UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30,~~December 31, 2020

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

43-0259330

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

8000 W. Florissant Ave.

P.O. Box 4100

St. Louis,

Missouri

63136

(Address of principal executive offices)

(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock of $0.50 par value per share			EMR			New York Stock Exchange
						NYSE Chicago ~~Stock Exchange~~
0.375% Notes due 2024			EMR 24			New York Stock Exchange
1.250% Notes due 2025			EMR 25A			New York Stock Exchange
2.000% Notes due 2029			EMR 29			New 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes ☒ 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.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

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 ☒

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 ~~July~~January 31, ~~2020:~~2021: ~~597,591,921~~600,029,672 shares.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Earnings

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three ~~and nine~~ months ended ~~June 30,~~December 31, 2019 and 2020

(Dollars in millions, except per share amounts; unaudited)


			Three Months Ended June 30,																		Nine Months Ended June 30,																	Three Months Ended December 31,
			2019						2020						2019						2020					2019						2020
Net sales	Net sales		$	4,684					3,914						13,401						12,227			Net sales		$	4,151					4,161

Costs and expenses:	Costs and expenses:																							Costs and expenses:
Cost of sales	Cost of sales		2,683						2,296						7,714						7,100			Cost of sales		2,392						2,438
Selling, general and administrative expenses	Selling, general and administrative expenses		1,126						934						3,348						3,040			Selling, general and administrative expenses		1,123						998
Other deductions, net	Other deductions, net		65						181						172						401			Other deductions, net		178						122
Interest expense (net of interest income of $7, $4, $19 and $16, respectively)			43						45						134						116
Interest expense (net of interest income of $6 and $2, respectively)																								Interest expense (net of interest income of $6 and $2, respectively)		35						40

Earnings before income taxes	Earnings before income taxes		767						458						2,033						1,570			Earnings before income taxes		423						563

Income taxes	Income taxes		155						51						429						310			Income taxes		94						111

Net earnings	Net earnings		612						407						1,604						1,260			Net earnings		329						452

Less: Noncontrolling interests in earnings of subsidiaries	Less: Noncontrolling interests in earnings of subsidiaries		8						8						15						18			Less: Noncontrolling interests in earnings of subsidiaries		3						7

Net earnings common stockholders	Net earnings common stockholders		$	604					399						1,589						1,242			Net earnings common stockholders		$	326					445

Basic earnings per share common stockholders	Basic earnings per share common stockholders		$	0.98					0.67						2.57						2.05			Basic earnings per share common stockholders		$	0.53					0.74

Diluted earnings per share common stockholders	Diluted earnings per share common stockholders		$	0.97					0.67						2.55						2.04			Diluted earnings per share common stockholders		$	0.53					0.74

See accompanying Notes to Consolidated Financial Statements.

1

Consolidated Statements of Comprehensive Income

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three ~~and nine~~ months ended ~~June 30,~~December 31, 2019 and 2020

(Dollars in millions; unaudited)


			Three Months Ended June 30,																														Nine Months Ended June 30,																													Three Months Ended December 31,
						2019									2020									2019									2020								2019									2020
Net earnings	Net earnings					$	612								407									1,604									1,260			Net earnings					$	329								452

Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:																																			Other comprehensive income (loss), net of tax:
Foreign currency translation	Foreign currency translation					(93)									134									(40)									(48)			Foreign currency translation					99									189
Pension and postretirement	Pension and postretirement					13									29									38									87			Pension and postretirement					28									27
Cash flow hedges	Cash flow hedges					(8)									40									2									(16)			Cash flow hedges					19									31
Total other comprehensive income (loss)	Total other comprehensive income (loss)					(88)									203									—									23			Total other comprehensive income (loss)					146									247

Comprehensive income	Comprehensive income					524									610									1,604									1,283			Comprehensive income					475									699

Less: Noncontrolling interests in comprehensive income of subsidiaries	Less: Noncontrolling interests in comprehensive income of subsidiaries					8									7									16									18			Less: Noncontrolling interests in comprehensive income of subsidiaries					3									7
Comprehensive income common stockholders	Comprehensive income common stockholders					$	516								603									1,588									1,265			Comprehensive income common stockholders					$	472								692

See accompanying Notes to Consolidated Financial Statements.

