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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock of $1.00 par value per share New York Stock Exchange
Chicago Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant as of close of business on October 31, 1995: $15,867 million.
Common stock outstanding at October 31, 1995: 224,003,608 shares.
Documents Incorporated by Reference
1. Portions of Emerson Electric Co. 1995 Annual Report to Stockholders
(Parts I and II).
2. Portions of Emerson Electric Co. Notice of 1996 Annual Meeting of
the Stockholders and Proxy Statement (Part III).
PART I
Item 1. Business
-----------------
Emerson was incorporated in Missouri in 1890. Originally engaged in
the manufacture and sale of electric motors and fans, Emerson's product
lines were subsequently expanded through internal growth and acquisitions.
Emerson is now engaged principally in the design, manufacture and sale of
a broad range of electrical, electromechanical and electronic products and
systems.
------------------------------------------------------
The products manufactured by the Company are classified into the
following industry segments: Commercial and Industrial Components and
Systems; and Appliance and Construction-Related Components. Net
sales, income before income taxes and accounting changes and total assets
attributable to each industry segment for the three years ended
September 30, 1995 are set forth in Note 12 of Notes to Consolidated
Financial Statements on page 39 of the 1995 Annual Report, which note is
hereby incorporated by reference. Information with respect to acquisition
and divestiture activities by Emerson is set forth in Note 2 of Notes to
Consolidated Financial Statements on page 33 of the 1995 Annual Report,
which note is hereby incorporated by reference.
COMMERCIAL AND INDUSTRIAL COMPONENTS AND SYSTEMS
------------------------------------------------
The Commercial and Industrial segment includes process control
instrumentation, valves and systems; industrial motors and drives;
industrial machinery, equipment and components; and electronic products.
These products are generally highly engineered, both in product design
and manufacturing process. Products of this segment are sold to commercial
and industrial distributors and end-users for manufacturing and commercial
applications.
Products used in process industries include various types of
instrumentation, valves and control systems for measurement and
control of fluid flow. Included are various types of meters such as
rotameters, positive displacement meters, magnetic flow meters,
turbine meters, direct mass flow meters and laboratory instruments to
measure water quality. Other products include solid state telemetering
equipment, various types of pressure and vacuum relief valves and personal
computer-based software used for industrial automation applications. In
addition, Emerson manufactures and sells temperature sensors, pressure
sensors and transmitters used to measure and/or control temperature, pressure,
level and rate and amount of flow. Also produced are process gas
chromatographs, in-situ absorptive oxygen analyzers, infrared gas and trace
moisture analyzers, combustion analyzers and systems, and other analyzers
which measure pH and conductivity. The Company also manufactures and sells
sliding stem valves, rotary valves, plastic-lined plug valves, butterfly
valves, pressure regulators, and related actuators and controllers.
2
Emerson also manufactures electronic measurement and data acquisition
equipment for use in industrial processing. In addition, Emerson
produces vibratory separating equipment used primarily in the
chemical, mining, pharmaceutical, food processing, pulp and paper,
ceramic and metal-working markets.
Beginning with a line of electric motors for industrial and heavy
commercial applications, Emerson's products for industrial automation
include certain kinds of integral horsepower motors, gear drives, pump
motors, alternators, electronic variable speed drives and diesel generator
sets. Emerson also produces electronic uninterruptible power supplies,
power conditioning and distribution equipment, modular power systems and
environmental control systems used in communications and information
processing applications.
Emerson manufactures and sells components for the transmission and
regulation of mechanical power, such as certain kinds of chains,
sprockets, sheaves, gears, bearings, couplings and speed reducers, and
a line of cam-operated index drives, programmable motion controllers
and automation accessories. These products are used primarily in
industrial and commercial applications requiring the transmission of
mechanical motion or drive systems of various types.
Emerson also manufactures a line of multi-purpose pressure and
solenoid valves, pressure, vacuum and temperature switches, automatic
transfer switches, remote control switches and electric power control
systems. These products are widely used in the automation of
equipment and industrial processes and for the control of emergency
electric power.
Emerson also produces a variety of industrial and commercial
ultrasonic products for applications such as cleaning, sealing, welding
and flaw detection. Other products include material preparation and
microstructure analysis equipment. Emerson also manufactures electric
circulation heaters, fluid heat transfer systems and component heating
elements.
