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Item 7. Management’s Discussion and Analysis

2024-11-12 compared with 2023-11-13 · 166 added, 155 removed, 443 unchanged (42% of the section changed)

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pretax earnings or pretax profit margin, segment earnings or segment margin ).

Earnings, earnings per share, return on common stockholders’ equity and return on total capital excluding certain gains and losses, impairments, restructuring costs, impacts of acquisitions or divestitures, amortization of intangibles, discrete taxes, or other items provide additional insight into the underlying, ongoing operating performance of the Company and facilitate period-to-period comparisons by excluding the earnings impact of these items.

Management believes that presenting earnings, earnings per share, return on common stockholders' equity and return on total capital excluding these items is more representative of the Company’s operational performance and may be more useful for investors (U.S.

Earnings and earnings per share excluding certain gains and losses, impairments, restructuring costs, impacts of acquisitions or divestitures, amortization of intangibles, discrete taxes, or other items provide additional insight into the underlying, ongoing operating performance of the Company and facilitate period-to-period comparisons by excluding the earnings impact of these items.

Management believes that presenting earnings and earnings per

share excluding these items is more representative of the Company’s operational performance and may be more useful for investors (U.S.

GAAP measures:

earnings, earnings per share, return on common stockholders’ equity, return on total capital ).

Free cash flow (operating cash flow less capital expenditures) and free cash flow as a percent of net sales are indicators of the Company’s cash generating capabilities, dividends as a percent of free cash flow is an indicator of the Company's ability to support its divid end, and free cash flow conversion of adjusted net earnings (free cash flow divided by net earnings adjusted for intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments) is an indicator of the quality of the Company's earnings, after considering investments in capital assets which are necessary to maintain and enhance existing operations.

earnings, earnings per share ).

Free cash flow (operating cash flow less capital expenditures) and free cash flow as a percent of net sales are indicators of the Company’s cash generating capabilities, and dividends as a percent of free cash flow is an indicator of the Company's ability to support its divid end, after considering investments in capital assets which are necessary to maintain and enhance existing operations.

The determination of operating cash flow adds back noncash depreciation expense to earnings and thereby does not reflect a charge for necessary capital expenditures.

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Percent of sales 26.2 % 27.6 % 29.4 % 1.4 pts 1.8 pts

Loss on Copeland note receivable $ — — 279

Gain on subordinated interest $ (453) (161) (79)

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Adjusted Diluted EPS – Earnings from continuing operations $ 3.64 4.44 5.49 22 % 24 %

Return on common stockholders' equity 25.2 % 31.9 % 85.1 % 6.7 pts 53.2 pts

Return on total capital 18.1 % 20.4 % 66.5 % 2.3 pts 46.1 pts

Overall, sales for 2023 were $15.2 billion, up 10 percent compared with the prior year, reflecting strong growth across the majority of the Company's business segments and all geographies.

Net earnings from continuing operations attributable to common stockholders were $2,152 in 2023, up 14 percent compared with prior year earnings of $1,886, and diluted earnings per share from continuing operations were $3.72, up 18 percent versus $3.16 in 2022.

Adjusted diluted earnings per share from continuing operations were $4.44 compared with $3.64 in the prior year, reflecting strong sales growth and operating performance.

The Company generated operating cash flow from continuing operations of $2.7 billion in 2023, an increase of $678, or 33 percent, reflecting higher earnings (excluding the impacts in both years from the Vertiv subordinated interest gains and higher Heritage AspenTech intangibles amortization in the current year).

On October 11, 2023, the Company completed the acquisition of National Instruments Corporation ("NI"), which is now referred to as Test & Measurement and reported as a new segment in the Software and Control business group.

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

On June 6, 2024, the Company entered into definitive agreements to sell its 40 percent non-controlling common equity interest in Copeland to private equity funds managed by Blackstone for $1.5 billion and its note receivable to Copeland for $1.9 billion, and the transactions were subsequently completed in August 2024.

Upon entering into the note agreement, the Company recorded a pretax loss in continuing operations of $279 ($217 after-tax, $0.38 per share) to adjust the carrying value of the note to $1.9 billion to reflect the transaction price, while the Company recognized a gain of $539 ($435 after-tax) in discontinued operations upon the sale of the common equity interest.

In addition, the equity method losses related to the Company's non-controlling common equity interest in Copeland, which were reported since May 2023 in Other deductions, net, have been reclassified and are now reported as discontinued operations for all periods presented.

See Notes 5 and 8 for further detail.

Overall, in 2024 sales were $17.5 billion, up 15 percent compared with the prior year.

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

The Test & Measurement acquisition added 9.5 percent and the divestiture of Metran, Emerson's Russia-based manufacturing subsidiary, deducted 0.5 percent.

Net earnings from continuing operations attributable to common stockholders were $1,618 in 2024, down 29 percent compared with prior year earnings of $2,286, and diluted earnings per share from continuing operations were $2.82, down 29 percent versus $3.96 in 2023.

The decrease was primarily due to purchase accounting related impacts from the NI acquisition and higher associated restructuring charges, and the loss on the sale of the Copeland note receivable.

Adjusted diluted earnings per share from continuing operations were $5.49 compared with $4.44 in the prior year, reflecting sales growth and strong operating performance, as well as a $0.45 contribution from Test & Measurement.

The Company generated operating cash flow from continuing operations of $3.3 billion in 2024, an increase of $607, or 22 percent, reflecting higher earnings (excluding the impact of non-cash items related to the NI acquisition and the loss on the Copeland note receivable).

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

Adjusted diluted earnings per share from continuing operations excludes intangibles

amortization expense, restructuring expense, first year purchase accounting related items and transaction-related costs, interest income on undeployed proceeds related to the Copeland transaction, gains or losses on the Copeland equity method investment, and certain gains, losses or impairments.

Adjusted diluted earnings per share from continuing operations excludes intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction-related costs, interest income on undeployed proceeds related to the Copeland transaction, gains or losses on the Copeland equity method investment, and certain gains, losses or impairments.

