10-Q/A: Quarterly report [Sections 13 or 15(d)]
Published on July 3, 2001
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 March 31, 2001
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, 2000: 428,452,143 shares.
1
Explanatory Note:
This amendment to the Form 10-Q for the quarterly period ended March 31,
2001, 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 AND SIX MONTHS ENDED MARCH 31, 2001 AND 2000
(Dollars in millions except per share amounts; unaudited)
Three Months Six Months
-------------------- -------------------
2001 2000 2001 2000
--------- -------- -------- --------
Net sales $ 4,103.3 3,894.7 8,022.8 7,438.0
--------- -------- -------- --------
Costs and expenses:
Cost of sales 2,652.5 2,514.3 5,184.0 4,803.1
Selling, general and
administrative expenses 790.0 743.3 1,564.0 1,445.2
Interest expense 79.3 69.0 162.9 121.0
Other deductions, net 36.1 29.5 22.4 34.1
--------- -------- -------- --------
Total costs and expenses 3,557.9 3,356.1 6,933.3 6,403.4
--------- -------- -------- --------
Income before income taxes 545.4 538.6 1,089.5 1,034.6
Income taxes 186.7 185.8 373.4 356.9
--------- -------- -------- --------
Net earnings $ 358.7 352.8 716.1 677.7
========= ======== ======== ========
Basic earnings per common share $ .84 .83 1.68 1.58
========= ======== ======== ========
Diluted earnings per common share $ .83 .82 1.66 1.57
========= ======== ======== ========
Cash dividends per common share $ .3825 .3575 .765 .715
========= ======== ======== ========
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)
March 31, September 30,
ASSETS 2001 2000
------ --------- --------
CURRENT ASSETS
Cash and equivalents $ 403.6 280.8
Receivables, less allowances of $63.2 and $58.5 2,879.5 2,705.6
Inventories 2,211.8 2,052.7
Other current assets 454.4 443.6
--------- --------
Total current assets 5,949.3 5,482.7
--------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 3,302.6 3,243.4
--------- --------
OTHER ASSETS
Goodwill 5,325.4 5,320.0
Other 1,160.0 1,118.2
--------- --------
Total other assets 6,485.4 6,438.2
--------- --------
$15,737.3 15,164.3
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings and current maturities
of long-term debt $ 2,521.4 2,352.7
Accounts payable 1,263.9 1,210.6
Accrued expenses 1,462.6 1,390.6
Income taxes 260.4 264.9
--------- --------
Total current liabilities 5,508.3 5,218.8
--------- --------
LONG-TERM DEBT 2,279.2 2,247.7
--------- --------
OTHER LIABILITIES 1,269.3 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 20.2 53.0
Retained earnings 9,000.9 8,612.9
Accumulated other nonstockholder
changes in equity (661.8) (578.6)
Cost of common stock in treasury, 48,224,863
shares and 49,200,165 shares (1,917.1) (1,922.8)
--------- --------
Total stockholders' equity 6,680.5 6,402.8
--------- --------
$15,737.3 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
SIX MONTHS ENDED MARCH 31, 2001 AND 2000
(Dollars in millions; unaudited)
2001 2000
OPERATING ACTIVITIES -------- --------
Net earnings $ 716.1 677.7
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 352.2 335.6
Changes in operating working capital (287.8) (277.9)
Gain on divestiture of businesses and other (107.0) (45.8)
-------- --------
Net cash provided by operating activities 673.5 689.6
-------- --------
INVESTING ACTIVITIES
Capital expenditures (291.2) (297.4)
Purchases of businesses, net of cash and
equivalents acquired (139.0) (1,165.3)
Divestiture of businesses and other, net 42.3 31.5
-------- --------
Net cash used in investing activities (387.9) (1,431.2)
-------- --------
FINANCING ACTIVITIES
Net increase in short-term borrowings 183.0 1,466.8
Proceeds from long-term debt 40.1 106.8
Principal payments on long-term debt (21.9) (16.7)
Dividends paid (328.1) (307.9)
Net purchases of treasury stock (37.2) (391.8)
-------- --------
Net cash (used in) provided by financing (164.1) 857.2
activities
-------- --------
Effect of exchange rate changes on cash and equivalents 1.3 (8.3)
-------- --------
INCREASE IN CASH AND EQUIVALENTS 122.8 107.3
Beginning cash and equivalents 280.8 266.1
-------- --------
ENDING CASH AND EQUIVALENTS $ 403.6 373.4
======== ========
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)
March 31, September 30,
2001 2000
Inventories -------- -------
-----------
Finished products $ 885.7 861.8
Raw materials and work in process 1,326.1 1,190.9
-------- -------
$2,211.8 2,052.7
======== =======
Property, plant and equipment, net
----------------------------------
Property, plant and equipment, at cost $6,668.7 6,411.6
