What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-11-13 compared with 2022-11-14 · 386 added, 257 removed, 943 unchanged (41% of the section changed)

11 unchanged sentences

Gain on subordinated interest — ( 453 ) ( 161 )

Gain on sale of business — — ( 486 )

Other deductions, net 319 519 683

Interest expense, net of interest income of:

Earnings before income taxes 2,335 2,912 4,085

Interest income from related party — — ( 41 )

Earnings from continuing operations before income taxes 1,762 2,432 2,726

Income taxes 346 549 599

Earnings from continuing operations 1,416 1,883 2,127

Discontinued operations, net of tax of $ 239 , $ 306 and $ 3,012 , respectively

911 1,347 11,073

Net earnings 2,327 3,230 13,200

1 unchanged sentence

Net earnings common stockholders $ 2,303 3,231 13,219

Earnings per share:

Basic $ 3.26 3.85 5.44

Diluted $ 3.24 3.82 5.41

Earnings common stockholders:

Earnings from continuing operations $ 1,414 1,886 2,152

Discontinued operations 889 1,345 11,067

Net earnings common stockholders $ 2,303 3,231 13,219

Basic earnings per share common stockholders:

Earnings from continuing operations $ 2.36 3.17 3.74

Discontinued operations 1.49 2.27 19.26

Basic earnings per common share $ 3.85 5.44 23.00

Diluted earnings per share common stockholders:

Earnings from continuing operations $ 2.35 3.16 3.72

Discontinued operations 1.47 2.25 19.16

Diluted earnings per common share $ 3.82 5.41 22.88

Weighted average outstanding shares:

16 unchanged sentences

Noncontrolling interests in comprehensive income of subsidiaries

23 ( 9 ) ( 18 )

Comprehensive income common stockholders $ 3,008 2,618 13,451

3 unchanged sentences

& SUBSIDIARIES

September 30 (Dollars and shares in millions, except per share amounts)

Years ended September 30 (Dollars and shares in millions, except per share amounts)

Current assets

3 unchanged sentences

Other current assets 1,301 1,244

Current assets held-for-sale 1,398 —

Total current assets 8,506 13,819

2 unchanged sentences

Other intangible assets 6,572 6,263

Copeland note receivable and equity investment — 3,255

Other 2,151 2,566

Noncurrent assets held-for-sale 2,258 —

Total other assets 24,927 26,564

5 unchanged sentences

Accrued expenses 3,038 3,210

Current liabilities held-for-sale 1,348 —

Total current liabilities 7,777 5,032

1 unchanged sentence

Other liabilities 3,153 3,506

Noncurrent liabilities held-for-sale 167 —

Common stock, $ 0.50 par value;

6 unchanged sentences

Accumulated other comprehensive income (loss) ( 1,485 ) ( 1,253 )

26,174 27,102

Cost of common stock in treasury, 362.0 shares in 2022;

16 unchanged sentences

Stock plans 52 85 127

Heritage AspenTech acquisition — — ( 550 )

AspenTech purchases of common stock — — ( 122 )

AspenTech acquisition — ( 550 ) —

Ending balance 522 57 62

24 unchanged sentences

Net earnings 24 ( 1 ) ( 19 )

AspenTech Stock plans — — 35

Stock plans — 35 94

AspenTech purchases of common stock — — ( 92 )

Other comprehensive income ( 1 ) ( 8 ) 1

Dividends paid ( 25 ) ( 4 ) ( 1 )

Heritage AspenTech acquisition — — 5,890

AspenTech acquisition — 5,890 —

Purchase of noncontrolling interests — — 3

Climate Technologies divestiture — — ( 29 )

Ending balance 40 5,952 5,909

8 unchanged sentences

Net earnings $ 2,327 3,230 13,200

Earnings from discontinued operations, net of tax ( 911 ) ( 1,347 ) ( 11,073 )

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

Depreciation and amortization 762 842 1,051

Stock compensation expense 110 224 144

Pension expense 67 28 2

Stock compensation 197 125 250

Pension expense (income) 28 2 ( 71 )

Pension funding ( 41 ) ( 43 ) ( 43 )

1 unchanged sentence

Gain on subordinated interest — ( 453 ) ( 161 )

Gain on sale of business — — ( 486 )

Other, net ( 71 ) 4 ( 237 )

Cash from continuing operations 2,458 2,048 2,726

Cash from discontinued operations 1,117 874 ( 2,089 )

Cash provided by operating activities 3,575 2,922 637

4 unchanged sentences

Proceeds from subordinated interest — 438 176

Proceeds from related party note receivable — — 918

Other, net ( 25 ) ( 138 ) ( 141 )

Cash used in investing activities ( 740 ) ( 2,120 ) ( 5,334 )

Cash from continuing operations ( 1,991 ) ( 5,684 ) ( 115 )

Cash from discontinued operations ( 129 ) 350 12,530

Cash provided by (used in) investing activities ( 2,120 ) ( 5,334 ) 12,415

Financing activities

Net decrease in short-term borrowings ( 90 ) ( 504 ) 1,241

Net increase (decrease) in short-term borrowings ( 504 ) 1,241 ( 1,578 )

Proceeds from short-term borrowings greater than three months 71 1,162 395

4 unchanged sentences

Purchases of common stock ( 500 ) ( 500 ) ( 2,000 )

AspenTech purchases of common stock — — ( 214 )

Payment of related party note payable — — ( 918 )

Other, net 100 80 ( 169 )

Cash used in financing activities ( 509 ) ( 2,422 ) 2,048

Cash provided by (used in) financing activities ( 2,422 ) 2,048 ( 6,823 )

Effect of exchange rate changes on cash and equivalents 6 ( 186 ) 18

21 unchanged sentences

Actual results could differ from these estimates.

Certain prior year amounts have been reclassified to conform with 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 18).

Effective October 1, 2021, the Company adopted three accounting standard updates which had an immaterial or no impact on the Company's financial statements for the year ended September 30, 2022.

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 divestitures) 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 20).

In 2023, the Company adopted ASU No.

2021-10 (Topic 832), Government Assistance, which requires annual disclosures about certain types of government assistance received.

This standard has no impact on the accounting for government assistance and did not materially impact the Company's disclosures.

In 2022, the Company adopted three accounting standard updates, and in 2021 adopted two accounting standard updates and one new accounting standard, each of which had an immaterial or no impact on the Company's financial statements.

These included:

4 unchanged sentences

• 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.

In fiscal 2021, the Company adopted two accounting standard updates and one new accounting standard, and in fiscal 2020 adopted updates to ASC 815, all of which had an immaterial impact on the Company's financial statements.

These included:

• Updates to ASC 350, Intangibles - Goodwill and Other , which eliminate the requirement to measure impairment based on the implied fair value of goodwill compared to the carrying amount of a reporting unit’s goodwill.

2 unchanged sentences

• Adoption of ASC 326, Financial Instruments - Credit Losses , which amends the impairment model by requiring entities to use a forward-looking approach to estimate lifetime expected credit losses on certain types of financial instruments, including trade receivables.

• Updates to ASC 815, Derivatives and Hedging , which permit hedging certain contractually specified risk components.

The updates also eliminate the requirement to separately measure and report hedge ineffectiveness and simplify hedge documentation and effectiveness assessment requirements.

Principles of Consolidation

2 unchanged sentences

Investments of 20 percent to 50 percent of the voting shares of other entities are accounted for by the equity method.

Investments in publicly traded

companies of less than 20 percent are carried at fair value, with changes in fair value reflected in accumulated other comprehensive income.

Investments in publicly traded companies of less than 20 percent are carried at fair value, with changes in fair value reflected in earnings.

Investments in nonpublicly traded companies of less than 20 percent are carried at cost, minus impairment, and adjusted for observable price changes in orderly transactions.

19 unchanged sentences

Valuations for all of the Company's financial instruments fall within Level 2.

The fair value of the Company's long-term debt is Level 2, estimated using current interest rates and pricing from financial institutions and other market sources for debt with similar maturities and characteristics.

The fair value of the Company's long-term debt and note receivable from Copeland are Level 2, estimated using current interest rates and pricing from financial institutions and other market sources for debt with similar maturities and characteristics.

Property, Plant and Equipment

13 unchanged sentences

Assets and liabilities acquired in business combinations are accounted for using the acquisition method and recorded at their respective fair values.

Substantially all goodwill is assigned to the reporting unit that acquires a

Substantially all goodwill is assigned to the reporting unit that acquires a business.

A reporting unit is an operating segment as defined in ASC 280, Segment Reporting , or a business one level below an operating segment if discrete financial information for that business unit is prepared and regularly reviewed by the segment manager.

5 unchanged sentences

Fair values are subject to changes in underlying economic conditions.

All of the Company's identifiable intangible assets are subject to amortization on a straight-line basis over their estimated useful lives.

Identifiable intangibles consist of intellectual property such as technology, patents and trademarks, customer relationships and capitalized software.

With the exception of certain trade names, all of the Company's identifiable intangible assets are subject to amortization on a straight-line basis over their estimated useful lives.

Ident ifiable intangibles consist of intellectual property such as technology, patents and trademarks, customer relationships and capitalized software.

