What changed in this filing

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Item 1. Financial Statements

2023-02-08 compared with 2022-08-09 · 377 added, 494 removed, 388 unchanged (69% of the section changed)

3 unchanged sentences

& SUBSIDIARIES

Three and nine months ended June 30, 2021 and 2022

Three months ended December 31, 2021 and 2022

(Dollars in millions, except per share amounts;

Three Months Ended

June 30, Nine Months Ended

2021 2022 2021 2022

Net sales $ 3,156 3,373

2 unchanged sentences

Gain on subordinated interest ( 453 ) —

Gain on sale of business — ( 483 ) — ( 483 )

Other deductions, net 38 120

Interest expense (net of interest income of $ 3 and $ 20 , respectively)

37 50 115 140

Earnings before income taxes 784 1,195 2,084 3,181

Earnings from continuing operations before income taxes 942 422

Income taxes 196 98

Earnings from continuing operations 746 324

Discontinued operations, net of tax:

$ 84 and $ 966 , respectively

Net earnings 895 2,326

1 unchanged sentence

Net earnings common stockholders $ 896 2,331

Earnings per share:

Basic $ 1.05 1.55 2.73 4.19

Diluted $ 1.04 1.54 2.71 4.17

Earnings common stockholders:

Earnings from continuing operations 746 329

Discontinued operations 150 2,002

Net earnings common stockholders $ 896 2,331

Basic earnings per share common stockholders:

Earnings from continuing operations $ 1.25 0.56

Discontinued operations 0.26 3.43

Basic earnings per common share $ 1.51 3.99

Diluted earnings per share common stockholders:

Earnings from continuing operations $ 1.25 0.56

Discontinued operations 0.25 3.41

Diluted earnings per common share $ 1.50 3.97

Weighted average outstanding shares:

5 unchanged sentences

& SUBSIDIARIES

Three and nine months ended June 30, 2021 and 2022

Three months ended December 31, 2021 and 2022

(Dollars in millions;

Three Months Ended June 30, Nine Months Ended June 30,

2021 2022 2021 2022

Three Months Ended December 31,

Net earnings $ 895 2,326

12 unchanged sentences

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

Sept 30, 2021 June 30, 2022

Sept 30, 2022 Dec 31, 2022

Current assets

3 unchanged sentences

Other current assets 1,301 1,290

Current assets held-for-sale 1,398 1,209

Total current assets 8,506 9,000

3 unchanged sentences

Other 2,151 2,268

Noncurrent assets held-for-sale 2,258 2,163

Total other assets 24,927 24,978

5 unchanged sentences

Accrued expenses 3,038 3,949

Current liabilities held-for-sale 1,348 1,200

Total current liabilities 7,777 8,160

1 unchanged sentence

Other liabilities 3,153 3,057

Noncurrent liabilities held-for-sale 167 151

Common stock, $ 0.50 par value;

15 unchanged sentences

& SUBSIDIARIES

Three and nine months ended June 30, 2021 and 2022

Three months ended December 31, 2021 and 2022

(Dollars in millions;

Three Months Ended June 30, Nine Months Ended June 30,

2021 2022 2021 2022

Three Months Ended December 31,

Common stock $ 477 477

2 unchanged sentences

Stock plans 42 55

AspenTech acquisition — ( 550 ) — ( 550 )

Ending balance 564 112

5 unchanged sentences

( 307 ) ( 308 )

Adoption of accounting standard — — ( 1 ) —

Ending balance 26,636 30,076

16 unchanged sentences

Other comprehensive income — 5

Dividends paid ( 9 ) ( 2 ) ( 14 ) ( 2 )

AspenTech acquisition — 5,890 — 5,890

Ending balance 39 5,987

4 unchanged sentences

& SUBSIDIARIES

Nine Months Ended June 30, 2021 and 2022

Three Months Ended December 31, 2021 and 2022

(Dollars in millions;

Nine Months Ended

Three Months Ended

Operating activities

Net earnings $ 895 2,326

Earnings from discontinued operations, net of tax ( 149 ) ( 2,002 )

Adjustments to reconcile net earnings to net cash provided by operating activities:

1 unchanged sentence

Stock compensation 34 102

Pension expense 23 2

Changes in operating working capital ( 125 ) ( 289 )

Gain on subordinated interest ( 453 ) —

Gain on sale of business — ( 428 )

Other, net ( 3 ) ( 95 )

Cash from continuing operations 377 302

Cash from discontinued operations 146 116

Cash provided by operating activities 523 418

2 unchanged sentences

Purchases of businesses, net of cash and equivalents acquired ( 39 ) —

Divestitures of businesses — 578

Proceeds from subordinated interest 438 15

Other, net 3 ( 23 )

Cash used in investing activities ( 1,908 ) ( 4,975 )

Cash from continuing operations 329 ( 67 )

Cash from discontinued operations ( 44 ) 2,953

Cash provided by investing activities 285 2,886

Financing activities

Net increase in short-term borrowings ( 335 ) ( 539 )

Proceeds from short-term borrowings greater than three months 71 1,162

Payments of short-term borrowings greater than three months — ( 445 )

Proceeds from long-term debt 2,975 —

5 unchanged sentences

Effect of exchange rate changes on cash and equivalents ( 37 ) 58

Increase (Decrease) in cash and equivalents ( 455 ) 175

Increase in cash and equivalents 2,372 467

Beginning cash and equivalents 2,354 1,804

18 unchanged sentences

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, 2022.

Certain prior year amounts have been reclassified to conform to the current year presentation to reflect the business combination with AspenTech (see Note 4), which is reported as a new segment and includes the historical results of Open Systems International, Inc.

and the Geological Simulation Software business.

These businesses were previously reported in the Automation Solutions segment (see Note 13).

Effective October 1, 2021, the Company adopted three accounting standard updates which had an immaterial or no impact on the Company's financial statements as of and for the nine months ended June 30, 2022.

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.

Over the past 18 months, Emerson Electric Co.

("Emerson" or the "Company") has taken significant actions to accelerate the transformation of its portfolio through the completion of strategic acquisitions and divestitures of non-core businesses.

The Company's recent portfolio actions include the combination of its industrial software businesses with Aspen Technology, Inc., with the Company owning 55 percent of the outstanding shares of the combined entity on a fully diluted basis upon closing of the transaction on May 16, 2022, the sale of its Therm-O-Disc business, which was completed on May 31, 2022, the sale of its InSinkErator business, which was completed on October 31, 2022, and the sale of a majority stake in its Climate Technologies business, which was announced on October 31, 2022, and is expected to close in the first half of calendar year 2023, subject to regulatory approvals and customary closing conditions.

Certain prior year amounts have been reclassified to conform to the current year presentation.

This includes reporting financial results for Climate Technologies, InSinkErator and Therm-O-Disc as discontinued operations for all periods presented, and the assets and liabilities of Climate Technologies and InSinkErator (prior to completion of the divestiture) as held-for-sale (see Note 5).

In addition, as a result of its portfolio transformation, the Company now reports six segments and two business groups (see Note 13).

(2) REVENUE RECOGNITION

3 unchanged sentences

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

Sept 30, 2021 June 30, 2022

Sept 30, 2022 Dec 31, 2022

Unbilled receivables (contract assets) $ 1,390 1,412

2 unchanged sentences

The majority of the Company's contract balances relate to (1) arrangements where revenue is recognized over time and payments from customers are made according to a contractual billing schedule, and (2) revenue from term software lice nse arrangements sold by AspenTech where the license revenue is recognized upfront upon delivery.

The change in the net contract balance was due to the AspenTech acquisition, which added net contract assets of approximately $ 700 , partially offset by an increase in net contract liabilities for the Company's existing businesses due to customer billings exceeding revenue recognized for performance completed during the period.

Revenue recognized for the three and nine months ended June 30, 2022 included $ 63 and $ 519 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 and nine months ended June 30, 2022 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 June 30, 2022, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately $ 8.5 billion, which includes approximately $ 700 related to the AspenTech acquisition.

AspenTech's remaining perform ance obligations primarily relate to software maintenance in long-term contracts for unspecified future software updates provided on a when-and-if available basis.

The Company expects to recognize approximately 80 percent of its remaining performance obligations as revenue over the next 12 months, with the remainder substantially over the following two years.

The decrease in net contract assets was due to customer billings exceeding revenue recognized for performance completed during the period.

Revenue recognized for the three months ended December 31, 2022 included $ 335 that was included in the beginning contract liability balance.

Other factors that impacted the change in net contract assets were immaterial.

Revenue recognized for the three months ended December 31, 2022 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, 2022, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately $ 7.8 billion .

The Company expects to recognize appro ximately 80 percent of its remaining performance obligations as revenue over the next 12 months, with the remainder substantially over the following two years.

(3) COMMON SHARES AND SHARE-BASED COMPENSATION

2 unchanged sentences

Three Months Ended

June 30, Nine Months Ended

2021 2022 2021 2022

Basic shares outstanding 594.6 583.6

1 unchanged sentence

Diluted shares outstanding 598.1 586.7

The Company changed the terms of its annual performance share awards issued in the first quarter of fiscal 2022.

The new terms meet the criteria for equity classification in accordance with ASC 718, Compensation - Stock Compensation , and therefore expense will be recognized on a fixed basis over the three-year performance period.

The terms of the performance share awards issued in fiscal 2020 and 2021 are unchanged and will therefore continue to be accounted for as liability awards and marked-to-market each period based on changes in the stock price.

As discussed in Note 4, Emerson completed the acquisition of AspenTech in the third quarter of fiscal 2022.

New AspenTech, as defined in Note 4, operates as a separate publicly traded company and has various stock-based compensation plans, including stock options and restricted stock units, which are settled in their own common stock and are accounted for as equity awards.

Stock compensation expense for New AspenTech was $ 15 for the three and nine months ended June 30, 2022.

(4) ACQUISITIONS AND DIVESTITURES

1 unchanged sentence

On May 16, 2022, the Company completed the transactions contemplated by its definitive agreement with Aspen Technology, Inc.

("AspenTech") to contribute two of Emerson's stand-alone industrial software businesses, Open Systems International, Inc.

and the Geological Simulation Software business ( collectively, the “Emerson Industrial Software Business”) , along with approximately $ 6.0 billion in cash to AspenTech stockholders, to create "New AspenTech", a diversified, high-performance industrial software leader with greater scale, capabilities and technologies.

Upon closing of the transaction, Emerson beneficially owned 55 percent of the outstanding shares of New AspenTech common stock (on a fully diluted basis) and former AspenTech stockholders owned the remaining outstanding shares of New AspenTech common stock.

New AspenTech and its subsidiaries now operate under AspenTech’s previous name “Aspen Technology, Inc.” and New AspenTech common stock is traded on NASDAQ under AspenTech’s previous stock ticker symbol “AZPN.”

The business combination has been accounted for using the acquisition method of accounting with Emerson considered the accounting acquirer of AspenTech.

The net assets of AspenTech were recorded at their estimated fair value and the Emerson Industrial Software Business continues at its historical basis.

The Company recorded a noncontrolling interest of $ 5.9 billion for the 45 percent ownership interest of former AspenTech stockholders in New AspenTech.

The noncontrolling interest associated with the AspenTech acquired net assets was recorded at fair value determined using the closing market price per share of AspenTech as of May 16, 2022, while the portion attributable

to the Emerson Industrial Software business was recorded at its historical carrying amount.

("Heritage AspenTech") to contribute two of Emerson's stand-alone industrial software businesses, Open Systems International, Inc.

and the Geological Simulation Software business ( collectively, the “Emerson Industrial Software Business”) , along with approximately $ 6.0 billion in cash to Heritage AspenTech stockholders, to create "New AspenTech", a diversified, high-performance industrial software leader with greater scale, capabilities and technologies (hereinafter referred to as "AspenTech").