Emerson manufactures a broad line of components for current-and
noncurrent-carrying electrical distribution devices such as panelboards,
receptacles, fittings, cable handling reels and lighting products for
use in hazardous and nonhazardous environments.
APPLIANCE AND CONSTRUCTION-RELATED COMPONENTS
---------------------------------------------
The Appliance and Construction-Related segment consists of fractional
horsepower motors; appliance components; heating, ventilating and air
conditioning components; and tools. This segment includes components sold
to distributors and original equipment manufacturers for inclusion in
end-products and systems (ultimately sold through commercial and residential
building construction channels); and construction-related products which
retain their identity and are sold through distributors to consumers and
the professional trades.
3
Emerson manufactures and sells a variety of components and systems for
refrigeration and comfort control applications, including hermetic
and semi-hermetic compressors; hermetic motors and terminals for
hermetically sealed compressors; and fractional and sub-fractional
horsepower motors for selected appliance, office equipment, ventilating
equipment, pump, heater and other motor-driven machine applications.
Automatic temperature controls, timers, switches, and thermo-protective
devices are manufactured for gas and electric heating systems, refrigeration
and air conditioning equipment and various large and small appliances.
Emerson also manufactures and sells a variety of electric heating elements
and electrostatic air cleaners.
Emerson manufactures and sells a line of electrical products primarily
for the residential markets, including humidifiers, electric waste
disposers, hot water dispensers, ventilating equipment and exhaust
fans.
Emerson is a producer of selected professional and hardware tools and
service equipment. These products include certain kinds of wrenches,
thread cutters, pipe cutters, reamers, vises, pipe and bolt threading
machines and sewer and drain cleaning equipment. The principal
markets for these professional tools and service equipment include
plumbing, heating and air conditioning contractors, construction and
maintenance companies, petroleum and gas producers, refiners and
processors, and farm and home consumers.
Emerson also produces a specialized line of light-duty industrial
bench power tools, ladders and scaffolding and related accessories.
Also produced by Emerson for marketing by a major retailer are shop
vacuum cleaners, a line of bench power tools for home workshop use
and a line of hand tools including adjustable wrenches, screwdrivers,
pliers and chisels.
PRODUCTION
----------
Emerson utilizes various production operations and methods. The
principal production operations are metal stamping, forming, casting,
machining, welding, plating, heat treating, painting and assembly.
In addition, Emerson also uses specialized production operations,
including automatic and semiautomatic testing, automated material
handling and storage, ferrous and nonferrous machining and special
furnaces for heat treating and foundry applications. Management
believes the equipment, machinery and tooling used in these processes
are of modern design and well maintained.
RAW MATERIALS AND ENERGY
------------------------
Emerson's major requirements for basic raw materials include steel,
copper, cast iron, aluminum and brass and, to a lesser extent,
plastics and other petroleum-based chemicals. Emerson has multiple
sources of supply for each of its material requirements. The raw
materials and various purchased components required for its products
have generally been available in sufficient quantities.
4
Emerson uses various forms of energy, principally natural gas and
electricity, obtained from public utilities. A majority of the plants
have the capability of being converted to use alternative sources of
energy.
PATENTS, TRADEMARKS, LICENSES AND FRANCHISES
--------------------------------------------
The Company has a number of patents, trademarks, licenses and
franchises, none of which is considered material to any segment of
its consolidated operations.
BACKLOG
-------
The estimated consolidated order backlog of the Company was $1,815
million and $1,546 million at September 30, 1995 and 1994, respectively.
Nearly all of the September 30, 1995 consolidated backlog amount is
expected to be shipped within one year. The estimated backlog by industry
segment at September 30, 1995 and 1994 follows (dollars in millions):
1995 1994
------- -------
Commercial and Industrial $ 1,215 1,000
Appliance and Construction-Related 600 546
------- -------
Consolidated Order Backlog $ 1,815 1,546
======= =======
COMPETITION
-----------
Emerson's businesses are highly competitive and the methods of
competition vary across the industry segments served. Although no
single company competes directly with Emerson in all of its product
lines, various companies compete in one or more product lines. Some
of these companies have substantially greater sales and assets than
Emerson. In addition, Emerson competes with many smaller companies.
RESEARCH AND DEVELOPMENT
------------------------
Costs associated with Company-sponsored research, new product
development and product improvement were $354.2 million in 1995,
$298.2 million in 1994 and $272.4 million in 1993.