Identifiable intangibles are also subject to evaluation for potential impairment if events or circumstances indicate the carrying amount may not be recoverable.

19 unchanged sentences

Revenue Recognition

Emerson is a global manufacturer that designs and manufactures products and delivers services that bring technology and engineering together to provide innovative solutions for its customers, largely in the form of tangible products.

Emerson is a global manufacturer that designs and manufactures products and delivers services that bring technology and engineering together to provide innovative solutions for its customers.

The Company evaluates its contracts with customers to identify the promised goods or services and recognizes revenue for the identified performance obligations at the amount the Company expects to be entitled to in exchange for those goods or services.

1 unchanged sentence

Revenue is recognized when, or as, performance obligations are satisfied and control has transferred to the customer, typically when products are shipped or delivered, title and risk of loss pass to the customer, and the Company has a present right to payment.

The majority of the Company's revenues relate to a broad offering of manufactured products which are recognized at the point in time when control transfers, generally in accordance with shipping terms.

A portion of the Company's revenues relate to the sale of software and post-contract customer support, parts and labor for repairs, and engineering services.

In some circumstances,

contracts include multiple performance obligations, where revenue is recognized separately for each good or service, as well as contracts where revenue is recognized over time as control transfers to the customer.

The majority of the Company's revenues relate to a broad offering of manufactured products and software which are recognized at the point in time when control transfers, generally in accordance with shipping terms, or the first day of the contractual term for software.

A portion of the Company's

revenues relate to the sale of post-contract customer support, parts and labor for repairs, and engineering services.

In some circumstances, contracts include multiple performance obligations, where revenue is recognized separately for each good or service, as well as contracts where revenue is recognized over time as control transfers to the customer.

Revenue is recognized over time for approximately 10 percent of the Company's revenues.

The majority of these revenues relate to projects in the Systems & Software product offering within the Automation Solutions segment where revenue is recognized using the percentage-of-completion method to reflect the transfer of control over time, while a smaller amount is attributable to long-term maintenance and service contracts where revenue is typically recognized on a straight-line basis as the services are provided.

Approximately 5 percent of revenues relate to sales arrangements with multiple performance obligations, principally in the Automation Solutions and AspenTech segments.

These revenues primarily relate to projects in the Control Systems & Software segment where revenue is recognized using the percentage-of-completion method to reflect the transfer of control over time, and software maintenance contracts in the AspenTech and Control Systems & Software segments where revenue is typically recognized on a straight-line basis.

Approximately 10 percent of revenues relate to sales arrangements with multiple performance obligations, principally in the AspenTech and Control Systems & Software segments.

Tangible products represent a large majority of the delivered items in contracts with multiple performance obligations or where revenue is recognized over time, while a smaller portion is attributable to installation, service and maintenance.

1 unchanged sentence

The Company believes costs incurred closely correspond with its performance under the contract and the transfer of control to the customer.

For software maintenance contracts, revenue is recognized ratably over the maintenance term.

In sales arrangements that involve multiple performance obligations, revenue is allocated based on the relative standalone selling price for each performance obligation.

15 unchanged sentences

Derivatives and Hedging

In the normal course of business, the Company is exposed to changes in interest rates, foreign currency exchange rates and commodity prices due to its worldwide presence and diverse business pr ofile.

In the normal course of business, the Company is exposed to changes in interest rates and foreign currency exchange rates due to its worldwide presence and diverse business pr ofile.

The Company's foreign currency exposures relate to transactions denominated in currencies that differ from the functional currencies of its business units, primarily in euros, Mexican pesos, and Singapore dollars.

Primary commodity exposures are price fluctuations on forecasted purchases of copper and aluminum and related products.

As part of the Company's risk management strategy, derivative instruments are selectively used in an effort to minimize the impact of these exposures.

Foreign exchange forwards and options are utilized to hedge foreign currency exposures impacting sales or cost of sales transactions, firm commitments and the fair value of assets and liabilities, while swap and option contracts may be used to minimize the effect of commodity price fluctuations on the cost of sales.

Foreign exchange forwards and options are utilized to hedge foreign currency exposures impacting sales or cost of sales transactions, firm commitments and the fair value of assets and liabilities.

dollar obligations are utilized to reduce foreign currency risk associated with the Company's net investments in foreign operations.

9 unchanged sentences

To the extent that any hedge is not fully effective at offsetting changes in the underlying hedged item, there could be a net earnings impact.

The Company also uses derivatives to hedge economic exposures that do not receive hedge accounting under ASC 815.

The underlying exposures for these hedges relate primarily to purchases of commodity-based components used in the Company's manufacturing processes, and the revaluation of certain foreign-currency-denominated assets and liabilities.

In addition, in fiscal 2022 AspenTech entered into foreign currency forward contracts to mitigate the impact of foreign currency exchange associated with the Micromine purchase price.

The Company also uses derivatives to he dge economic exposures that do not receive hedge accounting under ASC 815.

The underlying exposures for these hedges relate primarily to the revaluation of certain foreign-currency-denominated assets and liabilities.

In addition, in 2022 AspenTech entered into foreign currency forward contracts to mitigate the impact of foreign currency exchange associated with the Micromine purchase price.

On June 21, 2023, AspenTech terminated all outstanding foreign currency forward contracts and on August 1, 2023, announced the termination of the agreement to purchase Micromine.

Gains or losses on derivative instruments not designated as hedges are recognized in the income statement immediately.

26 unchanged sentences

Customer advances (contract liabilities) ( 776 ) ( 897 )

Net contract liabilities $ ( 202 ) 520

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 Heritage AspenTech where the license revenue is recognized upfront upon delivery.

The change in the net contract balance was due to the Heritage 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.

Net contract assets $ 614 556

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 decrease in net contract assets was due to customer billings exceeding revenue recognized for performance

completed during the period.

Revenue recognized for 2023 included approximately $ 534 that was included in the beginning contract liability balanc e.

2 unchanged sentences

Capitalized amounts related to incremental costs to obtain customer contracts and costs to fulfill contracts are immaterial.

As of September 30, 2022, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately $ 8.1 billion, which includes approximately $ 700 related to the Heritage AspenTech acquisition.

Heritage 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 subsequent two years thereafter.

As of September 30, 2023, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately $ 7.8 billion (of which approximately $ 1.2 billion related to AspenTech).

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 approxima tely 75 percent of its remaining performance obligations as revenue over the next 12 months, with the remainder substantially over the subsequent two years thereafter.

See Note 20 for additional information about the Company's revenues.

12 unchanged sentences

("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 beneficially owned 55 percent of the outstanding shares of AspenTech common stock (on a fully diluted basis) and former Heritage AspenTech stockholders owned the remaining outstanding shares of AspenTech common stock.

11 unchanged sentences

Total purchase consideration $ 11,188

The total purchase consideration for Heritage 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

20 unchanged sentences

Total $ 4,390

Results of operations for 2022 attributable to the Heritage AspenTech acquisition include sales of $ 356 while the impact to GAAP net earnings was not material.

Results of operations for 2023 attributable to the Heritage AspenTech acquisition include sales of $ 752 compared to $ 356 for 2022, while the impact to GAAP net earnings was not material in both years.

Pro Forma Financial Information

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).

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).

Net Sales $ 13,662 14,218

Net earnings common stockholders $ 2,106 3,262

Diluted earnings per share $ 3.50 5.46

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

Of these transaction costs, $ 91 were included in the Company's reported results for 2022, but have been excluded from the fiscal 2022 pro forma results above.

Net earnings from continuing operations common stockholders $ 1,217 1,916

Diluted earnings per share from continuing operations $ 2.02 3.21

The pro forma results for 2021 include $ 159 of transaction costs which were assumed to be incurred in the first quarter of 2021.

Of these transaction costs, $ 91 were included in the Company's reported results for 2022, but have been excluded from the 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 2021 include estimated interest expense of $ 147 , respectively, related to the issuance of $ 3.0 billion of term debt and increased commercial paper borrowings to fund the acquisition, while results for 2022 include additional interest expense of $ 56 to reflect the increased borrowings as if they were outstanding for the entire fiscal year.

The pro forma results for 2021 include estimated interest expense of $ 147 related to the issuance of $ 3.0 billion of term debt and increased commercial paper borrowings to fund the acquisition, while results for 2022 include additional interest expense of $ 56 to reflect the increased borrowings as if they were outstanding for the entire year.

Other Transactions

In 2023, the Company acquired two businesses, Flexim, which will be reported in the Measurement & Analytical segment, and Afag, which will be reported in the Discrete Automation segment, for $ 705 , net of cash acquired.

The Company recognized goodwill of $ 429 ( none of which is expected to be tax deductible) and other identifiable intangible assets of $ 314 , primarily customer relationships and intellectual property with a weighted-average useful life of approximately 9 years.

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 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 $ 486 ($ 429 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, and on September 27, 2022, announced an agreement to sell the business to the local management group.

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.

The Company recognized a pretax loss of $ 181 ($ 190 after-tax, in total $ 0.32 per share) related to its exit of business operations in Russia.