Upon closing of the transaction, Emerson owned 55 percent of the outstanding shares of New AspenTech common stock (on a fully diluted basis) and former Heritage AspenTech stockholders owned the remaining outstanding shares of AspenTech common stock.

AspenTech and its subsidiaries now operate under Heritage AspenTech’s previous name “Aspen Technology, Inc.” and AspenTech common stock is traded on NASDAQ under AspenTech’s previous stock ticker symbol “AZPN.”

The business combination has been accounted for using the acquisition method of accounting with Emerson considered the accounting acquirer of Heritage AspenTech.

The net assets of Heritage AspenTech were recorded at their estimated fair value and for the Emerson Industrial Software Business continue at their historical basis.

The Company recorded a noncontrolling interest of $ 5.9 billion for the 45 percent ownership interest of former Heritage AspenTech stockholders in AspenTech.

The noncontrolling interest associated with the Heritage AspenTech acquired net assets was recorded at fair value determined using the closing market price per share of Heritage AspenTech as of May 16, 2022, while the portion attributable to the Emerson Industrial Software business was recorded at its historical carrying amount.

The impact of recognizing the noncontrolling interest in the Emerson Industrial Software Business resulted in a decrease to additional paid-in-capital of $ 550 .

The following table summarizes the components of the purchase consideration reflected in the acquisition accounting using AspenTech's shares outstanding and closing market price per share as of May 16, 2022 (in millions except share and per share data):

AspenTech shares outstanding 66,662,482

AspenTech share price $ 166.30

The following table summarizes the components of the purchase consideration reflected in the acquisition accounting using Heritage AspenTech's shares outstanding and closing market price per share as of May 16, 2022 (in millions except share and per share data):

Heritage AspenTech shares outstanding 66,662,482

Heritage AspenTech share price $ 166.30

Purchase price $ 11,086

1 unchanged sentence

Total purchase consideration $ 11,188

The total purchase consideration for AspenTech was preliminarily allocated to assets and liabilities as follows.

Valuations of acquired assets and liabilities are in-process and subject to refinement.

The total purchase consideration for Heritage AspenTech was allocated to assets and liabilities as follows.

Cash and equivalents $ 274

12 unchanged sentences

Total purchase consideration $ 11,188

Emerson's cash contribution of approximately $ 6.0 billion was paid out at approximately $ 87.69 per share (on a fully diluted basis) to holders of issued and outstanding shares of AspenTech common stock as of the closing of the transactions, with $ 168 of cash remaining on New AspenTech's balance sheet as of the closing which is not included in the allocation of purchase consideration above.

Emerson's cash contribution of approximately $ 6.0 billion was paid out at approximately $ 87.69 per share (on a fully diluted basis) to holders of issued and outstanding shares of Heritage AspenTech common stock as of the closing of the transactions, with $ 168 of cash remaining on AspenTech's balance sheet as of the closing which is not included in the allocation of purchase consideration above.

The estimated intangible assets attributable to the transaction are comprised of the following (in millions) :

5 unchanged sentences

Total $ 4,390

Results of operations for the third quarter of 2022 attributable to the AspenTech acquisition include sales of $ 173 while the impact to GAAP net earnings was not material.

Results of operations for the first quarter of 2023 attributable to the Heritage AspenTech acquisition include sales of $ 168 while the impact to GAAP net earnings was not material.

Pro Forma Financial Information

The following unaudited proforma consolidated condensed financial results of operations are presented as if the acquisition of AspenTech occurred on Oct ober 1, 2020.

The following unaudited proforma consolidated condensed financial results of operations are presented as if the acquisition of Heritage AspenTech occurred on Oct ober 1, 2020.

The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved had the acquisition occurred as of that time ($ in millions, except per share amounts).

Three Months Ended June 30, Nine Months Ended June 30,

2021 2022 2021 2022

Three Months Ended December 31,

Net Sales $ 3,327

Net earnings common stockholders $ 614 964 1,480 2,517

Diluted earnings per share $ 1.02 1.62 2.46 4.21

The pro forma results for the nine months ended June 30, 2021 include $ 159 of transaction costs which were assumed to be incurred in the first fiscal quarter of 2021.

Of these transaction costs, $ 61 and $ 91 were included in the Company's reported results for the three and nine months ended June 30, 2022, respectively, but have been excluded from the fiscal 2022 pro forma results above.

In addition, AspenTech incurred $ 68 of transaction costs prior to the completion of the acquisition that were not included in Emerson's reported results.

The pro forma results for the three and nine months ended June 30, 2021 include estimated interest expense of $ 37 and $ 110 , respectively, related to the issuance of $ 3 billion of term debt and increased commercial paper borrowings to fund the acquisition, while results for the nine months ended June 30, 2022 include additional interest expense of $ 56 to reflect the increased borrowings as if they were outstanding for the entire fiscal year.

Net earnings from continuing operations common stockholders $ 734

Diluted earnings per share from continuing operations $ 1.23

The pro forma results for the three months ended December 31, 2021 include $ 32 of transaction costs which were assumed to be incurred in the first fiscal quarter of 2021.

Of these transaction costs, $ 22 were included in the Company's reported results for the three months ended December 31, 2021, but have been excluded from the fiscal 2022 pro forma results above.

In addition, Heritage AspenTech incurred $ 68 of transaction costs prior to the completion of the acquisition that were not included in Emerson's reported results.

The pro forma results for the three months ended December 31, 2021 include estimated interest exp ense of $ 37 related to the issuance of $ 3 billion of term debt and increased commercial paper borrowings to fund the acquisition.

Other Transactions

On August 8, 2022 the Company announced an agreement to sell its InSinkErator business, which manufactures food waste disposers and is reported in the Tools & Home Products segment, to Whirlpool Corporation for $ 3.0 billion.

This business had sales and pretax earnings of $ 565 and $ 143 in fiscal 2021 and $ 480 and $ 117 for the nine months ended June 30, 2022.

The assets and liabilities of InSinkErator were classified as held-for-sale as of June 30, 2022 and are included in other current assets, other assets, accrued expenses and other liabilities in the consolidated balance sheet.

The transaction is expected to close in fiscal 2023, subject to regulatory approvals and other customary closing conditions.

On July 27, 2022, New AspenTech entered into an agreement to acquire Micromine, a global leader in design and operational solutions for the mining industry, for AU$ 900 (approximately $ 623 USD).

The transaction is expected to close by the end of calendar 2022, subject to various regulatory approvals.

On May 31, 2022 the Company completed the divestiture of its Therm-O-Disc sensing and protection technologies business, which was reported in the Climate Technologies segment, to an affiliate of One Rock Capital Partners, LLC.

The Company recognized a pretax gain of $ 483 ($ 428 after-tax, $ 0.72 per share).

On May 4, 2022, Emerson announced its intention to exit business operations in Russia and divest Metran, its Russia-based manufacturing subsidiary.

Emerson's historical net sales in Russia were principally in the Automation Solutions segment and in total, represented approximately 1.5 percent of consolidated annual sales.

In the third quarter of fiscal 2022, the Company recognized a pretax loss of $ 162 ($ 174 after-tax, in total $ 0.29 per share) related to its exit of business operations in Russia.

This charge, which included a loss of $ 32 in operations and $ 130 reported in Other deductions ($ 9 of which is reported in restructuring costs), is primarily non-cash.

Emerson is committed to an orderly transfer of these assets and will support its employees through this process.

On October 1, 2020, the Company completed the acquisition of Open Systems International, Inc.

("OSI"), a leading operations technology software provider in the global power industry, for approximately $ 1.6 billion, net of cash acquired.

This business, which had net sales of $ 191 in fiscal 2021 and is now reported in the AspenTech segment, expanded the Company's offerings in the power industry to include the digitization and modernization of the electric grid.

The Company recognized goodwill of $ 967 ( none of which is expected to be tax deductible), identifiable intangible assets of $ 783 , primarily intellectual property and customer relationships with a weighted-average useful life

of approximately 11 years, and deferred tax liabilities of approximately $ 193 .

Results of operations for the three months ended June 30, 2021 included first year pre-tax acquisition accounting charges related to backlog amortization and deferred revenue of $ 7 and $ 3 , respectively, while year-to-date results included $ 24 and $ 11 , respectively.

As previously disclosed, the Company sold its network power systems business (rebranded as Vertiv, now a publicly traded company, symbol VRT) in 2017 and retained a subordinated interest contingent upon the equity holders first receiving a threshold cash return on their initial investment.

In the first quarter of fiscal 2022, the equity holders' cumulative cash return exceeded the threshold and as a result, the Company received a distribution of $ 438 in November 2021 (in total, a gain of $ 453 was recognized in the first quarter).

On July 27, 2022, AspenTech entered into an agreement to acquire Micromine, a global leader in design and operational solutions for the mining industry, for AU$ 900 (approximately $ 623 USD based on exchange rates when the transaction was announced).

The transaction is expected to close as soon as the remaining regulatory approval is obtained.

On May 4, 2022, Emerson announced its intention to exit business operations in Russia and divest Metran, its Russia-based manufacturing subs idiary, and on September 27, 2022, announced an agreement to sell the business to the local management group.

In the first quarter of fiscal 2023, the Company recognized a pretax loss of $ 47 in Other deductions ($ 47 after-tax, in total $ 0.08 per share) related to its exit of business operations in Russia.

The transaction will be subject to regulatory and government approvals, and other customary closing conditions.

Emerson will work closely with the local Russia management group to help ensure a smooth transition for employees through the sale process.

In the first quarter of fiscal 2022, the Company received a distribution of $ 438 related to its subordinated interest in Vertiv (in total, a pretax gain of $ 453 was recognized in the first quarter, $ 358 after-tax, $ 0.60 per share).

Based on the terms of the agreement and the current calculation, the Company could receive additional distributions of approximately $ 75 which are expected to be received over the next two -to- three years.

However, the distributions are contingent on the timing and price at which Vertiv shares are sold by the equity holders and therefore, there can be no assurance as to the amount or timing of the remaining distributions to the Company.

(5) DISCONTINUED OPERATIONS

In October 2022, the Board of Directors approved the Company's announced agreement to sell a majority stake in its Climate Technologies business (which constitutes the former Climate Technologies segment, excluding Therm-O-Disc which was divested earlier in fiscal 2022) to private equity funds managed by Blackstone in a $ 14.0 billion transaction.

Emerson will receive upfront, pre-tax cash proceeds of approximately $ 9.5 billion and a note of $ 2.25 billion at close (which will accrue 5 percent interest payable in kind by capitalizing interest), while retaining a 45 percent non-controlling interest in a new standalone joint venture between Emerson and Blackstone.

The Climate Technologies business, which includes the Copeland compressor business and the entire portfolio of products and services across all residential and commercial HVAC and refrigeration end-markets, had fiscal 2022 net sales of approximately $ 5.0 billion and pretax earnings of $ 1.0 billion.

The transaction is expected to close in the first half of calendar year 2023, subject to regulatory approvals and customary closing conditions.

On October 31, 2022, the Company completed the divestiture of its InSinkErator business, which manufactures food waste disposers, to Whirlpool Corporation for $ 3.0 billion.

This business had net sales of $ 630 and pretax earnings of $ 152 in fiscal 2022.

The Company recognized a pretax gain of $ 2.8 billion (approximately $ 2.1 billion after-tax) in the first quarter of fiscal 2023.

On May 31, 2022 the Company completed the divestiture of its Therm-O-Disc sensing and protection technologies business to an affiliate of One Rock Capital Partners, LLC.

The Company recognized a pretax gain of $ 486 ($ 429 after-tax) in the third fiscal quarter of 2022.

