Business Context and Reporting Period
This Form 8-K Current Report for Emerson Electric Co. was filed on April 28, 2006, with the earliest event reported on the same date. The filing primarily addresses the entry into a new material definitive agreement regarding a credit facility and references the upcoming announcement of second-quarter 2006 results scheduled for May 2, 2006.
Key Financial Metrics and Agreements
Debt and Liquidity: On April 28, 2006, the Company entered into a $2.8 billion five-year revolving credit facility (the "2006 Facility"). This facility replaces two prior revolving credit facilities totaling $2.83 billion ($1 billion and $1.83 billion). The 2006 Facility expires in April 2011.
- Outstanding Borrowings: There are no outstanding loans or letters of credit under the 2006 Facility.
- Usage Intent: The Company has not previously incurred borrowings under this or similar facilities and has no current intention to do so. The facility is maintained to support general corporate purposes, including commercial paper borrowings.
- Structure: The facility is unsecured and allows for syndicate, swingline, or competitive bid loans, as well as letters of credit in U.S. dollars or other currencies.
Revenue and Orders: Specific revenue, profit, or cash flow figures for the second quarter are not provided in this filing text, as the results were to be announced in a press release on May 2, 2006. However, the filing includes a summary of GAAP underlying orders for the three months ended March 2006:
- Total Emerson Order Growth: +10% to +15% (trailing 3-month average versus prior year).
- Network Power: Greater than +20% growth.
- Process Management: +15% to +20% growth.
- Industrial Automation: +10% growth.
- Climate Technologies: +5% growth.
- Appliance and Tools: +5% growth.
Material Changes Versus Prior Period
Credit Facility Restructuring: The Company consolidated its revolving credit facilities into a single $2.8 billion agreement, increasing the available capacity compared to the specific $1 billion facility from 2005, while maintaining a similar total capacity to the combined prior facilities.
Order Trends: Order growth maintained a double-digit pace during the quarter. Unfavorable currency exchange rates reduced orders by approximately 1 percentage point. Growth was led by Network Power, Process Management, and Industrial Automation, while Climate Technologies saw slowed growth due to the U.S. residential air-conditioning industry's conversion to higher efficiency units.
Guidance, Outlook, and Risks
Management Commentary: Management highlighted strong order growth in the United States, Asia, Latin America, and Europe. Specific drivers included the power generating alternator business, mechanical power transmission, and computing/telecommunications end-markets.
Risks and Contingencies: The 2006 Facility contains customary covenants. Events of default include failure to pay material debt, insolvency, bankruptcy, ERISA events, material unpaid judgments, or a change in control of 50% or more of the Company's outstanding common stock.
Non-GAAP Measures: The filing notes that the upcoming press release will contain non-GAAP financial measures, which should be considered supplemental to GAAP information.
Investor Verification Checklist
- Verify the specific second-quarter 2006 revenue, earnings, and cash flow figures in the May 2, 2006 press release (Exhibit 99.1).
- Review the full text of the Long-Term Credit Agreement (Exhibit 10.1) for detailed covenants and fee structures.
- Confirm the reconciliation of non-GAAP financial measures to GAAP results in the upcoming earnings release.
- Monitor the impact of unfavorable currency exchange rates on future order growth.
- Assess the continued strength of the Network Power and Process Management segments as primary growth drivers.