This charge, which included a loss of $ 36 in operations and $ 145 reported in Other deductions ($ 10 of

which is reported in restructuring costs), is primarily non-cash.

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 2022, the Company acquired three other businesses, two in the Automation Solutions segment and one in the AspenTech segment, for $ 130 , net of cash acquired.

On August 1, 2023, AspenTech announced the termination of the agreement to purchase Micromine.

AspenTech, along with the sellers of Micromine, had been waiting to secure a final Russian regulatory approval as a condition to the closing of the transaction.

As this process continued, the timing and requirements necessary to get this approval became increasingly unclear.

This lack of clarity on the potential for, and timing of, a successful review led AspenTech and the sellers of Micromine to this mutual course of action.

AspenTech did not pay any termination fee as part of this arrangement.

On March 31, 2023, Emerson completed the divestiture of Metran, its Russia-based manufacturing subsidiary.

In 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 Company had previously announced its intention to exit business operations in 2022 and recognized a pretax loss of $ 181 ($ 190 after-tax, in total $ 0.32 per share).

This charge included a loss of $ 36 in operations and $ 145 reported in Other deductions ($ 10 of which is reported in restructuring costs) and was primarily non-cash.

Emerson's historical net sales in Russia represented approximately 2.0 percent of consolidated annual sales.

In 2022, the Company acquired three other businesses, two in the Control Systems & Software segment and one in the AspenTech segment, for $ 130 , net of cash acquired.

The three businesses had combined annual sales of approximately $ 40 .

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 i n fiscal 2021 and is reported in the AspenTech segme nt, expands 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 $ 193 .

Results of operations for the year ended September 30, 2021 included first year pretax acquisition accounting charges related to backlog amortization and deferred revenue of $ 30 and $ 14 , respectively, and fees of $ 6 .

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 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.

In 2020, the Company acquired three businesses, two in the Automation Solutions segment and one in the Climate Technologies segment, for $ 126 , net of cash acquired.

These three businesses had combined annual sales of approximately $ 50 .

In the first quarter of 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 of 2022, $ 358 after-tax, $ 0.60 per share) and received the remaining $ 15 related to the pretax gain in the first quarter of 2023.

In 2023, the Company received additional distributions totaling $ 161 ($ 122 after-tax, $ 0.21 per share).

Based on the terms of the agreement and the current calculation, the Company could receive additional distributions of approximately $ 40 .

The remaining 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

On May 31, 2023, the Company completed the previously announced sale of a majority stake in its Climate Technologies business (which constitutes the former Climate Technologies segment, excluding Therm-O-Disc which was divested earlier in 2022) to private equity funds managed by Blackstone in a $ 14.0 billion transaction.

Emerson received upfront, pre-tax cash proceeds of approximately $ 9.7 billion (an increase of $ 0.2 billion from when the

transaction was announced due to Blackstone's decision to purchase an additional 5 percent of the common equity) and a note receivable with a face value of $ 2.25 billion (which will accrue 5 percent interest payable in kind by capitalizing interest), while retaining a 40 percent non-controlling common equity interest (down from 45 percent when the transaction was announced) 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 2022 net sales of approximately $ 5.0 billion and pretax earnings of $ 1.0 billion.

The Company recognized a pretax gain of approximately $ 10.6 billion (approximately $ 8.4 billion after-tax including tax expense recognized in prior quarters related to subsidiary restructurings).

The new standalone business is named Copeland.

See Note 8 for further details.

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 2022.

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

On May 31, 2022 the Company com pleted 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 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 all years presented and were as follows:

Climate Technologies ISE and TOD Total

2021 2022 2023 2021 2022 2023 2021 2022 2023

Net sales $ 4,401 4,976 3,156 903 848 49 5,304 5,824 3,205

Cost of sales 2,899 3,405 2,000 572 538 29 3,471 3,943 2,029

SG&A 560 514 390 125 119 7 685 633 397

Gain on sale of business — — ( 10,610 ) — ( 486 ) ( 2,783 ) — ( 486 ) ( 13,393 )

Other deductions, net ( 10 ) 55 75 8 26 12 ( 2 ) 81 87

Earnings before income taxes

952 1,002 11,301 198 651 2,784 1,150 1,653 14,085

Income taxes 196 209 2,358 43 97 654 239 306 3,012

Earnings, net of tax $ 756 793 8,943 155 554 2,130 911 1,347 11,073

Climate Technologies' results for 2023 include lower expense of $ 96 due to ceasing depreciation and amortization upon the held-for-sale classification and $ 57 of transaction-related costs reported in Other deductions, net.

Income taxes for 2023 included approximately $ 2.2 billion for the gain on the Copeland transaction and 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 September 30, 2023 and 2022 are summarized as follows:

Climate Technologies ISE Total

September 30, September 30, September 30,

Assets 2022 2023 2022 2023 2022 2023

Receivables $ 747 — 68 — 815 —

Inventories 449 — 81 — 530 —

Other current assets 49 — 4 — 53 —

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

Goodwill 716 — 2 — 718 —

Other noncurrent assets 265 — 12 — 277 —

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

Accounts payable $ 752 — 60 — 812 —

Other current liabilities 475 — 61 — 536 —

Deferred taxes and other noncurrent liabilities

154 — 13 — 167 —

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

Net cash from operating and investing activities for Climate Technologies, InSinkErator and Therm-O-Disc were as follows:

Climate Technologies ISE and TOD Total

2021 2022 2023 2021 2022 2023 2021 2022 2023

Cash from operating activities $ 906 881 ( 1,330 ) 211 ( 7 ) ( 759 ) 1,117 874 ( 2,089 )

Cash from investing activities $ ( 80 ) ( 202 ) 9,475 ( 49 ) 552 3,055 ( 129 ) 350 12,530

Cash from operating activities for 2023 reflects approximately $ 2.3 billion of income taxes paid related to the gains on the Copeland transaction and InSinkErator divestiture and subsidiary restructurings related to the Copeland transaction.

Cash from investing activities for 2023 reflects the proceeds of approximately $ 9.7 billion related to the Copeland transaction and approximately $ 3.0 billion related to the InSinkErator divestiture.

(6) OTHER DEDUCTIONS, NET

Other deductions, net are summarized below:

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Investment-related gains & gains from sales of capital assets ( 21 ) ( 30 ) ( 69 )

Loss on Copeland equity method investment — — 177

Russia business exit — 135 47

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Total $ 319 519 683

In fiscal 2022, intangibles amortization included $ 97 related to the Heritage AspenTech acquisition, while the prior year included backlog amortization related to the OSI acquisition of $ 30 .

Foreign currency transaction losses included a $ 50 mark-to-market loss in fiscal 2022 related to foreign currency forward contracts entered into by AspenTech to mitigate the impact of foreign currency exchange associated with the Micromine purchase price.

In 2023, intangibles amortization included $ 258 related to the Heritage AspenTech acquisition compared to $ 97 in 2022, while 2021 included backlog amortization related to the OSI acquisition of $ 30 .

Foreign currency transaction losses included a mark-to-market gain of $ 24 in 2023 related to foreign currency forward contracts entered into by AspenTech to mitigate the impact of foreign currency exchange associated with the Micromine purchase price compared to a mark-to-market loss of $ 50 in 2022.

On June 21, 2023, AspenTech terminated all outstanding foreign currency forward contracts.

The Company recognized a mark-to-market gain of $ 56 in 2023 related to its equity investment in National Instruments Corporation (see Note 11 for further information).

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

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Each year the Company incurs costs to size its businesses to levels appropriate for current economic conditions and to continually improve its cost structure and operational efficiency, deploy assets globally, and remain competitive on a worldwide basis.

Costs result from numerous individual actions implemented across the Company's various operating units on an ongoing basis and can include costs for moving facilities to best-cost locations, restarting plants after relocation or geographic expansion to better serve local markets, reducing forcecount or the number of facilities, exiting certain product lines, and other costs resulting from asset deployment decisions (such as contract termination costs, asset write-downs and vacant facility costs).

Costs result from numerous individual actions implemented across the Company's various operating units on an ongoing basis and can include costs for moving facilities to best-cost locations, restarting plants after relocation or geographic expansion to better serve local markets, reducing headcount or the number of facilities, exiting certain product lines, and other costs resulting from asset deployment decisions (such as contract termination costs, asset write-downs and vacant facility costs).

Restructuring expenses were $ 72 , $ 75 and $ 132 for 2023, 2022 and 2021, respectively.

The Company expects fiscal year 2023 restructuring expense to be approximately $ 100 .

The Company expects fiscal year 2024 restructuring and related costs to be approximately $ 160 , including incremental costs related to the National Instruments acquisition.

Restructuring costs by business segment follows:

2021 2022 2023

Automation Solutions $ 225 121 52

Measurement & Analytical $ 58 3 9

Final Control 41 38 12

Discrete Automation 11 — 27

Safety & Productivity 4 10 —

Intelligent Devices 114 51 48

AspenTech 2 — 1

Climate Technologies 23 15 10

Tools & Home Products 21 7 11

Commercial & Residential Solutions 44 22 21

Control Systems & Software 11 11 9

Software and Control 13 11 10

Corporate 5 13 14

Total $ 132 75 72

A ctions taken in 2022 inc luded workforce reductions of approximately 2,200 p ositions and the exit of eight production facilities worldwide.