The financial results of Climate Technologies, InSinkErator ("ISE") and Therm-O-Disc ("TOD") (through the completion of the divestitures), are reported as discontinued operations for the three months ended December 31, 2022 and 2021 and were as follows:

Climate Technologies ISE and TOD Total

Three Months Ended December 31, Three Months Ended December 31, Three Months Ended December 31,

2021 2022 2021 2022 2021 2022

Net sales $ 1,079 1,064 238 49 1,317 1,113

Cost of sales 762 702 148 29 910 731

SG&A 127 142 35 8 162 150

Gain on sale of business — — — ( 2,780 ) — ( 2,780 )

Other deductions, net 6 32 6 12 12 44

Earnings (Loss) before income taxes 184 188 49 2,780 233 2,968

Income taxes 39 313 45 653 84 966

Earnings (Loss), net of tax $ 145 ( 125 ) 4 2,127 149 2,002

Climate Technologies' results for the three months ended December 31, 2022 include lower expense of $ 27 due to ceasing depreciation and amortization upon the held-for-sale classification.

Other deductions, net for Climate Technologies included $ 27 of transaction-related costs for the three months ended December 31, 2022.

Income taxes for the three months ended December 31, 2022 included approximately $ 275 for Climate Technologies subsidiary restructurings and approximately $ 660 related to the gain on the InSinkErator divestiture.

The aggregate carrying amounts of the major classes of assets and liabilities classified as held-for-sale as of December 31, 2022 and September 30, 2022 are summarized as follows:

Climate Technologies ISE Total

Assets 2022 2022 2022 2022 2022 2022

Receivables $ 747 608 68 — 815 608

Inventories 449 541 81 — 530 541

Other current assets 49 60 4 — 53 60

Property, plant & equipment, net 1,122 1,093 141 — 1,263 1,093

Goodwill 716 720 2 — 718 720

Other noncurrent assets 265 350 12 — 277 350

Total assets held-for-sale $ 3,348 3,372 308 — 3,656 3,372

Accounts payable $ 752 733 60 — 812 733

Other current liabilities 475 467 61 — 536 467

Deferred taxes and other noncurrent liabilities

154 151 13 — 167 151

Total liabilities held-for-sale $ 1,381 1,351 134 — 1,515 1,351

Net cash from operating and investing activities for Climate Technologies, InSinkErator and Therm-O-Disc for the three months ended December 31, 2022 and 2021 were as follows:

Climate Technologies ISE and TOD Total

Three Months Ended December 31, Three Months Ended December 31, Three Months Ended December 31,

2021 2022 2021 2022 2021 2022

Cash from operating activities $ 132 205 14 ( 89 ) 146 116

Cash from investing activities $ ( 35 ) ( 43 ) ( 9 ) 2,996 ( 44 ) 2,953

Cash from operating activities reflects the payment of ISE transaction fees and unfavorable working capital.

Cash from investing activities for the three months ended December 31, 2022 reflects the proceeds of $ 3.0 billion related to the InSinkErator divestiture.

(6) PENSION & POSTRETIREMENT PLANS

Total periodic pension and postretirement (income) expense is summarized below:

Three Months Ended June 30, Nine Months Ended June 30,

2021 2022 2021 2022

Three Months Ended December 31,

Service cost $ 19 12

7 unchanged sentences

Three Months Ended

June 30, Nine Months Ended

2021 2022 2021 2022

Amortization of intangibles (intellectual property and

4 unchanged sentences

Investment-related gains & gains from sales of capital

— — ( 69 ) ( 15 )

Russia business exit — 47

1 unchanged sentence

Total $ 38 120

In the third quarter of fiscal 2022, intangibles amortization for the three and nine months ended June 30, 2022 included $ 32 related to the AspenTech acquisition, while the prior year included backlog amortization related to the OSI acquisition of $ 7 and $ 24 , respectively.

In the first quarter of fiscal 2023, intangibles amortization for the three months ended December 31, 2022 included $ 64 related to the Heritage AspenTech acquisition and foreign currency transaction gains included a mark-to-market gain of $ 35 related to foreign currency forward contracts entered into by AspenTec h to mitigate the impact of foreign currency exchange associated with the Micromine purchase price.

Other is composed of several items, including pension expense, litigation costs, provision for bad debt and other items, none of which is individually significant.

1 unchanged sentence

Restructuring expense reflects costs associated with the Company’s ongoing efforts to improve operational efficiency and deploy assets globally in order to remain competitive on a worldwide basis.

Expenses incurred in the first nine months of fiscal 2022 included costs related to workforce reductions of approximately 1,400 employees.

The Company expects fiscal 2022 restructuring expense and related costs to be approximately $ 150 , including costs to complete actions initiated in the first nine months of the year.

The Company expects fiscal 2023 restructuring expense and related costs to be approximately $ 90 , including costs to complete actions initiated in the first three months of the year.

Restructuring expense by business segment follows:

Three Months Ended

June 30, Nine Months Ended

2021 2022 2021 2022

Automation Solutions $ 20 20 92 33

Final Control $ — ( 1 )

Measurement & Analytical 2 1

Discrete Automation 2 1

Safety & Productivity — —

Intelligent Devices 4 1

Control Systems & Software 1 1

AspenTech — —

Climate Technologies 4 2 8 5

Tools & Home Products 2 ( 1 ) 4 1

Commercial & Residential Solutions 6 1 12 6

Software and Control 1 1

Corporate 1 8

Total $ 28 31 111 50

Details of the change in the liability for restructuring costs during the nine months ended June 30, 2022 follow:

Sept 30, 2021 Expense Utilized/Paid June 30, 2022

Details of the change in the liability for restructuring costs during the three months ended December 31, 2022 follow:

Sept 30, 2022 Expense Utilized/Paid Dec 31, 2022

Severance and benefits $ 117 ( 2 ) 1 114

1 unchanged sentence

Total $ 122 10 12 120

The tables above do not include $ 4 and $ 12 of costs related to restructuring actions incurred for the three months ended June 30, 2021 and 2022, respectively, that are required to be reported in cost of sales and selling, general and administrative expenses;

year-to-date amounts are $ 11 and $ 26 , respectively.

Income taxes were $ 243 in the third quarter of fiscal 2022 and $ 151 in 2021, resulting in effective tax rates of 20 percent and 19 percent, respectively.

Favorable net discrete tax items decreased the tax rates by 2 and 3 percentage points, respectively.

Income taxes were $ 659 for the first nine months of 2022 and $ 431 for 2021, resulting in effective tax rates of 21 percent and 21 percent, respectively.

The current year rate included a 2 percentage point benefit related to the completion of tax examinations, partially offset by portfolio restructuring activities which negatively impacted the rate by 1 percentage points, while the prior year had favorable net discrete items which reduced the rate 1 percentage point.

The tables above do not include $ 8 and $ 5 of costs related to restructuring actions incurred for the three months ended December 31, 2021 and 2022, respectively, that are required to be reported in cost of sales and selling, general and administrative expenses.

Income taxes were $ 98 in the first quarter of fiscal 2023 and $ 196 in 2022, resulting in effective tax rates of 23 percent and 21 percent, respectively.

The current year rate included a 2 percentage point unfavorable impact related to the Russia charge, which had no related tax benefit.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic, and among other things, provides tax relief to businesses.

Tax provisions of the CARES Act include the deferral of certain payroll taxes, relief for retaining employees, and other provisions.

The Company deferred $ 73 of certain payroll taxes through the end of calendar year 2020, of which approximately $ 37 was paid in December 2021 with the remaining amount due in December 2022.

The Company deferred $ 73 of certain payroll taxes through the end of calendar year 2020, of which approximately $ 37 was paid in December 2021 and the remainder was paid in December 2022.

(10) OTHER FINANCIAL INFORMATION

Sept 30, 2021 June 30, 2022

Sept 30, 2022 Dec 31, 2022

Finished products $ 417 456

6 unchanged sentences

Goodwill by business segment

Automation Solutions $ 5,508 5,378

Final Control $ 2,605 2,659

Measurement & Analytical 1,112 1,131

Discrete Automation 807 839

Safety & Productivity 364 389

Intelligent Devices 4,888 5,018

Control Systems & Software 732 740

AspenTech 8,326 8,329

Climate Technologies 753 719

Tools & Home Products 418 385

Commercial & Residential Solutions 1,171 1,104

Software and Control 9,058 9,069

Total $ 13,946 14,087

3 unchanged sentences

Net carrying amount $ 6,572 6,460

Other intangible assets include customer relationships, net, of $ 1,495 and $ 3,614 as of September 30, 2021 and June 30, 2022, respectively.

The increase in goodwill and intangibles was primarily due to the AspenTech acquisition.

Three Months Ended June 30, Nine Months Ended June 30,

2021 2022 2021 2022

Other intangible assets include customer relationships, net, of $ 3,436 and $ 3,399 and intellectual property, net, of $ 2,934 and $ 2,860 as of September 30, 2022 and December 31, 2022, respectively.

Three Months Ended December 31,

Depreciation and amortization expense include the following:

1 unchanged sentence

Amortization of intangibles (includes $ 14 and $ 49 reported in Cost of Sales, respectively)

86 129 266 282

Amortization of capitalized software 23 19

Total $ 178 260

Amortization of intangibles included $ 49 related to the AspenTech acquisition for the three and nine months ended June 30, 2021, while the prior year included backlog amortization of $ 7 and $ 24 related to the OSI acquisition for the three and nine months ended June 30, 2021, respectively.

For the three and nine months ended June 30, 2022, $ 5 of amortization of intangibles included in the table above is reported as a restructuring related cost.

Sept 30, 2021 June 30, 2022

Amortization of intangibles included $ 99 related to the Heritage AspenTech acquisition for the three months ended December 31, 2022.

Sept 30, 2022 Dec 31, 2022

Other assets include the following:

Pension assets $ 865 912

Operating lease right-of-use assets 558 531

Unbilled receivables (contract assets) 428 516

Operating lease right-of-use assets 439 434

Deferred income taxes 85 73

1 unchanged sentence

Accrued expenses include the following:

Income taxes $ 125 1,080

Customer advances (contract liabilities) 751 901

2 unchanged sentences

Product warranty 84 89

The increase in Income taxes was due to taxes of approximately $ 660 related to the gain on divestiture of InSinkErator and approximately $ 275 related to subsidiary restructurings at Climate Technologies.

Other liabilities include the following:

3 unchanged sentences

Asbestos litigation 205 200

The increases in Unbilled receivables and Deferred income taxes were primarily due to the AspenTech acquisition.

See Notes 2 and 4.

In December 2021, the Company issued $ 1 billion of 2.0 % notes due December 2028, $ 1 billion of 2.2 % notes due December 2031, and $ 1 billion of 2.8 % notes due December 2051.

The Company's commercial paper borrowings also increased by approximat ely $ 2.4 billion c ompared to September 30, 2021.

The Company used the net proceeds from the sale of the notes and the increased commercial paper borrowings to fund the majority of its contribution of approximately $ 6.0 billion to existing stockholders of AspenTech as part of the transaction discussed further in Note 4.

In the first quarter of fiscal 2022, the Company repaid $ 500 of 2.625 % notes that matured.

In the third quarter of fiscal 2022, the acquisition of AspenTech increased the Company's long-term debt by approximately $ 250 .

On January 17, 2023, AspenTech paid off the outstanding balance of its existing term loan facility of $ 264 , plus accrued interest, which resulted in the long-term portion being reclassified and reported as short-term borrowings as of December 31, 2022.

(11) FINANCIAL INSTRUMENTS

Hedging Activities – As of June 30, 2022, the notional amount of foreign currency hedge positions was approximately $ 2.1 billion, and commodity hedge contracts totaled approximately $ 170 (primarily 45 million pounds of copper and aluminum).

Hedging Activities – As of December 31, 2022, the notional amount of foreign currency hedge positions was approximately $ 5.2 billion, and commodity hedge contracts totaled approximately $ 115 (primarily 33 million pounds of copper and aluminum).