2022 2023 2024

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Restructuring and related costs 0.14 0.14 0.33

Amortization of acquisition-related inventory step-up — — 0.38

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

(in 2022) 0.15 0.13 0.26

Loss on divestiture of businesses — — 0.09

Loss on Copeland note receivable — — 0.38

Discrete taxes — — (0.10)

Gain on subordinated interest (0.60) (0.21) (0.10)

3 unchanged sentences

Interest income on undeployed proceeds from Copeland transaction — (0.19) —

Loss on Copeland equity method investment — — 0.24

Russia business exit charge 0.32 0.08 —

OSI first year acquisition accounting charges and fees 0.07 — —

Adjusted diluted earnings from continuing operations per share $ 3.64 4.44 5.49

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Adjusted diluted earnings from continuing operations per share - prior year $ 3.64 4.44

Operations, including impact of AspenTech acquisition 0.58 0.77

Operations 0.77 1.06

Corporate and other 0.07 (0.02)

3 unchanged sentences

Gains on sales of capital assets in 2022 (0.02) —

Gains on sales of investments in 2021 (0.03) —

Effective tax rate 0.01 (0.06)

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Net sales for 2024 were $17.5 billion, an increase of $2.3 billion, or 15 percent compared with 2023.

Intelligent Devices sales increased 7 percent, while Software and Control sales increased 20 percent, which included the impact of the Heritage AspenTech acquisition.

Intelligent Devices sales increased 5 percent, while Software and Control sales increased 48 percent, which included the impact of the Test & Measurement acquisition.

Underlying sales were up 6 percent on 4 percent higher volume and 2 percent higher price.

Foreign currency translation subtracted 2 percent, the Heritage AspenTech acquisition added 3 percent and the divestiture of Metran, Emerson's Russia-based manufacturing subsidiary, deducted 1 percent.

The Test & Measurement acquisition added 9.5 percent and the divestiture of Metran deducted 0.5 percent.

Underlying sales were up 2 percent in the U.S.

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Net sales for 2023 were $15.2 billion, an increase of $1.4 billion, or 10 percent compared with 2022 .

Intelligent Devices sales increased 5 percent, while Software and Control sales increased 16 percent.

Intelligent Devices sales increased 7 percent, while Software and Control sales increased 20 percent, which included the impact of the Heritage AspenTech acquisition.

Underlying sales increased 10 percent on 6 percent higher volume and 4 percent higher price.

The Heritage AspenTech acquisition

added 3 percent and fo reign currency translation deducted 3 percent.

Foreign currency translation subtracted 2 percent , the Heritage AspenTech acquisition added 3 percent and the divestiture of Metran deducted 1 percent .

Underlying sales were up 11 percent in the U.S.

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International destination sales, including U.S.

exports, increased 9 percent, to $8.9 billion in 2023, reflecting the Company's overall increase in sales and the impact of the Heritage AspenTech acquisition.

exports, increased 18 percent, to $10.5 billion in 2024, reflecting the Company's overall increase in sales and the impact of the Test & Measurement acquisition.

expo rts of $1.3 billion were up 26 percent compared with 2023.

Underlying international destination sales were up 9 percent, as foreign currency translation had a 3 percent unfavorable imp act on the comparison, the Heritage AspenTech acquisition added 3 percent and the divestiture of Metran, Emerson's Russia-based manufacturing subsidiary, deducted 1 percent.

Underlying sales increased 10 percent in Europe, 9 percent in Asia, Middle East & Africa (China up 4 percent), 14 percent in Latin America and 1 percent in Canada.

Underlying international destination sales were up 9 percent and t he Test & Measurement acquisition added 9 percent.

Underlying sales increased 7 percent in Europe, 8 percent in Asia, Middle East & Africa (China down 3 percent), 21 percent in Latin America and 5 percent in Canada.

Origin sales by international subsidiaries, including shipments to the U.S., totaled $9.3 billion in 2024, up 20 percent compared with 2023.

International destination sales, including U.S.

exports, increased 2 percent, to $8.2 billion in 2022, reflecting the impact of the Heritage AspenTech acquisition.

exports of $1.0 billion were up 51 percent compared with 2021, including an increase of approximately $200 due to the Heritage AspenTech acquisition .

Underlying international destination sales were up 5 percent, as foreign currency translation had a 5 percent unfavorable impact on the comparison and the Heritage AspenTech acquisition added 2 percent.

Underlying sales increased 5 percent in Asia, Middle East & Africa (China up 11 percent), 18 percent in Latin Americ a and 14 percent in Canada, while Europe was down slightly.

Origin sales by international subsidiaries, including shipments to the U.S., totaled $7.4 billion in 2022, down 2 percent compared with 2021.

exports, increased 9 percent, to $8.9 billion in 2023, reflecting the Company's overall increase in sales and the impact of the Heritage AspenTech acquisition.

exports of $1.0 billion were up 6 percent compared with 2022 .

Underlying international destination sales were up 9 percent, as foreign currency translation had a 3 percent unfavorable impact on the comparison, the Heritage AspenTech acquisition added 3 percent and the divestiture of Metran deducted 1 percent.

Underlying sales increased 10 percent in Europe, 9 percent in Asia, Middle East & Africa (China up 4 percent), 14 percent in Latin Americ a and 1 percent in Canada.

Origin sales by international subsidiaries, including shipments to the U.S., totaled $7.7 billion in 2023, up 5 percent compared with 2022.

ACQUISITIONS AND DIVESTITURES

Portfolio management is an integral component of Emerson's growth and value creation strategy.

Over the past two years, the Company has taken significant actions to accelerate the transformation of its portfolio through the completion of strategic acquisitions and divestitures of non-core businesses.

These actions were undertaken to create a higher growth and cohesive industrial technology portfolio as a global automation leader serving a diversified set of end markets.

Over the past three years, the Company has taken significant actions to accelerate the transformation of its portfolio through the completion of strategic acquisitions and divestitures of non-core businesses.

These actions were undertaken to create a cohesive, higher growth and higher margin industrial technology portfolio as a global automation leader serving a diversified set of end markets.

The Company’s recent portfolio actions include the following transactions:

On October 11, 2023, subsequent to Emerson's fiscal year-end, the Company completed the acquisition of National Instruments Corporation ("NI") at an equity value of $8.2 billion.

On November 5, 2024, the Company announced a proposal to acquire all outstanding shares of common stock of AspenTech not already owned by Emerson for $240 per share in cash, which implies a fully diluted market capitalization for AspenTech of $15.3 billion and an enterprise value of $15.1 billion.

The Company currently owns approximately 57 percent of AspenTech's outstanding shares of common stock.

The proposal is not subject to any financing condition and would be financed from cash on hand, committed lines of credit and/or other available sources of financing.

Also on November 5, 2024, the Company announced that it is exploring strategic alternatives, including a cash sale, for its Safety & Productivity segment.