Costs incurred in 2021 and 2020 primarily relate to the Company's initiatives to improve operating margins that began in the third quarter of fiscal 2019 and were expanded in the third quarter of fiscal 2020 in response to the effects of COVID-19 on demand for the Company's products.

Expenses incurred in 2021 and 2020 included actions to exit eight and six facilities, and eliminate approximately 3,600 and 5,400 positions, respectively.

A ctions taken in 2023 and 2022 inc luded workforce reductions of approximately 700 and 2,150 positions and the exit of ten and seven production facilities worldwide, respectively.

Cos ts incurred in 2021 primarily relate to the Company's initiatives to improve operating margins that began in the third quarter of fiscal 2019 and were expanded in the third quarter of fiscal 2020 in response to the effects of COVID-19 on demand for the Company's products.

Expenses incurred in 2021 included actions to exit five facilities and eliminate approximately 3,000 positions.

The change in the liability for restructuring costs during the years ended September 30 follows:

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Total $ 144 75 97 122

The tables above do not include $ 43 and $ 38 of costs related to restructuring actions incurred for the year ended September 30, 2022 and 2021, respectively, that are required to be reported in cost of sales and selling, general and administrative expenses.

The tables above do not include $ 20 , $ 40 and $ 34 of costs related to restructuring actions incurred in 2023, 2022 and 2021 respectively, that are required to be reported in cost of sales and selling, general and administrative expenses.

(8) EQUITY METHOD INVESTMENT AND NOTE RECEIVABLE

As discussed in Note 5, the Company completed the divestiture of a majority stake in Copeland on May 31, 2023, and received upfront, pre-tax cash proceeds of approximately $ 9.7 billion and a note receivable with a face value of $ 2.25 billion, while retaining a 40 percent non-controlling common equity interest in Copeland.

As a result of the transaction, the Company deconsolidated Copeland from its financial statements, as it no longer has a controlling interest, and initially recognized its common equity investment and note receivable at fair values of $ 1,359 and $ 2,052 , respectively.

The fair value of the common equity investment was determined using a discounted cash flow model, which included estimating financial projections for Copeland and applying an appropriate discount rate, and an option pricing model based on various assumptions.

Fair value for the note receivable was determined using a market approach primarily based on interest rates for companies with similar credit quality and the expected duration of the note.

The Company records its share of Copeland's income or loss using the equity method of accounting.

For the year ended September 30, 2023 the Company recorded a loss of $ 177 in Other deductions to reflect its share of Copeland's reported GAAP losses and a tax benefit of $ 43 in Income taxes related to Copeland's U.S.

business, which is taxed as a partnership (in total, $ 0.24 per share).

The Company recognized non-cash interest income on the note receivable of $ 41 , which is reported in Interest income from related party and capitalized to the carrying value of the note.

Copeland's valuations of acquired assets and liabilities are in-process and subject to refinement.

As of September 30, 2023, the carrying values of the retained equity investment and note receivable were $ 1,162 and $ 2,093 , respectively.

During the year ended September 30, 2023, the Company settled a note receivable and note payable with Copeland of $ 918 , which is reported in Investing and Financing cash flows, respectively.

Summarized financial information for Copeland as of and for the year ended September 30, 2023 is as follows.

Copeland's results only reflect activity subsequent to the Company's divestiture of its majority stake.

Current assets $ 1,737

Noncurrent assets $ 13,818

Current liabilities $ 1,371

Noncurrent liabilities $ 8,007

Noncontrolling interests $ 215

Net sales $ 1,677

Gross profit $ 479

Income (loss) from continuing operations $ ( 442 )

Net income (loss) $ ( 442 )

Net income (loss) attributable to shareholders $ ( 442 )

The components of lease expense for the years ended September 30 were as follows:

2021 2022 2023

Operating lease expense $ 169 160 178

Variable lease expense $ 17 18 20

Short-term lease expense and sublease income were immaterial for the years ended September 30, 2022 and September 30, 2021.

Cash paid for operating leases is classified within operating cash flows and was $ 188 and $ 192 for the years ended September 30, 2022 and 2021, respectively.

Operating lease right-of-use asset additions was $ 97 and $ 194 for the years ended September 30, 2022 and 2021, respectively.

Short-term lease expense and sublease income were immaterial for the years ended September 30, 2023, 2022 and 2021.

Cash paid for operating leases is classified within operating cash flows from continuing operations and was $ 170 , $ 163 and $ 167 for the years ended September 30, 2023, 2022 and 2021, respectively.

Operating lease right-of-use asset additions were $ 247 , $ 94 and $ 162 for the years ended September 30, 2023, 2022 and 2021, respectively.

The following table summarizes the balances of the Company's operating lease right-of-use assets and operating lease liabilities as of September 30, 2022 and 2023, the vast majority of which relates to offices and manufacturing facilities:

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Total lease liabilities $ 548

Lease commitments that have not yet commenced were immaterial as of September 30, 2022.

As of September 30, 2023, the Company had one operating lease that had not yet commenced with a lease term of approximately 15 years and total undiscounted future minimum payments of approximately $ 80 .

This lease is expected to commence in 2024 and will be recorded as a right-of-use asset and lease liability.

(10) GOODWILL AND OTHER INTANGIBLES

The change in the carrying value of goodwill by business segment follows:

Automation Solutions AspenTech Climate Technologies Tools & Home Products Commercial & Residential Solutions

Final Control Measurement & Analytical Discrete Automation Safety & Productivity Control Systems & Software AspenTech Total

Balance, September 30, 2021 $ 2,762 1,227 877 415 642 1,044 6,967

Acquisitions — — — — 40 7,289 7,329

Foreign currency

translation and other 2 — — ( 3 ) ( 3 ) ( 1 )

Foreign currency translation and other ( 146 ) ( 57 ) ( 70 ) ( 51 ) ( 19 ) ( 7 ) ( 350 )

Balance, September 30, 2022 2,616 1,170 807 364 663 8,326 13,946

Acquisitions — 374 55 — — — 429

Foreign currency

translation and other ( 292 ) ( 7 ) ( 38 ) ( 53 ) ( 91 ) ( 390 )

Foreign currency translation and other 44 1 30 24 5 1 105

Balance, September 30, 2023 $ 2,660 1,545 892 388 668 8,327 14,480

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Net carrying amount $ 3,436 3,353 2,934 2,707 202 203 6,572 6,263

Intangible a sset amortization expense for the major classes included above for 2022, 2021 and 2020 was $ 563 , $ 470 and $ 369 , respectively.

Intangible asset amortization expense for the major classes included above for 2023, 2022 and 2021 was $ 764 , $ 530 and $ 432 , respectively.

Based on intangible asset balances as of September 30, 2023, amortization expense is expected to approximate $ 768 in 2024, $ 696 in 2025, $ 596 in 2026, $ 564 in 2027 and $ 537 in 2028.

The increase in goodwill and intangible assets in fiscal 2022 and 2021 reflect the Heritage AspenTech and OSI acquisitions, respectively.

The increase in goodwill and intangible assets in 2022 reflects the Heritage AspenTech acquisition.

(11) FINANCIAL INSTRUMENTS

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Hedging Activities

As of September 30, 2022, the notional amount of foreign currency hedge positions was approximately $ 2.7 billion, and commodity hedge contracts totaled approximately $ 138 (primarily 38 million pounds of copper and aluminum).

As of September 30, 2023, the notional amount of foreign currency hedge positions was approximately $ 2.4 billion.

All derivatives receiving hedge accounting are cash flow hedges.

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Net Investment Hedge

In fiscal 2019, the Company issued euro-denominated debt of € 1.5 billion.

In 2019, the Company issued euro-denominated debt of € 1.5 billion.

The euro notes reduce foreign currency risk associated with the Company's international subsidiaries that use the euro as their functional currency and have been designated as a hedge of a portion of the investment in these operations.

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

Equity Investment

The Company had an equity investment in National Instruments Corporation ("NI"), valued at $ 136 as of September 30, 2023 (reported in Other noncurrent assets), and recognized a mark-to-market gain of $ 56 in 2023.

On April 12, 2023, Emerson announced an agreement to acquire NI for $ 60 per share in cash for the remaining shares not already owned by Emerson and the transaction closed on October 11, 2023.

Fair Value Measurement

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

The fair value of long-term debt was $ 7.6 billion and $ 6.8 billion, respectively, as of September 30, 2022 and 2021, which was lower than the carrying value by $ 1,207 and exceeded the carrying value by $ 485 , respectively.

Valuations for all derivatives, the Company's note receivable from Copeland, and the Company's long-term debt fall within Level 2 of the GAAP valuation hierarchy.

The fair value of the note receivable as of September 30, 2023 was approximately $ 1.9 billion, which was lower than the carrying value by approximately $ 200 .

See Note 8 for further details.

The fair value of long-term debt was $ 6.9 billion and $ 7.6 billion, respec tively, as of September 30, 2023 and 2022, which was lower than the carrying value by $ 1,275 and $ 1,207 , respectively.

