Missouri
(State
or other jurisdiction of
incorporation
or organization)
|
43-0259330
(I.R.S.
Employer
Identification
No.)
|
|
8000
W. Florissant Ave.
P.O.
Box 4100
St.
Louis, Missouri
(Address
of principal executive offices)
|
63136
(Zip
Code)
|
Three Months Ended
|
||||||||
December 31,
|
||||||||
2007
|
2008
|
|||||||
Net
Sales
|
$ | 5,520 | 5,415 | |||||
Costs
and expenses:
|
||||||||
Cost
of sales
|
3,510 | 3,419 | ||||||
Selling,
general and administrative expenses
|
1,184 | 1,193 | ||||||
Other
deductions, net
|
3 | 91 | ||||||
Interest
expense (net of interest income of $14 and $11,
respectively)
|
50 | 43 | ||||||
Earnings
from continuing operations before income taxes
|
773 | 669 | ||||||
Income
taxes
|
254 | 211 | ||||||
Earnings
from continuing operations
|
519 | 458 | ||||||
Discontinued
operations, net of tax
|
46 | - | ||||||
Net
earnings
|
$ | 565 | 458 | |||||
Basic
earnings per common share:
|
||||||||
Earnings
from continuing operations
|
$ | 0.66 | 0.60 | |||||
Discontinued
operations
|
0.06 | - | ||||||
Basic
earnings per common share
|
$ | 0.72 | 0.60 | |||||
Diluted
earnings per common share:
|
||||||||
Earnings
from continuing operations
|
$ | 0.65 | 0.60 | |||||
Discontinued
operations
|
0.06 | - | ||||||
Diluted
earnings per common share
|
$ | 0.71 | 0.60 | |||||
Cash
dividends per common share
|
$ | 0.30 | 0.33 |
September 30,
|
December 31,
|
|||||||
2008
|
2008
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
and equivalents
|
$ | 1,777 | 1,668 | |||||
Receivables,
less allowances of $90 and $89, respectively
|
4,618 | 4,007 | ||||||
Inventories
|
2,348 | 2,470 | ||||||
Other
current assets
|
588 | 728 | ||||||
Total
current assets
|
9,331 | 8,873 | ||||||
Property,
plant and equipment, net
|
3,507 | 3,459 | ||||||
Other
assets
|
||||||||
Goodwill
|
6,562 | 6,556 | ||||||
Other
|
1,640 | 1,634 | ||||||
Total
other assets
|
8,202 | 8,190 | ||||||
$ | 21,040 | 20,522 | ||||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||
Current
liabilities
|
||||||||
Short-term borrowings and current maturities of long-term
debt
|
$ | 1,221 | 2,042 | |||||
Accounts
payable
|
2,699 | 2,171 | ||||||
Accrued
expenses
|
2,480 | 2,412 | ||||||
Income
taxes
|
173 | 203 | ||||||
Total
current liabilities
|
6,573 | 6,828 | ||||||
Long-term
debt
|
3,297 | 3,234 | ||||||
Other
liabilities
|
2,057 | 2,058 | ||||||
Stockholders’
equity
|
||||||||
Preferred
stock of $2.50 par value per share
|
||||||||
Authorized
5.4 shares; issued – none
|
- | - | ||||||
Common
stock of $0.50 par value per share
|
||||||||
Authorized
1,200.0 shares; issued 953.4 shares; outstanding 771.2 shares and 759.0
shares, respectively
|
477 | 477 | ||||||
Additional
paid-in capital
|
146 | 140 | ||||||
Retained
earnings
|
14,002 | 14,208 | ||||||
Accumulated
other comprehensive income
|
141 | (356 | ) | |||||
Cost
of common stock in treasury, 182.2 shares and
194.4 shares, respectively
|
(5,653 | ) | (6,067 | ) | ||||
Total stockholders' equity
|
9,113 | 8,402 | ||||||
$ | 21,040 | 20,522 |
Three Months Ended
|
||||||||
December 31,
|
||||||||
2007
|
2008
|
|||||||
Operating
activities
|
||||||||
Net
earnings
|
$ | 565 | 458 | |||||
Adjustments
to reconcile net earnings to net cash
|
||||||||
provided
by operating activities:
|
||||||||
Depreciation
and amortization
|
171 | 176 | ||||||
Changes
in operating working capital
|
(307 | ) | (316 | ) | ||||
Other
|
(6 | ) | 1 | |||||
Net
cash provided by operating activities
|
423 | 319 | ||||||
Investing
activities
|
||||||||
Capital
expenditures
|
(127 | ) | (132 | ) | ||||
Purchases
of businesses, net of cash and equivalents acquired