No assurance can be given whether the proposal or the review will lead to one or more transactions or as to any of the terms or conditions of such transactions.

See Item 1A - "Risk Factors" for additional information.

On October 11, 2023, the Company completed the acquisition of National Instruments Corporation ("NI") at an equity value of $8.2 billion.

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.

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.

In 2023, the Company acquired two businesses, Flexim, which is reported in the Measurement & Analytical segment, and Afag, which is reported in the Discrete Automation segment, for $715, net of cash acquired.

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

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

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.

On May 31, 2023, the Company completed the 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.

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.

The standalone business is named Copeland.

Subsequently, on June 6, 2024, the Company entered into definitive agreements to sell its 40 percent non-controlling common equity interest in Copeland to private equity funds managed by Blackstone for $1.5 billion and its note receivable to Copeland for $1.9 billion and the transactions were completed in August 2024.

See Notes 5 and 8 and the discussion below 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, and the Company recognized a pretax gain of approximately $2.8 billion (approximately $2.1 billion after-tax) in 2023.

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

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

Climate Technologies (including equity method losses related to the Company's non-controlling common equity interest in Copeland), Therm-O-Disc and InSinkErator are reported within discontinued operations for all periods presented.

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

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

and the Geological Simulation Software business (collectively, the “Emerson Industrial Software Business”), along with approximately $6.0 billion in cash to Heritage AspenTech stockholders, to create "New AspenTech" (defined as "AspenTech" herein).

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" (defined as "AspenTech" herein).

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

AspenTech and its subsidiaries now operate under Heritage AspenTech’s previous name “Aspen Technology, Inc.” and AspenTech common stock is traded on NASDAQ under AspenTech’s previous stock ticker symbol “AZPN.” Due to the timing of the acquisition, the results for the first half of fiscal 2022 do not include the results of Heritage AspenTech.

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 had net sales of $191 in 2021 and is now reported in the AspenTech segment.

See Notes 4, 5 and 8 and Item 1A - "Risk Factors" for further information on acquisitions and divestitures.

COST OF SALES

Cost of sales for 2024 were $8,607, an increase of $869 compared with $7,738 in 2023, reflecting the impact of higher volume and the Test & Measurement acquisition.

Gross profit was $8,885 in 2024 compared to $7,427 in 2023, while gross margin increased 1.8 percentage poi nts to 50.8 percent, reflecting the Test & Measurement acquisition and higher price partially offset by the impact from acquisition-related inventory step-up amortization of $231, which negatively impacted margins by approximately 1.3 percentage points.

Cost of sales for 2023 were $7,738 , an increase of $240 compared with $7,498 in 2022.

Gross profit was $7,427 in 2023 compared to $6,306 in 2022, while gross margin increased 3.3 percentage poi nts to 49.0 percent due to favorable price less net material inflation, the impact of the Heritage AspenTech acquisition which benefited margins by 0.6 percentage points, and favorable mix.

Cost of sales for 2022 were $7,498 , an increase of $296 compared with $7,202 in 2021 , primarily due to higher sales volume and higher materials costs.

G ross profit was $6,306 in 2022 compared to $5,730 in 2021 , while gross margin increased 1.4 percentage points to 45.7 percent.

The Heritage AspenTech acquisition benefited gross margin 0.9 percentage points and favorable mix also contributed to the increase.

Price less net material inflation was favorable but had a slightly dilutive impact on margins, while higher freight and other inflation also negatively impacted margins.

G ross profit was $7,427 in 2023 compared to $6,306 in 2022 , while gross margin increased 3.3 percentage points to 49.0 percent due to favorable price less net material inflation, the impact of the Heritage AspenTech acquisition which benefited margins by 0.6 percentage points, and favorable mix.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses of $5,142 in 2024 increased $956 compared with 2023 and SG&A as a percent of sales increased 1.8 percentage points to 29.4 percent, reflecting the impact of the Test & Measurement acquisition, partially offset by strong operating leverage on higher sales.

SG&A expenses of $4,186 in 2023 increased $572 compared with 2022 and SG&A as a percent of sales increased 1.4 percentage points to 27.6 percent, reflecting the Heritage AspenTech acquisition and higher stock compensation expense of $125, of which $75 related to Emerson stock plans due to a higher share price and $50 was attributable to AspenTech stock plans.

These items were partially offset by strong operating leverage on higher sales.

SG&A expenses of $3,614 in 2022 increased $120 compared with 2021, reflecting the impact of higher sales and higher wage and other inflation.

SG&A as a percent of sales decreased 0.8 percentage points to 26.2 percent, reflecting lower stock compensation expense of $72 due to a lower share price in 2022 (0.6 percentage points) and leverage on higher sales.

SALE OF COPELAND NOTE RECEIVABLE AND EQUITY INTEREST

GAIN ON SUBORDINATED INTEREST

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.

In 2023, the Company received additional distributions totaling $161 ($122 after-tax, $0.21 per share) and in 2024, received its final distribution of $79 ($60 after-tax, $0.10 per share).

OTHER DEDUCTIONS, NET

Other deductions, net were $683 in 2023, an increase of $164 compared with 2022, reflecting a loss of $177 on the Company's equity method investment in Copeland, higher intangibles amortization of $146 primarily related to the Heritage AspenTech acquisition, and an unfavorable impact from foreign currency transactions of $112 reflecting losses in the current year compared to gains in the prior year.

The prior year included a charge of $145 related to the Company exiting its business in Russia compared to a charge of $47 in the current year .

The current year also included a mark-to-market gain of $56 on the Company's equity investment in NI, and a mark-to-market gain of $24 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 loss of $50 in the prior year.

Other deductions, net were $1,434 in 2024, an increase of $928 compared with 2023.

The current year included intangibles amortization related to the Test & Measurement acquisition of $560, while restructuring costs increased by $156 and acquisition/divestiture costs increased by $27.

The Company also incurred divestiture losses of $48 ($50 after-tax, $0.09 per share).

Other deductions, net were $506 in 2023, a decrease of $13 compared with 2022 , and included higher intangibles amortization of $146 primarily related to the Heritage AspenTech acquisition and an unfavorable impact from foreign currency transactions of $112 reflecting losses in the current year compared to gains in the prior year.

The prior year included a charge of $145 related to the Company exiting its business in Russia compared to a charge of $47 in

In 2023, the Company recognized a mark-to-market gain of $56 on its equity investment in NI, and a mark-to-market gain of $24 r elated 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 loss of $50 in 2022.