The fair values of commodity and foreign currency contracts were reported in Other current assets and Accrued expenses as summarized below:

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Foreign currency $ 51 80 30 22

Commodity contracts, which related to discontinued operations, were novated to Copeland upon the completion of the transaction and therefore no amounts are reported in the Company's balance sheet as of September 30, 2023 .

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 for the period ended September 30, 2023 .

(12) SHORT-TERM BORROWINGS AND LINES OF CREDIT

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Interest rate for weighted-average short-term borrowings at year end 2.8 % 0.4 %

In May 2018, the Company entered into a $ 3.5 billion five -year revolving backup credit facility with various banks, which replaced the April 2014 $ 3.5 billion facility.

In February 2023, the Company entered into a $ 3.5 billion five-year revolving backup credit facility with various banks, which replaced the May 2018 $ 3.5 billion facility.

The credit facility is maintained to support general corporate purposes, including commercial paper borrowings.

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The details of long-term debt follow:

2.625% notes due December 2021 $ 500 —

2.625 % notes due February 2023

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Total, net $ 8,259 7,610

As of September 30, 2022, other includes $ 240 in outstanding borrowings by AspenTech under a revolving term loan credit facility that matures on December 23, 2024.

The interest rate is variable and was 4.31 % as of September 30, 2022.

Long-term debt maturing during each of the four years after 2024 is $ 520 , $ 538 , $ 746 and $ 497 , respectively.

Total interest paid on long-term debt was approximately $ 200 , $ 199 and $ 156 in 2023, 2022 and 2021, respectively.

During the year, the Company repaid $ 500 of 2.625 % notes that matured in December 2021.

In 2021, the Company repaid $ 300 of 4.25 % notes that matured in November 2020.

During the year, the Company repaid $ 500 of 2.625 % notes that matured in February 2023 and AspenTech repaid $ 264 to pay off the outstanding balance on its existing term loan facility plus accrued interest.

In 2022, the Company repaid $ 500 of 2.625 % notes that matured in December 2021.

In December 2021, the Company issued $ 1,000 of 2.0 % notes due December 2028, $ 1,000 of 2.20 % notes due December 2031 and $ 1,000 of 2.80 % notes due December 2051.

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Securities can be sold in one or more separate offerings with the size, price and terms to be determined at the time of sale.

(12) PENSION AND POST RETIREMENT PLANS

(14) PENSION AND POSTRETIREMENT PLANS

Retirement plans expense includes the following components:

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Net amortization and other 143 102 ( 55 ) 14 3 18

Net periodic pension expense 62 27 ( 3 ) 5 1 5

Net periodic pension expense (income) 27 ( 3 ) ( 113 ) 1 5 49

Defined contribution plans 114 124 111 52 52 49

Total retirement plans expense $ 174 141 121 61 53 57

Net periodic pension expense decreased in 2022 primarily due to lower amortization of deferred losses.

Total retirement plans expense (income) $ 141 121 ( 2 ) 53 57 98

Net periodic pension expense decreased in 2023 primarily due to lower amortization of deferred losses partially offset by higher interest costs.

Net periodic pension expense (income) includes $ 7 , $ 16 and $ 21 and defined contribution expense includes $ 14 , $ 32 and $ 30 for 2023, 2022 and 2021, respectively, related to discontinued operations.

For defined contribution plans, the Company makes cash contributions based on plan requirements, which are expensed as incurred.

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defined benefit plan is closed to employees hired after January 1, 2016 while shorter-tenured employees ceased accruing benefits effective October 1, 2016.

All of the following tables include defined benefit pension plans related to continuing and discontinued operations.

Details of the changes in the actuarial present value of the projected benefit obligation and the fair value of plan assets for defined benefit pension plans follow:

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Actuarial gain ( 1,170 ) ( 75 ) ( 404 ) ( 25 )

Curtailments — ( 31 ) — —

Benefits paid ( 204 ) ( 204 ) ( 40 ) ( 42 )

Settlements — ( 2 ) ( 29 ) ( 70 )

Acquisitions (Divestitures), net — ( 56 ) — ( 46 )

Foreign currency translation and other — 1 ( 182 ) 74

5 unchanged sentences

Settlements — ( 2 ) ( 29 ) ( 70 )

Acquisitions (Divestitures), net — ( 74 ) — 2

Foreign currency translation and other — 1 ( 188 ) 74

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Noncurrent asset $ 663 815 205 180

Noncurrent asset held-for-sale 13 — — —

Current liability ( 14 ) ( 14 ) ( 17 ) ( 17 )

Noncurrent liability ( 149 ) ( 145 ) ( 203 ) ( 225 )

Net liability held-for-sale — — ( 42 ) —

Net amount recognized in the balance sheet $ 513 656 ( 57 ) ( 62 )

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A ctuarial gains in 2022 were largely due to an increase in the discount rates used to estimate the benefit obligations for the U.S.

plans, which was 2.92 % and 2.2 % at September 30, 2021 compared to 2.81 % and 1.9 % at September 30, 2020, respectively.

plans, which were 5.64 % and 4.9 % at September 30, 2022 compared to 2.92 % and 2.2 % at September 30, 2021, respectively.

As of September 30, 2023, U.S.

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The total projected benefit obligation, accumulated benefit obligation and fair value of plan assets for individual plans with projected benefit obligations in excess of plan assets were $ 519 , $ 435 and $ 118 , respectively, for 2023, and $ 527 , $ 444 and $ 102 , respectively, for 2022.

The total projected benefit obligation, accumulated benefit obligation and fair value of plan assets for individual plans with accumulated benefit obligations in excess of plan assets were $ 477 , $ 421 and $ 63 , respectively, for 2022, and $ 711 , $ 626 and $ 123 , respectively, for 2021.

The total projected benefit obligation, accumulated benefit obligation and fair value of plan assets for individual plans with accumulated benefit obligations

in excess of plan assets were $ 469 , $ 413 and $ 77 , respectively, for 2023, and $ 477 , $ 421 and $ 63 , respectively, for 2022.

Future benefit payments by U.S.

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Equity securities 39 % 39 % 35 - 45 %

11 % 8 % 5 - 15 %

Debt securities 54 51 50 - 60

73 75 70 - 80

Other 7 10 0 - 10

16 17 10 - 20

Total 100 % 100 % 100 % 100 % 100 % 100 %

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Leveraging techniques are not used and the use of derivatives in any fund is limited and inconsequential.

The fair values of defined benefit pension assets as of September 30, organized by asset class and by the fair value hierarchy of ASC 820, Fair Value Measurement, follow.

The fair values of defined benefit pension assets a s of September 30, o rganized by asset class and by the fair value hierarchy of ASC 820, Fair Value Measurement, follow.

Investments valued based on the net asset value (NAV) of fund units held, as derived from the fair value of the underlying assets, are excluded from the fair value hierarchy.

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Service and interest costs are negligible and more than offset by the amortization of deferred actuarial gains, which resulted in net postretirement income of $ 19 for 2023 and $ 12 for 2022 and $ 15 for 2021.

Benefits paid

were $ 10 and $ 9 for 2022 and 2021, respectively, and the Company estimates that future health care benefit payments will be approximately $ 10 per year for 2023 through 2027, and $ 33 in total over the five years 2028 through 2032.

Benefits paid were $ 9 and $ 10 for 2023 and 2022, respectively, and the Company estimates that future health care benefit payments will be approximately $ 8 per year for 2024 through 2028, and $ 29 in total over the five years 2029 through 2033.

(15) CONTINGENT LIABILITIES AND COMMITMENTS

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(16) INCOME TAXES

Pretax earnings consist of the following:

Pretax earnings from continuing operations consist of the following:

2021 2022 2023

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Foreign derived intangible income ( 1.6 ) ( 2.0 ) ( 2.8 )

Gain on divestiture — — ( 1.1 )

Russia business exit — — 1.2

Subsidiary restructuring ( 0.8 ) 0.8 —

Russia business exit — 2.0 0.2

Other — 0.5 3.5

Effective income tax rate 19.6 % 22.6 % 22.0 %

The tax rates for 2022, 2021 and 2020 include benefits from restructuring subsidiaries of $ 11 , $ 13 and $ 103 , respectively.

The impact on the 2022 tax rate from the gain on divestiture of the Therm-O-Disc business and the Russia business exit in 2022 essentially offset.

The lower rate in 2020 included the impact of a research and development tax credit study.

The 2023 increase in other was driven by a 1 percentage point impact from U.S.

taxation of Non-U.S.

operations and a 2 percentage point impact due to an increase in unrecognized tax benefits.

The Company has elected to recognize the tax on global intangible low-taxed income earned by certain of its non-U.S.

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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.

Tax provisions of the CARES Act included 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 and the remainder paid in December 2022.

tax holidays reduce tax rates in certain jurisdictions.

Approximately half of the tax holidays expired by September 2022, with the remaining expiring over the next 8 years.

Approximately 80 percent of the tax holidays expire over the next four years , with the remainder expiring by 2030.

Following are changes in unrecognized tax benefits before considering recoverability of any cross-jurisdictional tax credits (U.S.

