4 406.4 917.3 802.9
Interest expense 27.8 22.0 49.0 46.4
Gain on sale of business
and other non-recurring items - - (34.3) (192.0)
Other deductions, net 18.2 12.3 28.1 20.1
--------- -------- -------- --------
Total costs and expenses 2,157.6 1,811.5 4,087.9 3,351.6
Income before income taxes and
cumulative effects of changes
in accounting principles 356.5 305.0 710.8 774.4
Income taxes 129.4 110.7 259.0 286.2
--------- -------- -------- --------
Income before cumulative effects of
changes in accounting principles 227.1 194.3 451.8 488.2
Cumulative effects of changes in
accounting principles; $.10 and
$.52 per common share,
respectively - - (21.3) (115.9)
--------- -------- -------- --------
Net earnings $ 227.1 194.3 430.5 372.3
========= ======== ======== ========
Earnings per common share $ 1.02 .87 1.93 1.66
========= ======== ======== =======
Cash dividends per common share $ .43 .39 .86 .78
========= ======== ======== =======
Average number of shares used in
computing earnings per common
share (in thousands) 223,363 224,166 223,444 224,457
========= ======== ======== =======
See accompanying notes to consolidated financial statements.
____________________________________________________________________________
NOTE: Including the pretax impact of the cumulative
effects of accounting changes, income before income
taxes for the six months ended March 31, 1995 and 1994
would have been: $ 675.8 584.4
======== ========
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(Dollars in millions except per share amounts; unaudited)
March 31, September 30,
ASSETS 1995 1994
------ --------- -------
CURRENT ASSETS
Cash and equivalents $ 216.0 113.3
Receivables, less allowances of $49.2 and $42.0 1,871.7 1,542.6
Inventories 1,590.8 1,392.2
Other current assets 311.8 290.1
--------- -------
Total current assets 3,990.3 3,338.2
--------- -------
PROPERTY, PLANT AND EQUIPMENT, NET 2,051.6 1,947.3
--------- -------
OTHER ASSETS
Excess of cost over net assets of purchased
businesses 2,326.5 1,862.9
Other 1,054.9 1,066.6
--------- -------
Total other assets 3,381.4 2,929.5
--------- -------
$ 9,423.3 8,215.0
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings and current maturities
of long-term debt $ 1,720.7 923.3
Accounts payable 644.0 611.4
Accrued expenses 954.7 936.4
Income taxes 151.9 146.2
--------- -------
Total current liabilities 3,471.3 2,617.3
--------- -------
LONG-TERM DEBT 330.4 279.9
--------- -------
OTHER LIABILITIES 1,077.0 976.0
--------- -------
STOCKHOLDERS' EQUITY
Preferred stock of $2.50 par value per share.
Authorized 5,400,000 shares; issued - none - -
Common stock of $1 par value per share.
Authorized 400,000,000 shares; issued
238,338,503 shares and 238,338,503 shares 238.3 238.3
Retained earnings 4,852.6 4,619.1
Cumulative translation adjustments (9.1) 8.7
Cost of common stock in treasury, 14,933,424
shares and 14,752,649 shares (537.2) (524.3)
--------- -------
Total stockholders' equity 4,544.6 4,341.8
--------- -------
$ 9,423.3 8,215.0
========= =======
See accompanying notes to consolidated financial statements.
3
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1995 AND 1994
(Dollars in millions; unaudited)
1995 1994
--------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 249.4 360.8
INVESTING ACTIVITIES
Capital expenditures (183.1) (132.6)
Purchases of businesses, net of cash and
equivalents acquired (208.3) (21.7)
Proceeds from divestitures of businesses, net 8.3 199.6
Other 39.8 (4.9)
--------- -------
Net cash provided by (used in) investing activities (343.3) 40.4
--------- -------
FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings
with maturities of 90 days or less 592.1 (195.4)
Proceeds from short-term borrowings - 227.6
Principal payments on short-term borrowings (28.7) (65.0)
Principal payments on long-term debt (127.9) (19.4)
Dividends paid (192.3) (175.1)
Other (46.2) (83.3)
--------- -------
Net cash provided by (used in) financing activities 197.0 (310.6)
--------- -------
Effect of exchange rate changes on cash and equivalents (.4) (1.4)
--------- -------
INCREASE IN CASH AND EQUIVALENTS 102.7 89.2
Beginning cash and equivalents 113.3 101.9
--------- -------
ENDING CASH AND EQUIVALENTS $ 216.0 191.1
========= =======
See accompanying notes to consolidated financial statements.