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

Other deductions, net were $519 in 2022, an increase of $200 compared with 2021 , reflecting a charge of $145 related to the Company exiting its business in Russia ($10 of which is reported in restructuring costs), acquisition/divestiture costs of $91, higher intangibles amortization of $59, primarily related to the Heritage AspenTech acquisition, and a mark-to-market loss of $50 related to foreign currency forward contracts entered into by AspenTech to mitigate the impact of foreign currency exchange associated with the Micromine purchase price.

These items were partially offset by lower restructuring costs of $57.

See Notes 6 and 7.

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Interest expense, net was $175 , $34 and $194 in 2024, 2023 and 2022, respectively.

The decrease in 2023 reflects interest income on undeployed proceeds from the Copeland transaction of $141 ($108 after-tax, $0.19 per share).

The increase in 2022 compared to 2021 reflects the issuance of $3 billion of long-term debt in December 2021 to support the AspenTech transaction, partially offset by $500 of notes that matured in the first quarter of 2022.

Interest income from related party was $41 in 2023 and reflects n on-cash interest income on the Copeland note receivable, which is capitalized to the carrying value of the note.

Results in 2023 included interest income on undeployed proceeds from the Copeland transaction of $141 ($108 after-tax, $0.19 per share).

Interest income from related party was $86 and $41 in 2024 and 2023, respectively and reflects n on-cash interest income on the Copeland note receivable, which was capitalized to the carrying value of the note through the date of the sale agreement.

EARNINGS BEFORE INCOME TAXES

Pretax earnings from conti nuing operations of $2,726 increased $294 in 2023, up 12 percent compared with 2022, reflecting strong operating results in the current year.

Earnings increased $447 in Intelligent Devices and decreased $27 in Software and Control (reflecting the impact of higher intangibles amortization due to the Heritage AspenTech acquisition).

Pretax earnings from continuing operations of $2,432 increased $670 in 2022, up 38 percent compared with 2021, reflecting the impact of the Vertiv gain discussed above and strong earnings, which increased $340 in Intelligent Devices and increased $74 in Software and Contr ol.

Pretax earnings from conti nuing operations of $2,020 decreased $883 in 2024, down 30 percent compared with 2023, which included the impact of acquisition-related inventory step-up amortization, higher amortization due to the Test & Measurement acquisition, and the loss on the Copeland note receivable discussed above.

Earnings increased $191 in Intelligent Devices and decreased $140 in Software and Control.

Pretax earnings from continuing operations of $2,903 increased $471 in 2023, up 19 percent compared with 2022.

Earnings increased $447 in Intelligent Devices and decreased $27 in Software and Contr ol.

See the Business Segments discussion that follows and Note 20.

In come taxes were $415, $642 and $549 for 2024, 2023 and 2022, respectively, resulting in effective tax rates of 21 percent, 22 percent and 23 percent in 2024, 2023 and 2022, respectively.

The rate in 2022 reflected the impact of the Russia business exit which was essentially offset by a benefit related to the completion of tax examinations.

The current year rate included a $57 ($0.10 per share) benefit related to discrete tax items and a benefit related to the filing of the prior year U.S.

tax return, partially offset by unfavorable impacts from inventory step-up amortization and the divestiture losses (see Note 4), which were non-deductible for tax purposes.

In total, the net impact of these items benefited the rate by approximately 1 percentage point.

NET EARNINGS AND EARNINGS PER SHARE

Net earnings from continuing operations attributable to common stockholders in 2023 were $2,152, up 14 percent compared with 2022, and diluted earnings per share from continuing operations were $3.72, up 18 percent compared with $3.16 in 2022, reflecting strong operating results.

Net earnings from continuing operations attributable to common stockholders in 2024 were $1,618, down 29 percent compared with 2023, and diluted earnings per share from continuing operations were $2.82, down 29 percent compared with $3.96 in 2023, reflecting the impact of acquisition-related inventory step-up amortization, higher amortization due to the Test & Measurement acquisition, and the loss on the Copeland note receivable discussed above.

Adjusted diluted earnings per share from continuing operations were $5.49 compared with $4.44 in the prior year.

See the analysis of adjusted earnings per share in the Overview section for further detai ls.

Earnings from discontinued operations attributable to common stockholders in 2023 were $11,067 ($19.16 per share) which included the $8.4 billion after-tax gain on the Copeland transaction and the $2.1 billion after-tax gain on the divestiture of InSinkErator, compared to $1,345 ($2.25 per share) in 2022.

N et earnings attributable to common stockholders were $13,219 ($22.88 per share) compared with $3,231 ($5.41 per share) in 2022 .

Net earnings from continuing operations attributable to common stockholders in 2022 were $1,886 , up 33 percent compared with 2021 , and diluted earnings per share from continuing operations were $3.16, up 34 percent compared with $2.35 in 2021.

Results reflected strong operating results and included a gain of $0.60 per share related to the Company's subordinated interest in Vertiv.

Adjusted diluted earnings per share from continuing

operations were $3.64 compared with $3.01 in the prior year.

Earnings from discontinued operations attributable to common stockholders in 2024 were $350 ($0.61 per share) and included the gain on the sale of the Company's 40 percent non-controlling common equity interest in Copeland of $539 ($435 after-tax).

Earnings from discontinued operations in 2023 were $10,933 ($18.92 per share), which included the $8.4 billion after-tax gain on the Copeland transaction and the $2.1 billion after-tax gain on the divestiture of InSinkErator.

Net earni ngs attributable to common stockholders were $1,968 ($3.43 per share) compared with $13,219 ($22.88 per share) in 2023 .

Net earnings from continuing operations attributable to common stockholders in 2023 were $2,286 , up 21 percent compared with 2022 , and diluted earnings per share from continuing operations were $3.96, up 25 percent compared with $3.16 in 2022, reflecting strong operating results.

Adjusted diluted earnings per share from continuing operations were $4.44 compared with $3.64 in the prior year.

See the analysis of adjusted earnings per share in the Overview section for further details.

Earnin gs from discontinued operations attributable to common stockholders in 2022 wer e $1,345 ($2.25 per share) compared to $889 ($1.47 per share) in 2021, reflecting an after-tax gain of $429 ($0.72 per share) related to the Therm-O-Disc divestiture in 2022.

Earnin gs from discontinued operations attributable to common stockholders in 2023 wer e $10,933 ($18.92 per share) compared to $1,345 ($2.25 per share) in 2022.

