emr-20211231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2021

☐ 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 incorporation or organization)		(I.R.S. Employer 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:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock of $0.50 par value per share	EMR	New York Stock Exchange
		NYSE Chicago
0.375% Notes due 2024	EMR 24	New York Stock Exchange
1.250% Notes due 2025	EMR 25A	New York Stock Exchange
2.000% Notes due 2029	EMR 29	New York Stock Exchange

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common stock of $0.50 par value per share outstanding at December 31, 2021: 594.0 million shares.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Earnings

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three months ended December 31, 2020 and 2021

(Dollars in millions, except per share amounts; unaudited)


	Three Months Ended December 31,
	2020		2021
Net sales	$	4,161	4,473

Cost of sales	2,438		2,651
Selling, general and administrative expenses	998		1,011
Gain on subordinated interest	—		(453)
Other deductions, net	122		51
Interest expense (net of interest income of $2 and $3, respectively)	40		38

Earnings before income taxes	563		1,175

Income taxes	111		280





Net earnings	452		895

Less: Noncontrolling interests in subsidiaries	7		(1)

Net earnings common stockholders	$	445	896









Earnings per share:
Basic	$	0.74	1.51
Diluted	$	0.74	1.50

Weighted average outstanding shares:
Basic	598.5		594.6
Diluted	601.9		598.1

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three months ended December 31, 2020 and 2021

(Dollars in millions; unaudited)


	Three Months Ended December 31,
	2020		2021
Net earnings	$	452	895

Other comprehensive income (loss), net of tax:
Foreign currency translation	189		(72)
Pension and postretirement	27		18
Cash flow hedges	31		4
Total other comprehensive income (loss)	247		(50)

Comprehensive income	699		845

Less: Noncontrolling interests in subsidiaries	7		(1)
Comprehensive income common stockholders	$	692	846

See accompanying Notes to Consolidated Financial Statements.

Consolidated Balance Sheets

EMERSON ELECTRIC CO. & SUBSIDIARIES

(Dollars and shares in millions, except per share amounts; unaudited)


	Sept 30, 2021		Dec 31, 2021
ASSETS
Current assets
Cash and equivalents	$	2,354	4,726
Receivables, less allowances of $116 and $112, respectively	2,971		2,745
Inventories	2,050		2,335
Other current assets	1,057		1,054

Total current assets	8,432		10,860

Property, plant and equipment, net	3,738		3,685
Other assets
Goodwill	7,723		7,695
Other intangible assets	2,877		2,791
Other	1,945		1,928

Total other assets	12,545		12,414
Total assets	$	24,715	26,959

LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current maturities of long-term debt	$	872	37
Accounts payable	2,108		2,100
Accrued expenses	3,266		3,194


Total current liabilities	6,246		5,331

Long-term debt	5,793		8,722

Other liabilities	2,753		2,618



Equity
Common stock, $0.50 par value; authorized, 1,200.0 shares; issued, 953.4 shares; outstanding, 595.8 shares and 594.0 shares, respectively	477		477
Additional paid-in-capital	522		564
Retained earnings	26,047		26,636
Accumulated other comprehensive income (loss)	(872)		(922)
Cost of common stock in treasury, 357.6 shares and 359.4 shares, respectively	(16,291)		(16,506)
Common stockholders’ equity	9,883		10,249
Noncontrolling interests in subsidiaries	40		39
Total equity	9,923		10,288
Total liabilities and equity	$	24,715	26,959

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Equity

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three months ended December 31, 2020 and 2021

(Dollars in millions; unaudited)


	Three Months Ended December 31,
	2020		2021

Common stock	$	477	477

Additional paid-in-capital
Beginning balance	470		522
Stock plans	29		42

Ending balance	499		564

Retained earnings
Beginning balance	24,955		26,047
Net earnings common stockholders	445		896
Dividends paid (per share: $0.505 and $0.515, respectively)	(303)		(307)
Adoption of accounting standard	(1)		—
Ending balance	25,096		26,636

Accumulated other comprehensive income (loss)
Beginning balance	(1,577)		(872)
Foreign currency translation	189		(72)
Pension and postretirement	27		18
Cash flow hedges	31		4
Ending balance	(1,330)		(922)

Treasury stock
Beginning balance	(15,920)		(16,291)
Purchases	(13)		(258)
Issued under stock plans	86		43
Ending balance	(15,847)		(16,506)

Common stockholders' equity	8,895		10,249

Noncontrolling interests in subsidiaries
Beginning balance	42		40
Net earnings	7		(1)