|
(377 | ) | (271 | ) | ||||
Other
|
183 | (12 | ) | |||||
Net
cash used in investing activities
|
(321 | ) | (415 | ) | ||||
Financing
activities
|
||||||||
Net
increase in short-term borrowings
|
1,050 | 968 | ||||||
Proceeds
from long-term debt
|
- | 2 | ||||||
Principal
payments on long-term debt
|
- | (186 | ) | |||||
Dividends
paid
|
(237 | ) | (252 | ) | ||||
Purchases
of treasury stock
|
(194 | ) | (433 | ) | ||||
Other
|
(61 | ) | (35 | ) | ||||
Net
cash provided by financing activities
|
558 | 64 | ||||||
Effect
of exchange rate changes on cash and equivalents
|
38 | (77 | ) | |||||
Increase
(decrease) in cash and equivalents
|
698 | (109 | ) | |||||
Beginning
cash and equivalents
|
1,008 | 1,777 | ||||||
Ending
cash and equivalents
|
$ | 1,706 | 1,668 | |||||
Changes
in operating working capital
|
||||||||
Receivables
|
$ | 143 | 439 | |||||
Inventories
|
(170 | ) | (164 | ) | ||||
Other
current assets
|
74 | (85 | ) | |||||
Accounts
payable
|
(244 | ) | (424 | ) | ||||
Accrued
expenses
|
(152 | ) | (142 | ) | ||||
Income
taxes
|
42 | 60 | ||||||
$ | (307 | ) | (316 | ) |
FORM
10-Q
|
|
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 for annual financial statements presented in
conformity with U.S. generally accepted accounting
principles. First quarter 2008 results in this Form 10-Q
reflect the Company’s reclassification of its European appliance motor and
pump business as discontinued operations, which occurred in the second
quarter of 2008. 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,
2008.
|
|
2.
|
Reconciliations
of weighted average common shares for basic earnings per common share and
diluted earnings per common share follow (shares in
millions):
|
Three Months Ended
|
||||||||
December 31,
|
||||||||
2007
|
2008
|
|||||||
Basic
|
786.5 | 763.2 | ||||||
Dilutive
shares
|
10.0 | 4.7 | ||||||
Diluted
|
796.5 | 767.9 |
|
3.
|
Comprehensive
income (loss) is summarized as follows (dollars in
millions):
|
Three Months Ended
|
||||||||
December 31,
|
||||||||
2007
|
2008
|
|||||||
Net
earnings
|
$ | 565 | 458 | |||||
Foreign
currency translation
|
95 | (400 | ) | |||||
Cash
flow hedges and other
|
(33 | ) | (97 | ) | ||||
$ | 627 | (39 | ) |
EMERSON
ELECTRIC CO. AND SUBSIDIARIES
|
FORM
10-Q
|
4.
|
Other
Financial Information (dollars in
millions):
|
September 30,
|
December 31,
|
|||||||
2008
|
2008
|
|||||||
|
||||||||
Inventories
|
||||||||
Finished
products
|
$ | 884 | 980 | |||||
Raw
materials and work in process
|
1,464 | 1,490 | ||||||
$ | 2,348 | 2,470 | ||||||
Property, plant and equipment,
net
|
||||||||
Property,
plant and equipment, at cost
|
$ | 8,691 | 8,589 | |||||
Less
accumulated depreciation
|
5,184 | 5,130 | ||||||
$ | 3,507 | 3,459 | ||||||
Goodwill by segment
|
||||||||
Process
Management
|
$ | 2,043 | 2,002 | |||||
Industrial
Automation
|
1,107 | 1,178 | ||||||
Network
Power
|
2,432 | 2,387 | ||||||
Climate
Technologies
|
412 | 407 | ||||||
Appliance
and Tools
|
568 | 582 | ||||||
$ | 6,562 | 6,556 |
Other
assets, other
|
||||||||
Intellectual
property and customer relationships
|
$ | 627 | 680 | |||||
Pension
plans
|
436 | 393 | ||||||
Capitalized
software
|
192 | 196 | ||||||
Other
|
385 | 365 | ||||||
$ | 1,640 | 1,634 | ||||||
Product
warranty liability
|
$ | 204 | 187 | |||||
Other
liabilities
|
||||||||
Deferred
income taxes
|
$ | 533 | 566 | |||||
Postretirement
plans, excluding current portion
|
417 | 419 | ||||||
Retirement
plans
|
325 | 314 | ||||||
Minority
interests
|
188 | 158 | ||||||
Other
|
594 | 601 | ||||||
$ | 2,057 | 2,058 |
EMERSON
ELECTRIC CO. AND SUBSIDIARIES
|
FORM
10-Q
|
|
5.