All derivatives receiving hedge accounting are cash flow hedges.

The majority of hedging gains and losses deferred as of June 30, 2022 are expected to be recognized over the next 12 months as the underlying forecasted transactions occur.

The majority of hedging gains and losses deferred as of December 31, 2022 are expected to be recognized over the next 12 months as the underlying forecasted transactions occur.

Gains and losses on foreign currency derivatives reported in Other deductions, net reflect hedges of balance sheet exposures that do not receive hedge accounting.

2 unchanged sentences

Foreign currency gains or losses associated with the euro-denominated debt are deferred in accumulated other comprehensive income (loss) and will remain until the hedged investment is sold or substantially liquidated.

The following gains and losses are included in earnings and other comprehensive income (OCI) for the three and nine months ended June 30, 2021 and 2022:

The following gains and losses are included in earnings and other comprehensive income (OCI) for the three months ended December 31, 2021 and 2022:

Into Earnings Into OCI

3rd Quarter Nine Months 3rd Quarter Nine Months

1st Quarter 1st Quarter

Gains (Losses) Location 2021 2022 2021 2022

1 unchanged sentence

Foreign currency

— ( 1 ) 2 — — ( 3 ) 3 ( 5 )

Foreign currency

Cost of sales

3 10 5 21 1 15 28 32

Foreign currency

5 unchanged sentences

The amounts ultimately recognized will differ from those presented above for open positions, which remain subject to ongoing market price fluctuations until settlement.

Derivatives receiving hedge accounting are highly effective and no amounts were excluded from the assessment of hedge effectiveness.

Fair Value Measurement – Valuations for all derivatives and the Company's long-term debt fall within Level 2 of the GAAP valuation hierarch y.

As of June 30, 2022, the fair value of long-term debt was $ 8.1 billion, which was lower than the carrying value by $ 816 .

The fair values of commodity and foreign currency contracts were reported in Other current assets and Accrued expenses and did not materially change since September 30, 2021.

Derivatives receiving hedge accounting are highly effective and no amounts were excluded from the as sessment of hedge effectiveness.

Equity Investment – The Company has an equity investment in National Instruments, valued at $ 82 as of December 31, 2022, and reported in Other current assets.

On January 17, 2023, the Company announced a proposal to acquire National Instruments for $ 53 per share in cash at an implied enterprise value of $ 7.6 billion.

National Instruments, which had fiscal 2021 sales of approximately $ 1.5 billion, announced on January 13, 2023 it was undertaking a strategic review which could include the solicitation of interest from other potential acquirors.

Fair Value Measurement – Valuations for all derivatives and the Company's long-term debt fall within Level 2 of the GAAP valuation hierarchy.

As of December 31, 2022, the fair value of long-term debt was $ 7.7 billion, which was lower than the carrying value by $ 1,169 .

The fair values of commodity and foreign currency contracts did not materially change since September 30, 2022.

Foreign currency contracts were reported in Other current assets and Accrued expenses, while commodity contracts, which primarily relate to discontinued operations, were reported in Current assets and liabilities held-for-sale.

The fair value of the Company's equity investment in National Instruments falls within Level 1 and was based on the most recent quoted closing market price from its principal exchange.

Counterparties to derivatives arran gements are companies with investment-grade credit ratings.

3 unchanged sentences

The Company also can demand full collateralization of derivatives in net asset positions should any counterparty credit ratings fall below certain thresholds.

No collateral was posted with counterparties and none was held by the Company as of June 30, 2022.

No collateral was posted with counterparties and none was held by the Company as of December 31, 2022.

(12) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Activity in Accumulated other comprehensive income (loss) for the three and nine months ended June 30, 2021 and 2022 is shown below, net of income taxes:

Three Months Ended June 30, Nine Months Ended June 30,

2021 2022 2021 2022

Activity in Accumulated other comprehensive income (loss) for the three months ended December 31, 2021 and 2022 is shown below, net of income taxes:

Three Months Ended December 31,

Foreign currency translation

1 unchanged sentence

Other comprehensive income (loss), net of tax of $( 10 ) and $ 28 , respectively

( 6 ) ( 186 ) 163 ( 317 )

Ending balance ( 701 ) ( 1,029 )

6 unchanged sentences

Gains deferred during the period, net of taxes of $( 4 ) and $( 3 ), respectively

7 ( 15 ) 50 14

Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $ 2 and $ — , respectively

( 13 ) ( 12 ) ( 24 ) ( 31 )

Ending balance 20 12

1 unchanged sentence

(13) BUSINESS SEGMENTS

As a result of the AspenTech acquisition, the Company identified one additional segment in the third quarter of fiscal 2022.

The new segment, referred to as "AspenTech," reflects the combined results of AspenTech and the Emerson Industrial Software Business (see Note 4 for further details).

The results for this new segment include the historical results of the Emerson Industrial Software Business (which were previously reported in the Automation Solutions segment), while results related to the AspenTech business only include periods subsequent to the close of the transaction.

Prior year amounts for the Automation Solutions segment have been reclassified to conform to the current year presentation.

Summarized information about the Company's results of operations by business segment follows:

Three Months Ended June 30, Nine Months Ended June 30,

Sales Earnings Sales Earnings

As disclosed in Note 5, the financial results of Climate Technologies, InSinkErator and Therm-O-Disc are reported as discontinued operations for all periods presented.

As a result of these portfolio actions, the Company has realigned its business segments and now reports six segments and two business groups, which are highlighted in the table below.

The Company also reclassified certain product sales that were previously reported in Control Systems & Software to Discrete Automation.

INTELLIGENT DEVICES SOFTWARE AND CONTROL

• Final Control

• Control Systems & Software

• Measurement & Analytical

• Discrete Automation

• Safety & Productivity

The new segments were previously described as follows:

Final Control was the Valves, Actuators & Regulators product offering;

Measurement & Analytical was the Measurement & Analytical instrumentation product offering;

Discrete Automation was the Industrial Solutions product offering;

Safety & Productivity was the Tools & Home Products segment, excluding the divested InSinkErator business;

Control Systems & Software was the Systems & Software product offering;

and, AspenTech remains unchanged.

The AspenTech segment was identified in the third quarter of fiscal 2022 as a result of the Heritage AspenTech acquisition and reflects the combined results of Heritage AspenTech and the Emerson Industrial Software Business (see Note 4 for further details).

The results for this new segment include the historical results of the Emerson Industrial Software Business (which were previously reported in the Control Systems & Software segment), while results related to the Heritage AspenTech business only include periods subsequent to the close of the transaction.

Prior year amounts have been reclassified to conform to the current year presentation.

Three Months Ended December 31,

Sales Earnings

2021 2022 2021 2022

Automation Solutions $ 2,865 2,872 519 530 8,193 8,451 1,354 1,618

Final Control $ 817 862 122 158

Measurement & Analytical 737 749 170 175

Discrete Automation 617 618 120 121

Safety & Productivity 351 310 65 63

Intelligent Devices 2,522 2,539 477 517

Control Systems & Software 570 606 116 107

AspenTech 82 243 ( 2 ) ( 33 )

Climate Technologies 1,268 1,380 274 300 3,459 3,884 731 754

Tools & Home Products 489 522 101 107 1,419 1,546 311 317

Commercial & Residential Solutions

1,757 1,902 375 407 4,878 5,430 1,042 1,071

Software and Control 652 849 114 74

Stock compensation

3 unchanged sentences

Gain on subordinated interest 453 —

Gain on sale of business — 483 — 483

Eliminations/Interest ( 18 ) ( 15 ) ( 39 ) ( 48 )

Total $ 3,156 3,373 942 422

Corporate and other for the three and nine months ended June 30, 2022 includes a loss of $ 162 related to the Company's exit of business operations in Russia and acquisition/divestiture costs of $ 61 and $ 97 , respectively.

Automation Solutions sales by major product offering are summarized below.

Three Months Ended June 30, Nine Months Ended June 30,

2021 2022 2021 2022

Measurement & Analytical Instrumentation $ 781 785 2,211 2,287

Valves, Actuators & Regulators 880 905 2,522 2,604

Industrial Solutions 593 575 1,656 1,743

Systems & Software 611 607 1,804 1,817

Automation Solutions $ 2,865 2,872 8,193 8,451

Corporate and other for the three months ended December 31, 2022 included a loss of $ 47 related to the Company's exit of business operations in Russia and a mark-to-market gain of $ 35 related to foreign currency forward contracts entered into by AspenTec h to mitigate the impact of foreign currency exchange associated with the Micromine purchase price, while the three months ended December 31, 2021 included acquisition/divestiture costs of $ 23 .

Depreciation and amortization (includes intellectual property, customer relationships and capitalized software) by business segment are summarized below:

Three Months Ended June 30, Nine Months Ended June 30,

2021 2022 2021 2022

Automation Solutions $ 128 127 393 383

Three Months Ended December 31,

Final Control $ 53 45

Measurement & Analytical 31 30

Discrete Automation 23 21

Safety & Productivity 15 14

Intelligent Devices 122 110

Control Systems & Software 25 21

AspenTech 23 123

Climate Technologies 48 43 144 136

Tools & Home Products 20 19 59 58

Commercial & Residential Solutions 68 62 203 194

Software and Control 48 144

Corporate and other 8 6

Total $ 178 260

Sales by geographic destination are summarized below:

Three Months Ended June 30,

Automation Solutions Aspen Tech Commercial & Residential Solutions Total Automation Solutions Aspen Tech Commercial & Residential Solutions Total

Americas $ 1,269 52 1,190 2,511 1,418 131 1,362 2,911

Asia, Middle East & Africa 997 14 331 1,342 929 50 321 1,300

Europe 599 16 236 851 525 58 219 802

Total $ 2,865 82 1,757 4,704 2,872 239 1,902 5,013

Nine Months Ended June 30,

Automation Solutions Aspen Tech Commercial & Residential Solutions Total Automation Solutions Aspen Tech Commercial & Residential Solutions Total

Americas $ 3,561 150 3,290 7,001 3,942 234 3,789 7,965

Asia, Middle East & Africa 2,861 46 944 3,851 2,894 85 981 3,960

Europe 1,771 43 644 2,458 1,615 86 660 2,361

Sales by geographic destination, Americas, Asia, Middle East & Africa ("AMEA") and Europe, are summarized below:

Three Months Ended December 31, Three Months Ended December 31,

Americas AMEA Europe Total Americas AMEA Europe Total

Final Control $ 352 336 129 817 446 308 108 862

Measurement & Analytical 311 296 130 737 396 246 107 749

Discrete Automation 274 183 160 617 291 175 152 618

Safety & Productivity 270 16 65 351 236 17 57 310

Intelligent Devices 1,207 831 484 2,522 1,369 746 424 2,539

Control Systems & Software 268 173 129 570 294 185 127 606

AspenTech 54 16 12 82 112 63 68 243

Software and Control 322 189 141 652 406 248 195 849

Total $ 1,529 1,020 625 3,174 1,775 994 619 3,388

2 unchanged sentences

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

For the third quarter of fiscal 2022, net sales were $5.0 billion, up 7 percent compared with the prior year.

As previously disclosed, in October 2022, the Board of Directors approved the Company's announced agreement to sell a majority stake in its Climate Technologies business (which constitutes the historical Climate Technologies segment, excluding Therm-O-Disc which was divested in fiscal 2022) to private equity funds managed by Blackstone in a $14.0 billion transaction.

The transaction is expected to close in the first half of calendar year 2023, subject to regulatory approvals and customary closing conditions.

Additionally, on October 31, 2022, the Company completed the divestiture of its InSinkErator business, which manufactures food waste disposers, to Whirlpool Corporation for $3.0 billion, and the Company recognized a pretax gain of $2.8 billion (approximately $2.1 billion after-tax) in the first quarter of fiscal 2023.