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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.
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. Certain prior year amounts have been reclassified to
conform to the current year presentation. 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, 1994.
2. Other Financial Information
(Dollars in millions; unaudited)
March 31, September 30,
Inventories 1995 1994
----------- --------- -------
Finished products $ 569.0 506.5
Raw materials and work in process 1,021.8 885.7
--------- -------
$ 1,590.8 1,392.2
========= =======
March 31, September 30,
Property, plant and equipment, net 1995 1994
---------------------------------- --------- -------
Property, plant and equipment, at cost $ 4,073.0 3,840.7
Less accumulated depreciation 2,021.4 1,893.4
--------- -------
$ 2,051.6 1,947.3
========= =======
3. The Company has guaranteed performance under certain contracts
related to the government and defense businesses distributed to
stockholders in 1990, and has effectively guaranteed 50 percent
of the indebtedness of a joint venture. For further information,
refer to the Company's 1994 Annual Report on Form 10-K.
4. Effective October 1, 1994, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 112, "Employers'
Accounting for Postemployment Benefits", which establishes
accounting standards for workers' compensation, disability and
severance benefits. The Company recognized the obligation as a
cumulative effect of change in accounting principle of $21.3 million
(net of $13.7 million in related income tax benefits). The statement
will not have a material impact on the Company's ongoing results of
operations.
5. In the first quarter of fiscal 1995, the Company purchased F. G.
Wilson (Engineering) Ltd., a United Kingdom-based manufacturer of
diesel generator sets. The acquisition was financed by issuing $271
million in notes to the sellers. In December 1994, the Company
5
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
commenced a tender offer for the remaining common stock of Control
Techniques, plc, a United Kingdom-based manufacturer of variable speed
drives used for motor applications. The acquisition was completed in
the second quarter for a purchase price of approximately $227 million
(net of cash and equivalents acquired). Approximately $49 million of
the purchase price was financed by issuing notes to the sellers. The
increases in excess of cost over net assets of purchased businesses,
receivables, and inventories during the six months ended March 31, 1995
reflect the impact of these acquisitions.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Results of Operations
Sales, net earnings and earnings per share for the second quarter and
first six months of fiscal 1995 were the highest for any quarter and
first six-month period in the Company's history.
Net sales were $2,514.1 million for the quarter ended March 31, 1995,
up 18.8 percent over net sales of $2,116.5 million for the quarter ended
March 31, 1994, and $4,798.7 million for the six months ended March 31,
1995, up 16.3 percent over net sales of $4,126.0 for the same period a
year ago. The second quarter results reflect strong underlying domestic
and international sales growth further aided by acquisitions. Excluding
the favorable impact of currency, underlying international subsidiary sales
increased 13 percent while exports increased 26 percent. All major
international regions experienced double-digit sales growth.
The Appliance and Construction-Related segment reported a double-digit
sales increase compared to the second quarter of 1994. Strong sales by
the heating, ventilating and air conditioning business reflected
continued strength in domestic end-markets, robust international demand,
new product acceptance, and market penetration. The fractional motors
and appliance components businesses achieved double-digit sales gains due
to strong international appliance demand and continued domestic appliance
market strength. The consolidated tools business and the unconsolidated
tool joint ventures reported solid sales growth.
The Commercial and Industrial segment also reported a double-digit sales
increase compared to the second quarter of 1994. The industrial motors
and drives business reported the largest sales gains for the quarter due
to the F.G. Wilson and Control Techniques acquisitions and strong
domestic and international demand. The industrial components and
equipment business benefited from strengthening of the domestic capital
goods market and continued strength in the European capital goods market.