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earnings ( 37 ) ( 32 )

Deferred gains ( 10 ) ( 596 )

Other ( 146 ) ( 75 )

2 unchanged sentences

Total income taxes paid were approximately $ 3,310 , $ 720 and $ 680 in 2023, 2022 and 2021, respectively.

Taxes paid in 2023 included approximately $ 2.3 billion related to the gains on the Copeland transaction and InSinkErator divestiture and subsidiary restructurings related to the Copeland transaction.

Approximately two-thirds of the $ 253 of net operating losses can be carried forward indefinitely, while most of the remainder expire over the next 10 years.

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In fiscal 2022, the Company changed the terms of its annual performance share awards that were issued in the first quarter.

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 therefore continue to be accounted for as liability awards and marked-to-market each period based on changes in the stock price.

The 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 2021 are unchanged and therefore continue to be accounted for as liability awards and marked-to-market each period based on changes in the stock price.

AspenTech also has stock-based compensation plans that are settled in its own stock.

These plans consist of restricted stock units and stock options.

These plans consist of performance shares, restricted stock units and stock options.

Total compensation expense and income tax benefits for Emerson and AspenTech stock options and incentive shares follows.

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Restricted stock and restricted stock units 21 23 24

Stock options 1 — —

AspenTech stock-based compensation plans — 32 82

Total stock compensation expense 224 144 271

discontinued operations 27 19 21

Stock compensation expense from continuing operations $ 197 125 250

Income tax benefits recognized $ 27 19 28

As of September 30, 2022, total unrecognized compensation expense related to unvested shares awarded under Emerson plans was $ 153 , which is expected to be recognized over a weighted-average period of 1.3 years, while the total future unrecognized compensation cost related to AspenTech stock options and RSUs was $ 41 and $ 97 , respectively, which is expected to be recorded over a weighted average period of 2.1 years and 1.8 years, respectively.

As of September 30, 2023, total unrecognized compensation expense related to unvested shares awarded under Emerson plans was $ 119 , which is expected to be recognized over a weighted-average period of 1.1 years, while the total future unrecognized compensation cost related to AspenTech stock options, RSUs and performance stock units was $ 18 , $ 59 and $ 12 respectively, which is expected to be recorded over a weighted average period of 2.1 years, 3.0 years and 2.8 respectively.

Emerson Performance Shares, Restricted Stock and Restricted Stock Units

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As of September 30, 2023, approximately 1,468,000 shares awarded primarily in 2021 were outstanding, contingent on the Company achieving its performance objectives through 2023.

The objectives for these shares were met at the 106 percent level and the shares will be distributed in early fiscal 2023.

Additionally, the rights to receive approximately 1,057,000 and 1,481,000 common shares awarded in 2022 and 2021, respectively, are outstanding and contingent upon the Company achieving its performance objectives through 2024 and 2023, respectively.

The objectives for these shares were met at t he 118 percent level a nd the shares will be distributed in early fiscal 2024.

Additionally, the rights to receive approximately 975,000 and 928,000 shares awarded in 2023 and 2022, respectively, are outstanding and contingent upon the Company achieving its performance objectives through 2025 and 2024, respectively.

Incentive shares plans also include restricted stock awards and restricted stock units.

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The fair value of restricted stock awards and restricted stock units is determined based on the average of the high and low market prices of the Company's common stock on the date of grant, with compensation expense recognized ratably over the applicable vesting period.

In 2022, approximately 116,000 shares of restricted stock vested as a result of participants fulfilling the applicable service requirements.

Consequently, approximately 76,000 shares were issued while 40,000 shares were withheld for income taxes in accordance with minimum withholding requirements.

As of September 30, 2022, there were approximately 1,272,000 shares of unvested restricted stock and restricted stock units outstanding.

In addition to the employee stock option and incentive shares plans, in 2022 the Company awarded approximately 19,000 shares of restricted stock under the restricted stock plan for non-management directors.

In 2023, approximately 125,000 shares of restricted stock and approximately 220,000 restricted stock units vested as a result of participants fulfilling the applicable service requirements.

Consequently, approximately 80,000 shares and 158,000 units were issued while 45,000 shares and 62,000 units were withheld for income taxes in accordance with minimum withholding requirements.

A s of September 30, 2023, there were approximately 1,065,000 shares of unvested restricted stock and restricted stock units outstanding.

In addition to the employee stock option and incentive share plans, in 2023 the Company awarded approximately 22,000 restricted stock units under the restricted stock plan for non-management directors.

As of September 30, 2023, approximately 57,000 shares were available for issuance under this plan.

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There were no stock option grants in 2023, 2022 and 2021.

The Company's stock option plans expired in fiscal year 2021.

The Company's stock option plans expired in 2021.

Previously awarded stock options allow key officers and employees to purchase common stock at specified prices, which are equal to 100 percent of the closing market price of the Company's stock on the date of grant.

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Beginning of year $ 58.10 1,692

Options granted $ — —

Options exercised $ 60.66 ( 1,099 )

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AspenTech Stock-Based Compensation

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

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

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.

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Option awards have been granted with an exercise price equal to the market closing price of AspenTech's stock on the trading day prior to the grant date.

These options generally vest over 4 years and expire within 7 years or 10 years of grant.

These options generally vest over four years and expire within seven years or ten years of grant.

AspenTech's policy is to issue new shares upon the exercise of vested stock awards.

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and expected life, approximately 5 years.

A summary of AspenTech stock option activity in fiscal 2022 is as follows (shares in thousands):

A summary of AspenTech stock option activity in 2023 is as follows (shares in thousands):

Weighted- Average Exercise Price Per Share Shares Total

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Beginning of year $ 131.26 1,256

Issuance of replacement awards $ 101.44 1,165

Issuance of non-replacement awards $ 204.27 238

Granted $ 196.04 47

Exercised $ 93.04 ( 302 )

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$ 143.96 957 $ 59 6.3

The weighted average estimated fair value of option awards granted during fiscal 2022 was $ 72.26 .

The total intrinsic value of options exercised during fiscal 2022 was $ 13 .

Cash proceeds of $ 14 from issuances of shares of AspenTech common stock were received during fiscal 2022.

AspenTech Restricted Stock Units

A summary of AspenTech restricted stock unit activity in fiscal 2022 is as follows (shares in thousands):

The weighted average estimated fair value of option awards granted during 2023 was $ 76.99 .

The total intrinsic value of options exercised during 2023 was $ 38 .

Cash proceeds of $ 29 from issuances of shares of AspenTech common stock were received during 2023.

AspenTech Restricted Stock Units and Performance Stock Units

A summary of AspenTech restricted stock unit and performance stock unit activity in 2023 is as follows (shares in thousands):

Weighted- Average Grant Date Fair Value Shares

Beginning of year $ 190.44 589

Issuance of replacement awards $ 166.30 454

Issuance of non-replacement awards $ 202.39 288

Granted $ 192.51 367

Settled $ 193.23 ( 268 )

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Vested and expected to vest at September 30, 2023

During fiscal 2022, the total fair value of vested shares from AspenTech RSU grants amounted to $ 34 .

Withholding taxes of $ 5 were paid on vested RSUs during fiscal 2022.

During 2023, AspenTech granted performance stock units with a performance condition and service condition.

These performance stock units vest on a cliff basis in three years based upon the achievement of predefined performance goals, with the ability for 25 percent of granted awards to vest on an accelerated basis in each of the first two years .

The performance goal relates to the sum of (i) Annual Contract Value growth and (ii) free cash flow margin over the performance period.

Up to 175 percent of the performance stock units could vest upon achievement of the performance goals.

Conversely, if a minimum performance goal is not met, none of the performance stock units will vest.

On a quarterly basis, management evaluates the probability that the threshold performance goals will be achieved, if at all, and the anticipated level of attainment to determine the amount of compensation expense to record in the consolidated financial statements.

During 2023, the total fair value of vested shares from AspenTech RSU grants amounted to $ 53 .

Withholding taxes of $ 19 were paid on vested RSUs during 2023.

At September 30, 2023, common stock reserved for future issuance under all AspenTech equity compensation plans was 3.7 million shares.

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At September 30, 2023, 8.8 million shares of common stock were reserved for issuance under the Company's stock-based compensation plans.

During 2022, 5.7 million common shares were purchased and 1.3 million treasury shares were reissued.

During 2023, 21.3 million common shares were purchased and 1.8 million

treasury shares were reissued.

In 2022, 5.7 million common shares were purchased and 1.3 million treasury shares were reissued.