Less accumulated depreciation 3,366.1 3,168.2
-------- -------
$3,302.6 3,243.4
======== =======
Other assets, other
-------------------
Equity and other investments $ 225.4 227.0
Retirement plans 336.0 311.2
Leveraged leases 175.6 179.4
Other 423.0 400.6
-------- -------
$1,160.0 1,118.2
======== =======
Other liabilities
-----------------
Minority interest $ 103.9 104.4
Postretirement plans, excl. current portion 310.7 311.3
Deferred taxes 401.2 360.6
Other 453.5 518.7
-------- -------
$1,269.3 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 and six months ended March 31, 2001 and 2000, follows
(dollars in millions):
Sales Earnings
------------------- --------------
Three months ended March 31, 2001 2000 2001 2000
---------------------------- -------- ------- ----- -----
Process Control $ 837.9 747.7 82.3 57.0
Industrial Automation 772.5 830.4 105.1 117.8
Electronics and Telecommunications 1,025.2 712.9 131.2 96.2
HVAC 683.1 670.8 106.4 106.7
Appliance and Tools 900.3 1,034.4 132.2 159.8
-------- ------- ----- -----
4,219.0 3,996.2 557.2 537.5
Differences in accounting methods 49.6 48.2
Interest income, corporate and other 17.9 21.9
Eliminations/Interest expense (115.7) (101.5) (79.3) (69.0)
-------- ------- ----- -----
Net sales/Income
before income taxes $4,103.3 3,894.7 545.4 538.6
======== ======= ===== =====
Sales Earnings
------------------ ----------------
Six months ended March 31, 2001 2000 2001 2000
-------------------------- -------- ------- ------- -------
Process Control $1,598.9 1,477.2 149.7 114.5
Industrial Automation 1,538.6 1,638.1 211.6 229.7
Electronics and Telecommunications 2,111.8 1,303.6 278.8 167.1
HVAC 1,202.8 1,211.7 181.1 185.7
Appliance and Tools 1,780.8 2,000.2 267.8 306.1
-------- ------- ------- -------
8,232.9 7,630.8 1,089.0 1,003.1
Differences in accounting methods 97.7 92.7
Interest income, corporate and other 65.7 59.8
Eliminations/Interest expense (210.1) (192.8) (162.9) (121.0)
-------- ------- ------ -------
Net sales/Income
before income taxes $8,022.8 7,438.0 1,089.5 1,034.6
======== ======= ======= =======
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 March 31, 2001 and 2000, respectively, were $98 million and
$84 million. Intersegment sales of the Appliance and Tools segment for
the six months ended March 31, 2001 and 2000, respectively, were $173
million and $154 million.
6
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 March 31, 2001 and March 31, 2000, were
$320.4 million and $281.9 million comprised of net earnings of $358.7
million and $352.8 million and foreign currency translation adjustments
and other of $(38.3) million and $(70.9) million, respectively.
Nonstockholder changes in equity for the six months ended March 31, 2001,
and March 31, 2000, were $632.9 million and $564.4 million comprised of
net earnings of $716.1 million and $677.7 million and foreign currency
translation adjustments and other of $(83.2) million and $(113.3)
million, respectively.
7. The weighted average number of common shares outstanding (in millions)
was 426.9 and 427.2 for the three months ended March 31, 2001 and 2000,
and 427.0 and 428.8 for the six months ended March 31, 2001 and 2000,
respectively. The weighted average number of shares outstanding assuming
dilution (in millions) was 431.4 and 430.7 for the three months ended
March 31, 2001 and 2000, and 431.5 and 432.6 for the six months ended
March 31, 2001 and 2000, respectively. Dilutive shares primarily relate
to employee stock plans.
7
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
Emerson achieved record sales, net earnings and earnings per share for
the second quarter and first six months of fiscal year 2001. The results
reflect strong sales increases in the process and network power
businesses, as well as widespread strength in international markets.
Net sales were $4,103.3 million for the quarter ended March 31, 2001, up
5 percent over net sales of $3,894.7 million for the quarter ended March
31, 2000, and $8,022.8 million for the six months ended March 31, 2001,
up 8 percent over net sales of $7,438.0 million for the same period a
year ago. Second quarter results reflect solid underlying sales growth
and the success of our major growth initiatives. Underlying sales
increased 6 percent, excluding the impact of acquisitions, divestitures,
and a 2 percentage point unfavorable impact from currency. Underlying
domestic sales showed modest growth while underlying international sales
had a very strong increase, driven by very strong growth in Europe, Asia
and Latin America.