Climate Technologies, Therm-O-Disc and InSinkErator are reported within discontinued operations for all periods presented.

On May 16, 2022, the Company completed the transactions contemplated by its definitive agreement with Aspen Technology, Inc.

("Heritage AspenTech") to contribute two of Emerson's stand-alone industrial software businesses, Open Systems International, Inc.

and the Geological Simulation Software business, along with approximately $6.0 billion in cash to Heritage AspenTech stockholders, to create "New AspenTech" (hereinafter referred to as "AspenTech").

Upon closing of the transaction, Emerson owned 55 percent of the outstanding shares of New AspenTech common stock (on a fully diluted basis).

Due to the timing of the acquisition in the prior year, the results for the first quarter of fiscal 2022 do not include the results of Heritage AspenTech.

For the first quarter of fiscal 2023, net sales from continuing operations were $3.4 billion, up 7 percent compared with the prior year.

Underlying sales, which exclude foreign currency translation, acquisitions and divestitures, were up 6 percent.

The AspenTech acquisition added 4 percent and divestitures deducted 1 percent, while foreign currency translation had a 3 percent unfavorable impact.

Sales growth continued to be strong in the quarter, benefiting from strong results in North America, despite headwinds due to the impact of lockdowns in China and supply chain and logistics constraints.

Net earnings common stockholders were $921, up 47 percent, and diluted earnings per share were $1.54, up 48 percent compared with $1.04 in the prior year.

Adjusted diluted earnings per share were $1.38 compared with $1.19 in the prior year, reflecting strong operating results and a $0.08 benefit related to the AspenTech acquisition.

The table below presents the Company's diluted earnings per share on an adjusted basis to facilitate period-to-period comparisons and provide additional insight into the underlying, ongoing operating performance of the Company.

Adjusted diluted earnings per share excludes intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction and AspenTech pre-closing costs, and certain gains, losses or impairments.

Three Months Ended June 30 2021 2022

Diluted earnings per share $ 1.04 1.54

Restructuring and related costs 0.04 0.05

The AspenTech acquisition added 5 percent, while foreign currency translation had a 4 percent unfavorable impact.

Sales growth continued to be strong in North America, while Asia, Middle East & Africa was essentially flat and Europe was down modestly due to the negative impact of the business exit from Russia.

Earnings from continuing operations attributable to common stockholders were $329, down 56 percent, and diluted earnings per share from continuing operations were $0.56, down 55 percent compared with $1.25 in the prior year.

The prior year included a $0.60 gain related to the Company's subordinated interest in Vertiv.

Adjusted diluted earnings per share from continuing operations were $0.78 compared with $0.79 in the prior year, reflecting strong operating results offset by higher stock compensation expense due to an increasing stock price in the current year.

The table below presents the Company's diluted earnings per share from continuing operations on an adjusted basis to facilitate period-to-period comparisons and provide additional insight into the underlying, ongoing operating performance of the Company.

Adjusted diluted earnings per share from continuing operations excludes intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction-related costs, and certain gains, losses or impairments.

Three Months Ended Dec 31 2021 2022

Diluted earnings from continuing operations per share $ 1.25 0.56

Amortization of intangibles 0.09 0.15

Gain on sale of business — (0.72)

Restructuring and related costs 0.02 0.02

Gain on subordinated interest (0.60) —

Acquisition/divestiture costs 0.03 —

Russia business exit — 0.08

Acquisition/divestiture costs and pre-acquisition interest on AspenTech debt — 0.09

OSI first year acquisition accounting charges 0.01 —

Adjusted diluted earnings per share $ 1.19 1.38

The table below summarizes the changes in adjusted diluted earnings per share.

AspenTech Micromine purchase price hedge — (0.03)

Adjusted diluted earnings from continuing operations per share $ 0.79 0.78

The table below summarizes the changes in adjusted diluted earnings per share from continuing operations.

The items identified below are discussed throughout MD&A, see further discussion above and in the Business Segments and Financial Position sections below.

Three Months Ended

Adjusted diluted earnings per share - June 30, 2021

Operations 0.09

AspenTech acquisition 0.08

Corporate and other (0.03)

Adjusted diluted earnings from continuing operations per share - Dec 31, 2021

Operations excluding impact of acquisitions 0.10

Heritage AspenTech acquisition 0.05

Stock compensation (0.09)

Foreign currency (0.09)

Higher effective tax rate (0.03)

Pensions 0.02

Interest expense, net (0.01)

Share repurchases 0.01

Adjusted diluted earnings per share - June 30, 2022

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30

Following is an analysis of the Company’s operating results for the third quarter ended June 30, 2021, compared with the third quarter ended June 30, 2022.

Adjusted diluted earnings from continuing operations per share - Dec 31, 2022

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31

Following is an analysis of the Company’s operating results for the first quarter ended December 31, 2021, compared with the first quarter ended December 31, 2022.

2021 2022 Change

5 unchanged sentences

Percent of sales 27.0 % 30.5 % 3.5 pts

Gain on sale of business $ — (483)

Gain on subordinated interest $ (453) —

Other deductions, net $ 38 120

2 unchanged sentences

Interest expense, net $ 39 48

Earnings before income taxes $ 784 1,195 52 %

Earnings from continuing operations before income taxes $ 942 422 (55) %

Percent of sales 29.8 % 12.5 % (17.3) pts

Net earnings common stockholders $ 627 921 47 %

Earnings from continuing operations common stockholders $ 746 329 (56) %

Percent of sales 23.6 % 9.8 % (13.8) pts

Diluted earnings per share $ 1.04 1.54 48 %

Net sales for the third quarter of fiscal 2022 were $5.0 billion, up 7 percent compared with 2021.

Automation Solutions sales were flat, Commercial & Residential Solutions sales were up 8 percent and AspenTech sales were up 189 percent.

Net earnings common stockholders $ 896 2,331 160 %

Diluted EPS - Earnings from continuing operations $ 1.25 0.56 (55) %

Diluted EPS - Net Earnings $ 1.50 3.97 165 %

Net sales for the first quarter of fiscal 2023 were $3.4 billion, up 7 percent compared with 2022.

Intelligent Devices sales were up 1 percent, while Software and Control sales were up 30 percent, which included the impact of the Heritage AspenTech acquisition.

Underlying sales were up 6 percent on 2 percent higher volume and 4 percent higher price, while f or eign currency translation had a 4 percent negative impact.

The AspenTech acquisition added 4 percent, while divestitures deducted 1 percent.

The Heritage AspenTech acquisition added 5 percent.

Underlying sales were up 12 percent in the U.S.

and up 2 percent internationally.

The Americas was up 14 percent, Europe was flat and Asia, Middle East & Africa was down 1 percent (China down 6 percent due to the impact of lockdowns).

Cost of sales for the third quarter of fiscal 2022 were $2,908, an increase of $193 compared with 2021, due to higher sales volume and higher materials costs.

Gross margin of 41.9 percent decreased 0.3 percentage points, as freight and other inflation negatively impacted margins, while price less net material inflation was favorable but had a dilutive impact on margins.

The AspenTech acquisition benefited gross margin by 1.6 percentage points, while the Russia business exit negatively impacted gross margin by 0.6 percentage points.

Selling, general and administrative (SG&A) expenses of $1,052 decreased $21 and SG&A as a percent of sales decreased 1.9 percentage points to 21.0 percent compared with the prior year, reflecting leverage on higher sales and lower stock compensation expense of $50, partially offset by higher wage and other inflation.

On May 31, 2022, the Company completed the sale of its Therm-O-Disc sensing and protection technologies business to an affiliate of One Rock Capital Partners, LLC.

The Company recognized a pretax gain o f $483 ($428 after-tax, $0.72 per share).

Other deductions, net were $283 in 2022, an increase of $195 compared with the prior year, reflecting a charge of $130 related to the Company exiting its business in Russia ($9 of which is reported in restructuring costs).

Ac quisition/divestiture costs of $61 and a favorable impact from foreign currency transactions of $14 also impacted comparisons.

Intangibles amortization was higher by $27, as the current year included $32 related to the AspenTech acquisition, while the prior year included backlog amortization of $7 related to the OSI acquisition.

See Notes 6 and 7.

Pretax earnings of $1,195 increased $411, up 52 percent compared with the prior year.

Earnings increased $11 in Automation Solutions, $55 in AspenTech and $32 in Commercial & Residential Solutions, while costs reported at Corporate increased $157 largely due to the Russia business exit loss.

See the Business Segments discussion that follows and Note 13.

Income taxes were $243 in the third quarter of fiscal 2022 and $151 in 2021, resulting in effective tax rates of 20 percent and 19 percent, respectively.

Favorable net discrete tax items decreased the tax rates by 2 and 3 percentage points, respectively.

Net earnings common stockholders in the third quarter of fiscal 2022 were $921, up 47 percent, compared with $627 in the prior year, and earnings per share were $1.54, up 48 percent, compared with $1.04 in the prior year.

See discussion in the Overview above and the analysis below of adjusted earnings per share for further details.

The table below, which shows results on an adjusted EBITA basis, is intended to supplement the Company's discussion of its results of operations herein.

The Company defines adjusted EBITA as earnings excluding interest expense, net, income taxes, intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments.

Adjusted EBITA and adjusted EBITA margin are measures used by management and may be useful for investors to evaluate the Company's operational performance.

Three Months Ended June 30 2021 2022 Change

Earnings before income taxes $ 784 1,195 52 %

Percent of sales 16.7 % 23.9 % 7.2 pts

Interest expense, net 37 50

Restructuring and related costs 32 34

Amortization of intangibles 79 124

Gain on sale of business — (483)

Russia business exit — 162

Acquisition/divestiture costs — 61

OSI first year acquisition accounting charges 10 —

Adjusted EBITA $ 942 1,143 21 %

Percent of sales 20.1 % 22.8 % 2.7 pts

Business Segments

Following is an analysis of operating results for the Company’s business segments for the third quarter ended June 30, 2021, compared with the third quarter ended June 30, 2022.

The Company defines segment earnings as earnings before interest and taxes.

See Note 13 for a discussion of the Company's business segments.

AUTOMATION SOLUTIONS

Three Months Ended June 30 2021 2022 Change

Sales $ 2,865 2,872 — %

Earnings $ 519 530 2 %

Margin 18.1 % 18.5 % 0.4 pts

Restructuring and related costs $ 20 31

Amortization of intangibles $ 44 41

Adjusted EBITA $ 583 602 3%

Adjusted EBITA Margin 20.3 % 21.0 % 0.7 pts

Sales by Major Product Offering

Measurement & Analytical Instrumentation $ 781 785 1 %

Valves, Actuators & Regulators 880 905 3 %

Industrial Solutions 593 575 (3) %

Systems & Software 611 607 (1) %

Total $ 2,865 2,872 — %

Automation Solutions sales were $2,872 in the third quarter, essentially flat compared with the prior year.

Foreign currency translation had a 4 percent unfavorable impact.

Underlying sales increased 4 percent on 1 percent higher volume and 3 percent higher price, reflecting strength in North America partially offset by softness in Asia, Middle East & Africa.

Overall, demand remained steady during the quarter, but lockdowns in China, electronic component shortages, and other supply chain and logistics constraints unfavorably impacted sales.

Underlying sales increased 12 percent in the Americas (U.S.

up 14 percent), as process end markets remained strong, while Europe, which was negatively impacted by the business exit from Russia, was down 2 percent, and Asia, Middle East & Africa decreased 3 percent (China down 2 percent).

Sales for Measurement & Analytical Instrumentation increased $4, or 1 percent as market conditions remained strong for North American process industries, offset by weakness in Asia, Middle East & Africa due to component shortages and other supply chain constraints.

Valves, Actuators & Regulators increased $25, or 3 percent, reflecting strength in chemical end markets, partially offset by the impact of lockdowns in China.

