10-Q: Quarterly report [Sections 13 or 15(d)]
Published on May 15, 1997
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, 1997
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, 1997: 445,249,761 shares.
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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, 1997 AND 1996
(Dollars in millions except per share amounts; unaudited)
Three Months Six Months
-------------------- -------------------
1997 1996 1997 1996
--------- -------- -------- --------
Net sales $ 3,103.5 2,819.8 5,934.1 5,385.6
--------- -------- -------- --------
Costs and expenses:
Cost of sales 1,987.4 1,821.1 3,792.8 3,471.5
Selling, general and
administrative expenses 612.2 544.0 1,195.5 1,061.0
Interest expense 29.8 33.9 57.3 64.0
Other deductions, net 28.4 18.4 37.5 24.8
--------- -------- -------- --------
Total costs and expenses 2,657.8 2,417.4 5,083.1 4,621.3
Income before income taxes 445.7 402.4 851.0 764.3
Income taxes 165.3 147.5 315.7 278.9
--------- -------- -------- --------
Net earnings $ 280.4 254.9 535.3 485.4
========= ======== ======== ========
Earnings per common share $ .63 .57 1.20 1.08
========= ======== ======== ========
Cash dividends per common share $ .27 .245 .54 .49
========= ======== ======== ========
Average number of shares used in
computing earnings per common
share (in thousands) 446,112 448,111 446,760 448,108
========= ======== ======== ========
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 1997 1996
------ --------- -------
CURRENT ASSETS
Cash and equivalents $ 284.2 149.0
Receivables, less allowances of $56.8 and $50.3 2,254.6 1,979.8
Inventories 1,824.1 1,743.9
Other current assets 336.0 314.5
--------- --------
Total current assets 4,698.9 4,187.2
--------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 2,538.0 2,450.8
--------- --------
OTHER ASSETS
Excess of cost over net assets of purchased
businesses 2,830.7 2,779.2
Other 851.9 1,063.8
--------- --------
Total other assets 3,682.6 3,843.0
--------- --------
$10,919.5 10,481.0
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings and current maturities
of long-term debt $ 1,308.9 967.0
Accounts payable 725.9 791.3
Accrued expenses 1,092.1 1,063.3
Income taxes 177.6 199.5
--------- --------
Total current liabilities 3,304.5 3,021.1
--------- --------
LONG-TERM DEBT 783.8 772.6
--------- --------
OTHER LIABILITIES 1,413.6 1,333.9
--------- --------
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 5.3 12.3
Retained earnings 6,001.6 5,707.7
Cumulative translation adjustments (114.7) (29.2)
Cost of common stock in treasury, 31,427,245
shares and 29,237,152 shares (712.9) (575.7)
--------- --------
Total stockholders' equity 5,417.6 5,353.4
--------- --------
$10,919.5 10,481.0
========= ========
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, 1997 AND 1996
(Dollars in millions; unaudited)
1997 1996
--------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 412.9 338.2
INVESTING ACTIVITIES
Capital expenditures (227.1) (218.8)
Purchases of businesses, net of cash and
equivalents acquired (22.7) (54.9)
Other, net .9 (37.1)
--------- -------
Net cash (used in) investing activities (248.9) (310.8)
--------- -------
FINANCING ACTIVITIES
Net increase in short-term borrowings 384.3 89.0
Proceeds from long-term debt 5.9 257.4
Principal payments on long-term debt (9.3) (16.7)
Dividends paid (241.3) (219.6)
Net purchases of treasury stock (152.4) (59.4)
--------- -------
Net cash provided by financing activities (12.8) 50.7
--------- -------
Effect of exchange rate changes on cash and equivalents (16.0) (.8)
--------- -------
INCREASE IN CASH AND EQUIVALENTS 135.2 77.3
Beginning cash and equivalents 149.0 117.3
--------- -------
ENDING CASH AND EQUIVALENTS $ 284.2 194.6
========= =======
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.
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, 1996.
2. During the second quarter of fiscal 1997, Emerson began consolidating
the results of Astec (BSR) Plc into the Company's financial
statements. The increases in total assets and liabilities reflect
this consolidation.
3. On March 10, 1997 the Company consummated a two-for-one stock split
and stockholders of record February 21, 1997, received one additional
share of common stock for each share held. The accompanying
financial statements have been restated to give effect to the split.
4. Other Financial Information
(Dollars in millions; unaudited)
March 31, September 30,
Inventories 1997 1996
----------- --------- -------
Finished products $ 748.9 720.7
Raw materials and work in process 1,075.2 1,023.2
--------- -------
$ 1,824.1 1,743.9
========= =======
March 31, September 30,
Property, plant and equipment, net 1997 1996
---------------------------------- --------- -------
Property, plant and equipment, at cost $ 5,162.6 4,865.6
Less accumulated depreciation 2,624.6 2,414.8
--------- -------
$ 2,538.0 2,450.8
========= =======
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
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 1997 were the highest for any quarter and
first six-month period in the Company's history.