ENVIRONMENT
-----------
Compliance with laws regulating the discharge of materials into the
environment or otherwise relating to the protection of the
environment has not had a material effect upon Emerson's capital
expenditures, earnings or competitive position. It is not
anticipated that Emerson will have material capital expenditures for
environmental control facilities during the next fiscal year.
5
EMPLOYEES
---------
Emerson and its subsidiaries had an average of approximately 78,900
employees during 1995.
DOMESTIC AND FOREIGN OPERATIONS
-------------------------------
International sales were $4,386 million in 1995, $3,243 million in
1994 and $3,168 million in 1993, including U.S. exports of $768
million, $589 million and $562 million in 1995, 1994 and 1993,
respectively. Although there are additional risks attendant to
foreign operations, such as nationalization of facilities, currency
fluctuations and restrictions on the movement of funds, Emerson's
financial position has not been materially affected thereby to date.
See Note 12 of Notes to Consolidated Financial Statements on page 39
of the 1995 Annual Report for further information with respect to
foreign operations.
Item 2. Properties
-------------------
At September 30, 1995, Emerson had approximately 275 manufacturing
locations worldwide, of which approximately 150 were located in 25
countries outside the United States. Approximately 185 locations are
occupied by the Commercial and Industrial segment, and approximately 90
are occupied by the Appliance and Construction-Related segment.
The majority of the locations are owned or occupied under capital lease
obligations with the remainder occupied under operating leases.
The Company considers its facilities suitable and adequate for the
purposes for which they are used.
Item 3. Legal Proceedings
--------------------------
Emerson is a party to a number of pending legal proceedings, several
of which claim substantial amounts of damages. There are no pending
legal proceedings that, in the opinion of management, are expected to
be material in relation to the Company's business or financial
position.
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
There were no matters submitted to a vote of security holders during
the quarter ended September 30, 1995.
-------------------------------------------
6
Executive Officers of the Registrant
The following sets forth certain information as of December 1995 with
respect to Emerson's executive officers. These officers have been
elected or appointed to terms which will expire February 6, 1996:
First
Served as
Name Position Age Officer
---- -------- --- ----------
C. F. Knight* Chairman of the Board, President
and Chief Executive Officer 59 1972
A. E. Suter* Senior Vice Chairman and
Chief Operating Officer 60 1979
R. W. Staley* Vice Chairman - Asia Pacific 60 1975
W. J. Galvin Senior Vice President - Finance
and Chief Financial Officer 49 1984
W. W. Withers Senior Vice President,
Secretary and
General Counsel 55 1989
*Also chairman and/or member of certain committees of the Board of
Directors.
There are no family relationships among any of the executive officers
and directors.
Each of the above has served as an officer or in a supervisory
capacity with Emerson for the last five years.
7
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
----------------------------------------------------------------------
Matters
-------
The information regarding the market for the Company's common stock,
quarterly market price ranges and dividend payments set forth in Note
13 of Notes to Consolidated Financial Statements on page 40 of the
1995 Annual Report is hereby incorporated by reference. There were
approximately 31,000 stockholders at September 30, 1995.
Item 6. Selected Financial Data
--------------------------------
Years ended September 30
(Dollars in millions except per share amounts)
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Net sales $ 10,012.9 8,607.2 8,173.8 7,706.0 7,427.0
Net earnings $ 907.7 788.5 708.1 662.9 631.9
Earnings
per common share $ 4.06 3.52 3.15 2.96 2.83
Cash dividends
per common share $ 1.78 1.56 1.44 1.38 1.32
Long-term debt $ 208.6 279.9 438.0 448.0 450.2
Total assets $ 9,399.0 8,215.0 7,814.5 6,627.0 6,364.4
Income before cumulative effect of change in accounting for postemployment
benefits ($21.3 million; $.10 per share) was $929.0 million in 1995. Net
earnings in 1995 includes non-recurring items which were substantially
offset by the accounting change.
Income before cumulative effect of change in accounting for postretirement
benefits ($115.9 million; $.52 per share) was $904.4 million in 1994. Net
earnings in 1994 includes non-recurring items which were substantially
offset by the accounting change. See Notes 2 and 7 of Notes to Consolidated
Financial Statements on pages 33 and 36 of the 1995 Annual Report for
information regarding these items and the Company's acquisition and
divestiture activities.