Industrial Solutions sales were down $18, or 3 percent, reflecting unfavorable currency translation and the impact of lockdowns in China, partially offset by strength in North America.

Systems & Software decreased $4, or 1 percent, reflecting unfavorable currency translation and the impact of component shortages.

Results were strong in North America, offset by weakness in Europe.

Earnings were $530, an increase of $11, or 2 percent, and margin increased 0.4 percentage points to 18.5 percent, reflecting leverage on higher volume, favorable mix and savings from cost reduction actions.

Price less net material inflation was slightly favorable, while freight and other inflation negatively impacted margin.

Three Months Ended June 30 2021 2022 Change

Sales $ 82 239 189 %

Earnings $ 2 57 2,950 %

Margin 2.2 % 23.7 % 21.5 pts

Restructuring and related costs $ (2) 1

Amortization of intangibles $ 22 71

Adjusted EBITA $ 22 129 483%

Adjusted EBITA Margin 26.7 % 53.8 % 27.1 pts

As a result of the AspenTech acquisition, the Company identified one additional segment in the third quarter of fiscal 2022.

The new segment, referred to as "AspenTech," reflects the combined results of AspenTech and the Emerson Industrial Software Business (see Note 4 for further details).

The results for this new segment include the historical results of the Emerson Industrial Software Business (which were previously reported in the Automation Solutions segment), while results related to the AspenTech business include only periods subsequent to the close of the transaction on May 16, 2022.

AspenTech sales were $239 in the third quarter, an increase of $157 or 189% due to the acquisition of AspenTech.

Earnings were $57, an increase of $55, and margin improved to 23.7 percent, reflecting the impact of the AspenTech acquisition.

Results for the third quarter of fiscal 2022 included intangibles amortization of $49 related to the AspenTech acquisition ($17 of which was reported in Cost of sales).

COMMERCIAL & RESIDENTIAL SOLUTIONS

Three Months Ended June 30 2021 2022 Change

Climate Technologies $ 1,268 1,380 9 %

Tools & Home Products 489 522 7 %

Total $ 1,757 1,902 8 %

Climate Technologies $ 274 300 10 %

Tools & Home Products 101 107 5 %

Total $ 375 407 8 %

Margin 21.3 % 21.4 % 0.1 pts

Restructuring and related costs $ 7 1

Amortization of intangibles $ 13 12

Adjusted EBITA $ 395 420 6 %

Adjusted EBITA Margin 22.5 % 22.0 % (0.5) pts

Commercial & Residential Solutions sales were $1.9 billion in the third quarter, up $145, or 8 percent compared to the prior year.

Foreign currency translation had a 2 percent unfavorable impact and divestitures deducted 3 percent.

Underlying sales increased 13 percent on 1 percent higher volume and 12 percent higher price.

Overall, underlying sales increased 16 percent in the Americas (U.S.

up 16 percent), 6 percent in Europe and 5 percent in Asia, Middle East & Africa (China down 18 percent).

Climate Technologies sales were $1.4 billion in the third quarter, an increase of $112, or 9 percent.

Air conditioning, heating and refrigeration sales were strong across all end markets except for China which was negatively impacted by lockdowns.

Tools & Home Products sales were $522 in the third quarter, an increase of $33, or 7 percent.

Sales of food waste disposers and professional tools were strong while wet/dry vacuums sales decreased modestly due to difficult comparisons.

Earnings were $407, up 8 percent compared with the prior year, and margin increased 0.1 percentage points to 21.4 percent, as favorable price less net material inflation and savings from cost reduction actions were mostly offset by freight and other inflation and unfavorable mix.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30

Following is an analysis of the Company’s operating results for the nine months ended June 30, 2021, compared with the nine months ended June 30, 2022.

2021 2022 Change

Net sales $ 13,289 14,269 7 %

Gross profit $ 5,567 5,871 5 %

Percent of sales 41.9 % 41.1 % (0.8) pts

SG&A $ 3,125 3,112 — %

Percent of sales 23.5 % 21.8 % (1.7) pts

Gain on subordinated interest $ — (453)

Gain on sale of business $ — (483)

Other deductions, net $ 243 374

Amortization of intangibles $ 223 223

Restructuring costs $ 111 50

Interest expense, net $ 115 140

Earnings before income taxes $ 2,084 3,181 53 %

Percent of sales 15.7 % 22.3 % 6.6 pts

Net earnings common stockholders $ 1,633 2,491 53 %

Percent of sales 12.3 % 17.5 % 5.2 pts

Diluted earnings per share $ 2.71 4.17 54 %

Net sales for the first nine months of 2022 were $14.3 billion, up 7 percent compared with 2021.

Automation Solutions sales were up 3 percent, Commercial & Residential Solutions sales were up 11 percent and AspenTech sales were up 69 percent.

Underlying sales were up 9 percent on 5 percent higher volume and 4 percent higher price, and foreign currency translation subtracted 2 percent.

Underlying sales increased 14 percent in the U.S.

and increased 1 percent internationally.

The Americas was up 13 percent, Europe was up 1 percent and Asia, Middle East & Africa was up 4 percent (China up 6 percent).

Cost of sales for 2022 were $8,398, an increase of $676 versus $7,722 in 2021, primarily due to higher sales volume and higher materials costs.

Gross margin of 41.1 percent decreased 0.8 percentage points compared to the prior year, as price less net material inflation was slightly favorable but had a dilutive impact on margins and higher freight and other inflation also negatively impacted margins, partially offset by favorable mix.

The AspenTech acquisition benefited gross margin by 0.6 percentage points, while the Russia business exit negatively impacted gross margin by 0.2 percentage points.

SG&A expenses of $3,112 decreased $13 compared with the prior year, reflecting lower stock compensation expense of $84, partially offset by the impact of higher sales.

SG&A as a percent of sales decreased 1.7 percentage points to 21.8 percent, reflecting leverage on higher sales and lower stock compensation expense .

In the first quarter of fiscal 2022, the equity holders' cumulative cash return exceeded the threshold and as a result, the Company received a distribution of $438 in November 2021 (in total, a gain of $453 was recognized in the first quarter).

The Americas was up 13 percent, while Asia, Middle East & Africa was flat (China down 7 percent).

Europe decreased 2 percent, but was up 7 percent excluding the negative impact of the business exit from Russia.

Cost of sales for the first quarter of fiscal 2023 were $1,753, an increase of $12 compared with 2022.

Gross margin of 48.0 percent increased 3.1 percentage points due to favorable price less net material inflation, the impact of the Heritage AspenTech acquisition which benefited margins by 1.3 percentage points, and favorable mix.

Selling, general and administrative (SG&A) expens es of $1,030 increased $181 and SG&A as a percent of sales increased 3.5 percentage points to 30.5 percent compared with the prior year, reflecting the Heritage AspenTech acquisition and higher stock compensation expense of $68, of which $45 related to Emerson stock plans due to an increasing stock price in the current year and $23 was attributable to AspenTech stock plans.

In the first quarter of fiscal 2022, the Company received a distribution of $438 related to its subordinated interest in Vertiv (in total, a gain of $453 was recognized in the first quarter, $358 after-tax, $0.60 per share).

Based on the terms of the agreement and the current calculation, the Company could receive additional distributions of approximately $75 which are expected to be received over the next two-to-three years.

On May 31, 2022, the Company completed the sale of its Therm-O-Disc sensing and protection technologies business to an affiliate of One Rock Capital Partners, LLC.

The Company recognized a pretax gain o f $483 ($428 after-tax, $0.72 per share).

Other deductions, net were $374 in 2022, an increase of $131 compared with the prior year, reflecting a charge of $130 related to the Company exiting its business in Russia ($9 of which is reported in restructuring costs) and ac quisition/divestiture costs of $97.

These items were partially offset by a favorable impact from foreign currency transactions of $48 and gains from the sales of capital assets of $15 in the first quarter of fiscal 2022.

The prior year also included investment-related gains, including a gain of $21 from an investment sale, a $17 gain from the acquisition of full ownership of an equity investment and a gain of $31 on the sale of an equity investment.

Intangibles amortization was flat a s the current year included $32 related to the AspenTech acquisition, while the prior year included backlog amortization of $24 related to the OSI acquisition.

See Notes 6 and 7.

Pretax earnings of $3,181 increased $1,097, or 53 percent.

Earnings increased $264 in Automation Solutions, $52 in AspenTech and $29 in Commercial & Residential Solutions, while costs reported at Corporate increased $159 largely due to the Russia business exit loss.

Other deductions, net were $120 in 2023, an increase of $82 compared with the prior year, reflecting higher intangibles amortization of $61 primarily related to the Heritage AspenTech acquisition and a charge of $47 related to the Company exiting its business in Russia, partially offset by lower acquisition/divestiture costs of $23.

The current year also included a mark-to-market gain of $35 related to foreign currency forward contracts entered into by AspenTec h to mitigate the impact of foreign currency exchange associated with the Micromine purchase price, which was largely offset by unfavorable foreign currency transaction losses compared to gains in the prior year.

Pretax earnings from continuing operations of $422 decreased $520, down 55 percent compared with the prior year largely due to the Vertiv gain discussed above.

Earnings increased $40 in Intelligent Devices and decreased $40 in Software and Control, while costs reported at Corporate increased $58 largely due to higher stock compensation expense of $68 and the $47 Russia business exit loss, partially offset by the $ 35 gain on the Micromine foreign currency forward contracts.

See the Business Segments discussion that follows and Note 13.

Income taxes were $659 for the first nine months of 2022 and $431 for 2021, resulting in effective tax rates of 21 percent and 21 percent, respecti vely.

The current year rate included a 2 percentage point benefit related to the completion of tax examinations, partially offset by portfolio restructuring activities which negatively impacted the rate by 1 percentage points, while the prior year had favora ble net discrete items which reduced the rate 1 percentage point.

Net earnings common stockholders in 2022 were $2,491, up 53 percent compared with the prior year, and earnings per share were $4.17, up 54 percent compared with $2.71 in 2021.

Results reflected strong operating results and included a pretax gain of $453 ($358 after-tax, $0.60 per share) related to the Company's subordinated interest in Vertiv and a pretax gain of $483 ($428 after-tax, $0.72 per share) related to the Therm-O-Disc divestiture.

See the analysis below of adjusted earnings per share for further details.

The table below, which shows results on an adjusted EBITA basis, is intended to supplement the Company's discussion of its results of operations herein.

Nine Months Ended June 30 2021 2022 Change

Earnings before income taxes $ 2,084 3,181 53 %

Income taxes were $98 in the first quarter of fiscal 2023 and $196 in 2022, resulting in effective tax rates of 23 percent and 21 percent, respectively.

The current year rate included a 2 percentage point unfavorable impact related to the Russia charge, which had no related tax benefit.

The prior year included a $0.60 gain related to the Company's subordinated interest in Vertiv.

See the analysis above of adjusted earnings per share for further details.

Earnings from discontinued operations were $2,002 ($3.41 per share) which included the $2.1 billion after-tax gain on the divestiture of InSinkErator, compared to $149 ($0.25 per share) in the prior year.

Earnings from discontinued operations were negatively impacted in the current year by approximately $275 of income taxes within Climate Technologies related to subsidiary restructurings and $27 of transaction-related costs.

Net earnings common stockholders in the first quarter of fiscal 2023 were $2,331, up 160 percent, compared with $896 in the prior year, and earnings per share were $3.97, up 165 percent, compared with $1.50 in the prior year.

The table below, which shows results from continuing operations on an adjusted EBITA basis, is intended to supplement the Company's discussion of its results of operations herein.

The Company defines adjusted EBITA as earnings from continuing operations excluding interest expense, net, income taxes, intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction-related costs, and certain gains, losses or impairments.

Adjusted EBITA and adjusted EBITA margin are measures used by management and may be useful for investors to evaluate the Company's operational performance.