Net sales were $3,103.5 million for the quarter ended March 31, 1997,
up 10.1 percent over net sales of $2,819.8 million for the quarter ended
March 31, 1996, and $5,934.1 million for the six months ended March 31,
1997, up 10.2 percent over net sales of $5,385.6 for the same period a
year ago. The second quarter results reflect solid international and
modest domestic demand, and the impact of 1996 acquisitions and
consolidation of Astec (BSR) Plc. Excluding the negative impact of
currency, underlying international sales showed good improvement due to
very strong export sales and continued strength in the Asia-Pacific and
Latin American regions.
In the Commercial and Industrial segment, the electronics business
achieved very strong sales growth, driven by the success of new products
and contributions from all geographic areas and product lines.
Industrial motors and drives achieved moderate sales growth benefiting
from acquisitions and improving domestic demand. Sales of the process
business increased modestly as solid international sales growth was
substantially offset by weakening European currencies. Modest gains in
the industrial components and equipment business were due to solid
worldwide demand partially offset by currency translation.
In the Appliance and Construction-Related segment, the heating,
ventilating and air-conditioning business reported solid sales growth,
reflecting increased demand in international markets. The underlying
tools business reported a modest sales increase led by strong
international sales growth. Sales of the fractional motors and appliance
components business reflected solid international demand offset by
sluggish domestic sales of motors for room air-conditioning units and
fans due to customer inventory adjustments.
Cost of sales for the second quarter was $1,987.4 million or 64.0
percent of sales, compared with $1,821.1 million, or 64.6 percent of
sales, for the second quarter of 1996. Cost of sales for the six months
ended March 31, 1997 was $3,792.8 million or 63.9 percent of sales,
compared to $3,471.5 million or 64.5 percent of sales for the same period
a year ago. Selling, general and administrative expenses for the three
months ended March 31, 1997 were $612.1 million, or 19.8 percent of
sales, compared to $544.0 million, or 19.3 percent of sales for the same
period a year ago. For the first six months of 1997, selling, general
and administrative expenses were $1,195.5 million or 20.2 percent of
sales, compared to $1,061.0 million or 19.7 percent of sales for the same
period in 1996. Operating margins benefited from continuing cost
reduction efforts and productivity improvement programs.
6
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,
1997 1996
-------- --------
Working capital (in millions) $1,394.4 1,166.1
Current ratio 1.4 to 1 1.4 to 1
Total debt to total capital 27.9% 24.5%
Net debt to net capital 25.0% 22.9%
The Company's interest coverage ratio (earnings before income taxes
and interest expense, divided by interest expense) was 15.9 times for the
six months ended March 31, 1997 compared to 12.9 times for the same
period one year earlier. The increase in interest coverage ratio
reflects earnings growth and a reduction in interest rates.
Cash and equivalents increased by $135.2 million during the six months
ended March 31, 1997. Cash flow provided by operating activities of
$412.9 million and an increase in borrowings of $380.9 million were used
primarily to pay dividends of $241.3 million, fund capital expenditures
of $227.1 million and fund net purchases of treasury stock of $152.4
million.
The Company is in a strong financial position, continues to generate
strong operating cash flows, 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, 1996.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders on February 4, 1997, three
proposals described in the Notice of Annual Meeting of Stockholders dated
December 6, 1996, were voted upon.
1. The directors listed below were elected for terms ending in 2000
with voting for each as follows:
7
EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
DIRECTOR FOR WITHHELD
-------- ----------- ----------
L. L. Browning, Jr. 193,779,590 1,997,878
A. A. Busch III 193,748,853 2,028,615
R. B. Horton 194,074,997 1,702,471
G. A. Lodge 194,082,742 1,694,726
V. R. Loucks, Jr. 193,999,883 1,777,585
2. The proposal to amend the Restated Articles of Incorporation to
increase the authorized shares of common stock and decrease the par
value per share was approved by a vote of 160,613,755 in favor to
34,085,508 against, with 1,066,320 abstaining.
3. The proposal to approve the 1997 Incentive Shares Plan was approved
by a vote of 186,397,066 in favor to 7,989,414 against, with
1,390,988 abstaining.
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.,
filed herewith.
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).
10(n) 1997 Incentive Shares Plan, incorporated by reference to
Emerson Electric Co. 1997 Proxy Statement dated December 6,
1996, Exhibit A.
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, 1997.
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 14, 1997 By /s/ Walter J. Galvin
-----------------------
Walter J. Galvin
Senior Vice President - Finance
and Chief Financial Officer
(on behalf of the registrant and
as Chief Financial Officer)
8