8
Item 7. Management's Discussion and Analysis of Financial Condition
--------------------------------------------------------------------
and Results of Operations
-------------------------
Narrative discussion appearing in the 1995 Annual Report under "Results
of Operations" and "Financial Position, Capital Resources and Liquidity"
on pages 22 through 26, is hereby incorporated by reference. Subsequent to
year end, the Company announced an agreement in principle for Caterpillar Inc.
to take an equity position in Emerson's F.G. Wilson subsidiary. The
transaction is contingent upon negotiating a definitive agreement and
receiving applicable regulatory approvals.
Item 8. Financial Statements and Supplementary Data
----------------------------------------------------
The consolidated financial statements of the Company and its
subsidiaries on pages 27 through 40 and the report thereon of KPMG
Peat Marwick LLP appearing on page 41 of the 1995 Annual Report are
hereby incorporated by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
--------------------------------------------------------------------
and Financial Disclosure
------------------------
None.
9
PART III
Item 10. Directors and Executive Officers of the Registrant
------------------------------------------------------------
Information regarding nominees and directors appearing under "Nominees
and Continuing Directors" in the Emerson Electric Co. Notice of Annual
Meeting of the Stockholders and Proxy Statement for the February 1996
annual stockholders' meeting (the "1996 Proxy Statement") is hereby
incorporated by reference. Information regarding executive officers
is set forth in Part I of this report.
Item 11. Executive Compensation
--------------------------------
Information appearing under "Board of Directors and Committees" and
"Executive Compensation" in the 1996 Proxy Statement is hereby
incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
-------------------------------------------------------------
Management
----------
The information regarding beneficial ownership of shares by nominees
and continuing directors and by all directors and executive officers
as a group appearing under "Nominees and Continuing Directors" in the
1996 Proxy Statement is hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions
--------------------------------------------------------
Information appearing under "Certain Business Relationships" in the
1996 Proxy Statement is hereby incorporated by reference.
10
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
-----------------------------------------------------------------
Form 8-K
---------
A) Documents filed as a part of this report:
1. The consolidated financial statements of the Company and its
subsidiaries on pages 27 through 40 and the report
thereon of KPMG Peat Marwick LLP appearing on page 41 of
the 1995 Annual Report.
2. Financial Statement Schedules
All schedules are omitted because they are not required, not
applicable or the information is given in the financial
statements or notes thereto contained in the 1995 Annual Report.
3. 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).
4(a) Indenture dated as of April 17, 1991, between
Emerson Electric Co. and The Boatmen's National Bank
of St. Louis, Trustee, incorporated by reference to
Emerson Electric Co. Registration Statement on
Form S-3, File No. 33-62545, Exhibit 4.1.
No other long-term debt instruments are filed since
the total amount of securities authorized under any
such instrument does not exceed 10 percent of the
total assets of Emerson Electric Co. and its
subsidiaries on a consolidated basis. Emerson
Electric Co. agrees to furnish a copy of such
instruments to the Securities and Exchange
Commission upon request.
4(b) Rights Agreement dated as of November 1, 1988
between Emerson Electric Co. and Centerre Trust
Company of St. Louis, incorporated by reference to
Emerson Electric Co. Form 8-K, dated November 1,
1988, Exhibits 1 and 2.
11
10(a)* 1974 Non-qualified Stock Option Plan, as amended,
incorporated by reference to Emerson Electric Co.
1991 Form 10-K, Exhibit 10(a) and Form 10-Q for the
quarter ended December 31, 1992, Exhibit 10(a).
10(b)* 1982 Incentive Stock Option Plan, as amended,
incorporated by reference to Emerson Electric Co.
1992 Form 10-K, Exhibit 10(b).
10(c)* Employment Agreement made as of October 1, 1975 and
amended January 9, 1987 between Emerson Electric Co.
and C. F. Knight, incorporated by reference to
Emerson Electric Co. 1987 Form 10-K, Exhibit 10(e).
10(d)* 1986 Stock Option Plan, as amended, incorporated by
reference to Emerson Electric Co. 1992 Form 10-K,
Exhibit 10(e) and Form 10-Q for the quarter ended
December 31, 1992, Exhibit 10(b).
10(e)* 1991 Stock Option Plan, as amended, incorporated by
reference to Emerson Electric Co. 1992 Form 10-K,
Exhibit 10(f) and Form 10-Q for the quarter ended
December 31, 1992, Exhibit 10(c).