|
Net
periodic pension expense is summarized as follows (dollars in
millions):
|
Three Months Ended
|
||||||||
December 31,
|
||||||||
2007
|
2008
|
|||||||
Service
cost
|
$ | 18 | 18 | |||||
Interest
cost
|
52 | 56 | ||||||
Expected
return on plan assets
|
(68 | ) | (72 | ) | ||||
Net
amortization
|
24 | 21 | ||||||
$ | 26 | 23 |
Three Months Ended
|
||||||||
December 31,
|
||||||||
|
2007
|
2008
|
||||||
Service
cost
|
$ | 1 | 1 | |||||
Interest
cost
|
7 | 7 | ||||||
Net
amortization
|
7 | 2 | ||||||
$ | 15 | 10 |
|
6.
|
Other
deductions, net are summarized as follows (dollars in
millions):
|
Three Months Ended
|
||||||||
December 31,
|
||||||||
2007
|
2008
|
|||||||
Other
deductions, net
|
||||||||
Rationalization
of operations
|
$ | 9 | 43 | |||||
Amortization
of intangibles
|
17 | 23 | ||||||
Other
|
41 | 29 | ||||||
Gains
|
(64 | ) | (4 | ) | ||||
$ | 3 | 91 |
EMERSON
ELECTRIC CO. AND SUBSIDIARIES
|
FORM
10-Q
|
|
7.
|
The
change in the liability for rationalization of operations during the three
months ended December 31, 2008, follows (dollars in
millions):
|
September 30,
|
December 31,
|
|||||||||||||||
2008
|
Expense
|
Paid/Utilized
|
2008
|
|||||||||||||
Severance
and benefits
|
$ | 33 | 34 | 12 | 55 | |||||||||||
Lease/contract
terminations
|
5 | 1 | 1 | 5 | ||||||||||||
Fixed
asset write-downs
|
- | 1 | 1 | - | ||||||||||||
Vacant facility and
other shutdown costs
|
1 | 2 | 2 | 1 | ||||||||||||
Start-up
and moving costs
|
1 | 5 | 5 | 1 | ||||||||||||
$ | 40 | 43 | 21 | 62 |
Three Months Ended
|
||||||||
December 31,
|
||||||||
2007
|
2008
|
|||||||
Process
Management
|
$ | 1 | 2 | |||||
Industrial
Automation
|
3 | 3 | ||||||
Network
Power
|
3 | 20 | ||||||
Climate
Technologies
|
1 | 14 | ||||||
Appliance
and Tools
|
1 | 4 | ||||||
$ | 9 | 43 |
EMERSON
ELECTRIC CO. AND SUBSIDIARIES
|
FORM
10-Q
|
|
8.
|
Summarized
information about the Company's operations by business segment follows
(dollars in millions):
|
Sales
|
Earnings
|
|||||||||||||||
Three months ended December 31,
|
2007
|
2008
|
2007
|
2008
|
||||||||||||
Process
Management
|
$ | 1,436 | 1,553 | 258 | 302 | |||||||||||
Industrial
Automation
|
1,125 | 1,103 | 171 | 153 | ||||||||||||
Network
Power
|
1,406 | 1,435 | 180 | 149 | ||||||||||||
Climate
Technologies
|
766 | 692 | 102 | 53 | ||||||||||||
Appliance
and Tools
|
932 | 771 | 132 | 79 | ||||||||||||
5,665 | 5,554 | 843 | 736 | |||||||||||||
Differences
in accounting methods
|
53 | 50 | ||||||||||||||
Corporate
and other
|
(73 | ) | (74 | ) | ||||||||||||
Eliminations/Interest
|
(145 | ) | (139 | ) | (50 | ) | (43 | ) | ||||||||
Net
sales/Earnings before income taxes
|
$ | 5,520 | 5,415 | 773 | 669 |
|
9.