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Beginning balance $ ( 711 ) ( 629 ) ( 1,265 )

Other comprehensive income (loss), net of taxes of $ 29 , $( 5 ) and $( 62 ), respectively

Other comprehensive income (loss), net of tax of $( 5 ), $( 62 ) and $ 26 , respectively

82 ( 636 ) 158

Reclassified to gain on sale of business — — 95

Ending balance ( 629 ) ( 1,265 ) ( 1,012 )

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Beginning balance ( 864 ) ( 259 ) ( 222 )

Actuarial gains (losses) deferred during the period, net of taxes of $ 15 , $( 150 )

and $ 10 , respectively

Actuarial gains (losses) deferred during the period, net of taxes of $( 150 ), $ 10 and $ 0 , respectively

Amortization of deferred actuarial losses into earnings, net of tax of $( 34 ), $( 21 ) and $ 17 , respectively

106 70 ( 51 )

Amortization of deferred actuarial losses into earnings, net of taxes of $( 34 ), $( 34 )

and $( 21 ), respectively

Reclassified to gain on sale of business — — 22

Ending balance ( 259 ) ( 222 ) ( 247 )

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Beginning balance ( 2 ) 16 2

Gains (Losses) deferred during the period, net of taxes of $ 2 , $( 15 ) and $( 6 ),

Reclassifications of realized (gains) losses to sales and cost of sales, net of taxes

of $( 2 ), $ 11 and $ 10 , respectively

Gains deferred during the period, net of taxes of $( 15 ), $( 6 ) and $( 11 ),

Reclassifications of realized (gains) losses to sales and cost of sales, net of tax of $ 11 , $ 10 and $ 4 , respectively

( 33 ) ( 32 ) ( 14 )

Reclassified to gain on sale of business — — ( 19 )

Ending balance 16 2 6

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(20) BUSINESS SEGMENTS INFORMATION

The Company designs and manufactures products and delivers services that bring technology and engineering together to provide innovative solutions for customers in a wide range of industrial, commercial and consumer markets around the world.

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

The new segment 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 Automation Solutions segment), while results related to the Heritage AspenTech business only include periods subsequent to the close of the transaction on May 16, 2022.

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

The Company now reports four segments:

Automation Solutions, AspenTech ;

and Climate Technologies and Tools & Home Products , which together comprise the Commercial & Residential Solutions business.

The Automation Solutions segment enables process, hybrid and discrete manufacturers to maximize production, protect personnel and the environment, reduce project costs, and optimize their energy efficiency and operating costs through a broad offering of integrated solutions, software, services and products, including measurement and analytical instrumentation, industrial valves and equipment, and process control software and systems.

Markets served include oil and gas, refining, chemicals, power generation, life sciences, food and beverage, automotive, pulp and paper, metals and mining, and municipal water supplies.

The segment's major product offerings are described below.

• Measurement & Analytical Instrumentation products measure the physical properties of liquids or gases in a process stream and communicate this information to a process control system or other software applications, and analyze the chemical composition of process fluids and emissions to enhance quality and efficiency, as well as environmental compliance.

• Valves, Actuators & Regulators consists of control, isolation and pressure relief valves which respond to commands from a control system to continuously and precisely modulate the flow of process fluids and gases, smart actuation and control technologies, pressure management products, and industrial and residential regulators that reduce the pressure of fluids and gases moving from high-pressure supply lines into lower pressure systems.

• Industrial Solutions provides fluid control and pneumatic mechanisms, electrical distribution equipment, and materials joining and precision cleaning products which are used in a variety of manufacturing operations to provide integrated solutions to customers.

• Systems & Software provides a digital ecosystem that controls plant processes by communicating with and adjusting the "intelligent" plant devices described above to provide precision measurement, control, monitoring, asset optimization, and plant safety and reliability for plants that produce power, or process fluids or other items.

The AspenTech segment provides asset optimization software that enables industrial manufacturers to design, operate, and maintain their operations for maximum performance through a combination of decades of modeling, simulation, and optimization capabilities with industrial operations expertise and apply advanced analytics to improve the profitability and sustainability of production assets.

The Commercial & Residential Solutions business consists of the Climate Technologies and Tools & Home Products segments.

This business provides products and solutions that promote energy efficiency and sustainability, enhance household and commercial comfort, and protect food quality and sustainability through heating, air conditioning and refrigeration technology, as well as a broad range of mechanical, electrical, utility and do-it-yourself tools that promote safety and productivity.

The Climate Technologies segment provides products, services and solutions for all areas of the climate control industry, including residential heating and cooling, commercial air conditioning, commercial and industrial refrigeration, and cold chain management.

Products include compressors, temperature sensors and controls, thermostats, flow controls, and stationary and mobile remote monitoring technologies and services that enable homeowners and businesses to better manage their heating, air conditioning and refrigeration systems for improved control and comfort, and lower energy costs.

The Tools & Home Products segment offers tools for professionals and homeowners that promote safety and productivity.

Products include professional pipe-working tools, electrical and utility tools, and wet-dry vacuums.

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.

The Final Control segment is a leading global provider of control valves, isolation valves, shutoff valves, pressure relief valves, pressure safety valves, actuators, and regulators for process and hybrid industries.

These solutions respond to commands from a control system to continuously and precisely control and regulate the flow of liquids or gases to achieve safe operation along with reliability and optimized performance.

The Measurement & Analytical segment is a leading supplier of intelligent instrumentation measuring the physical properties of liquids or gases, such as pressure, temperature, level, flow, acoustics, corrosion, pH, conductivity, water quality, toxic gases, and flame.

The instrumentation transfers data to control systems and automation software, allowing process and hybrid industry operators to make educated decisions regarding production, reliability and safety.

The Discrete Automation segment includes solenoid valves, pneumatic valves, valve position indicators, pneumatic cylinders and actuators, air preparation equipment, pressure and temperature switches, electric linear motion solutions, programmable automation control systems and software, electrical distribution equipment, and materials joining solutions used primarily in discrete industries.

The Safety & Productivity segment offers tools for professionals and homeowners that promote safety and productivity.

Pipe-working tools include pipe wrenches, pipe cutters, pipe threading and roll grooving equipment, battery hydraulic tools for press connections, drain cleaners, tubing tools and diagnostic systems, including sewer inspection cameras and locating equipment.

Electrical tools include conduit benders and cable pulling equipment, battery hydraulic tools for cutting and crimping electrical cable, and hole-making equipment.

Other professional tools include water jetters, wet-dry vacuums, commercial vacuums and hand tools.

The Control Systems & Software segment provides control systems and software that control plant processes by collecting and analyzing information from measurement devices in the plant and using that information to adjust valves, pumps, motors, drives and other control hardware for maximum product quality, process efficiency and safety.

These solutions include distributed control systems, safety instrumented systems, SCADA systems, application software, digital twins, asset performance management and cybersecurity.

Control Systems & Software solutions are predominantly used by process and hybrid manufacturers.

AspenTech is a global leader in asset optimization software that enables industrial manufacturers to design, operate, and maintain their operations for maximum performance.

AspenTech combines decades of modeling, simulation, and optimization capabilities with industrial operations expertise and applies advanced analytics to improve the profitability and sustainability of production assets.

The purpose-built software drives value for customers by improving operational efficiency and maximizing productivity, reducing unplanned downtime and safety risks, and minimizing energy consumption and emissions.

The principal distribution method for each segment is direct sales forces, although the Company also uses independent sales representatives and distributors.

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Corporate and other includes unallocated corporate expenses, acquisition/divestiture costs, first year acquisition accounting charges (which include fair value adjustments related to inventory, backlog and deferred revenue) and other items.

Corporate assets are primarily comprised of cash and cash equivalents, investments and certain fixed assets.

Corporate assets are primarily comprised of cash and cash equivalents, investments, certain fixed assets and assets held-for-sale.

Summarized below is information about the Company's operations by business segment and by geography.

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2021 2022 2023 2021 2022 2023 2021 2022 2023

Automation Solutions $ 11,026 11,292 11,758 $ 1,539 1,955 2,356 $ 13,704 13,734 13,184

Final Control $ 3,488 3,607 3,970 $ 432 592 865 $ 5,245 4,805 5,614

Measurement & Analytical 3,078 3,215 3,595 684 785 936 4,410 4,395 3,976

Discrete Automation 2,474 2,612 2,635 457 542 509 2,405 2,284 2,493

Safety & Productivity 1,340 1,402 1,388 256 250 306 1,163 1,125 1,238

Intelligent Devices 10,380 10,836 11,588 1,829 2,169 2,616 13,223 12,609 13,321

Control Systems & Software 2,321 2,398 2,606 382 437 529 1,674 1,700 2,151

AspenTech 319 656 1,042 ( 7 ) 12 ( 107 ) 2,089 14,484 14,048

Climate Technologies 3,980 4,748 5,200 801 965 1,038 3,065 3,269 3,209

Tools & Home Products 1,663 1,905 2,033 317 399 402 1,491 1,598 1,486

Commercial & Residential Solutions 5,643 6,653 7,233 1,118 1,364 1,440 4,556 4,867 4,695

Software and Control 2,640 3,054 3,648 375 449 422 3,763 16,184 16,199

Corporate items:

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Unallocated pension and postretirement costs 94 99 171

Corporate and other ( 93 ) ( 116 ) ( 424 ) 4,076 4,025 3,309

Corporate and other (includes assets held-for-sale) ( 184 ) ( 419 ) ( 224 ) 7,729 6,879 13,226

Gain on subordinated interest — 453 161

Gain on sale of business — — 486

Loss on Copeland equity method investment — — ( 177 )

Eliminations/Interest ( 88 ) ( 86 ) ( 71 ) ( 155 ) ( 194 ) ( 34 )

Total $ 16,785 18,236 19,629 $ 2,335 2,912 4,085 $ 22,882 24,715 35,672

In fiscal 2022, Corporate and other includes a loss of $ 181 related to the Company's exit of business operations in Russia and acquisition/divestiture costs of $ 110 .