10(f)* 1988 Incentive Shares plan, incorporated by
reference to Emerson Electric Co. 1988 Proxy
Statement dated December 18, 1987, Exhibit A, and
Form 10-Q for the quarter ended December 31, 1992,
Exhibits 10(d) and 10(e), and Amendments No. 3 and
No. 4 thereto, incorporated by reference to Emerson
Electric Co. 1993 Form 10-K, Exhibit 10(g).
10(g)* 1993 Incentive Shares Plan, incorporated by
reference to Emerson Electric Co. 1993 Proxy
Statement dated December 16, 1992, Exhibit A, and
Amendment No. 2 filed herewith.
10(h)* Restricted Shares Award Agreement with C. F. Knight
dated November 1, 1993, incorporated by reference to
Emerson Electric Co. 1993 Form 10-K, Exhibit 10(i).
10(i)* Emerson Electric Co. Directors' Continuing
Compensation Plan, incorporated by reference to
Emerson Electric Co. 1987 Form 10-K, Exhibit 10(g).
10(j)* Deferred Compensation Plan for Non-Employee
Directors, as amended, incorporated by reference to Emerson
Electric. Co. 1994 Form 10-K, Exhibit 10(k).
10(k)* Emerson Electric Co. Supplemental Executive
Retirement Plan, incorporated by reference to
Emerson Electric Co. 1989 Form 10-K, Exhibit 10(i).
12
10(l)* Second Amendment to the Supplemental Executive
Savings Investment Plan, incorporated by reference
to Emerson Electric Co. 1991 Form 10-K, Exhibit
10(j).
10(m)* Annual Incentive Plan incorporated by reference to
Emerson Electric Co. 1995 Proxy Statement dated
December 14, 1994, Appendix A.
13 Portions of Emerson Electric Co. Annual Report to
Stockholders for the year ended September 30, 1995
incorporated by reference herein.
21 Subsidiaries of Emerson Electric Co.
23 Independent Auditors' Consent.
24 Power of Attorney.
27 Financial Data Schedule.
* Management contract or compensatory plan.
B) No reports on Form 8-K were filed during the quarter ended
September 30, 1995.
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/ W. J. Galvin
-------------------------
W. J. Galvin
Senior Vice President -
Finance and Chief Financial
Officer (and Principal Accounting
Officer)
Date: December 20, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on December 20, 1995, by the
following persons on behalf of the registrant and in the capacities
indicated.
Signature Title
--------- -----
*
---------------------------------------- Chairman of the Board, President
C. F. Knight and Chief Executive Officer
and Director
/s/ W. J. Galvin
---------------------------------------- Senior Vice President -
W. J. Galvin Finance and Chief Financial
Officer (and Principal Accounting
Officer)
*
---------------------------------------- Director
L. L. Browning, Jr.
*
---------------------------------------- Director
A. A. Busch III
*
---------------------------------------- Director
D. C. Farrell
*
---------------------------------------- Director
J. A. Frates
14
*
---------------------------------------- Director
R. B. Horton
*
---------------------------------------- Director
G. A. Lodge
*
---------------------------------------- Director
V. R. Loucks, Jr.
*
---------------------------------------- Director
R. B. Loynd
*
---------------------------------------- Director
R. L. Ridgway
*
---------------------------------------- Director
R. W. Staley
*
---------------------------------------- Director
A. E. Suter
*
---------------------------------------- Director
W. M. Van Cleve
*
---------------------------------------- Director
E. E. Whitacre, Jr.
*
---------------------------------------- Director
E. F. Williams, Jr.
* By /s/ W. J. Galvin
--------------------------------
W. J. Galvin
Attorney-in-fact
15
INDEX TO EXHIBITS
-----------------
Exhibits are listed by numbers corresponding to the Exhibit Table of
Item 601 in Regulation S-K.
Exhibit No. Exhibit
---------- -------
10(g) Amendment No. 2 to the 1993 Incentive Shares plan
13 Portions of Annual Report to Stockholders for
the year ended September 30, 1995, incorporated
by reference herein
21 Subsidiaries of Emerson Electric Co.
23 Independent Auditors' Consent
24 Power of Attorney
27 Financial Data Schedule
See Item 14(A)(3) for a list of exhibits incorporated by reference.
16