The process control business sales increased 12 percent, reflecting the
continued success of PlantWeb (tm) field-based architecture and
increasing participation in the solutions and services aspects of major
process projects. Underlying sales were very strong in all major
geographic regions - the United States, Europe, Asia and Latin America -
reflecting customers return to investing in capital projects.
Differentiation via PlantWeb technology investment, combined with
strategic organizational changes and acquisitions, have positioned the
Company as a full solutions and services provider enabled to deliver more
total value to customers than ever before.
Underlying sales in the industrial automation business were in line with
a year ago, with strong international increases in Europe and Asia
offsetting softness in the U.S. capital goods market. Reported sales
declined 7 percent, reflecting unfavorable currency exchange and the
impact of the Krautkramer and Sweco divestitures. Ongoing issues with
the U.S. power grid are triggering increased awareness and demand in
alternators for backup and distributed power applications.
Sales in the electronics and telecommunications business increased 44
percent. Approximately one-half of the increase was driven by very
strong underlying sales growth with the remainder due to the acquisition
of Ericsson's Energy Systems division, renamed Emerson Energy Systems.
Diverse products and end-market presence helped to continue growth at a
solid rate, as did international breadth, with Europe, Asia and Latin
America each posting very strong sales growth.
8
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
The heating, ventilating and air conditioning business sales increased 2
percent. Europe and Asia continued to realize strong sales gains,
partially offset by flat sales in the United States. Copeland Scroll
compressor technology continues to create opportunities to drive this
segment internationally, particularly in Europe and Asia. Inventory
levels in the United States have normalized from the high levels earlier
in the year that were caused by the cool Northeast summer in 2000.
The appliance and tools business reported a 13 percent decline in sales,
with the contribution of recent acquisitions more than offset by the
impact of the Vermont American divestiture, softness in appliance-related
products and unfavorable currency exchange. During the quarter, a new
shelving initiative was launched with Wal-Mart that encompasses both
ClosetMaid (tm) coated wire and Stack-A-Shelf (r) laminated wood shelving
for home applications. Innovative programs such as this have helped the
Company to sustain rates higher than the overall market.
Cost of sales for the second quarter of fiscal 2001 and 2000 was $2,652.5
million and $2,514.3 million, respectively. Cost of sales as a percent
of net sales was 64.6 percent in the second quarter of each fiscal
period. Cost of sales for the six months ended March 31, 2001 was
$5,184.0 or 64.6 percent of sales, compared to $4,803.1 million or 64.6
percent of sales for the same period a year ago. Selling, general and
administrative expenses for the three months ended March 31, 2001, were
$790.0 million, or 19.3 percent of sales, compared to $743.3 million, or
19.0 percent of sales for the same period a year ago. For the first six
months of 2001, selling, general and administrative expenses were
$1,564.0 million of 19.5 percent of sales, compared to $1,445.2 million
or 19.4 percent of sales for the same period in 2000.
Earnings before interest and income taxes for the second quarter
Increased 2.8 percent. The underlying operating margin improved 0.4
points, although the addition of lower-margin acquisitions led to a
decline of 0.3 points. Disciplined ongoing focus on cost reductions,
including the company-wide intranet-based consolidation of purchasing and
other e-business activities, continues to drive underlying improvement.
Earnings before interest and income taxes in the process business
increased 44 percent in the second quarter of 2001, driven by strong
increases in the valves, systems and solutions businesses, as well as
the Daniel operations acquired in 1999. The electronics and
telecommunications earnings increased 36 percent, reflecting very strong
sales growth and acquisitions. Earnings of the appliance and tools
business decreased compared to the same period a year ago, resulting from
the divestiture of Vermont American and a modest decline in sales due to
weakness in the appliance market.
9
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
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,
2001 2000
-------- --------
Working capital (in millions) $ 441.0 $ 263.9
Current ratio 1.1 to 1 1.1 to 1
Total debt to total capital 41.8% 41.8%
Net debt to net capital 39.7% 40.2%
The Company's interest coverage ratio (earnings before income taxes and
interest expense, divided by interest expense) was 7.7 times for the six
months ended March 31, 2001, compared to 9.6 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 of $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. In the second quarter, the Company terminated the swap of $250
million of 5.85% 10-year bonds originally swapped to floating U.S.
commercial paper rates.
Cash and equivalents increased by $122.8 million during the six months
ended March 31, 2001. Cash flow provided by operating activities of
$673.5 million and a net increase in borrowings of $201.2 million were
used primarily to fund purchases of businesses of $139.0 million, pay
dividends of $328.1 million, fund capital expenditures of $291.2 million,
and fund net purchases of treasury stock of $37.2 million.
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.
10
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 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)
11