Emerson 2009 Annual Report Download - page 22

Emerson 200920
in 2008 and 23.6 percent in 2007. The operating cash
ow-to-debt ratio was 67.5 percent, 72.9 percent and
79.9 percent in 2009, 2008 and 2007, respectively. The
Company’s interest coverage ratio (earnings before
income taxes plus interest expense, divided by interest
expense) was 10.9 times in 2009, compared with 15.7
times and 12.9 times in 2008 and 2007. The decrease
in the interest coverage ratio from 2008 to 2009 was
primarily due to lower earnings and the increase from
2007 to 2008 reects higher earnings and lower interest
rates. See Notes 3, 8 and 9 for additional information. The
Company’s strong nancial position supports long-term
debt ratings of A2 by Moody’s Investors Service and A by
Standard and Poor’s. The Company anticipates no change
in credit rating due to the Avocent acquisition discussed
in Note 3.
The Company has a universal shelf registration statement
on le with the U.S. Securities and Exchange Commission
(SEC) under which it can issue debt securities, preferred
stock, common stock, warrants, share purchase contracts
and share purchase units without a predetermined limit.
Securities can be sold in one or more separate offerings
with the size, price and terms to be determined at the
time of sale.
At year end 2009, the Company maintained, but has not
drawn upon, a $2.8 billion, ve-year, revolving backup
credit facility that expires in April 2011 to support short-
term borrowings. The credit facility contains no nancial
covenants and is not subject to termination based on a
change in credit ratings or a material adverse change.
The Company expects to renew the backup credit facility
in 2010.

Total debt was 35 percent of total capital and net debt was
26 percent of net capital at year end 2009.
Although credit markets in the U.S., including the
commercial paper market, have stabilized, there remains
a risk of volatility and illiquidity that could affect the
Company’s ability to access those markets. However,
despite the adverse market conditions over the past year,
the Company has thus far been able to readily meet all its
funding needs and currently believes that sufcient funds
will be available to meet the Company’s needs in the
foreseeable future through existing resources, ongoing
operations, short- and long-term debt or backup
credit lines.

At September 30, 2009, the Company’s contractual obli-
gations, including estimated payments due by period, are
as follows (dollars in millions):
 p A y m e n t s d u e b y p e R i o d
 l e s s t h A n  m o R e t h A n 
(d o l l A R s in m i l l i o n s ) t o t A l 1y e A R 1-3y e A R s 3-5y e A R s 5y e A R s 
Long-term Debt
(including interest) $6,508 796 734 1,072 3,906
Operating Leases 766 227 275 116 148
Purchase Obligations 1,029 807 209 13 –
Total $8,303 1,830 1,218 1,201 4,054
Purchase obligations consist primarily of inventory
purchases made in the normal course of business to
meet operational requirements. The above table does
not include $2.3 billion of other noncurrent liabilities
recorded in the balance sheet and summarized in Note 17,
which consist primarily of retirement and postretire-
ment plan liabilities and deferred income taxes (including
unrecognized tax benets), because it is not certain when
these amounts will become due. See Notes 10, 11 and 13
for additional information.

The Company is exposed to market risk related to
changes in interest rates, commodity prices and foreign
currency exchange rates, and selectively uses derivative
nancial instruments, including forwards, swaps and
purchased options, to manage these risks. The Company
does not hold derivatives for trading purposes. The value
of market risk sensitive derivative and other nancial
instruments is subject to change as a result of move-
ments in market rates and prices. Sensitivity analysis
is one technique used to evaluate the impact of these
movements. Based on a hypothetical 10 percent increase
in interest rates, 10 percent decrease in commodity
prices or 10 percent weakening in the U.S. dollar across
all currencies, the potential losses in future earnings,
fair value and cash ows are immaterial. This method
has limitations; for example, a weaker U.S. dollar would
benet future earnings through favorable translation of
non-U.S. operating results, and lower commodity prices
would benet future earnings through lower cost of sales.
See Notes 1, 7, 8 and 9.
2004 2009
40%
30%
20%
10%
0%