|
Effective
October 1, 2008, the Company adopted the recognition and disclosure
provisions of Statement of Financial Accounting Standards (FAS)
No. 157, “Fair Value Measurements.” FAS 157 defines
fair value, establishes a formal hierarchy and framework for measuring
fair value, and expands disclosures about fair value measurements and the
reliability of valuation inputs. Under FAS 157, a fair value
measurement assumes that the transaction to sell an asset or transfer a
liability occurs in the principal market for that asset or liability or,
in the absence of a principal market, the most advantageous market
available. Level 1 instruments have the most reliable
valuations and are measured using observable market prices for the same
item in active markets. Fair values using market-observable
inputs in active markets, including forward and spot prices, interest
rates and volatilities for similar underlying currencies or commodities
are considered Level 2. Unobservable inputs are the least
reliable for valuation and are considered Level 3. In February
2008, the FASB delayed until fiscal 2010 the effective date of
FAS 157 for nonfinancial assets and nonfinancial
liabilities. This includes goodwill and certain other
intangible and long-lived assets. The Company has in place
bilateral collateral agreements with thresholds indexed to credit ratings
that limit both Emerson’s and its counterparties’ exposure in the event of
default. Due to the high credit quality of the Company and its
counterparties there was only an inconsequential impact on the fair value
of the Company’s derivative assets and liabilities due to the adoption of
FAS 157.
|
Level
|
Assets
|
Liabilities
|
||||||||||
Commodity
futures
|
2
|
$ | - | 135 | ||||||||
Commodity
options
|
2
|
$ | 6 | - | ||||||||
Foreign currency
forwards
|
2
|
$ | 1 | 92 | ||||||||
Foreign currency
options
|
2
|
|
$ | 11 | - | |||||||
Available for sale
investments
|
1
|
$ | 4 | - |
10.
|
In
December 2008, the Company acquired System Plast, a manufacturer of
engineered modular belts and custom conveyer components for the bottling,
baking, food processing and packaging industries, for approximately $200
million in cash. System Plast has annual revenues of
approximately $100 million and is reported in the Industrial Automation
business segment.
|
EMERSON
ELECTRIC CO. AND SUBSIDIARIES
|
FORM
10-Q
|
Three months ended December
31,
|
2007
|
2008
|
Change
|
|||||||||
(dollars
in millions, except per share amounts)
|
||||||||||||
Net
sales
|
$ | 5,520 | 5,415 | (2 | )% | |||||||
Gross
profit
|
$ | 2,010 | 1,996 | (1 | )% | |||||||
Percent
of sales
|
36.4 | % | 36.9 | % | ||||||||
SG&A
|
$ | 1,184 | 1,193 | |||||||||
Percent
of sales
|
21.4 | % | 22.1 | % | ||||||||
Other
deductions, net
|
$ | 3 | 91 | |||||||||
Interest
expense, net
|
$ | 50 | 43 | |||||||||
Earnings
from continuing operations before income taxes
|
$ | 773 | 669 | (14 | )% | |||||||
Earnings
from continuing operations
|
$ | 519 | 458 | (12 | )% | |||||||
Net
earnings
|
$ | 565 | 458 | (19 | )% | |||||||
Percent
of sales
|
10.2 | % | 8.5 | % | ||||||||
EPS-
Continuing operations
|
$ | 0.65 | 0.60 | (8 | )% | |||||||
EPS-
Net earnings
|
$ | 0.71 | 0.60 | (15 | )% |
EMERSON
ELECTRIC CO. AND SUBSIDIARIES
|
FORM
10-Q
|
Three months ended December
31,
|
2007
|
2008
|
Change
|
|||||||||
(dollars
in millions)
|
||||||||||||