Sales in the electronics business continued to benefit from strong
domestic and international markets and the success of new product
introductions. Double-digit growth for the process business reflected
strong demand in international markets.
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Cost of sales for the second quarter was $1,635.2 million or 65.0
percent of sales, compared with $1,370.8 million, or 64.8 percent of
sales, for the second quarter of 1994. Cost of sales for the six months
ended March 31, 1995 was $3,127.8 million or 65.2 percent of sales,
compared to $2,674.2 million or 64.8 percent of sales for the same period
a year ago. Selling, general and administrative expenses for the three
months ended March 31, 1995 were $476.4 million, or 19.0 percent of
sales, compared to $406.4 million, or 19.2 percent of sales for the same
period a year ago. For the first six months of 1995, selling, general
and administrative expenses were $917.3 million or 19.1 percent of sales,
compared to $802.9 million or 19.5 percent of sales for the same period
in 1994.
The second quarter consolidated profit margins remained at high levels
as a result of the Company's ongoing commitments to cost reduction
efforts and productivity improvement programs across the Company.
Earnings in the first quarter of fiscal 1995 included a $41.3 million
preferential distribution from the S-B Power Tool joint venture which
was substantially offset by other non-recurring items and the adoption of
SFAS No. 112. Earnings in the first quarter of fiscal 1994 included a
gain on the sale of business which was substantially offset by non-
recurring items and the adoption of SFAS No. 106 ($115.9 million, net
of $74.1 million in related income tax benefits).
Financial Condition
A comparison of key elements of the Company's financial condition at
the end of the second quarter as compared to the end of the prior
fiscal year follows:
March 31, September 30,
1995 1994
-------- --------
Working capital (in millions) $519.0 720.9
Current ratio 1.1 to 1 1.3 to 1
Total debt to total capital 31.1% 21.7%
Net debt to net capital 28.7% 20.0%
The Company's interest coverage ratio (earnings before income taxes,
non-recurring items and interest expense, divided by interest expense)
was 14.8 times for the six months ended March 31, 1995 compared to 13.6
times for the same period one year earlier. The current ratio decrease
and the increase in the debt to capital ratios reflect additional
debt related to the acquisitions.
Cash flow provided by operating activities was $249.4 million for the six
months ended March 31, 1995 versus $360.8 million for the same period in
the prior year. These results reflect increases in inventories and
receivables associated with strong sales growth. Cash and equivalents
increased by $102.7 million during the six months ended March 31, 1995.
Cash flow provided by operating activities and an increase in borrowings
7
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
of $437.0 million were used primarily to purchase businesses (net of cash
and equivalents acquired) for $208.3 million, pay dividends of $192.3
million, and fund capital expenditures of $183.1 million. In addition,
$320 million of notes were issued to the sellers to finance the F. G.
Wilson and Control Techniques acquisitions.
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.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on February 7, 1995.
The directors listed in the Notice of Annual Meeting of Stockholders
dated December 14, 1994 were elected for terms ending in 1998 with voting
for each as follows:
DIRECTOR FOR WITHHELD
-------- ----------- ----------
J. A. Frates 193,030,375 2,416,691
R. L. Ridgway 193,089,927 2,357,139
A. E. Suter 193,103,429 2,343,637
W. M. Van Cleve 190,904,636 4,542,430
E. E. Whitacre, Jr. 193,282,230 2,164,836
E. F. Williams, Jr. 193,234,420 2,212,646
F.G. Wilson was elected for a term ending in 1997 with 193,280,190
votes for and 2,166,876 votes withheld. In addition, the proposal
to approve the annual incentive plan was approved by a vote of
186,769,499 in favor to 7,232,551 against with 1,445,016 abstentions.
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. 1989 Form
10-K, Exhibit 3(a).
3(b) Bylaws of Emerson Electric Co., as amended through May 3,
1994, incorporated by reference to Emerson Electric Co. 1994
Form 10-K, Exhibit 3(b).
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 March 31, 1995.
8
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
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: May 12, 1995 By
-----------------------
Walter J. Galvin
Senior Vice President - Finance
and Chief Financial Officer
(on behalf of the registrant and
as Chief Financial Officer)
9