Dividends paid	(5)		—

Ending balance	44		39

Total equity	$	8,939	10,288

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Cash Flows

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three Months Ended December 31, 2020 and 2021

(Dollars in millions; unaudited)


	Three Months Ended
	December 31,
	2020		2021
Operating activities
Net earnings	$	452	895

Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	244		231
Stock compensation	64		41
Pension expense	8		1
Changes in operating working capital	71		(185)
Gain on subordinated interest	—		(453)

Other, net	(31)		(7)


Cash provided by operating activities	808		523

Investing activities
Capital expenditures	(122)		(116)
Purchases of businesses, net of cash and equivalents acquired	(1,611)		(39)

Proceeds from subordinated interest	—		438
Other, net	13		2


Cash provided by (used in) investing activities	(1,720)		285

Financing activities
Net increase (decrease) in short-term borrowings	340		(335)


Proceeds from long-term debt	—		2,975
Payments of long-term debt	(301)		(501)
Dividends paid	(303)		(307)
Purchases of common stock	(13)		(253)
Other, net	42		22
Cash provided by (used in) financing activities	(235)		1,601

Effect of exchange rate changes on cash and equivalents	29		(37)
Increase (Decrease) in cash and equivalents	(1,118)		2,372
Beginning cash and equivalents	3,315		2,354
Ending cash and equivalents	$	2,197	4,726

Changes in operating working capital
Receivables	$	232	217
Inventories	(37)		(302)
Other current assets	18		(10)
Accounts payable	(37)		10
Accrued expenses	(105)		(100)

Total changes in operating working capital	$	71	(185)

See accompanying Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

EMERSON ELECTRIC CO. & SUBSIDIARIES

(Dollars and shares in millions, except per share amounts or where noted)

(1) BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary for a fair presentation of operating results for the interim periods presented. Adjustments consist of normal and recurring accruals. The consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all disclosures required for annual financial statements presented in conformity with U.S. generally accepted accounting principles (GAAP). 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, 2021.

Effective October 1, 2021, the Company adopted three accounting standard updates which had no impact or an immaterial impact on the Company's financial statements as of and for the three months ended December 31, 2021. These included:

•Updates to ASC 805, Business Combinations, which clarify the accounting for contract assets and liabilities assumed in a business combination. In general, this will result in contract liabilities being recognized at their historical amounts under ASC 606, rather than at fair value in accordance with the general requirements of ASC 805.

•Updates to ASC 740, Income Taxes, which require the recognition of a franchise tax that is partially based on income as an income-based tax with any incremental amount as a non-income based tax. These updates also make certain changes to intra-period tax allocation principles and interim tax calculations.

•Updates to ASC 321, Equity Securities, ASC 323 Investments - Equity Method and Joint Ventures, and ASC 815, Derivatives and Hedging, which clarify how to account for the transition into and out of the equity method of accounting when evaluating observable transactions.

(2) REVENUE RECOGNITION

Emerson is a global manufacturer that combines technology and engineering to provide innovative solutions to its customers, largely in the form of tangible products. The vast majority of the Company's revenues relate to a broad offering of manufactured products which are recognized at the point in time when control transfers, while a smaller portion is recognized over time or relates to sales arrangements with multiple performance obligations. See Note 13 for additional information about the Company's revenues.

The following table summarizes the balances of the Company's unbilled receivables (contract assets), which are reported in Other current assets, and its customer advances (contract liabilities), which are reported in Accrued expenses.


	Sept 30, 2021			Dec 31, 2021
Unbilled receivables (contract assets)		$	528		527
Customer advances (contract liabilities)		(730)			(851)
Net contract liabilities		$	(202)		(324)

The majority of the Company's contract balances relate to arrangements where revenue is recognized over time and payments from customers are made according to a contractual billing schedule. The increase in net contract liabilities was due to customer billings which exceeded revenue recognized for performance completed during the period. Revenue recognized for the three months ended December 31, 2021 included $348 that was included in the beginning contract liability balance. Other factors that impacted the change in net contract liabilities were immaterial. Revenue recognized for the three months ended December 31, 2021 for performance obligations that were satisfied in previous periods, including cumulative catchup adjustments on the Company's long-term contracts, was not material.

As of December 31, 2021, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately $7.2 billion. The Company expects to recognize approximately 85 percent of its remaining performance obligations as revenue over the next 12 months, with the remainder substantially over the subsequent two years thereafter.

(3) COMMON SHARES AND SHARE-BASED COMPENSATION

Reconciliations of weighted-average shares for basic and diluted earnings per common share follow. Earnings allocated to participating securities were inconsequential.

SEC Form 10-Q filed by Emerson Electric Company