Sales
|
$ | 1,436 | 1,553 | 8 | % | |||||||
Earnings
|
$ | 258 | 302 | 17 | % | |||||||
Margin
|
18.0 | % | 19.4 | % |
1.4
|
pts |
EMERSON
ELECTRIC CO. AND SUBSIDIARIES
|
FORM
10-Q
|
Three months ended December
31,
|
2007
|
2008
|
Change
|
|||||||||
(dollars
in millions)
|
||||||||||||
Sales
|
$ | 1,125 | 1,103 | (2 | )% | |||||||
Earnings
|
$ | 171 | 153 | (10 | )% | |||||||
Margin
|
15.2 | % | 13.9 | % |
(1.3
|
) pts |
Three months ended December
31,
|
2007
|
2008
|
Change
|
|||||||||
(dollars
in millions)
|
||||||||||||
Sales
|
$ | 1,406 | 1,435 | 2 | % | |||||||
Earnings
|
$ | 180 | 149 | (17 | )% | |||||||
Margin
|
12.8 | % | 10.4 | % |
(2.4
|
) pts |
Three months ended December
31,
|
2007
|
2008
|
Change
|
|||||||||
(dollars
in millions)
|
||||||||||||
Sales
|
$ | 766 | 692 | (10 | )% | |||||||
Earnings
|
$ | 102 | 53 | (48 | )% | |||||||
Margin
|
13.4 | % | 7.7 | % |
(5.7
|
) pts |
EMERSON
ELECTRIC CO. AND SUBSIDIARIES
|
FORM
10-Q
|
Three months ended December
31,
|
2007
|
2008
|
Change
|
|||||||||
(dollars
in millions)
|
||||||||||||
Sales
|
$ | 932 | 771 | (17 | )% | |||||||
Earnings
|
$ | 132 | 79 | (40 | )% | |||||||
Margin
|
14.1 | % | 10.2 | % |
(3.9
|
) pts |
September 30,
2008
|
December 31,
2008
|
|||||||
Working
capital (in millions)
|
$ | 2,758 | 2,045 | |||||
Current
ratio
|
1.4
to 1
|
1.3
to 1
|
||||||
Total
debt to total capital
|
33.1 | % | 38.6 | % | ||||
Net
debt to net capital
|
22.7 | % | 29.6 | % | ||||
Interest
coverage ratio
|
15.7 | 13.4 |
EMERSON
ELECTRIC CO. AND SUBSIDIARIES
|
FORM
10-Q
|
EMERSON
ELECTRIC CO. AND SUBSIDIARIES
|
FORM
10-Q
|
Period
|
Total Number of
Shares
Purchased (000s)
|
Average Price
Paid per Share
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (000s)
|
Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs (000s)
|
||||||||||||
October
2008
|
4,600 | $34.65 | 4,600 | 67,792 | ||||||||||||
November
2008
|
3,800 | $32.89 | 3,800 | 63,992 | ||||||||||||
December
2008
|
4,400 | $33.41 | 4,400 | 59,592 | ||||||||||||
Total
|
12,800 | $33.70 | 12,800 | 59,592 |
(a)
|
Exhibits
(Listed by numbers corresponding to the Exhibit Table of Item 601 in
Regulation S-K).
|
3.1
|
Bylaws
of Emerson Electric Co., as amended through November 4,
2008.
|
|
4
|
Emerson
agrees to furnish to the Securities and Exchange Commission, upon request,
copies of any long-term debt instruments that authorize an amount of
securities constituting 10 percent or less of the total assets of Emerson
and its subsidiaries on a consolidated basis.
|
|
12
|
Ratio
of Earnings to Fixed Charges.
|
|
31
|
Certifications
pursuant to Exchange Act Rule 13a-14(a).
|
|
32
|
Certifications
pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. Section
1350.
|
EMERSON
ELECTRIC CO. AND SUBSIDIARIES
|
FORM
10-Q
|
EMERSON
ELECTRIC CO.
|
||
Date:
February 4, 2009
|
By
|
/s/
Walter J. Galvin
|
Walter
J. Galvin
|
||
Senior
Executive Vice President
|
||
and
Chief Financial Officer
|
||
(on
behalf of the registrant and
|
||
as
Chief Financial
Officer)
|
EMERSON
ELECTRIC CO. AND SUBSIDIARIES
|
FORM
10-Q
|
Exhibit No.
|
Exhibit
|
|
3.1
|
Bylaws
of Emerson Electric Co., as amended through November 4,
2008.
|
|
12
|
Ratio
of Earnings to Fixed Charges.
|
|
31
|
Certifications
pursuant to Exchange Act Rule 13a-14(a).
|
|
32
|
Certifications
pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. Section
1350.
|