Emerson 2010 Annual Report Download - page 30

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Total debt, which includes long-term debt, current
maturities of long-term debt, commercial paper and
other short-term borrowings, was $5.1 billion, $4.6 billion
and $4.5 billion for 2010, 2009 and 2008, respectively.
Total short-term borrowings increased $398 million in
2010, primarily reflecting incremental commercial paper
borrowings associated with the mix of funding for the
Avocent and Chloride acquisitions, which also included
issuance of long-term debt, proceeds from divestitures
and the availability of operating cash flow. See Note 3 for
additional information. In the first quarter of 2010, the
Company issued $300 million each of 4.25% notes due
November 2020 and 5.25% notes due November 2039
and in the fourth quarter repaid $500 million of 7.125%
notes that matured in August. During 2009, the Company
issued $250 million each of 4.125% notes due April 2015,
5.0% notes due April 2019 and 6.125% notes due April
2039 and $500 million of 4.875% notes due October
2019, and repaid $175 million of 5.0% notes and
$250 million of 5.85% notes that matured in October
2008 and March 2009, respectively. In 2008, the
Company issued $400 million of 5.25% notes due
October 2018 and repaid $250 million of 5.5% notes
that matured in September 2008.
DEBT AS A PERCENT OF CAPITAL AND
NET DEBT AS A PERCENT OF NET CAPITAL
Total debt was 34 percent of total capital and net debt was
26 percent of net capital at year-end 2010.
The total debt-to-capital ratio was 34.1 percent at
year-end 2010, compared with 34.8 percent for 2009
and 33.1 percent for 2008. At September 30, 2010, net
debt (total debt less cash and short-term investments)
was 26.2 percent of net capital, compared with 25.7
percent in 2009 and 22.7 percent in 2008. The operating
cash flow-to-debt ratio was 65.0 percent, 67.5 percent
and 72.9 percent in 2010, 2009 and 2008, respectively.
The Company’s interest coverage ratio (earnings before
income taxes plus interest expense, divided by interest
expense) was 11.3 times in 2010, compared with
11.0 times and 15.9 times in 2009 and 2008. The increase
in the interest coverage ratio from 2009 to 2010 reflects
higher earnings while the decrease from 2008 to 2009
was primarily due to lower earnings. See Notes 8 and 9 for
additional information.
During 2010 the Company maintained, but had not
drawn upon, a $2.8 billion, five-year, revolving backup
credit facility to support short-term borrowings that
expires in April 2011. The credit facility contains no
financial covenants and is not subject to termination
based on a change in credit ratings or a material adverse
change. There were no borrowings under this facility in
the last three years. The Company has initiated renewal
of the backup credit facility and anticipates completion in
the next three months. The Company also has a universal
shelf registration statement on file with the U.S. Securi-
ties 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.
Emerson maintains a conservative financial structure
which provides the strength and flexibility necessary to
achieve its strategic objectives. Although credit markets
in the U.S. have stabilized, there remains a risk of volatility
and illiquidity that could affect the Company’s ability to
access those markets. The Company has been able to
readily meet all its funding requirements and currently
believes that sufficient funds will be available to meet
the Company’s needs in the foreseeable future through
ongoing operations, existing resources, short- and long-
term debt capacity or backup credit lines.
CONTRACTUAL OBLIGATIONS
At September 30, 2010, the Company’s contractual obli-
gations, including estimated payments, are as follows:
AMOUNTS DUE BY PERIOD
LESS THAN MORE THAN
(DOLLARS IN MILLIONS) TOTAL 1 YEAR 1-3 YEARS 3-5 YEARS 5 YEARS
Long-term Debt
(including interest) $6,869 301 1,259 1,110 4,199
Operating Leases 762 223 267 128 144
Purchase Obligations 1,150 1,039 109 2 –
Total $8,781 1,563 1,635 1,240 4,343
Purchase obligations consist primarily of inventory
purchases made in the normal course of business to
meet operational requirements. The above table does
34.1%
34.8%
33.1%
30.1%
33.1%
26.2%
28.1%
20102006 2008