Three Months Ended Dec 31 2021 2022 Change

Earnings from continuing operations before income taxes $ 942 422 (55) %

Percent of sales 29.8 % 12.5 % (17.3) pts

Interest expense, net 39 48

Restructuring and related costs 122 67

Amortization of intangibles 71 167

Gain on subordinated interest — (453)

Gain on sale of business — (483)

Russia business exit — 162

Acquisition/divestiture costs — 97

Gain on acquisition of full ownership of equity investment (17) —

OSI first year acquisition accounting charges and fees 41 —

Adjusted EBITA $ 2,587 2,988 16 %

Percent of sales 19.5 % 20.9 % 1.4 pts

Nine Months Ended June 30 2021 2022

Diluted earnings per share $ 2.71 4.17

Restructuring and related costs 14 15

Amortization of intangibles 0.30 0.33

Gain on subordinated interest (453) —

Gain on sale of business — (0.72)

Acquisition/divestiture costs 23 —

Russia business exit — 47

Acquisition/divestiture costs and pre-acquisition interest on AspenTech debt — 0.16

Gain on acquisition of full ownership of equity investment (0.03) —

OSI first year acquisition accounting charges and fees 0.05 —

Adjusted diluted earnings per share $ 3.19 3.72

The table below summarizes the changes in adjusted diluted earnings per share.

The items identified below are discussed throughout MD&A, see further discussion above and in the Business Segments and Financial Position sections below.

Nine Months Ended

Adjusted diluted earnings per share - June 30, 2021

Operations 0.30

AspenTech acquisition 0.08

Corporate and other (0.03)

Stock compensation 0.13

Pensions 0.04

Gains on sales of investments - prior year (0.07)

Gains on sales of capital assets - current year 0.02

Share repurchases/other 0.06

Adjusted diluted earnings per share - June 30, 2022

AspenTech Micromine purchase price hedge — (35)

Adjusted EBITA from continuing operations $ 636 664 5 %

Percent of sales 20.1 % 19.7 % (0.4) pts

The Company has an equity investment in National Instruments, valued at $82 as of December 31, 2022.

On January 17, 2023, the Company announced a proposal to acquire National Instruments for $53 per share in cash at an implied enterprise value of $7.6 billion.

National Instruments, which had fiscal 2021 sales of approximately $1.5 billion, announced on January 13, 2023 it was undertaking a strategic review which could include the solicitation of interest from other potential acquirors.

Business Segments

Following is an analysis of operating results for the Company’s business segments for the nine months ended June 30, 2021, compared with the nine months ended June 30, 2022.

Following is an analysis of operating results for the Company’s business segments for the three months ended December 31, 2021, compared with the three months ended December 31, 2022.

The Company defines segment earnings as earnings before interest and taxes.

AUTOMATION SOLUTIONS

Nine Months Ended June 30 2021 2022 Change

Sales $ 8,193 8,451 3 %

Earnings $ 1,354 1,618 19 %

As a result of the Company's portfolio transformation, the Company has realigned its business segments and now reports six segments and two business groups.

INTELLIGENT DEVICES

2021 2022 Change FX Acq/Div U/L

Final Control $ 817 862 6 % 4 % — % 10 %

Measurement & Analytical 737 749 2 % 4 % — % 6 %

Discrete Automation 617 618 — % 6 % — % 6 %

Safety & Productivity 351 310 (12) % 2 % — % (10) %

Total $ 2,522 2,539 1 % 4 % — % 5 %

Final Control $ 122 158 30 %

Measurement & Analytical 170 175 3 %

Discrete Automation 120 121 1 %

Safety & Productivity 65 63 (3) %

Total $ 477 517 9 %

Margin 18.9 % 20.4 % 1.5 pts

Restructuring and related costs $ 94 54

Amortization of intangibles:

Adjusted EBITA $ 1,584 1,797 14 %

Adjusted EBITA Margin 19.3 % 21.3 % 2.0 pts

Sales by Major Product Offering

Measurement & Analytical Instrumentation $ 2,211 2,287 3 %

Valves, Actuators & Regulators 2,522 2,604 3 %

Industrial Solutions 1,656 1,743 5 %

Systems & Software 1,804 1,817 1 %

Final Control $ 24 22

Measurement & Analytical 6 5

Discrete Automation 8 7

Safety & Productivity 6 6

Total $ 44 40

Automation Solutions sales were $8.5 billion in the first nine months of 2022, an increase of $258, or 3 percent.

Foreign currency translation had a 2 percent unfavorable impact.

Underlying sales increased 5 percent on 3 percent higher volume and 2 percent higher price, reflecting strength in process end markets and sustained demand in discrete and hybrid end markets, despite supply chain and logistics constraints and the impact of lockdowns in China which unfavorably impacted sales.

Underlying sales increased 11 percent in the Americas, while Europe, which was negatively impacted by the business exit from Russia, decreased 2 percent and Asia, Middle East & Africa was up 3 percent (China up 10 percent).

Sales for Measurement & Analytical Instrumentation increased $76, or 3 percent.

Sales were strong in China and North America, while sales were down moderately in Europe due to supply chain constraints.

Valves, Actuators & Regulators increased $82, or 3 percent , reflecting strong demand in the Americas and China, partially offset by softness in the rest of Asia, Middle East & Africa.

Ind ustrial Solutions sales increased $87, or 5 percent, reflecting strong demand in North America and Europe.

Systems & Software increased $13, or 1 percent , reflecting strength in process end markets in North America and China, partially offset by weakness in Europe, while power end markets were solid in North America.

Earnings were $1,618, an increase of $264, or 19 percent, and margin increased 2.6 percentage points to 19.1 percent, reflecting leverage on higher volume, favorable mix, lower restructuring expense which benefited margins 0.4 percentage points, and savings from cost reduction actions, partially offset by higher inflation.

Price less net material inflation was slightly favorable and foreign currency transactions benefited margins by 0.3 percentage points.

Nine Months Ended June 30 2021 2022 Change

Sales $ 239 405 69 %

Earnings $ (1) 51 (3,687) %

Margin (0.6) % 12.5 % 13.1 pts

Restructuring and related costs:

Amortization of intangibles $ 67 116

Final Control $ 7 4

Measurement & Analytical 2 1

Discrete Automation 2 1

Safety & Productivity 1 —

Adjusted EBITA $ 533 563 6 %

Adjusted EBITA Margin 21.1 % 22.2 % 1.1 pts

AspenTech sales were $405 in the first nine months of 2022, an increase of $166, or 69 percent due to the acquisition of AspenTec h.

Earnings were $51 , an increase of $52 , and margin improved to 12.5 percent , reflecting the impact of the AspenTech acquisition.

Resul ts for fiscal 2022 included intangibles amortization of $49 related to the AspenTech acquisition ($17 of which was reported in Cost of sales).

COMMERCIAL & RESIDENTIAL SOLUTIONS

Nine Months Ended June 30 2021 2022 Change

Climate Technologies $ 3,459 3,884 12 %

Tools & Home Products 1,419 1,546 9 %

Intelligent Devices sales were $2.5 billion in the first three months of 2023, an increase of $17, or 1 percent.

Underlying sales increased 5 percent on higher price, while volume was flat overall reflecting lagging performance in Safety & Productivity.

Unde rlying sales increased 14 percent in the Americas, while Asia, Middle East & Africa was down 3 percent (China down 12 percent ).

Europe decreased 5 percent, but was up moderately excluding the negative impact of the business exit from Russia.

F inal Control sales increased $45, or 6 percent.

Underlying sales were up 10 percent, reflecting strength in chemical, energy and power end markets, particularly in the Americas.

Europe was up slightly excluding the impact from Russia and Asia was down slightly.

Sales for Measurement & Analytical increased $12, or 2 percent.

Underlying sales were up 6 percent, reflecting strength in North America and solid growth in Europe excluding the impact from Russia.

Sales were down 16 percent in Asia reflecting the negative impact from continued supply chain constraints.

Discrete Automation sales were flat while underlying sales increased 6 percent, reflecting broad-based demand across most end markets and all geographies despite continued supply chain constraints.

Safety & Productivity sales decreased $41, or 12 percent, reflecting weakness across all end markets, particularly in the Americas.

Earnings were $517, an increase of $40, or 9 percent, and margin increased 1.5 percentage points to 20.4 percent, reflecting favorable price less net material inflation and favorable mix, partially offset by higher wage and other inflation and unfavorable foreign currency transactions which negatively impacted margins 0.6 percentage points.

Adjusted EBITA margin was 22.2 percent, an increase of 1.1 percentage points.

SOFTWARE AND CONTROL

2021 2022 Change FX Acq/Div U/L

Control Systems & Software $ 570 606 6 % 4 % — % 10 %

AspenTech 82 243 197 % — % (197) % — %

Total $ 652 849 30 % 4 % (24) % 10 %

Climate Technologies $ 731 754 3 %

Tools & Home Products 311 317 2 %

Control Systems & Software $ 116 107 (8) %

AspenTech (2) (33) (1668) %

Total $ 114 74 (36) %

Margin 17.6 % 8.7 % (8.9) pts

Restructuring and related costs $ 15 8

Amortization of intangibles:

Control Systems & Software $ 5 6

AspenTech 22 121

Total $ 27 127

Restructuring and related costs:

Control Systems & Software $ 1 1

AspenTech — —

Adjusted EBITA $ 142 202 42 %

Adjusted EBITA Margin 21.8 % 23.8 % 2.0 pts

Commercial & Residential Solutions sales were $5.4 billion in the first nine months of 2022, an increase of $552, or 11 percent compared to the prior year.

Foreign currency translation had a 1 percent unfavorable impact and divestitures deducted 2 percent .

Software and Control sales were $849 in th e first three months of 2023, an increase of $197, or 30 percent compared to the prior year, reflecting the impact of the Heritage AspenTech acquisition.

Underlying sales were up 10 percent on 8 percent higher volume and 2 percent higher price.

Overall, underlying sales increased 16 percent in the Americas, 11 percent in Europe and 7 percent in Asia, Middle East & Africa (China down 7 percent).

Climate Technologies sales were $3.9 billion in the first nine months of 2022, an increase of $425, or 12 percent.

Air conditioning, heating and refrigeration sales were strong, reflecting global demand across all end markets.

Tools & Home Products sales were $1.5 billion in the first nine months of 2022, up $127, or 9 percent.

Sales of professional tools and food waste disposers were both up low teens, while wet/dry vacuums were flat due to difficult comparisons .

Earnings were $1,071, up 3 percent, and margin decreased 1.7 percentage points, as price less net material inflation was favorable but had a dilutive impact on margins and higher freight and other inflation also negatively impacted margins, partially offset by leverage on higher sales and savings from cost reduction actions.

Overall, underlying sales increased 11 percent in the Americas, 6 percent in Europe and 15 percent in Asia, Middle East & Africa ( China up 26 percent).

Control Systems & Software sales increased $36, or 6 percent.

Underlying sales increased 10 percent, reflecting strength in process end markets in North America, Europe (excluding the impact of the business exit from Russia) and Asia, which benefited from improved electronic component availability, while power end markets were up modestly.

AspenTech sales increased $161, or 197 percent, due to the acquisition of Heritage AspenTech.

Earnings decreased $40, down 36 percent, and margin decreased 8.9 percentage points, reflecting the impact from $99 of incremental intangibles amortization ($35 of which was reported in Cost of Sales) related to the Heritage AspenTech acquisition.

Adjusted EBITA margin increased 2.0 percentage points, reflecting the impact of the Heritage AspenTech acquisition, partially offset by lower margins within Control Systems & Software due to higher inflation and unfavorable foreign currency transactions.

FINANCIAL CONDITION

Key elements of the Company's financial condition for the nine months ended June 30, 2022 as compared to the year ended September 30, 2021 and the nine months ended June 30, 2021 follow.