Net earnings common stockholders w ere $13,219 ($22.88 per share) in 2022 compared with $3,231 ($5.41 per share) in 2022 .

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discussion of its results of operations herein.

Twelve Months Ended September 30 2021 2022 2023 22 vs.

2022 2023 2024 23 vs.

Earnings from continuing operations before income taxes $ 2,432 2,903 2,020 19 % (30) %

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Restructuring and related costs 105 92 244

Amortization of acquisition-related inventory step-up — — 231

Acquisition/divestiture and related costs 91 84 220

Loss on divestitures of businesses — — 48

Loss on Copeland note receivable — — 279

Gain on subordinated interest (453) (161) (79)

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AspenTech Micromine purchase price hedge 50 (24) —

Loss on Copeland equity method investment — — 177

Russia business exit charge 181 47 —

OSI first year acquisition accounting charges 50 — —

Adjusted EBITA from continuing operations $ 3,016 3,556 4,326 18 % 22 %

Percent of sales 21.8 % 23.4 % 24.7 % 1.6 pts 1.3 pts

RETURNS ON EQUITY AND TOTAL CAPITAL

Return on common stockholders' equity (net earnings attributable to common stockholders divided by average common stockholders' equity) was 85.1 percent in 2023 compared with 31.9 percent in 2022 and 25.2 percent in 2021.

Return on total capital (computed as net earnings attributable to common stockholders excluding after-tax net interest expense, divided by average common stockholders' equity plus short- and long-term debt less cash and short-term investments) was 66.5 percent in 2023 compared with 20.4 percent in 2022 and 18.1 percent in 2021.

The higher returns in 2023 included the impact of the after-tax gain from the Copeland transaction (approximately $8.4 billion), the after-tax gain on the InSinkErator divestiture (approximately $2.1 billion), the Vertiv subordinated interest after-tax gain of $122, the National Instruments investment after-tax gain of $43, the after-tax loss on the Copeland equity method investment of $134, after-tax acquisition/divestiture costs of $78, and the Russia business exit after-tax loss of $47.

The higher returns in 2022 included the impact of the Vertiv subordinated interest after-tax gain of $358, the after-tax gain on the Therm-O-Disc divestiture of $429, after-tax acquisition/divestiture costs of $93 (including amounts reported in discontinued operations), and the Russia business exit after-tax loss of $190.

Excluding these items in both years, return on common stockholders' equity was 17.9 percent and 26.9 percent in 2023 and 2022, respectively, and return on total capital was 14.0 percent and 17.4 percent, respectively.

The decrease in 2023 reflects the increase to equity from the after-tax gains on the Copeland transaction and InSinkErator divestiture.

Business Segments

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Underlying sales increased 3 percent in the Americas (U.S.

up 12 percent), increased 9 percent in Europe and increased 8 percent in Asia, Middle East & Africa (China up 2 percent).

Sales for Final Control increased $363, or 10 percent.

Underlying sales increased 13 percent, reflecting strength in chemical and energy end markets and across all geographies, particularly in the U.S.

Sa les for Measurement & Analytical increased $380, or 12 percent.

Underlying sales increased 16 percent, reflecting robust growth in the Americas and Europe due to strong demand, while Asia, Middle East & Africa was up moderately due to softness in China.

D iscrete Automation sales increased $23, or 1 percent, while underlying sales increased 3 percent, reflecting softening demand in the second half of the year, with all geographies up low-to-mid single digits for the full year.

Safety & Productivity sales decreased $14, or 1 percent, and underlying sales decreased 1 percent, reflecting softness in the Americas and Europe, while Asia, Middle East & Africa was up slightly.

Earnings for Intellig ent Devices were $2,616 , an increase of $447 , or 21 percent , and margin increased 2.6 percentage points to 22.6 percent, reflecting favorable price less net material inflation, leverage on higher sales and favorable mix, partially offset by wage and other inflation.

up 1 percent), increased 5 percent in Europe and increased 9 percent in Asia, Middle East & Africa (China down 2 percent).

Sales for Final Control increased $234, or 6 percent, reflecting strength in energy and power end markets.

Sa les for Measurement & Analytical increased $466, or 13 percent, reflecting robust growth in all geographies and strong backlog conversion.

D iscrete Automation sales decreased $129, or 5 percent, reflecting softness in all geographies.

Safety & Productivity sales increased $2, essentially flat, reflecting moderate results across all geographies.

Earnings for Intellig ent Devices were $2,807 , an increase of $191 , or 7 percent , and margin increased 0.5 percentage points to 23.1 percent, reflecting leverage on higher sales and favorable price less net material inflation, partially offset by increases in other costs.

Adj usted EBITA margin was 25.4 percent , an increase of 0.8 percentage points.

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Underlying sales increased 10 percent on 5 percent higher volume and 5 percent higher price.

Foreign currency translation had a 3 percent unfavorable impact.

Underlying sales increased 11 percent in the Americas (U.S.

up 12 percent), increased 9 percent in Europe and increased 8 percent in Asia, Middle East & Africa (China up 2 percent).

Sales for Final Control increased $119, or 4 percent, and underlying sales increased 7 percent, reflecting strong demand in the Americas and China, partially offset by softness in the rest of Asia, Middle East & Africa.

Sales for Measurement & Analytical increased $137, or 4 percent, and underlying sales increased 7 percent.

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

Discrete Automation sales increased $138, or 6 percent, and underlying sales increased 10 percent, reflecting strong demand across all geographies.

Safety & Productivity sales increased $62, or 5 percent, and underlying sales increased 7 percent.

Sales of professional tools were strong, while wet/dry vacuums decreased moderately due to difficult comparisons.

Earnings for Intelligent Devices were $2,169, an increase of $340, or 19 percent, and margin increased 2.4 percentage points to 20.0 percent, reflecting leverage on higher volume, favorable mix, lower restructuring expenses which benefited margins 0.5 percentage points, savings from cost reduction actions and favorable price less net material inflation, partially offset by higher freight and other inflation.

Sales for Final Control increased $363, or 10 percent.

Underlying sales increased 13 percent, reflecting strength in chemical and energy end markets and across all geographies, particularly in the U.S.

Sales for Measurement & Analytical increased $380, or 12 percent.

Underlying sales increased 16 percent, reflecting robust growth in the Americas and Europe due to strong demand, while Asia, Middle East & Africa was up moderately due to softness in China.

Discrete Automation sales increased $23, or 1 percent, while underlying sales increased 3 percent, reflecting softening demand in the second half of the year, with all geographies up low-to-mid single digits for the full year.

Safety & Productivity sales decreased $14, or 1 percent, and underlying sales decreased 1 percent, reflecting softness in the Americas and Europe, while Asia, Middle East & Africa was up slightly.

Earnings for Intelligent Devices were $2,616, an increase of $447, or 21 percent, and margin increased 2.6 percentage points to 22.6 percent, reflecting favorable price less net material inflation, leverage on higher sales and favorable mix, partially offset by wage and other inflation.

Adjusted EBITA margin was 24.6 percent, an increase of 2.2 percentage points.

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Control Systems & Software $ 2,606 2,842 9 % — % 1 % 10 %

Test & Measurement — 1,464

AspenTech 1,042 1,093 5 % — % — % 5 %

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Control Systems & Software $ 529 645 22 %

Test & Measurement — (290)

AspenTech (107) (73) 32 %

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Control Systems & Software $ 22 26

Test & Measurement — 560

AspenTech 486 486

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Control Systems & Software $ 9 15

Test & Measurement — 81

AspenTech 1 8

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Adjusted EBITA Margin 25.8 % 27.0 % 1.2 pts

2022 - Software and Control sales were $3.6 billion in 2023, an increase of $594, or 20 percent compared to the prior year, reflecting the impact of the Heritage AspenTech acquisition and strong growth in Control Systems & Software.

2023 - Software and Control sales were $5.4 billion in 2024, an increase of $1,751, or 48 percent compared to the prior year, reflecting the impact of the Test & Measurement acquisition.

Underlying sales increased 8 percent on 5 percent higher volume and 3 percent higher price.

Underlying sales increased 8 percent in the Americas (U.S.

up 6 percent), increased 11 percent in Europe and increased 13 percent in Asia, Middle East & Africa (China up 16 percent).

Sales for Control Systems & Software increased $208, or 9 percent, and underlying sales increased 11 percent, reflecting global strength in process end markets while power end markets were up modestly.

Sales for AspenTech increased $386, or 59 percent, due to the acquisition of Heritage AspenTech.

Earnings for Software and Control were $422, a decrease of $27, or 6 percent, and margin decreased 3.1 percentage points to 11.6 percent, reflecting the impact from $249 of incremental intangibles amortization related to the Heritage AspenTech acquisition.

Adjusted EBITA margin was 25.8 percent, an increase of 2.3 percentage points, reflecting leverage on higher sales, higher price and favorable mix, partially offset by inflation and unfavorable foreign currency transactions.

up 7 percent), increased 9 percent in Europe and increased 8 percent in Asia, Middle East & Africa (China down 5 percent).

Sales for Control Systems & Software increased $236, or 9 percent, reflecting strong international demand in process and hybrid end markets while power end markets were strong globally.

Test & Measurement sales were $1,464.

Sales for AspenTech increased $51, or 5 percent, reflecting higher maintenance and services revenue.

Earnings for Software and Control were $282, a decrease of $140, or 33 percent, and margin decreased 6.4 percentage points to 5.2 percent, reflecting the impact from $560 of incremental intangibles amortization related to the Test & Measurement acquisition.

Adjusted EBITA margin was 27.0 percent, an increase of 1.2 percentage points, reflecting leverage on higher sales and higher price, partially offset by the impact of the Test & Measurement acquisition.

SOFTWARE AND CONTROL

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Control Systems & Software $ 2,398 2,606 9 % 1 % 1 % 11 %

Test & Measurement — —

AspenTech 656 1,042 59 % — % (60) % (1) %

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Control Systems & Software $ 437 529 21 %

Test & Measurement — —

AspenTech 12 (107) (967) %

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Control Systems & Software $ 22 22

Test & Measurement — —

AspenTech 237 486

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Control Systems & Software $ 11 9

Test & Measurement — —

AspenTech — 1

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Adjusted EBITA Margin 23.5 % 25.8 % 2.3 pts

2021 - Software and Control sales were $3.1 billion in 2022, an increase of $414, or 16 percent compared to 2021, reflecting the impact of the Heritage AspenTech acquisition and growth in Control Systems & Software.

Underlying sales increased 7 percent on higher volume.

2022 - Software and Control sales were $3.6 billion in 2023, an increase of $594, or 20 percent compared to 2022, reflecting the impact of the Heritage AspenTech acquisition and strong growth in Control Systems & Software.

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

Underlying sales increased 7 percent in the Americas (U.S.

up 12 percent), decreased 4 percent in Europe and increased 6 percent in Asia, Middle East & Africa (China up 11 percent).

Sales for Control Systems & Software increased $77, or 3 percent, and underlying sales increased 7 percent, reflecting strength in process end markets in North America and China, partially offset by weakness in Europe, while power end markets were strong in North America and Europe.

up 6 percent), increased 11 percent in Europe and increased 13 percent in Asia, Middle East & Africa (China up 16 percent).

Sales for AspenTech increased $386, or 59 percent, due to the acquisition of Heritage AspenTech.

Earnings for Software and Control were $449, an increase of $74, or 20 percent, and margin increased 0.5 percentage points to 14.7 percent.

Results for 2022 included intangibles amortization of $148 related to the Heritage AspenTech acquisition.

Adjusted EBITA margin was 23.5 percent, an increase of 4.7 percentage points, reflecting the impact of the Heritage AspenTech acquisition and leverage on higher volume in Control Systems & Software.

Financial Position, Liquidity and Capital Resources

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The Company continues to generate substantial operating cash flow, including over $3.3 billion from continuing operations in 2024.

Cash flows have been and are expected to be sufficient for at least the next 12 months to meet the Company’s operating requirements, including those related to salaries and wages, working capital, capital expenditures, and other liquidity requirements associated with operations.

Cash flows have been and are expected to be sufficient for at least the next 12 months to meet

the Company’s operating requirements, including those related to salaries and wages, working capital, capital expenditures, and other liquidity requirements associated with operations.

Th e Company also has certain contractual obligations, primarily long-term debt and operating leases (see Notes 9, 12 and 13).

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Percent of sales 7.2 % 8.5 % 8.0 %

Operating cash flow from continuing operations for 2023 was $2.7 billion, an increase of $678, or 33 percent compared with 2022, reflecting higher earnings (excluding the impacts in both years from the Vertiv subordinated interest gains and higher Heritage AspenTech intangibles amortization in the current year).

Operating cash flow included approximately $310 generated by AspenTech.

Operating cash flow from continuing operations of $2.0 billion in 2022 decreased 17 percent compared to $2.5 billion in 2021, reflecting higher working capital due to increased sales and ongoing supply chain constraints.

Operating cash flow from continuing operations for 2024 was $3.3 billion, an increase of $607, or 22 percent compared with 2023, reflecting higher earnings (excluding the impact of non-cash items related to the NI acquisition and the loss on the Copeland note receivable).

Acquisition-related costs and integration activities negatively impacted operating cash flow in the current year by approximately $235.

AspenTech generated operating cash flow of approximately $320 compared to approximately $310 in the prior year.

Operating cash flow from continuing operations for 2023 was $2.7 billion, an increase of 32 percent compared to $2.0 billion in 2022, reflecting higher earnings (excluding the impacts in both years from the Vertiv subordinated interest gains and higher Heritage AspenTech intangibles amortization in 2023).

At September 30, 2024, operating working capital as a percent of sales was 8.0 percent compared with 8.5 percent in 2023 and 7.2 percent in 2022.

Operating working capital remained elevated in 2023 due to higher inventory levels to support sales growth and higher receivables.

The increase for 2022 compared to 2021 was due to higher inventory levels to support sales growth and reflecting supply chain constraints.

In addition, the Heritage AspenTech acquisition increased operating working capital by approximately $250 in 2022.

As of September 30, 2023, Emerson's cash and equivalents totaled $8.1 billion, reflecting the after-tax proceeds related to the Copeland transaction, which were used along with other available liquidity to fund the National Instruments transaction subsequent to year-end (see the Leverage/Capitalization section for further discussion of Emerson's post-close financial position).

Going forward, Copeland is not expected to issue dividends to the Company but will distribute cash for the Company to pay its share of U.S.

The Company's cash also includes approximately $120 attributable to AspenTech which is intended to be used for its own purposes and is not available to return to Emerson shareholders.

Total operating working capital increased in 2024 due to the NI acquisition, but improved as a percent of sales compared to 2023 due improvements in inventory levels.

Operating working capital was elevated in 2023 due to higher inventory levels to support sales growth and higher receivables.

Free cash flow from continuing operations (operating cash flow less capital expenditures) was $2,898 in 2024, up 23 percent, reflecting the increase in operating cash flow.

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The decrease in 2023 was due to 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.

Investing cash flow from discontinued operations of $12.5 billion in 2023 reflects the proceeds from the Copeland transaction and InSinkErator divestiture.

Investing cash flow from discontinued operations was $3.4 billion in 2024, reflecting the proceeds of approximately $1.5 billion related to the sale of the Company's 40 percent non-controlling common equity interest in Copeland and $1.9 billion related to the sale of the note receivable, while 2023 was $12.5 billion, reflecting the proceeds from the Copeland transaction and InSinkErator divestiture.

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

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Dividends were $1,201 ($2.10 per share) in 2024, compared with $1,198 ($2.08 per share) in 2023 and $1,223 ($2.06 per share) in 2022.

In November 2023, the Board of Directors voted to increase the quarterly cash dividend 1 percent, to an annualized rate of $2.10 per share.

In November 2024, the Board of Directors voted to increase the quarterly cash dividend to an annualized rate of $2.11 per share.

Purchases of Emerson common stock totaled $435, $2,000 and $500 in 2024, 2023 and 2022, respectively, at average per share prices of $99.04, $94.09 and $87.64.

AspenTech repurchases were $214 in 2023, which increased the Company's common ownership percentage to approximately 57 percent.

AspenTech repurchases were $208 in 2024 and $214 in 2023, and the Company's current common ownership percentage is approximately 57 percent.

In November 2015, the Board of Directors authorized the purchase of up to 70 million shares, and during 2022, the remaining shares available under this authorization were purchased.

In March 2020, the Board of Directors authorized the purchase of an a dditional 60 million shares and a total of approximately 33.3 million shares remain available.

In March 2020, the Board of Directors authorized the purchase of an additional 60 million shares and a total of approximately 28.9 million shares remain available.

The Company purchased 4.4 million shares in 2024, 21.3 million shares in 2023 and 5.7 million shares in 2022 under the authorizations.

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Total debt, which includes long-term debt, current maturities of long-term debt, commercial paper and other short-term borrowings, was $7,687, $8,157 and $10,374 as of September 30, 2024, 2023 and 2022, respectively.

The decrease in 2024 reflected the repayment of €500 of 0.375% euro notes that matured in May 2024.

The decrease in 2023 included a net reduction in short-term borrowings of approximately $1.6 billion and repayments of long-term debt of $741 (including $264 related to AspenTech's repayment of the outstanding balance on its existing term loan facility plus accrued interest).

The increase in 2022 was due to the issuance of $3 billion of long-term debt and increased commercial paper borrowings of approximately $1.3 billion compared to September 30, 2021.

Activity in 2022 included the issuance of $3 billion of long-term debt and increased commercial paper borrowings of approximately $1.3 billion.

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

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$1 billion of 2.0% notes due December 2028, $1 billion of 2.2% notes due December 2031, and $1 billion of 2.8% notes due December 2051.

Additionally, the Company repaid $500 of 2.625% notes that matured in 2022, and in 2021 repaid $300 of 4.25% notes that matured.

Additionally, the Company repaid $500 of 2.625% notes that matured in 2022.

See Note 4 and Note 13.

The total debt-to-total capital ratio and net debt-to-net capital ratio (less cash and short-term investments) decreased in 2023 due to the proceeds and after-tax gains (which increased common stockholder's equity) on the Copeland transaction and InSinkErator divestiture.

Considering the cash paid to complete the National Instruments transaction in October 2023, the Company's net debt-to-net capital ratio was approximately 29.0 percent, reflecting moderate levels of debt consistent with prior years.

These ratios increased in 2022 due to the increased borrowings to support the AspenTech transaction discussed above.

The total debt-to-total capital ratio decreased slightly in 2024, reflecting repayments of long-term debt, while the net debt-to-net capital ratio increased reflecting the use of cash held on the balance sheet at September 30, 2023 that was used to complete the NI acquisition.

These ratios decreased in 2023 compared to 2022 due to the proceeds and after-tax gains (which increased common stockholder's equity) on the Copeland transaction and InSinkErator divestiture.

The interest coverage ratio is computed as earnings before income taxes plus interest expense, divided by interest expense.

The Company's earnings increased in 2023 and 2022 which offset higher interest expense due to the increased long-term debt and commercial paper borrowings to fund the Heritage AspenTech acquisition.

The decrease in 2024 reflects lower GAAP pretax earnings largely due to the NI acquisition.

Excluding the impact from acquisition-related inventory step-up amortization of $231, higher intangibles amortization of $595, acquisition/divestiture fees and related costs of $220, higher restructuring and related costs of $152, the loss of $279 on the Copeland note receivable and the gain on the subordinated interest of $79, the interest coverage ratio was 11.6X.

The Company's earnings increased in 2023 which offset higher interest expense due to the increased long-term debt and commercial paper borrowings to fund the Heritage AspenTech acquisition.

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.

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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 and selectively uses derivative financial instruments, including forwards, swaps and purchased options to manage these risks.

The Company does not hold

derivatives for trading or speculative purposes.

The Company does not hold derivatives for trading or speculative purposes.

The value of derivatives and other financial instruments is subject to change as a result of market movements in rates and prices.

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

In 2022, the Company completed the acquisition of Aspen Technology, Inc.

and engaged an independent third-party valuation specialist to assist in the determination of the fair value of intangible assets.

This included the use of certain assumptions and estimates, including the projected revenue for the customer relationship and developed technology intangible asset and the obsolescence rate for the developed technology intangible asset.

Although we believe the assumptions and estimates to be reasonable and appropriate, they require judgement and are based on experience and historical information obtained from Aspen Technology, Inc.

In 2023, the consideration received from the divestiture of a majority stake in Copeland included a note receivable with a face value of $2.25 billion and the Company also retained a 40 percent non-controlling common equity interest in Copeland.

The note receivable and common equity interest were required to be initially valued at fair value as part of the overall consideration received for the transaction.

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.

In 2024, the Company completed the acquisition of National Instruments Corporation and in 2022 completed the acquisition of Aspen Technology, Inc.

and engaged independent third-party valuation specialists to assist in the determination of the fair value of intangible assets.

This included the use of certain assumptions and estimates, including projected revenue for customer relationship and developed technology intangible assets, the attrition rate for customer relationship intangible assets, and the obsolescence rate for developed technology intangible assets.

Although we believe the assumptions and estimates to be reasonable and appropriate, they require judgement and are based on experience and historical information obtained from National Instruments Corporation and Aspen Technology, Inc.

LONG-LIVED ASSETS

Long-lived assets, which include property, plant and equipment, goodwill and identifiable intangible assets, are reviewed for impairment whenever events or changes in business circumstances indicate impairment may exist.

If the Company determines that the carrying value of a long-lived asset may not be recoverable, a permanent impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its estimated fair value.

the Company determines that the carrying value of a long-lived asset may not be recoverable, a permanent impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its estimated fair value.

Reporting units are also reviewed for possible goodwill impairment at least annually, in the fourth quarter.

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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.

Effective January 1, 2025, the Company is implementing a new profit sharing retirement program for all U.S.

non-union employees.

Eligible employees will receive a base contribution to a cash balance account administered within the principal U.S.

defined benefit plan, to be funded by surplus pension assets, as well as a potential profit sharing contribution to their defined contribution account.

After December 31, 2024, future service for employees that had continued to accrue benefits in the principal U.S.

defined benefit plan will be frozen.

As of September 30, 2024, the U.S.

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Deferred tax assets and liabilities arise from temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and consideration of operating loss and tax credit carryforwards.

Deferred income taxes are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled.

Deferred income taxes are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be

recovered or settled.

The impact on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

Valuation allowances are provided to reduce deferred tax assets to the

amount that will more likely than not be realized.

Valuation allowances are provided to reduce deferred tax assets to the amount that will more likely than not be realized.

This requires management to make judgments and estimates regarding the amount and timing of the reversal of taxable temporary differences, expected future taxable income, and the impact of tax planning strategies.

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In 2024, the Company adopted ASU No.

2022-04 (Subtopic 405-50), Liabilities - Supplier Finance Programs, which requires disclosures about the use of supplier finance programs.

This standard has no impact on the accounting for supplier finance programs and did not materially impact the Company's disclosures.

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.

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

These included:

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• 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.

• 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.

Instead, goodwill impairment will be measured as the excess of a reporting unit’s carrying amount over its estimated fair value.

• Updates to ASC 350, Intangibles - Goodwill and Other , which align the requirements for capitalizing implementation costs incurred in a software hosting arrangement with the requirements for costs incurred to develop or obtain internal-use software.

• 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.

FISCAL 2025 OUTLOOK

For fiscal year 2024, consolidated net sales from continuing operations are expected to be up 13 to 15.5 percent, with underlying sales up 4 to 6 percent excluding a 1 percent unfavorable impact from foreign currency translation and a 10 to 10.5 percent impact from the NI acquisition.

Earnings per share, which incorporate the NI acquisition other than as set forth below, are expected to be $3.82 to $4.02, while adjusted earnings per share are expected to be $5.15 to $5.35 (see the following reconciliation).

For fiscal year 2025, consolidated net sales from continuing operations are expected to be up 3.5 to 5.5 percent, with underlying sales up 3 to 5 percent, excluding a 0.5 percent favorable impact from foreign currency translation.

Earnings per share are expected to be $4.42 to $4.62, while adjusted earnings per share are expected to be $5.85 to $6.05 (see the following reconciliation).

Outlook for Fiscal 2025 Earnings Per Share 2025

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Acquisition/divestiture fees and related costs ~ 0.04

Copeland equity loss ~ 0.22

Adjusted diluted earnings per share $5.85 - $6.05

Operating cash flow is expected to be $3.6 to $3.7 billion and free cash flow, which excludes projected capital spending of approximately $0.4 billion, is expected to be $3.2 to $3.3 billion.

The fiscal 2024 outlook assumes approximately $500 million returned to shareholders through share repurchases and approximately $1.2 billion of dividend payments.

GAAP earnings per share guidance for fiscal 2024 does not include the impact of intangibles amortization and other purchase accounting-related costs related to the NI transaction.

The initial accounting for this transaction is not yet complete and therefore Emerson is unable to estimate these amounts.

Although these items may have a significant impact on GAAP earnings per share, they will be excluded from adjusted earnings per share and will have no impact on cash flows.

The fiscal 2025 outlook assumes approximately $2.0 billion returned to shareholders through share repurchases (including approximately $1.0 billion expected to be completed in the first fiscal quarter) and approximately $1.2 billion of dividend payments.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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 7. Management’s Discussion and Analysis