Automation Solutions sales by major product offering are summarized below.

2020 2021 2022

Measurement & Analytical Instrumentation $ 3,108 3,071 3,206

Valves, Actuators & Regulators 3,589 3,483 3,604

Industrial Solutions 2,012 2,266 2,403

Systems & Software 2,317 2,472 2,545

Interest income from related party — — 41

Total $ 12,932 13,804 15,165 $ 1,762 2,432 2,726 $ 24,715 35,672 42,746

In 2023 , Corporate and other includes a loss of $ 47 r elated to the Company's exit of business operations in Russia while 2022 includes a loss of $ 181 .

Corporate and other for 2023 includes acquisition/divestiture and related costs of $ 84 ($ 15 of which is reported in operating profit) while 2022 includes $ 91 .

and Amortization Capital

2021 2022 2023 2021 2022 2023

Automation Solutions $ 530 537 514 $ 306 319 248

Final Control $ 210 212 170 $ 73 62 93

Measurement & Analytical 128 117 121 130 90 93

Discrete Automation 96 88 84 100 68 56

Safety & Productivity 60 57 57 59 27 35

Intelligent Devices 494 474 432 362 247 277

Control Systems & Software 103 93 90 17 27 33

AspenTech 95 242 492 6 4 6

Climate Technologies 184 191 177 158 143 206

Tools & Home Products 77 76 71 58 94 52

Commercial & Residential Solutions 261 267 248 216 237 258

Software and Control 198 335 582 23 31 39

Corporate and other 70 33 37 19 21 47

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Sales by major geographic destination are summarized below:

Automation Solutions AspenTech

2020 2021 2022 2020 2021 2022

Americas $ 5,004 4,901 5,548 $ 40 200 362

Asia, Middle East & Africa 3,761 3,986 4,049 42 60 140

Europe 2,261 2,405 2,161 49 59 154

Americas AMEA Europe Total Americas AMEA Europe Total

Measurement & Analytical $ 1,338 1,181 559 3,078 $ 1,529 1,199 487 3,215

Final Control 1,504 1,385 599 3,488 1,706 1,373 528 3,607

Discrete Automation 1,084 700 690 2,474 1,217 732 663 2,612

Safety & Productivity 992 66 282 1,340 1,057 71 274 1,402

Intelligent Devices 4,918 3,332 2,130 10,380 5,509 3,375 1,952 10,836

AspenTech 200 60 59 319 362 140 154 656

Control Systems & Software 1,042 721 558 2,321 1,170 745 483 2,398

Software and Control 1,242 781 617 2,640 1,532 885 637 3,054

Total $ 6,160 4,113 2,747 13,020 $ 7,041 4,260 2,589 13,890

Commercial & Residential Solutions Total

2020 2021 2022 2020 2021 2022

Americas $ 3,896 4,513 5,106 $ 8,940 9,614 11,016

Asia, Middle East & Africa 1,053 1,277 1,267 4,856 5,323 5,456

Europe 694 863 860 3,004 3,327 3,175

Americas AMEA Europe Total

Measurement & Analytical $ 1,847 1,222 526 3,595

Final Control 1,949 1,481 540 3,970

Discrete Automation 1,234 720 681 2,635

Safety & Productivity 1,049 70 269 1,388

Intelligent Devices 6,079 3,493 2,016 11,588

AspenTech 470 286 286 1,042

Control Systems & Software 1,259 818 529 2,606

Software and Control 1,729 1,104 815 3,648

Total $ 7,808 4,597 2,831 15,236

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Property, plant and equipment located in the U.S.

was $ 2,006 in 2022, $ 2,141 in 2021 and $ 2,124 in 2020.

w as $ 1,261 in 2023, $ 1,219 in 2022 and $ 1,273 in 2021.

(21) OTHER FINANCIAL DATA

Items reported in earnings during the years ended September 30 included the following:

Items reported in earnings from continuing operations during the years ended September 30 included the following:

2021 2022 2023

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Depreciation expense $ 330 312 287

Amortization of intangibles (includes $ 17 , $ 57 and $ 108 reported in Cost of Sales in

2020, 2021 and 2022, respectively) (a)

Amortization of intangibles (includes $ 57 , $ 108 and $ 196 reported in Cost of Sales in 2021, 2022 and 2023, respectively) (a)

Amortization of capitalized software 98 86 86

Total $ 762 842 1,051

(a) Amortization of intangibles includes $ 148 related to the Heritage AspenTech acquisition for the year ended September 30, 2022 and backlog amortization of $ 30 related to the OSI acquisition for the year ended September 30, 2021.

For the year ended September 30, 2022, $ 14 of amortization of intangibles included in the table above is reported as a restructuring related cost.

(a) Amortization of intangibles include s $ 397 and $ 148 related to the Heritage AspenTech acquisition for 2023 and 2022, respectively, and $ 14 that is reported as a restructuring related cost in 2022.

Backlog amortization of $ 30 related to the OSI acquisition is included in 2021.

Items reported in other noncurrent assets included the following:

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(22) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

First Quarter Second Quarter Third Quarter Fourth Quarter Full Year

Quarter Second Quarter Third

Quarter Fourth Quarter Full

2022 2023 2022 2023 2022 2023 2022 2023 2022 2023

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Gross profit $ 1,415 1,620 1,476 1,801 1,586 1,994 1,829 2,012 6,306 7,427

Earnings from continuing operations common stockholders $ 746 329 428 530 226 592 486 701 1,886 2,152

Net earnings common stockholders $ 896 2,331 674 792 921 9,352 740 744 3,231 13,219

Earnings per common share from continuing operations:

Basic $ 1.25 0.56 0.72 0.93 0.38 1.04 0.82 1.23 3.17 3.74

Diluted $ 1.25 0.56 0.72 0.92 0.38 1.03 0.82 1.22 3.16 3.72

Net earnings per common share:

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(23) SUBSEQUENT EVENTS

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

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 common equity ownership 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 for fiscal 2022 and is reported in the Tools & Home Products segment.

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

On October 11, 2023, the Company completed the acquisition of National Instruments Corporation (“NI”) for $ 60 per share in cash at an equity value of $ 8.2 billion.

The effective price per share is $ 59.61 considering shares previously acquired by Emerson.

NI, which provides software-connected automated test and measurement systems that enable enterprises to bring products to market faster and at a lower cost, had revenues of approximately $ 1.7 billion and pretax earnings of approximately $ 170 for the 12 months ended September 30, 2023.

NI will be referred to as Test & Measurement and reported as a new segment in the Software and Control business group in 2024.

The initial accounting for this transaction is not yet complete.

Report of Independent Registered Public Accounting Firm

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company acquired Aspen Technology, Inc.

during 2022, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2022, Aspen Technology, Inc.’s internal control over financial reporting representing 36 percent of total assets and 2 percent of total revenues included in the consolidated financial statements of the Company as of and for the year ended September 30, 2022.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Aspen Technology, Inc.

Basis for Opinions

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting

includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sufficiency of Audit Evidence over Net Sales

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• Evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s net sales processes, including the Company’s controls over the accurate recording of amounts.

• Ass essed the recorded net sales by selecting a sample of transactions and compared the amounts recognized for consistency with underlying documentation, including contracts with customers and shipping documentation.

Evaluation of the Acquisition Date Fair Value of Certain Acquired Intangible Assets

As discussed in Notes 1 and 4 to the consolidated financial statements, on May 16, 2022, the Company consummated a business combination for total consideration of $11.2 billion.

In connection with the business combination, the Company recorded various intangible assets, which included customer relationship and developed technology intangible assets with an acquisition date fair value of $2.3 billion and $1.35 billion, respectively.

We identified the evaluation of the acquisition date fair value of the customer relationship and developed technology intangible assets as a critical audit matter.

A high degree of subjective and complex auditor judgment was required to evaluate key assumptions used to value these acquired intangible assets.

Specifically, key assumptions included projected revenue for the customer relationship intangible asset and

projected revenue and obsolescence rates for the developed technology intangible asset.

Changes to these assumptions could have had a significant impact on the fair value of such assets.

In addition, valuation professionals with specialized skills and knowledge were needed to assist in the evaluation of the obsolescence rates.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s business combinations process, including controls related to the development of the projected revenue and obsolescence rate assumptions used in the Company’s valuations.

We evaluated the projected revenue used by the Company by (1) comparing to historical results of the acquired entity and publicly available information for peer companies and (2) inquiring of individuals outside of the accounting function about projected revenue and the process used to develop them.

In addition, we compared the acquiree’s historical projected revenue to actual revenue to evaluate the Company’s ability to forecast.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the obsolescence rates by comparing them to certain comparable companies.

• Assessed the recorded net sales by selecting a sample of transactions and compared the amounts recognized for consistency with underlying documentation, including contracts with customers and shipping documentation.

We or our predecessor firms have served as the Company’s auditor since 193 8.

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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-K

Item 8. Financial Statements and Supplementary Data