June 30, 2021 Sept 30, 2021 June 30, 2022

Key elements of the Company's financial condition for the three months ended December 31, 2022 as compared to the year ended September 30, 2022 and the three months ended December 31, 2021 follow.

Dec 31, 2021 Sept 30, 2022 Dec 31, 2022

Operating working capital $ 780 $ 990 $ 351

3 unchanged sentences

Interest coverage ratio 23.9 X 11.7 X 7.3 X

The Company's operating working capit al increase d co mpared to the same quarter last year and compared to September 30, 2021 due to higher inventory levels to support sales growth and reflecting ongoing supply chain and logistics constraints.

In addition, the AspenTech acquisition increased operating working capital by approximately $250.

As of June 30, 2022, Emerson's cash and equivalents totaled $2,529, which included $450 attributable to New AspenTech.

The cash held by New AspenTech is intended to be used for its own purposes and is not a readily available source of liquidity for other Emerson general business purposes or to return to Emerson shareholders.

The decrease in the current ratio reflects the increase in commercial paper borrowings discussed below.

The i nterest coverage ratio (earnings before income taxes plus interest expense, divided by interest expense) of 21.1X for the first nine months of fiscal 2022 compares to 17.8X for the nine months ended June 30, 2021.

The increase reflects higher pretax earnings in the current year, which included the Vertiv subordinated interest gain of $453, the gain on the Therm-O-Disc divestiture of $483, and the Russia business exit loss of $162.

Excluding these items, the interest coverage ratio was 16.2X, reflecting higher interest expense due to the increased long-term debt and commercial paper borrowings to fund the AspenTech acquisition.

In December 2021, the Company issued $1 billion of 2.0% notes due December 2028, $1 billion of 2.2% notes due December 2031, and $1 billion of 2.8% notes due December 2051.

The Company's commercial paper borrowings also increased by approximate ly $2.4 billion compare d to September 30, 2021.

The Company used the net proceeds from the sale of the notes and the increased commercial paper borrowings to fund the majority of its contribution of approximately $6.0 billion to existing stockholders of AspenTech as part of the transaction.

See Note 4 and Note 10.

Operating cash flow for the first nine months of fiscal 2022 was $1,705, a decrease of $1,015 compared with $2,720 in the prior year, reflecting higher working capital due to increased sales and continued supply chain constraints.

Operating cash flow was also negatively impacted by approximately $68 of taxes paid on the Vertiv subordinated interest gain.

The remaining taxes owed on the gain are approximately $27 and are expected to be paid by the end of fiscal 2022.

Free cas h flow of $1,370 in the first nine months of fiscal 2022 (operating cash flow of $1,705 less capital expenditures of $335) decreased $1,000 compared to free cash flow of $2,370 in 2021 (operating cash flow of $2,720 less capital expenditures of $350), reflecting the decrease in operating cash flow.

Cash used in investing activities was $4,975, reflecting $5.6 billion of cash paid, net of cash acquired related to the AspenTech acquisition, partially offset by the Vertiv gain and proceeds from the Therm-O-Disc divestiture.

Cash provided by financing activities was $3,557, primarily due to proceeds of nearly $3 billion from the December 2021 debt issuance and increased commercial paper borrowings of $2.4 billion to fund the AspenTech transaction, partially offset by the repayment of $500 of long-term debt, dividend payments, and share repurchases.

The Company's operating working capital as of December 31, 2022 includes income taxes payable of approximately $660 related to the gain on the InSinkErator divestiture, which is expected to be paid over the next three quarters, and approximately $275 related to subsidiary restructurings at Climate Technologies, approximately $230 of which was paid in January 2023 with the remainder expected to be paid by the end of fiscal 2023.

Excluding these income taxes payable related to discontinued operations, operating working capital increased compared to the same quarter last year and compared to September 30, 2022 due to higher inventory levels to support sales growth and reflecting ongoing supply chain and logistics constraints.

As of December 31, 2022, Emerson's cash and equivalents totaled $2,271, which included approximately $450 attributable to AspenTech.

Subsequent to the end of the quarter, in January 2023 AspenTech paid off the outstanding balance of its existing term loan facility of $264, plus accrued interest.

The cash held by AspenTech is intended to be used for its own purposes and is not a readily available source of liquidity for other Emerson general business purposes or to return to Emerson shareholders.

The current ratio was unchanged compared to September 30, 2022.

The i nterest coverage ratio (earnings before income taxes plus interest expense, divided by interest expense) of 7.3X for the first three months of fiscal 2023 compares to 23.9X for the three months ended December 31, 2021, reflecting lower pretax earnings and higher interest expense.

Pretax earnings in the prior year included the Vertiv subordinated interest gain of $453.

Excluding the gain, the interest coverage ratio was 12.9X in the prior year.

Operating cash flow from continuing operations for the first three months of fiscal 2023 was $302, a decrease of $75 compared with $377 in the prior year, reflecting higher working capital due to ongoing supply chain constraints.

Operating cash flow included approximately $50 generated by AspenTech.

Free cas h flow from continuing operations of $243 in the first three months of fiscal 2023 (operating cash flow of $302 less capital expenditures of $59) decreased $61 compared to free cash flow of $304 in 2022 (operating cash flow of $377 less capital expenditures of $73), reflecting the decrease in operating cash flow.

Cash used in investing activities from continuing operations was $67.

Cash used in financing activities from continuing operations was $2,895, reflecting share repurchases of $2.0 billion, net repayments of short-term borrowings of $539, and dividend payments.

Total cash provided by operating activities was $418 including the impact of discontinued operations, and decreased $105 compared with $523 in the prior year.

Investing cash flow from discontinued operations was $3.0 billion, reflecting proceeds from the InSinkErator divestiture.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic, and among other things, provides tax relief to businesses.

Tax provisions of the CARES Act include the deferral of certain payroll taxes, relief for retaining employees, and other provisions.

The Company deferred $73 of certain payroll taxes through the end of calendar year 2020, of which approximately $37 was paid in December 2021 with the remaining amount due in December 2022.

The Company deferred $73 of certain payroll taxes through the end of calendar year 2020, of which approximately $37 was paid in December 2021 and the remainder paid in December 2022.

Emerson maintains a conservative financial structure to provide the strength and flexibility necessary to achieve our strategic objectives and has been successful in efficiently deploying cash where needed worldwide to fund operations, complete acquisitions and sustain long-term growth.

Emerson is in a strong financial position, with total assets of $37 billion and stockholders' equity of $10 billion, and has the resources available for reinvestment in existing businesses, strategic acquisitions and managing its capital structure on a short- and long-term basis.

Emerson is in a strong financial position, with total assets of $36 billion and common stockholders' equity of $11 billion, and has the resources available for reinvestment in existing businesses, strategic acquisitions and managing its capital structure on a short- and long-term basis.

FISCAL 2023 OUTLOOK

Emerson continues to see strong demand for the Company's technology, software and solutions.

The outlook for fiscal 2022 reflects the impacts of the AspenTech and Therm-O-Disc transactions and write-offs associated with the Russia business exit, and considers continued macroeconomic and geopolitical uncertainty, supply chain constraints, exchange rate fluctuations and challenges related to COVID-19.

For the full year, consolidated net sales are expected to be up 7 to 8 percent, with underlying sales up 9 to 10 percent excluding a 2 to 3 percent unfavorable impact from foreign currency translation, a 1 to 2 percent favorable impact from acquisitions and a 1 percent deduction from divestitures.

Automation Solutions net sales are expected to be up 4 to 5 percent, with underlying sales up 6 to 7 percent excluding a 2 percent unfavorable impact from foreign currency translation.

Commercial & Residential Solutions net sales are expected to be up 9 to 10 percent with underlying sales up 13 to 14 percent excluding a 1 percent unfavorable impact from foreign currency translation and a 3 percent negative impact from divestitures.

Earnings per share are expected to be $5.25 to $5.35, while adjusted earnings per share are expected to be $5.05 to $5.15.

Adjusted earnings per share exclude a $0.20 impact from restructuring actions, a $0.47 impact from amortization of intangibles, a $0.60 gain from the Vertiv subordinated interest (see Note 4), a $0.72 gain from the sale of Therm-O-Disc (see Note 4), a $0.29 loss from the Company exiting business in Russia (see Note 4) and a $0.16 impact from transaction and AspenTech pre-closing costs.

Operating cash flow is expected to be approximately $3.0 billion and free cash flow, which excludes projected capital spending of $525 million, is expected to be approximately $2.5 billion.

Share repurchases are expected to be approximately $500 million in fiscal 2022.

For the full year, consolidated net sales from continuing operations are expected to be up 8 to 10 percent, with underlying sales up 6.5 to 8.5 percent excluding a 2 percent unfavorable impact from foreign currency translation and an approximately 3.5 percent favorable impact from acquisitions net of divestitures.

Earnings per share from continuing operations are expected to be $3.55 to $3.70 (which excludes any potential impact from the 45 percent common equity ownership in Climate Technologies' income or loss post-close), while adjusted earnings per share are expected to be $4.00 to $4.15, excluding a $0.60 per share impact from amortization of intangibles, $0.12 per share from restructuring actions, $0.08 per share from the Russia business exit, a $0.03 per share benefit from the AspenTech Micromine purchase price hedge, $0.09 per share from interest income on the Climate Technologies note receivable, and $0.23 per share of interest income on undeployed proceeds from the Climate Technologies and InSinkErator divestitures.

Earnings from discontinued operations are expected to be $10.5 billion to $11.5 billion, or $18 to $20 per share, including the net gains on 2023 divestitures.

The fiscal 2023 outlook includes $2 billion returned to shareholders through share repurchases completed in the first quarter and approximately $1.2 billion of dividend payments.

The Company's fiscal 2023 results from continuing operations after the Climate Technologies divestiture (assumed to close March 31, 2023 for the purposes of guidance) will reflect a 45 percent common equity ownership in the income, or loss, of Climate Technologies.

Emerson will not control Climate Technologies post-closing and is therefore unable to estimate the amount of its 45 percent share of Climate Technologies' post-close results.

The effect of Emerson's 45 percent share of Climate Technologies is expected to be immaterial to post-closing cash flows.

Statements in this report that are not strictly historical may be "forward-looking" statements, which involve risks and uncertainties, and Emerson undertakes no obligation to update any such statements to reflect later developments.

These risks and uncertainties include the the Company's ability to successfully complete on the terms and conditions contemplated, and the financial impact of, the proposed sale of its InSinkErator food waste disposal business, the financial impact of the AspenTech acquisition, the scope, duration and ultimate impacts of the COVID-19 pandemic and the Russia-Ukraine conflict, as well as economic and currency conditions, market demand, including related to the pandemic and oil and gas price declines and volatility, pricing, protection of intellectual property, cybersecurity, tariffs, competitive and technological factors, inflation, among others, which are set forth in the “Risk Factors” of Part I, Item 1A, and the "Safe Harbor Statement" of Part II, Item 7, to the Company's Annual Report on Form 10-K for the year ended September 30, 2021 and in subsequent reports filed with the SEC, which are hereby incorporated by reference.

These risks and uncertainties include the the Company's ability to successfully complete on the terms and conditions contemplated, and the financial impact of, the proposed Climate Technologies transaction, the potential National Instruments transaction, the scope, duration and ultimate impacts of the COVID-19 pandemic and the Russia-Ukraine conflict, as well as economic and currency conditions, market demand, including related to the pandemic and oil and gas price declines and volatility, pricing, protection of intellectual property, cybersecurity, tariffs, competitive and technological factors, inflation, among others, which are set forth in the “Risk Factors” of Part I, Item 1A, and the "Safe Harbor Statement" of Part II, Item 7, to the Company's Annual Report on Form 10-K for the year ended September 30, 2022 and in subsequent reports filed with the SEC, which are hereby incorporated by reference.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements