UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-Q

ý
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934


For the quarterly period ended December 31, 20172021


OR


¨☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934


For the transition period from ____________________ to __________________


Commission file number 1-278


EMERSON ELECTRIC CO.
(Exact name of registrant as specified in its charter)
Missouri
emr-20211231_g1.jpg
43-0259330
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
Missouri
(State or other jurisdiction of
incorporation or organization)
logoemerson3.jpg
43-0259330
(I.R.S. Employer
Identification No.)
8000 W. Florissant Ave.
 
 
P.O. Box 4100
St. Louis,Missouri
63136
(Address of principal executive offices)
63136
(Zip Code)


Registrant's telephone number, including area code: (314) (314) 553-2000


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)		Name of each exchange on which registered
Common Stock of $0.50 par value per shareEMRNew York Stock Exchange
NYSE Chicago
0.375% Notes due 2024EMR 24New York Stock Exchange
1.250% Notes due 2025EMR 25ANew York Stock Exchange
2.000% Notes due 2029EMR 29New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý☒ No ¨☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ý☒ No ¨☐








Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Large accelerated filer ý
Accelerated filer ¨
Non-accelerated filer ¨   (Do not check if a smaller reporting company)
Smaller reporting company ¨
Emerging growth company¨
☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐No ý☒


Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common stock of $0.50 par value per share outstanding at JanuaryDecember 31, 2018: 634,837,581 shares.

2021:594.0 million shares.


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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements


Consolidated Statements of Earnings
EMERSON ELECTRIC CO. & SUBSIDIARIES


Three months ended December 31, 20162020 and 20172021
(Dollars in millions, except per share amounts; unaudited)
 Three Months Ended
December 31,
 2020 2021 
Net sales$4,161 4,473 
Cost of sales2,438 2,651 
Selling, general and administrative expenses998 1,011 
Gain on subordinated interest— (453)
Other deductions, net122 51 
Interest expense (net of interest income of $2 and $3, respectively)40 38 
Earnings before income taxes563 1,175 
Income taxes111 280 
Net earnings452 895 
Less: Noncontrolling interests in subsidiaries7 (1)
Net earnings common stockholders$445 896 
Earnings per share:
Basic$0.74 1.51 
Diluted$0.74 1.50 
Weighted average outstanding shares:
Basic598.5 594.6 
Diluted601.9 598.1 
 Three Months Ended
December 31,
 2016
 2017
Net sales$3,216
 3,816
    
Costs and expenses:   
Cost of sales1,851
 2,195
Selling, general and administrative expenses822
 992
Other deductions, net33
 88
Interest expense (net of interest income of $6 and $11, respectively)46
 38
    
Earnings from continuing operations before income taxes464
 503
    
Income taxes94
 109
    
Earnings from continuing operations370
 394
    
Discontinued operations, net of tax(55) —
    
Net earnings315
 394
    
Less: Noncontrolling interests in earnings of subsidiaries6
 2
    
Net earnings common stockholders$309
 392
    
Earnings common stockholders:   
     Earnings from continuing operations$364
 392
     Discontinued operations, net of tax(55) —
Net earnings common stockholders$309
 392
    
Basic earnings per share common stockholders:   
     Earnings from continuing operations$0.56
 0.61
     Discontinued operations(0.08) —
Basic earnings per common share$0.48
 0.61
    
Diluted earnings per share common stockholders:   
     Earnings from continuing operations$0.56
 0.61
     Discontinued operations(0.08) —
Diluted earnings per common share$0.48
 0.61
    
Cash dividends per common share$0.48
 0.485
    
    
    
    

 















See accompanying Notes to Consolidated Financial Statements.



2



1




Consolidated Statements of Comprehensive Income
EMERSON ELECTRIC CO. & SUBSIDIARIES


Three months ended December 31, 20162020 and 20172021
(Dollars in millions; unaudited)

 Three Months Ended December 31,
 2020 2021 
Net earnings$452 895 
Other comprehensive income (loss), net of tax:
Foreign currency translation189 (72)
Pension and postretirement27 18 
Cash flow hedges31 4 
        Total other comprehensive income (loss)247 (50)
Comprehensive income699 845 
Less: Noncontrolling interests in subsidiaries7 (1)
Comprehensive income common stockholders$692 846 

 Three Months Ended December 31,
  2016

 2017
Net earnings $315
  394
      
Other comprehensive income (loss), net of tax:     
Foreign currency translation (103)  7
Pension and postretirement 55
  23
Cash flow hedges 15
  (3)
        Total other comprehensive income (33)  27
      
Comprehensive income 282
  421
      
Less: Noncontrolling interests in comprehensive
income of subsidiaries
 4
  2
Comprehensive income common stockholders $278
  419


































































See accompanying Notes to Consolidated Financial Statements.




3


2




Consolidated Balance Sheets
EMERSON ELECTRIC CO. & SUBSIDIARIES


(Dollars and shares in millions, except per share amounts; unaudited)
 Sept 30, 2021Dec 31, 2021
ASSETS  
Current assets  
Cash and equivalents$2,354 4,726 
Receivables, less allowances of $116 and $112, respectively2,971 2,745 
Inventories2,050 2,335 
Other current assets1,057 1,054 
Total current assets8,432 10,860 
Property, plant and equipment, net3,738 3,685 
Other assets 
Goodwill7,723 7,695 
Other intangible assets2,877 2,791 
Other1,945 1,928 
Total other assets12,545 12,414 
Total assets$24,715 26,959 
LIABILITIES AND EQUITY  
Current liabilities  
Short-term borrowings and current maturities of long-term debt$872 37 
Accounts payable2,108 2,100 
Accrued expenses3,266 3,194 
Total current liabilities6,246 5,331 
Long-term debt5,793 8,722 
Other liabilities2,753 2,618 
Equity  
Common stock, $0.50 par value; authorized, 1,200.0 shares; issued, 953.4 shares; outstanding, 595.8 shares and 594.0 shares, respectively477 477 
Additional paid-in-capital522 564 
Retained earnings26,047 26,636 
Accumulated other comprehensive income (loss)(872)(922)
Cost of common stock in treasury, 357.6 shares and 359.4 shares, respectively(16,291)(16,506)
Common stockholders’ equity9,883 10,249 
Noncontrolling interests in subsidiaries40 39 
Total equity9,923 10,288 
Total liabilities and equity$24,715 26,959 
 Sept 30, 2017 Dec 31, 2017
ASSETS   
Current assets   
Cash and equivalents$3,062
 3,096
Receivables, less allowances of $91 and $99, respectively3,072
 2,881
Inventories1,696
 1,845
Other current assets422
 330
Total current assets8,252
 8,152
    
Property, plant and equipment, net3,321
 3,279
Other assets 
  
Goodwill5,316
 5,616
Other intangible assets1,890
 2,118
Other810
 693
Total other assets8,016
 8,427
Total assets$19,589
 19,858
    
LIABILITIES AND EQUITY 
  
Current liabilities 
  
Short-term borrowings and current maturities of long-term debt$862
 2,093
Accounts payable1,776
 1,596
Accrued expenses2,342
 2,286
Income taxes65
 217
Total current liabilities5,045
 6,192
    
Long-term debt3,794
 3,375
    
Other liabilities1,980
 1,903
    
Equity 
  
Common stock, $0.50 par value; authorized, 1,200,000,000 shares; issued, 953,354,012 shares; outstanding, 641,691,971 shares and 634,221,544 shares, respectively477
 477
Additional paid-in-capital297
 306
Retained earnings21,995
 22,079
Accumulated other comprehensive income (loss)(1,019) (992)
Cost of common stock in treasury, 311,662,041 shares and 319,132,468 shares, respectively(13,032) (13,521)
Common stockholders’ equity8,718
 8,349
Noncontrolling interests in subsidiaries52
 39
Total equity8,770
 8,388
Total liabilities and equity$19,589
 19,858











See accompanying Notes to Consolidated Financial Statements.







3



Consolidated Statements of Equity
EMERSON ELECTRIC CO. & SUBSIDIARIES

Three months ended December 31, 2020 and 2021
(Dollars in millions; unaudited)
Three Months Ended December 31,
2020 2021 
Common stock$477 477 
Additional paid-in-capital
     Beginning balance470 522 
     Stock plans29 42 
        Ending balance499 564 
Retained earnings
     Beginning balance24,955 26,047 
     Net earnings common stockholders445 896 
Dividends paid (per share: $0.505 and $0.515, respectively)(303)(307)
     Adoption of accounting standard(1)— 
        Ending balance25,096 26,636 
Accumulated other comprehensive income (loss)
     Beginning balance(1,577)(872)
     Foreign currency translation189 (72)
     Pension and postretirement27 18 
     Cash flow hedges31 4 
        Ending balance(1,330)(922)
Treasury stock
     Beginning balance(15,920)(16,291)
     Purchases(13)(258)
     Issued under stock plans86 43 
        Ending balance(15,847)(16,506)
Common stockholders' equity8,895 10,249 
Noncontrolling interests in subsidiaries
     Beginning balance42 40 
     Net earnings7 (1)
     Dividends paid(5)— 
        Ending balance44 39 
Total equity$8,939 10,288 







See accompanying Notes to Consolidated Financial Statements.





4




Consolidated Statements of Cash Flows
EMERSON ELECTRIC CO. & SUBSIDIARIES


Three months endedMonths Ended December 31, 20162020 and 20172021
(Dollars in millions; unaudited)
Three Months Ended
December 31,
 2020 2021 
Operating activities  
Net earnings$452 895 
Adjustments to reconcile net earnings to net cash provided by operating activities:
        Depreciation and amortization244 231 
        Stock compensation64 41 
        Pension expense8 1 
        Changes in operating working capital71 (185)
        Gain on subordinated interest— (453)
        Other, net(31)(7)
            Cash provided by operating activities808 523 
Investing activities
Capital expenditures(122)(116)
Purchases of businesses, net of cash and equivalents acquired(1,611)(39)
Proceeds from subordinated interest— 438 
Other, net13 2 
    Cash provided by (used in) investing activities(1,720)285 
Financing activities
Net increase (decrease) in short-term borrowings340 (335)
Proceeds from long-term debt— 2,975 
Payments of long-term debt(301)(501)
Dividends paid(303)(307)
Purchases of common stock(13)(253)
Other, net42 22 
    Cash provided by (used in) financing activities(235)1,601 
Effect of exchange rate changes on cash and equivalents29 (37)
Increase (Decrease) in cash and equivalents(1,118)2,372 
Beginning cash and equivalents3,315 2,354 
Ending cash and equivalents$2,197 4,726 
Changes in operating working capital
Receivables$232 217 
Inventories(37)(302)
Other current assets18 (10)
Accounts payable(37)10 
Accrued expenses(105)(100)
Total changes in operating working capital$71 (185)
  Three Months Ended
  December 31,
  2016
 2017
Operating activities    
Net earnings $315
 394
Loss from discontinued operations, net of tax 55
 —
Adjustments to reconcile net earnings to net cash provided by operating activities:    
        Depreciation and amortization 143
 187
        Changes in operating working capital (138) (160)
        Other, net 35
 26
            Cash from continuing operations 410
 447
            Cash from discontinued operations (172) —
            Cash provided by operating activities 238
 447
     
Investing activities    
Capital expenditures (100) (96)
Purchases of businesses, net of cash and equivalents acquired (16) (513)
Divestitures of businesses —
 235
Other, net (20) (18)
    Cash from continuing operations (136) (392)
    Cash from discontinued operations 3,894
 —
    Cash provided by (used in) investing activities 3,758
 (392)
     
Financing activities    
Net increase (decrease) in short-term borrowings (2,225) 1,061
Payments of short-term borrowings greater than three months (90) —
Payments of long-term debt (251) (251)
Dividends paid (311) (311)
Purchases of common stock —
 (500)
Other, net (43) (30)
    Cash used in financing activities (2,920) (31)
     
Effect of exchange rate changes on cash and equivalents (107) 10
Increase in cash and equivalents 969
 34
Beginning cash and equivalents 3,182
 3,062
Ending cash and equivalents $4,151
 3,096
     
Changes in operating working capital    
Receivables $212
 216
Inventories (103) (149)
Other current assets 10
 (14)
Accounts payable (119) (129)
Accrued expenses (162) (166)
Income taxes 24
 82
Total changes in operating working capital $(138) (160)








See accompanying Notes to Consolidated Financial Statements.







5




Notes to Consolidated Financial Statements
EMERSON ELECTRIC CO. & SUBSIDIARIES


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


1.In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary for a fair presentation of operating results for the interim periods presented. Adjustments consist of normal and recurring accruals. The consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all disclosures required for annual financial statements presented in conformity with U.S. generally accepted accounting principles (GAAP). For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2017.

On(1) BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary for a fair presentation of operating results for the interim periods presented. Adjustments consist of normal and recurring accruals. The consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all disclosures required for annual financial statements presented in conformity with U.S. generally accepted accounting principles (GAAP). For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2021.

Effective October 1, 2021, the Company adopted three accounting standard updates which had no impact or an immaterial impact on the Company's financial statements as of and for the three months ended December 22, 2017, the U.S. government enacted tax reform, the Tax Cuts and Jobs Act (the “Act”)31, 2021. These included:

•Updates to ASC 805, Business Combinations, which made comprehensiveclarify the accounting for contract assets and liabilities assumed in a business combination. In general, this will result in contract liabilities being recognized at their historical amounts under ASC 606, rather than at fair value in accordance with the general requirements of ASC 805.

•Updates to ASC 740, Income Taxes, which require the recognition of a franchise tax that is partially based on income as an income-based tax with any incremental amount as a non-income based tax. These updates also make certain changes to federal incomeintra-period tax laws by moving fromallocation principles and interim tax calculations.

•Updates to ASC 321, Equity Securities, ASC 323 Investments - Equity Method and Joint Ventures, and ASC 815, Derivatives and Hedging, which clarify how to account for the transition into and out of the equity method of accounting when evaluating observable transactions.

(2) REVENUE RECOGNITION

Emerson is a global manufacturer that combines technology and engineering to provide innovative solutions to its customers, largely in the form of tangible products. The vast majority of the Company's revenues relate to a modified territorial tax regime. broad offering of manufactured products which are recognized at the point in time when control transfers, while a smaller portion is recognized over time or relates to sales arrangements with multiple performance obligations. See Note 13 for additional information about the Company's revenues.

The Act includes a reductionfollowing table summarizes the balances of the U.S. corporate income tax rateCompany's unbilled receivables (contract assets), which are reported in Other current assets, and its customer advances (contract liabilities), which are reported in Accrued expenses.     
Sept 30, 2021Dec 31, 2021
Unbilled receivables (contract assets)$528 527 
Customer advances (contract liabilities)(730)(851)
      Net contract liabilities$(202)(324)
The majority of the Company's contract balances relate to arrangements where revenue is recognized over time and payments from 35 percentcustomers are made according to 21 percent along with the elimination of certain deductions and credits, and a one-time “deemed repatriation” of accumulated foreign earnings. In the first quarter, the Company recognized acontractual billing schedule. The increase in net tax benefit of $43 ($0.07 per share)contract liabilities was due to impacts ofcustomer billings which exceeded revenue recognized for performance completed during the Act, consisting of a $98 benefit on revaluation of net deferred income tax liabilities to the lower tax rate, and $185 of expenseperiod. Revenue recognized for the tax on deemed repatriation of accumulated foreign earnings and withholding taxes partially offset by $130 accruedthree months ended December 31, 2021 included $348 that was included in the beginning contract liability balance. Other factors that impacted the change in net contract liabilities were immaterial. Revenue recognized for the three months ended December 31, 2021 for performance obligations that were satisfied in previous periods, forincluding cumulative catchup adjustments on the planned repatriationCompany's long-term contracts, was not material.





6




As of non-U.S. cash. GivenDecember 31, 2021, the complexities associatedCompany's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately $7.2 billion. The Company expects to recognize approximately 85 percent of its remaining performance obligations as revenue over the next 12 months, with the Act,remainder substantially over the ultimate effects on repatriation cost and other tax items may differ materially from these provisional amounts due to additional regulatory guidance that may be issued and further evaluation of the Company’s actions, assumptions and interpretations.subsequent two years thereafter.     


The effective tax rate for full year 2018 is currently expected to be approximately 25 to 27 percent. In 2019 and thereafter, the tax rate is expected to be approximately 25 percent.

(3) COMMON SHARES AND SHARE-BASED COMPENSATION
In the first quarter of fiscal 2018, the Company adopted updates to ASC 330, Inventory, which changed the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. These updates did not materially impact the Company's financial statements.

In the first quarter of fiscal 2018, the Company adopted updates to ASC 740, Income Taxes, requiring recognition of the income tax effects of intra-entity transfers of assets other than inventory when the transfer occurs. These updates were adopted on a modified retrospective basis and did not materially impact the Company's financial statements.

2.    Reconciliations of weighted-average shares for basic and diluted earnings per common share follow. Earnings allocated to participating securities were inconsequential.
 Three Months Ended
December 31,
 2016
 2017
    
Basic shares outstanding642.8
 638.2
Dilutive shares1.5
 2.3
Diluted shares outstanding644.3
 640.5
Three Months Ended
December 31,
 2020 2021 
Basic shares outstanding598.5 594.6 
Dilutive shares3.4 3.5 
Diluted shares outstanding601.9 598.1 

The Company changed the terms of its annual performance share awards issued in the first quarter of fiscal 2022. The new terms meet the criteria for equity classification in accordance with ASC 718, Compensation - Stock Compensation, and therefore expense will be recognized on a fixed basis over the three-year performance period. The terms of the performance share awards issued in fiscal 2020 and 2021 are unchanged and will therefore continue to be accounted for as liability awards and marked-to-market each period based on changes in the stock price.
3.    Other Financial Information

Sept 30, 2017 Dec 31, 2017
Inventories     
Finished products $560
  641
Raw materials and work in process 1,136
  1,204
Total $1,696
  1,845



6

(4) ACQUISITIONS AND DIVESTITURES

 Sept 30, 2017 Dec 31, 2017
Property, plant and equipment, net   
Property, plant and equipment, at cost $7,873
  7,930
Less: Accumulated depreciation 4,552
  4,651
     Total $3,321
  3,279
On October 11, 2021, the Company announced that it entered into a definitive agreement with Aspen Technology, Inc. ("AspenTech") to contribute two of Emerson's stand-alone industrial software businesses, Open Systems International, Inc. and the Geological Simulation Software business, along with approximately $6.0 billion in cash to AspenTech stockholders, to create "new AspenTech", a diversified, high-performance industrial software leader with greater scale, capabilities and technologies. Upon closing of the transaction, the Company will own 55 percent of new AspenTech and its results and financial position will be consolidated in Emerson's financial statements.

 Sept 30, 2017 Dec 31, 2017
Goodwill by business segment     
Automation Solutions $4,704
  5,005
      
Climate Technologies 555
  555
Tools & Home Products 57
  56
Commercial & Residential Solutions 612
  611
      
     Total $5,316
  5,616
The increase in goodwill reflectsOn October 1, 2020, the Company completed the acquisition of Paradigm. See Note 11.Open Systems International, Inc. ("OSI"), a leading operations technology software provider in the global power industry, for approximately $1.6 billion, net of cash acquired. This business, which had net sales of $191 in fiscal 2021 and is reported in the Automation Solutions segment, 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 approximately $193.

As previously disclosed, the Company sold its network power systems business (rebranded as Vertiv, now a publicly traded company, symbol VRT) in 2017 and retained a subordinated interest contingent upon the equity holders first receiving a threshold cash return on their initial investment. In the first quarter of fiscal 2022, the equity holders' cumulative cash return exceeded the threshold and as a result, the Company received a distribution of $438 in November 2021 (in total, a gain of $453 was recognized in the first quarter). Based on the terms of the agreement and the current calculation, the Company could receive additional distributions of approximately $100 which are expected to be received over the next two 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.





7


 Sept 30, 2017 Dec 31, 2017
Accrued expenses include the following     
Employee compensation $531
  548
Customer advanced payments $505
  539
Product warranty $120
  128

(5) PENSION & POSTRETIREMENT PLANS

Total periodic pension and postretirement (income) expense is summarized below:
 Three Months Ended December 31,
 2020 2021 
Service cost$21 19 
Interest cost32 34 
Expected return on plan assets(84)(78)
Net amortization35 23 
Total$4 (2)

(6) OTHER DEDUCTIONS, NET

Other deductions, net are summarized below:
 Three Months Ended
December 31,
 2020 2021 
Amortization of intangibles (intellectual property and customer relationships)$78 63 
Restructuring costs66 9 
Other(22)(21)
Total$122 51 

In the first quarter of fiscal 2022, the decrease in intangibles amortization was largely due to the backlog amortization of $11 in the prior year related to the OSI acquisition. Other is composed of several items, including acquisition/divestiture costs, foreign currency transaction gains and losses, pension expense and other items. In the first quarter of fiscal 2022, other included transaction costs related to the AspenTech transaction of $23, a favorable impact from foreign currency transactions of $25 due to losses in the prior year and gains in the current year, and gains from the sales of capital assets of $15. Comparisons were also impacted by prior year investment-related gains, including $21 from an investment sale and $17 from the acquisition of full ownership of an equity investment.

(7) RESTRUCTURING COSTS

Restructuring expense reflects costs associated with the Company’s ongoing efforts to improve operational efficiency and deploy assets globally in order to remain competitive on a worldwide basis. Costs incurred in the first three months of fiscal 2022 relate to the Company's initiatives that began in the third quarter of fiscal 2019 to improve operating margins and were subsequently increased in response to the effects of the COVID-19 pandemic on demand for the Company's products. Expenses incurred in the first three months of fiscal 2022 included costs related to workforce reductions of approximately 150 employees. The Company expects fiscal 2022 restructuring expense and related costs to be approximately $150, including costs to complete actions initiated in the first three months of the year.






8



 Sept 30, 2017 Dec 31, 2017
Other liabilities     
Pension and postretirement liabilities $664
  659
Deferred income taxes 425
  244
Asbestos litigation 340
  336
Other 551
  664
     Total $1,980
  1,903
Restructuring expense by business segment follows:
 Three Months Ended
December 31,
 2020 2021 
Automation Solutions$64 5 
Climate Technologies1 2 
Tools & Home Products1 1 
Commercial & Residential Solutions2 3 
Corporate— 1 
Total$66 9 

Details of the change in the liability for restructuring costs during the three months ended December 31, 2021 follow:
 Sept 30, 2021ExpenseUtilized/PaidDec 31, 2021
Severance and benefits$172 2 20 154 
Other4 7 9 2 
Total$176 9 29 156 

The tables above do not include $3 and $9 of costs related to restructuring actions incurred for the three months ended December 31, 2020 and 2021, respectively, that are required to be reported in cost of sales and selling, general and administrative expenses.
(8) TAXES

Income taxes were $280 in the first quarter of fiscal 2022 and $111 in 2021, resulting in effective tax rates of 24 percent and 20 percent, respectively. Income taxes in the first quarter included expense of $95 related to the Vertiv subordinated interest gain, which benefited the tax rate by approximately 2 percentage points. This was offset by portfolio restructuring activities which negatively impacted the rate by 4 percentage points, while the prior year rate included discrete benefits which decreased the rate 2 percentage points.

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.

(9) OTHER FINANCIAL INFORMATION

Sept 30, 2021Dec 31, 2021
Inventories
Finished products$616 744 
Raw materials and work in process1,434 1,591 
Total$2,050 2,335 
Property, plant and equipment, net  
Property, plant and equipment, at cost$9,427 9,442 
Less: Accumulated depreciation5,689 5,757 
     Total$3,738 3,685 





9



Goodwill by business segment
Automation Solutions$6,552 6,534 
Climate Technologies753 751 
Tools & Home Products418 410 
Commercial & Residential Solutions1,171 1,161 
     Total$7,723 7,695 
Other intangible assets  
Gross carrying amount$5,911 5,910 
Less: Accumulated amortization3,034 3,119 
     Net carrying amount$2,877 2,791 
Other long-termintangible assets include $132customer relationships, net, of asbestos-related insurance receivables.$1,495 and $1,449 as of September 30, 2021 and December 31, 2021, respectively.

Three Months Ended
Dec 31, 2020Dec 31, 2021
Depreciation and amortization expense include the following:
Depreciation expense$124 128 
Amortization of intangibles (includes $14 and $14 reported in Cost of Sales for the three months ended December 31, 2020 and 2021, respectively)92 77 
Amortization of capitalized software28 26 
Total$244 231 
Amortization of intangibles included backlog amortization of $11 related to the OSI acquisition for the three months ended December 31, 2020.
4.Following is a discussion regarding the Company’s use of financial instruments:
Sept 30, 2021Dec 31, 2021
Other assets include the following:
Pension assets$1,015 1,042 
Operating lease right-of-use assets558 536 
Deferred income taxes115 101 
Asbestos-related insurance receivables95 91 
Accrued expenses include the following:
Customer advances (contract liabilities)$730 851 
Employee compensation690 428 
Operating lease liabilities (current)155 152 
Product warranty146 136 
Other liabilities include the following:  
Deferred income taxes$711 736 
Pension and postretirement liabilities676 674 
Operating lease liabilities (noncurrent)413 395 
Asbestos litigation256 251 





10



(10) DEBT
In December 2021, the Company issued $1 billion of 2.0% notes due December 2028, $1 billion of 2.2% notes due December 2031, and $1 billion of 2.8% notes due December 2051. The Company expects to use the net proceeds from the sale of the notes to pay a portion of its contribution of approximately $6.0 billion to existing stockholders of AspenTech as part of the transaction discussed further in Note 4. If the transaction with AspenTech is not completed or is terminated, the Company will be required to redeem the notes at a redemption price equal to 101% of the principal amount plus accrued and unpaid interest.

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

(11) FINANCIAL INSTRUMENTS
Hedging Activities – As of December 31, 2017,2021, the notional amount of foreign currency hedge positions was approximately $1.6$2.4 billion,, and commodity hedge contracts totaled approximately $124$143 (primarily 4940 million pounds of copper and aluminum). All derivatives receiving deferralhedge accounting are cash flow hedges. The majority of hedging gains and losses deferred as of December 31, 20172021 are expected to be recognized over the next 12 months as the underlying forecasted transactions occur. Gains and losses on foreign currency derivatives reported in otherOther deductions, net reflect hedges of balance sheet exposures that do not receive deferralhedge accounting.
Net Investment Hedge – In fiscal 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. Foreign currency gains or losses associated with the euro-denominated debt are deferred in accumulated other comprehensive income (loss) and will remain until the hedged investment is sold or substantially liquidated.
The following gains and losses are included in earnings and other comprehensive income (OCI) for the three months endedDecember 31, 20172020 and 2016:
2021:
Into EarningsInto OCI
1st Quarter1st Quarter
Gains (Losses)Location2020 2021 2020 2021 
CommodityCost of sales$3 7 13 13 
Foreign currencySales1 1 5 — 
Foreign currencyCost of sales— 2 27 3 
Foreign currencyOther deductions, net(4)44 
Net Investment Hedges
Euro denominated debt(80)44 
     Total $— 54 (35)60 
    Into Earnings Into OCI
    1st Quarter 1st Quarter
Gains (Losses) Location 2016
 2017
 2016
 2017
Commodity Cost of sales $(2) 5
 10
 13
Foreign currency Sales, cost of sales (10) —
 2
 (12)
Foreign currency Other deductions, net 6
 —
    
     Total   $(6) 5
 12
 1



7

Regardless of whether derivatives and non-derivative financial instruments receive deferralhedge accounting, the Company expects hedging gains or losses to be essentially offset by losses or gains on the related underlying exposures. The amounts ultimately recognized will differ from those presented above for open positions, which remain subject to ongoing market price fluctuations until settlement. Derivatives receiving deferralhedge accounting are highly effective and no amounts were excluded from the assessment of hedge effectiveness. Hedge ineffectiveness was immaterial for the three months ended December 31, 2017and 2016.
Fair Value Measurement– Valuations for all derivatives and the Company's long-term debt fall within Level 2 of the GAAP valuation hierarchy.hierarchy. As of December 31, 2017,2021, the fair value of long-term debt was $4,092,$9.2 billion, which exceeded the carrying value by $278. At December 31, 2017, the$411. The fair values of commodity contracts and foreign currency contracts were reported in otherOther current assets and accrued expenses. Valuations of derivative contract positions are summarized below:  Accrued expenses and did not materially change since September 30, 2021.
 September 30, 2017 December 31, 2017
 Assets Liabilities Assets Liabilities
Foreign Currency $26
 18
 11
 19
Commodity $12
 —
 20
 —

Counterparties to derivatives arrangementsarrangements are companies with investment-grade credit ratings. The Company has bilateral collateral arrangements with counterparties with credit rating-based posting thresholds that vary depending on the arrangement. If credit ratings on the Company's debt fall below pre-established levels, counterparties can require immediate full collateralization of all derivatives in net liability positions. The maximum amount that could potentially have been required was $11.immaterial. The Company also can demand full collateralization of derivatives in net asset positions should any counterparty credit ratings fall below certain thresholds. No collateral was posted with counterparties and none was held by the Company as of December 31, 2017.

5.The change in equity for the first three months of 2018 is shown below:  
 
Common
Stockholders'
Equity
 
Noncontrolling
Interests in Subsidiaries
 Total Equity
Balance at September 30, 2017 $8,718
  52
  8,770
Net earnings 392
  2
  394
Other comprehensive income (loss) 27
  —
  27
Cash dividends (311)  (15)  (326)
Purchases of treasury stock, net of issuances (480)  —
  (480)
Adoption of accounting standard update 3
  —
  3
Balance at December 31, 2017 $8,349
  39
  8,388


2021.


8



11





6.Activity in accumulated other comprehensive income (loss) for the three months ended December 31, 2017 and 2016 is shown below:  
(12) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
 Three Months Ended December 31,
  2016
  2017
Foreign currency translation     
   Beginning balance $(812)  (369)
   Other comprehensive income (loss) before reclassifications (367)  24
   Reclassified to gain/loss on sale of businesses 266
  (17)
   Ending balance (913)  (362)
      
Pension and postretirement     
   Beginning balance (1,162)  (662)
   Amortization of deferred actuarial losses into earnings 35
  23
   Reclassified to gain/loss on sale of businesses 20
  —
   Ending balance (1,107)  (639)
      
Cash flow hedges     
   Beginning balance (25)  12
   Deferral of gains (losses) arising during the period 8
  1
   Reclassification of realized (gains) losses to sales and cost of sales 7
  (4)
   Ending balance (10)  9
      
Accumulated other comprehensive income (loss) $(2,030)  (992)
      
Activity above is shown net of income taxes for the three months ended December 31, 2017 and 2016, respectively, as follows: amortization of pension and postretirement deferred actuarial losses: $(8) and $(18); pension and postretirement divestiture: $- and $(7); deferral of cash flow hedging gains (losses): $- and $(4); reclassification of realized cash flow hedging (gains) losses: $1 and $(5).

7.Total periodic pension and postretirement expense is summarized below:
Activity in Accumulated other comprehensive income (loss) for the three months ended December 31, 2020 and 2021 is shown below, net of income taxes: 
Three Months Ended December 31,
2020 2021 
Foreign currency translation
   Beginning balance$(711)(629)
   Other comprehensive income (loss), net of tax of $19 and $(10), respectively189 (72)
   Ending balance(522)(701)
Pension and postretirement
   Beginning balance(864)(259)
Amortization of deferred actuarial losses into earnings, net of tax of $(8) and $(5),
  respectively
27 18 
   Ending balance(837)(241)
Cash flow hedges
   Beginning balance(2)16 
Gains deferred during the period, net of taxes of $(11) and $(4), respectively34 12 
   Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $1 and
     $2, respectively
(3)(8)
   Ending balance29 20 
Accumulated other comprehensive income (loss)$(1,330)(922)
 Three Months Ended December 31,
  2016  2017
Service cost $21
  19
Interest cost 42
  46
Expected return on plan assets (86)  (87)
Net amortization 53
  31
Total $30
  9


8.Other deductions, net are summarized below:
 Three Months Ended
December 31,
 2016   2017
      
Amortization of intangibles $22
  56
Restructuring costs 11
  15
Other —
  17
Total $33
  88

The increase in amortization and restructuring in the first quarter of 2018 is due to the valves & controls acquisition. Other for the first quarter includes unfavorable foreign currency transactions of $22 compared with the prior year, partially offset by lower acquisition/divestiture costs of $4.


9


9.
Restructuring expense reflects costs associated with the Company’s ongoing efforts to improve operational efficiency and deploy assets globally in order to remain competitive on a worldwide basis. The Company expects full year 2018 restructuring expense to be approximately $85. The full year expense includes $15 incurred to date, as well as costs to complete actions initiated before the end of the first quarter and actions anticipated to be approved and initiated during the remainder of the year. Costs for the three months endedDecember 31, 2017 largely relate to restructuring of the global cost structure consistent with the current level of economic activity, as well as the redeployment of resources for future growth.

Restructuring expense by business segment follows:
 Three Months Ended
December 31,
 2016  2017 
      
Automation Solutions $6
  10
      
Climate Technologies 4
  5
Tools & Home Products 1
  —
Commercial & Residential Solutions 5
  5
      
Total $11
  15

Details of the change in the liability for restructuring costs during the three months ended December 31, 2017 follow:
 Sept 30, 2017  Expense  Utilized/Paid  Dec 31, 2017 
            
Severance and benefits $60
  10
  14
  56
Lease and other contract terminations 4
  2
  1
  5
Vacant facility and other shutdown costs 1
  1
  1
  1
Start-up and moving costs —
  2
  2
  —
Total $65
  15
  18
  62

10.
Business Segments – 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.
The Automation Solutions segment enables process, hybrid and discrete manufacturers to maximize production, protect personnel and the environment, and optimize their energy efficiency and operating costs through a broad offering of integrated solutions and products, including measurement and analytical instrumentation, industrial valves and equipment, and process control systems. Significant end markets serviced include oil and gas, refining, chemicals and power generation, as well as pharmaceuticals, 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, smart actuation and control technologies, pressure management products, and industrial and residential regulators that reduce the pressure of fluids moving from high-pressure supply lines into lower pressure systems.
Industrial Solutions provides fluid power and control 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.


10

(13) BUSINESS SEGMENTS
Process Control Systems & Solutions 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 Commercial & Residential Solutions business consists of the Climate Technologies and Tools & Home Products segments. This business provides products and solutions that promote energy efficiency, 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 tools and appliance solutions.
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 and appliance solutions. Products include professional pipe-working tools, residential and commercial food waste disposers, and wet-dry vacuums.
Summarized information about the Company's results of operations by business segment follows:
 Three Months Ended December 31,
 SalesEarnings
 2020 2021 2020 2021 
Automation Solutions$2,692 2,805 361 526 
Climate Technologies1,031 1,163 212 192 
Tools & Home Products445 508 98 107 
Commercial & Residential Solutions1,476 1,671 310 299 
Stock compensation(64)(41)
Unallocated pension and postretirement costs24 26 
Corporate and other(28)(50)
Gain on subordinated interest— 453 
Eliminations/Interest(7)(3)(40)(38)
     Total$4,161 4,473 563 1,175 






12



 Three Months Ended December 31,
 Sales Earnings
 2016
 2017
 2016
 2017
        
Automation Solutions$1,967
 2,572
 326
 386
        
Climate Technologies859
 922
 161
 165
Tools & Home Products393
 330
 88
 87
Commercial & Residential Solutions1,252
 1,252
 249
 252
        
Differences in accounting methods    33
 51
Corporate and other    (98) (148)
Eliminations/Interest(3) (8) (46) (38)
     Total$3,216
 3,816
 464
 503
Corporate and other for the first quarter of 2018 includes valves & controls first year acquisition accounting charges of $10 related to inventory and $15 for backlog amortization, as well as higher incentive stock compensation of $40.

Automation Solutions sales by major product offering are summarized below:below.
 Three Months Ended December 31,
 2020 2021 
Measurement & Analytical Instrumentation$698 735 
Valves, Actuators & Regulators806 816 
Industrial Solutions508 566 
Systems & Software680 688 
     Automation Solutions$2,692 2,805 

 Three Months Ended December 31,
  2016
  2017
      
Measurement & Analytical Instrumentation $682
  772
Valves, Actuators & Regulators 449
  867
Industrial Solutions 367
  424
Process Control Systems & Solutions 469
  509
     Total $1,967
  2,572


11


11.On December 1, 2017, the Company acquired Paradigm, a provider of software solutions for the oil and gas industry, for $505, net of cash acquired. This business had annual sales of approximately $140 and is included in the Measurement & Analytical Instrumentation product offering within Automation Solutions. The Company recognized goodwill of $304 ($160 of which is expected to be tax deductible), and identifiable intangible assets of $248, primarily intellectual property and customer relationships with weighted-average useful lives of approximately 11 years. Valuations of acquired assets and liabilities are in process and subject to refinement. The Company also acquired one smaller business in the Automation Solutions segment. Total cash paid for all businesses was $513, net of cash acquired.

On January 10, 2018, the Company completed the acquisition of Cooper-Atkins for $247, net of cash acquired. This business, which manufactures temperature management and monitoring products for foodservice markets, will be reported in the Climate Technologies segment.

On October 2, 2017, the Company sold its residential storage business for $200 in cash, subject to post-closing adjustments, and recognized a small pretax gain and an after-tax loss of $24 ($0.04 per share) in the first quarter of 2018 due to income taxes resulting from nondeductible goodwill. The Company will realize approximately $150 in after-tax cash proceeds from the sale. Assets and liabilities for this business were classified as held-for-sale in the consolidated balance sheet at September 30, 2017 as follows: current assets, $73; other assets, $176; and accrued expenses and other liabilities, $61. This business was previously reported within the Tools & Home Products segment.

On April 28, 2017, the Company completed the acquisition of Pentair's valves & controls business for $2.960 billion, net of cash acquired of $207, subject to certain post-closing adjustments. This business, with annualized sales of approximately $1.4 billion, is a manufacturer of control, isolation and pressure relief valves and actuators, and complements the Valves, Actuators & Regulators product offering within Automation Solutions.

Results for the first quarter ended December 31, 2017 included first year pretax acquisition accounting charges related to inventory and backlog of $25, $19 after-tax, $0.03 per share.

Pro Forma Financial Information
The following unaudited pro forma consolidated condensed financial results of operations are presented as if the acquisition of the valves & controls business occurred on October 1, 2015. 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.
 
Three Months
Ended
Dec 31, 2016

   
Net sales $3,620
Net earnings from continuing operations common stockholders $362
Diluted earnings per share from continuing operations $0.56

12.
Discontinued Operations – In fiscal 2017, the Company completed the previously announced strategic repositioning actions to streamline its portfolio and drive growth in its core businesses. On November 30, 2016, the Company completed the sale of its network power systems business for $4 billion in cash and retained a subordinated interest in distributions, contingent upon the equity holders first receiving a threshold return on their initial investment. Additionally, on January 31, 2017, the Company completed the sale of its power generation, motors and drives business for approximately $1.2 billion, subject to post-closing adjustments.



12

The financial results of the network power systems and power generation, motors and drives businesses reported as discontinued operations for the three months ended December 31, 2016 were as follows:
 
Three Months Ended
Dec 31, 2016
  
Net sales$940
Cost of sales626
SG&A242
Other (income) deductions, net(421)
Earnings (Loss) before income taxes493
Income taxes548
Earnings (Loss), net of tax$(55)

Discontinued operations for the first quarter of 2017 included a loss of $55, consisting of net earnings from operations of $14, an after-tax gain on the divestiture of the network power systems business of $86 ($465 pretax), income tax expense of$144 for repatriation of sales proceeds, a loss of $38 to write down the power generation, motors and drives business to the sales price less cost to sell, and lower expense of $27 due to ceasing depreciationDepreciation and amortization for the discontinued businesses held-for-sale.(includes intellectual property, customer relationships and capitalized software) by business segment are summarized below:
Three Months Ended December 31,
2020 2021 
Automation Solutions$156 155 
Climate Technologies49 47 
Tools & Home Products19 20 
Commercial & Residential Solutions68 67 
Corporate and other20 9 
     Total$244 231 


Net cash from operating and investing activities for the network power systems and power generation, motors and drives businesses for the three months ended December 31, 2016 were as follows:    

  
Three Months Ended
Dec 31, 2016
   
Cash from operating activities $(172)
Cash from investing activities $3,894
Sales by geographic destination are summarized below:
Three Months Ended December 31,
20202021
 Automation SolutionsCommercial & Residential SolutionsTotalAutomation SolutionsCommercial & Residential SolutionsTotal
Americas$1,168 981 2,149 1,241 1,144 2,385 
Asia, Middle East & Africa942 308 1,250 1,005 322 1,327 
Europe582 187 769 559 205 764 
     Total$2,692 1,476 4,168 2,805 1,671 4,476 

Operating cash flow used by discontinued operations of $172 for the three months ended December 31, 2016 included payments of $139 for income taxes and fees related to the transactions.










13




Items 2 and 3.


Management's Discussion and Analysis of Financial Condition and Results of Operations

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

OVERVIEW
Net sales for
For the first quarter of 2018fiscal 2022, net sales were $3.8$4.5 billion, up 19 percent, supported by acquisitions, net of a divestiture, which added 9 percent. Underlying sales increased 7 percent reflecting improving trends in energy-related and general industrial markets, while HVAC and refrigeration markets remained favorable.
Earnings from continuing operations common stockholders were $392 million, up 8 percent compared with $364 millionthe prior year. Underlying sales, which exclude foreign currency translation, acquisitions and divestitures, were also up 8 percent. Sales growth reflected the continuation of the Company's strong rebound which began in 2017,the prior year, with favorable results across both business platforms and diluted earnings per share from continuing operations were $0.61, up 9 percent compared with $0.56 in 2017. all geographies.
Net earnings common stockholders were $392 million,$896, up 27101 percent, and diluted earnings per share were $0.61,$1.50, up 27103 percent reflecting the impact of discontinued operationscompared with $0.74 in the prior year. Results reflected strong operating results and included a pretax gain of $453 ($358 after-tax, $0.60 per share) related to the Company's subordinated interest in Vertiv.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31


Following is an analysis of the Company’s operating results for the first quarter ended December 31, 2017,2020, compared with the first quarter ended December 31, 2016.2021.
20202021Change
Net sales$4,161 4,473 8 %
Gross profit$1,723 1,822 6 %
Percent of sales41.4 %40.7 % 
SG&A$998 1,011 1 %
Percent of sales24.0 %22.6 % 
Gain on subordinated interest$— (453)
Other deductions, net$122 51  
Amortization of intangibles$78 63 
Restructuring costs$66 9 
Interest expense, net$40 38  
Earnings before income taxes$563 1,175 109 %
Percent of sales13.5 %26.3 % 
Net earnings common stockholders$445 896 101 %
Percent of sales10.7 %20.0 % 
Diluted earnings per share$0.74 1.50 103 %

Three Months Ended Dec 312016 2017 Change
(dollars in millions, except per share amounts) 
  
  
      
Net sales$3,216
 3,816
 19%
Gross profit$1,365
 1,621
 19%
Percent of sales42.4% 42.5%  
      
SG&A$822
 992
  
Percent of sales25.5% 26.0%  
Other deductions, net$33
 88
  
Interest expense, net$46
 38
  
      
Earnings from continuing operations before income taxes$464
 503
 9%
Percent of sales14.4% 13.2%  
Earnings from continuing operations common stockholders$364
 392
 8%
Net earnings common stockholders$309
 392
 27%
Percent of sales9.6% 10.3%  
      
Diluted EPS - Earnings from continuing operations$0.56
 0.61
 9%
Diluted EPS - Net earnings$0.48
 0.61
 27%

Net sales for the first quarter of 2018fiscal 2022 were $3.8$4.5 billion, an increase of $600 millionup 8 percent compared with $3.2 billion in 2017. Underlying sales increased 7 percent ($229 million) on higher volume. Acquisitions added 12 percent ($373 million) and foreign currency translation added 3 percent ($75 million), while the divestiture of the residential storage business subtracted 3 percent ($77 million). Underlying sales increased 8 percent in the U.S. and 7 percent internationally. Asia was up 15 percent (China up 23 percent), while sales in Europe were flat. Canada increased 14 percent and Latin America increased 4 percent. Middle East/Africa was down 5 percent. Sales increased $605 million in2021. Automation Solutions supported by acquisitionssales were up 4 percent and broad-based demand across energy-related and general industrial markets. Commercial & Residential Solutions sales were flat, as favorable demandup 13 percent. Underlying sales were also up 8 percent on 5 percent higher volume and 3 percent higher price, while foreign currency translation had a slightly negative impact. Underlying sales were up 10 percent in global HVACthe U.S. and refrigeration marketsup 7 percent internationally. The Americas was offset by the divestiture of the residential storage business.up 11 percent, Europe was up 3 percent and Asia, Middle East & Africa was up 6 percent (China up 12 percent).


Cost of sales for the first quarter of 2018fiscal 2022 were $2.2 billion,$2,651, an increase of $344 million$213 compared with $1.9 billion in 2017, primarily2021, due to acquisitions, higher sales volume and the impact of foreign currency translation.higher materials costs. Gross margin improved slightly to 42.5of 40.7 percent decreased 0.7 percentage points compared with the prior year reflecting unfavorable price-cost in Commercial & Residential Solutions, partially offset by leverage on higher sales volume savings from cost reduction actions and favorable mix, largely offset by dilution of 1.6 percentage points due to the valves & controls operations and first year acquisition accounting charges of $10 million related to inventory.mix.




14

Selling, general and administrative (SG&A) expenses of $992 million$1,011 increased $170 million$13 compared with the prior year primarily due to acquisitions and an increase in volume. on increased sales volume, partially offset by lower stock compensation expense of $23. SG&A as a percent of sales increased 0.5





14



decreased 1.4 percentage points to 26.022.6 percent reflecting leverage on higher incentive stock compensationsales volume and savings from the Company's restructuring and cost reset actions.

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 $40 million due to an increasefiscal 2022, the equity holders' cumulative cash return exceeded the threshold and as a result, the Company received a distribution of $438 in November 2021 (in total, a gain of $453 was recognized in the Company's stock price, partially offset by leveragefirst quarter). Based on the higher volume.terms of the agreement and the current calculation, the Company could receive additional distributions of approximately $100 which are expected to be received over the next two 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.


Other deductions, net were $88 million$51 in 2018, an increase2022, a decrease of $55 million$71 compared with the prior year, largely due to higher intangibles amortizationreflecting a decline in restructuring costs of $19 million and backlog amortization of $15 million, primarily related to the valves & controls acquisition, and unfavorable$57, a favorable impact from foreign currency transactions of $22 million.$25 due to losses in the prior year and gains in the current year, and gains from the sales of capital assets of $15, partially offset by transaction costs of $23 related to the AspenTech transaction. Intangibles amortization was lower by $11 due to backlog amortization in the prior year related to the OSI acquisition. The prior year also included investment-related gains, including a gain of $21 from an investment sale and a $17 gain from the acquisition of full ownership of an equity investment also impacted comparisons. See Note 8.Notes 6 and 7.


Pretax earnings from continuing operationsearnings of $503 million$1,175 increased $39 million, or 9 percent.$612, up 109 percent compared with the prior year, reflecting the Vertiv subordinated interest gain of $453 discussed above. Earnings increased $60 million$165 in Automation Solutions and $3 milliondecreased $11 in Commercial & Residential Solutions.Solutions, while costs reported at Corporate decreased $3. See Note 10 and the following Business Segments discussion.discussion that follows and Note 13.


On December 22, 2017, the U.S. government enacted tax reform, the Tax Cuts and Jobs Act (the "Act"), which made comprehensive changes to federal income tax laws by moving from a global to a modified territorial tax regime. The Act includes a reduction of the U.S. corporate income tax rate from 35 percent to 21 percent along with the elimination of certain deductions and credits, and a one-time “deemed repatriation” of accumulated foreign earnings. InIncome taxes were $280 in the first quarter the Company recognized a net tax benefit of $43 million ($0.07 per share) due to impacts of the Act, consisting of a $98 million benefit on revaluation of net deferred income tax liabilities to the lower tax rate,fiscal 2022 and $185 million of expense for the tax on deemed repatriation of accumulated foreign earnings and withholding taxes partially offset by $130 million accrued$111 in previous periods for the planned repatriation of non-U.S. cash. Given the complexities associated with the Act, the ultimate effects on repatriation cost and other tax items may differ materially from these provisional amounts due to additional regulatory guidance that may be issued and further evaluation of the Company’s actions, assumptions and interpretations.

Income taxes were $109 million for 2018 and $94 million for 2017,2021, resulting in effective tax rates of 2224 percent and 20 percent, respectively. The effective tax rate forIncome taxes in the first quarter included expense of 2017 included a $47 million ($0.07 per share) income tax benefit from restructuring a foreign subsidiary. The effective tax rate for full year 2018 is currently expected$95 related to be approximately 25 to 27 percent. In 2019 and thereafter,the Vertiv subordinated interest gain, which benefited the tax rate is expected to beby approximately 25 percent.

Earnings from continuing operations attributable to common stockholders were $392 million, up 8 percent, and diluted earnings per share were $0.61, up 9 percent. Earnings per share include a $0.03 per share benefit from the lower corporate federal income tax rate on first quarter earnings. In addition, results include the $0.07 per share net benefit of the tax law change,2 percentage points. This was offset by a $(0.04) per share loss onportfolio restructuring activities which negatively impacted the residential storage divestiture and $0.03 per share from firstrate by 4 percentage points, while the prior year acquisition accounting charges.rate included discrete benefits which decreased the rate 2 percentage points.


Net earnings common stockholders in the first quarter of 2018fiscal 2022 were $392 million,$896, up 27101 percent, compared with $309 million$445 in the prior year, and earnings per share were $0.61,$1.50, up 27103 percent, compared with $0.48$0.74 in 2017. Resultsthe prior year. See discussion in the Overview above and the analysis below of adjusted earnings per share for 2017 includedfurther details.

The table below, which shows results on an adjusted EBITA basis, is intended to supplement the impactCompany's discussion of discontinuedits results of operations which was aherein. The Company defines adjusted EBITA as earnings excluding interest expense, net, loss of $55 million ($0.08 per share). See Note 12.income taxes, intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments. Adjusted EBITA and adjusted EBITA margin are measures used by management and may be useful for investors to evaluate the Company's operational performance.


20202021Change
Earnings before income taxes$563 1,175 109 %
      Percent of sales13.5 %26.3 %
    Interest expense, net40 38 
    Restructuring and related costs69 18 
    Amortization of intangibles81 77 
    Gain on subordinated interest— (453)
    AspenTech transaction costs— 23 
    Gain on acquisition of full ownership of equity investment(17)— 
    OSI first year acquisition accounting charges and fees21 — 
Adjusted EBITA$757 878 16 %
      Percent of sales18.2 %19.6 %








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The tables below presents the Company's diluted earnings per share on an adjusted basis to facilitate period-to-period comparisons and provide additional insight into the underlying, ongoing operating performance of the Company. Adjusted earnings per share excludes intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments.

Three Months Ended Dec 31
20202021
Diluted earnings per share$0.74 1.50 
    Restructuring and related costs0.09 0.02 
    Amortization of intangibles0.10 0.10 
    Gain on subordinated interest— (0.60)
    AspenTech transaction costs— 0.03 
    Gain on acquisition of full ownership of equity investment(0.03)— 
    OSI first year acquisition accounting charges and fees0.03 — 
Adjusted diluted earnings per share$0.93 1.05

The table below summarizes the changes in adjusted diluted earnings per share. The items identified below are discussed throughout MD&A, see further discussion above and in the Business Segments and Financial Position sections below.

Three Months Ended
Adjusted diluted earnings per share - Dec 31, 2020$0.93
    Operations0.10
    Stock compensation0.03
    Pensions0.01
    Gains on sales of investments - prior year(0.03)
    Gains on sales of capital assets - current year0.02
    Foreign currency0.03
    Income tax rate(0.06)
    Share repurchases0.02
Adjusted diluted earnings per share - Dec 31, 2021$1.05

Business Segments
Following is an analysis of operating results for the Company’s business segments for the first quarter ended December 31, 2017,2020, compared with the first quarter ended December 31, 2016.2021. The Company defines segment earnings as earnings before interest and taxes. See Notes 1 and 10Note 13 for a discussion of the Company's business segments.





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AUTOMATION SOLUTIONS
Three Months Ended Dec 3120202021Change
Sales$2,692 2,805 4 %
Earnings$361 526 45 %
     Margin13.4 %18.7 % 
   Restructuring and related costs$64 12 
   Amortization of intangibles$68 65 
Adjusted EBITA$493 603 22 %
   Adjusted EBITA Margin18.3 %21.5 %
Three Months Ended Dec 312016 2017 Change
(dollars in millions)     
      
Sales$1,967
 2,572
 31%
Earnings$326
 386
 18%
     Margin16.6% 15.0%  

Sales by Major Product Offering     Sales by Major Product Offering
Measurement & Analytical Instrumentation$682
 772
 13%Measurement & Analytical Instrumentation$698 735 5 %
Valves, Actuators & Regulators449
 867
 93%Valves, Actuators & Regulators806 816 1 %
Industrial Solutions367
 424
 15%Industrial Solutions508 566 12 %
Process Control Systems & Solutions469
 509
 9%
Systems & SoftwareSystems & Software680 688 1 %
Total$1,967
 2,572
 31% Total$2,692 2,805 4 %
Automation Solutions sales were $2.6$2.8 billion in the first quarter, an increase of $605 million,$113 or 314 percent. Underlying sales increased 95 percent ($176 million) on 4 percent higher volume. Acquisitions added 19volume and 1 percent ($373 million)higher price, reflecting continued recovery in most end markets and foreignworld areas. However, sales continued to be unfavorably impacted by supply chain and logistics constraints in the quarter. Foreign currency translation had a 31 percent ($56 million) favorableunfavorable impact. Underlying sales increased 7 percent in the Americas (U.S. up 4 percent), as process end markets continue to recover, while Europe was flat, and Asia, Middle East & Africa increased 7 percent (China up 17 percent). Sales for Measurement & Analytical Instrumentation increased 13$37, or 5 percent as market conditions continued to improve for North American process industries. Measurement & Analytical sales were strong in Asia, Middle East & Africa, with China up over 20 percent, up moderately in North America, and Process Control Systems & Solutions increased 9 percent on increased spending by global oil and gas customers, strong MRO demand and growth of small and mid-sized projects focused on facility expansion and optimization.soft in Europe. Valves, Actuators & Regulators increased $418 million,$10, or 931 percent ledas favorable demand in the Americas and China was offset by softness in the valvesrest of Asia, Middle East & controls acquisition ($349 million) and broad-based demand across end markets, including energy, chemical and life sciences.Africa. Industrial Solutions sales increased $57 million,were up $58, or 1512 percent, driven by favorablereflecting strong global trendsdemand in general industrialdiscrete end markets. Underlying salesSystems & Software increased 14 percent in the U.S. and decreased$8, or 1 percent, as strength in Europe. Sales increased 13 percentprocess end markets in North America was offset by declines in Europe and Asia, Middle East & Africa, while power end markets were strong in Asia, (China up 22 percent) supported by strong demand in process automation and discrete markets, while Canada was up 18 percent and Latin America was up 6 percent. Sales decreased 7 percent in Middle East/East & Africa. Earnings were $386 million,$526, an increase of $60 million,$165, or 18 percent. The increase was driven by45 percent, and margin increased 5.3 percentage points to 18.7 percent, reflecting leverage on higher volume, leverage andlower restructuring expenses which benefited margins 2.0 percentage points, savings from cost reduction savings,actions and favorable mix, partially offset by slightly unfavorable foreign currency transactions of $26 million compared withcomparisons due to higher COVID-related savings in the prior year. Margin declined 1.6 percentage points to 15.0 percent. Margin improved 1.2 percentage points to 17.8 percent, excluding dilution of 2.8 percentage points from the valves & controls acquisition, which includes intangibles amortization of $18 million.







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COMMERCIAL & RESIDENTIAL SOLUTIONS
Three Months Ended Dec 3120202021Change
Sales:
  Climate Technologies$1,031 1,163 13 %
  Tools & Home Products445 508 14 %
     Total$1,476 1,671 13 %
Earnings:
  Climate Technologies$212 192 (9)%
  Tools & Home Products98 107 9 %
     Total$310 299 (3)%
     Margin21.0 %17.9 % 
   Restructuring and related costs$3 4 
   Amortization of intangibles$13 12 
Adjusted EBITA$326 315 (3)%
   Adjusted EBITA Margin22.1 %18.9 %
Three Months Ended Dec 312016 2017 Change
(dollars in millions)     
      
Sales:     
Climate Technologies$859
 922
 7 %
Tools & Home Products393
 330
 (16)%
     Total$1,252
 1,252
 — %
      
Earnings:     
Climate Technologies$161
 165
 2 %
Tools & Home Products88
 87
 (1)%
     Total$249
 252
 1 %
     Margin19.9% 20.1%  




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Commercial & Residential Solutions sales were $1.3$1.7 billion in the first quarter, flatup $195, or 13 percent compared to the prior year. Underlying sales were up 5increased 13 percent ($58 million) on 8 percent higher volume and slightly5 percent higher price. Foreign currency translation added 2price, reflecting strong growth across all businesses and geographies, especially in commercial and industrial end markets while residential end markets were solid. Overall, underlying sales increased 17 percent ($19 million)in the Americas (U.S. up 16 percent), while the divestiture of the residential storage business deducted 713 percent ($77 million) in Europe and 4 percent in Asia, Middle East & Africa (China was flat). Climate Technologies sales were $922 million$1.2 billion in the first quarter, an increase of $132, or 13 percent. Air conditioning, heating and refrigeration sales were up, reflecting strong global demand across all end markets, especially food service, food retail and aftermarket. Tools & Home Products sales were $508 in the first quarter, an increase of $63, million, or 714 percent. Global HVAC sales were solid, reflecting robust growth in China on strength in commercial air conditioning and heating, partially offset by a modest decline in U.S. residential air conditioning. Global refrigeration sales were solid led by robust growth in China, while the U.S. was flat. Sensors had solid growth and temperature controls was up slightly. Tools & Home Products sales were $330 million in the first quarter, a decreaseSales of $63 million, or 16 percent, reflecting the impact of the residential storage divestiture. Sales for professional tools were strong on favorable demand in oil and gas and construction-related markets. Wet/up nearly 20 percent, while wet/dry vacuums had solid sales growth and food waste disposers were up slightly. Overall, underlying sales increased 1 percent in the U.S., 1 percent in Europe and 17 percent in Asia (China up 24 percent). Sales increased 5 percent in Canada, 4 percent in Middle East/Africa and 1 percent in Latin America.over 10 percent. Earnings were $252 million, an increase of $3 million$299, down 3 percent compared with the prior year, and margin improved 0.2decreased 3.1 percentage points to 17.9 percent due to unfavorable price-cost reflecting steel price increases, partially offset by leverage on higher sales volume and savings from cost reduction actions. Unfavorable price-cost is expected to improve and become favorable during the second half of fiscal 2022 as price partially offset by higher materials costs. In addition, the residential storage divestiture reduced earnings by $6 million, but benefited margin comparisons 0.8 percentage points, while higher warranty costs of $10 million associated with a specific product issue in Climate Technologies offset this benefit.increases are realized.







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FINANCIAL CONDITION

Key elements of the Company's financial condition for the three months ended December 31, 20172021 as compared to the year ended September 30, 20172021 and the three months ended December 31, 2020 follow.
 Dec 31, 2020Sept 30, 2021Dec 31, 2021
Operating working capital$825 $704 $840 
Current ratio1.2 1.3 2.0 
Total debt-to-total capital46.1 %40.3 %46.1 %
Net debt-to-net capital37.8 %30.4 %28.2 %
Interest coverage ratio14.2 X18.6 X29.6 X
 Sept 30, 2017
 Dec 31, 2017
Working capital (in millions)$3,207
 1,960
Current ratio1.6
 1.3
Total debt-to-total capital34.8% 39.6%
Net debt-to-net capital15.4% 22.1%
Interest coverage ratio12.6X 11.2X
The Company's debt-to-capital increased primarilyoperating working capital increased compared to the same quarter last year and compared to September 30, 2021 due to higher borrowingsinventory levels to support acquisitionssales growth and share repurchases.reflecting ongoing supply chain and logistics constraints. The increase in the current ratio reflects increased cash from the Company's $3 billion of debt issued in the first quarter of fiscal 2022 to support the AspenTech transaction and cash received related to the Vertiv subordinated interest of $438. The interest coverage ratio (earnings before income taxes plus interest expense, divided by interest expense) of 11.2X29.6X for the first three months of 2018fiscal 2022 compares to 9.9X14.2X for the three months ended December 31, 2020. The increase reflects higher pretax earnings in the current quarter, including the Vertiv subordinated interest gain of $453. Excluding the gain, the interest coverage ratio was 18.6X.
In December 2021, the Company issued $1 billion of 2.00% notes due 2028, $1 billion of 2.20% notes due 2031 and $1 billion of 2.80% notes due 2051. The net proceeds from the sale of the notes will be used to pay a portion of the Company's contribution of approximately $6.0 billion to existing stockholders of Aspen Technology, Inc. (“AspenTech”) as part of the AspenTech transaction. The Company expects to finance the remainder of the contribution through existing sources, including cash on hand, short-term debt capacity, and cash from operations. See Note 4 and Note 10.
Operating cash flow for the first three months of 2017. The increase reflects higher pretax earnings and lower interest expensefiscal 2022 was $523, a decrease of $285 compared with $808 in the current year.

Operatingprior year due to higher inventory levels to support sales growth and reflecting ongoing supply chain and logistics constraints. Free cash flow from continuing operations forof $407 in the first three months of 2018 was $447 million, an increase of $37 million compared with $410 million in the prior year, reflecting higher earnings partially offset by an investment in working capital to support higher levels of sales activity. Operating cash flow from continuing operations funded dividends of $311 million and capital expenditures of $96 million. Free cash flow from continuing operations of $351 millionfiscal 2022 (operating cash flow of $447 million$523 less capital expenditures of $96 million) increased $41 million in 2018. Free$116) decreased $279 compared to free cash flow from continuing operations was $310 millionof $686 in 20172021 (operating cash flow of $410 million$808 less capital expenditures of $100 million). Divestiture$122), reflecting the decrease in operating cash flow. Cash provided by investing activities was $285, reflecting cash received related to the Vertiv subordinated interest of $438. Cash provided by financing activities was $1,601, primarily due to proceeds of $235 million and increased short-term borrowings were used to fund acquisitions of $513 million and common stock purchasesnearly $3 billion from the December 2021 debt issuance, partially offset by the repayment of $500 million.of long-term debt, dividend payments, and share repurchases.

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.
Emerson'sEmerson maintains a conservative financial structure providesto provide the strength and flexibility necessary to achieve itsour strategic objectives. The Companyobjectives and has been successful in efficiently deploying cash where needed worldwide to fund operations, complete acquisitions and sustain long-term growth. The Company believes that sufficient funds will beEmerson is in a strong financial position, with total assets of $27 billion and stockholders' equity of $10 billion, and has the resources available to meet the Company’s needsfor reinvestment in the foreseeable future through operating cash flow, existing resources,businesses, strategic acquisitions and managing its capital structure on a short- and long-term debt capacity or backup credit lines.basis.






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FISCAL 20182022 OUTLOOK

The Company’s first quarter results reflected continued favorable global economic conditions and solid sales growthEmerson continues to see strong demand in both the Automation Solutions and Commercial & Residential Solutions. These favorable trends along withSolutions platforms and to manage ongoing supply chain constraints and challenges related to the positive effects of U.S. tax reform supportCOVID-19 pandemic. For the Company’s outlook for full-year fiscal 2018. Consolidatedfull year, consolidated net sales are expected to be up 116 to 138 percent, with underlying sales up 57 to 79 percent excluding an approximate 4a 1 percent unfavorable impact from acquisitions and divestitures and 2 percent fromforeign currency translation. Automation Solutions net sales are expected to be up 185 to 207 percent, with underlying sales up 67 to 89 percent excluding an approximate 9a 2 percent unfavorable impact from acquisitions and 3 percent fromforeign currency translation. Commercial & Residential Solutions net sales are expected to be up 18 to 310 percent with underlying sales up 49 to 611 percent excluding an approximate 5a 1 percent negativeunfavorable impact from acquisitions and divestitures and 2 percent from favorableforeign currency translation. Earnings per share are expected to be $3.05$4.71 to $3.15, including a $0.15$4.86, while adjusted earnings per share benefit from the lower U.S. corporate income tax rate on full-year earnings. The outlook also includes the $0.07 per share net benefit of the tax law change, offset by the $0.04 per share loss on the residential storage divestiture and $0.03 per share from first year acquisition accounting charges. The Company expects operating cash flow of $2.9 billion and capital spending of approximately $575 million. For the second quarter of 2018, consolidated net sales are expected to be up approximately 18 percent, with underlying sales up approximately 7 percent, excluding an approximate 8 percent$4.90 to $5.05. Adjusted earnings per share exclude a $0.20 impact from acquisitionsrestructuring actions, a $0.39 impact from amortization of intangibles, a $0.60 gain from the Vertiv subordinated interest (see Note 4), and divestituresa $0.20 impact from Aspen Tech transaction costs and 3 percentinterest expense. Operating cash flow is expected to be approximately $3.8 billion and free cash flow, which excludes projected capital spending of $650 million, is expected to be approximately $3.1 billion. Share repurchases are expected to be approximately $250 to $500 million in fiscal 2022.

The guidance above does not include the operational impact of the pending transaction with AspenTech, but does include estimated transaction fees and interest expense on $3 billion of debt already incurred to fund the transaction. Emerson will contribute approximately $6.0 billion in cash related to its definitive agreement with AspenTech, and the transaction is expected to close in the second calendar quarter of 2022, subject to approval by AspenTech shareholders, regulatory approvals and other customary closing conditions. The Company issued $3 billion of long-term debt in the first quarter of fiscal 2022 and expects to finance the remainder of the contribution through existing sources, including cash on hand, short-term debt capacity, and cash from currency.

operations. While the transaction will initially increase the Company's financial leverage and debt ratios, Emerson's debt rating agencies reaffirmed the Company's investment-grade long-term debt ratings on the new debt issuances. Further, the Company expects its leverage and debt ratios to improve through strong combined cash flow of the companies and disciplined capital allocation. See Item 1A - "Risk Factors" in our Annual Report on Form 10-K.
Statements in this report that are not strictly historical may be "forward-looking" statements, which involve risks and uncertainties, and Emerson undertakes no obligation to update any such statements to reflect later developments. These risks and uncertainties include the Company's ability to successfully complete on the terms and conditions contemplated, and the financial impact of, the proposed AspenTech transaction, the scope, duration and ultimate impact of the COVID-19 pandemic, as well as economic and currency conditions, market demand, including related to the pandemic and oil and gas price declines and volatility, pricing, protection of intellectual property, andcybersecurity, tariffs, competitive and technological factors, among others, which are set forth in the “Risk Factors” of Part I, Item 1A, and the "Safe Harbor Statement" of Part II, Item 7, to the Company's Annual Report on Form 10-K for the year ended September 30, 20172021 and in subsequent reports filed with the SEC, which are hereby incorporated by reference, as well as the impact of U.S. tax reform as discussed in Note 1 of Notes to Consolidated Financial Statements set forth in Part I, Item 1, of this Quarterly Report on Form 10-Q.reference.

Item 4. Controls and Procedures 

The Company maintains a system of disclosure controls and procedures designed to ensure that information required to be disclosed in its reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported in a timely manner. This system also is designed to ensure information is accumulated and communicated to management, including the Company's certifying officers, to allow timely decisions regarding required disclosure. Based on an evaluation performed, the certifying officers have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.
Notwithstanding the foregoing, there can be no assurance that the Company's disclosure controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiaries to report material information otherwise required to be set forth in the Company's reports.
There was no change in the Company's internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.





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20





PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) Issuer Purchases of Equity Securities (shares in 000s).
Period
Total Number of Shares
Purchased
 Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 2017— $0.00 — 56,930
November 20175,007 $61.65 5,007 51,923
December 20172,855 $67.01 2,855 49,068
     Total7,862 $63.60 7,862 49,068
PeriodTotal Number of Shares
Purchased		Average Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 2021870 $95.51870 59,375
November 2021382 $94.70382 58,993
December 20211,524 $91.081,524 57,469
     Total2,776 $92.972,776 57,469
In November 2015, the Board of Directors authorized the purchase of up to 70 million shares. In March 2020, the Board of Directors authorized the purchase of an additional 60 million shares and 49.1a total of approximately 57.5 million shares remain available.available for purchase under the authorizations.







21



Item 6. Exhibits


(a) Exhibits (Listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K). 

10.12.1 
LetterTransaction Agreement and Plan of Merger, dated as of October 10, 2021, among Emerson Electric Co., Aspen Technology, Inc., EMR Worldwide, Inc., Emersub CX, Inc. and Emersub CXI, Inc., incorporated by reference to the Company’s Form 8-K, filed on October 12, 2021, File No. 1-278, Exhibit 2.1. *

4.1 
Form of 2.000% Notes due 2028, incorporated by reference to the Company’s Form 8-K, filed on December 21, 2021, File No. 1-278, Exhibit 4.2. **

4.2 
Form of 2.200% Notes due 2031, incorporated by reference to the Company’s Form 8-K, filed on December 21, 2021, File No. 1-278, Exhibit 4.3. **
4.3 
Form of 2.800% Notes due 2051, incorporated by reference to the Company’s Form 8-K, filed on December 21, 2021, File No. 1-278, Exhibit 4.4. **

10.1 
Suspension of Rights Agreement dated November 8, 2017 by andOctober 12, 2021 between Emerson Electric Co. and Edgar M. Purvis, incorporated by referenceJPMorgan Chase Bank, N.A., as Agent, under the Credit Agreement dated as of May 23, 2018 (as amended or otherwise modified from time to Emersontime).

10.2 
1231 
31
Certifications pursuant to Exchange Act Rule 13a-14(a).
32
101
Attached as Exhibit 101 to this report are the following documents formatted in XBRL (ExtensibleiXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Statements of Earnings for the three months ended December 31, 20172021 and 2016,2020, (ii) Consolidated Statements of Comprehensive Income for the three months ended December 31, 20172021 and 2016,2020, (iii) Consolidated Balance Sheets as of September 30, 20172021 and December 31, 2017,2021, (iv) Consolidated Statements of Equity for the three months ended December 31, 2021 and 2020, (v) Consolidated Statements of Cash Flows for the three months ended December 31, 20172021 and 2016,2020, and (v)(vi) Notes to Consolidated Financial Statements for the three months ended ended December 31, 2017.  2021 and 2020.  


104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).    
*
Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Emerson agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request. Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10).

**The Company entered into two global notes for each series of notes (Notes A-1 and A-2), which are identical other than with respect to the note number.




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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
EMERSON ELECTRIC CO.
By/s/ F. J. Dellaquila
Frank J. Dellaquila
Frank J. Dellaquila
Senior Executive Vice President and Chief Financial Officer
(on behalf of the registrant and as Chief Financial Officer)
February 7, 20182, 2022





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