2

Consolidated Balance Sheets

EMERSON ELECTRIC CO. & SUBSIDIARIES

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


			Sept 30, 2019						June 30, 2020					Sept 30, 2020						Dec 31, 2020
ASSETS	ASSETS											ASSETS
Current assets	Current assets											Current assets
Cash and equivalents	Cash and equivalents		$	1,494					2,450			Cash and equivalents		$	3,315					2,197
Receivables, less allowances of $112 and $109, respectively			2,985						2,512
Receivables, less allowances of $138 and $140, respectively												Receivables, less allowances of $138 and $140, respectively		2,802						2,652
Inventories	Inventories		1,880						2,102			Inventories		1,928						2,013
Other current assets	Other current assets		780						815			Other current assets		761						819

Total current assets	Total current assets		7,139						7,879			Total current assets		8,806						7,681

Property, plant and equipment, net	Property, plant and equipment, net		3,642						3,565			Property, plant and equipment, net		3,688						3,693
Other assets	Other assets											Other assets
Goodwill	Goodwill		6,536						6,624			Goodwill		6,734						7,832
Other intangible assets	Other intangible assets		2,615						2,488			Other intangible assets		2,468						3,196
Other	Other		565						1,174			Other		1,186						1,276

Total other assets	Total other assets		9,716						10,286			Total other assets		10,388						12,304
Total assets	Total assets		$	20,497					21,730			Total assets		$	22,882					23,678

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY											LIABILITIES AND EQUITY
Current liabilities	Current liabilities											Current liabilities
Short-term borrowings and current maturities of long-term debt	Short-term borrowings and current maturities of long-term debt		$	1,444					1,725			Short-term borrowings and current maturities of long-term debt		$	1,160					1,717
Accounts payable	Accounts payable		1,874						1,426			Accounts payable		1,715						1,694
Accrued expenses	Accrued expenses		2,658						2,834			Accrued expenses		2,910						2,965

Total current liabilities	Total current liabilities		5,976						5,985			Total current liabilities		5,785						6,376

Long-term debt	Long-term debt		4,277						5,500			Long-term debt		6,326						5,892

Other liabilities	Other liabilities		1,971						2,367			Other liabilities		2,324						2,471

Equity	Equity											Equity
Common stock, $0.50 par value; authorized, 1,200.0 shares; issued, 953.4 shares; outstanding, 611.0 shares and 597.6 shares, respectively			477						477
Common stock, $0.50 par value; authorized, 1,200.0 shares; issued, 953.4 shares; outstanding, 598.0 shares and 599.8 shares, respectively												Common stock, $0.50 par value; authorized, 1,200.0 shares; issued, 953.4 shares; outstanding, 598.0 shares and 599.8 shares, respectively		477						477
Additional paid-in-capital	Additional paid-in-capital		393						459			Additional paid-in-capital		470						499
Retained earnings	Retained earnings		24,199						24,531			Retained earnings		24,955						25,096
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)		(1,722)						(1,699)			Accumulated other comprehensive income (loss)		(1,577)						(1,330)
Cost of common stock in treasury, 342.4 shares and 355.8 shares, respectively			(15,114)						(15,937)
Cost of common stock in treasury, 355.4 shares and 353.6 shares, respectively												Cost of common stock in treasury, 355.4 shares and 353.6 shares, respectively		(15,920)						(15,847)
Common stockholders’ equity	Common stockholders’ equity		8,233						7,831			Common stockholders’ equity		8,405						8,895
Noncontrolling interests in subsidiaries	Noncontrolling interests in subsidiaries		40						47			Noncontrolling interests in subsidiaries		42						44
Total equity	Total equity		8,273						7,878			Total equity		8,447						8,939
Total liabilities and equity	Total liabilities and equity		$	20,497					21,730			Total liabilities and equity		$	22,882					23,678

See accompanying Notes to Consolidated Financial Statements.

3

Consolidated Statements of Equity

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three ~~and nine~~ months ended ~~June 30,~~December 31, 2019 and 2020

(Dollars in millions; unaudited)


			Three Months Ended June 30,																		Nine Months Ended June 30,																	Three Months Ended December 31,
			2019						2020						2019						2020					2019						2020

Common stock	Common stock		$	477					477						477						477			Common stock		$	477					477

Additional paid-in-capital	Additional paid-in-capital																							Additional paid-in-capital
Beginning balance	Beginning balance		380						453						348						393			Beginning balance		393						470
Stock plans	Stock plans		7						6						39						66			Stock plans		54						29

Ending balance	Ending balance		387						459						387						459			Ending balance		447						499

Retained earnings	Retained earnings																							Retained earnings
Beginning balance	Beginning balance		23,475						24,431						23,072						24,199			Beginning balance		24,199						24,955
Net earnings common stockholders	Net earnings common stockholders		604						399						1,589						1,242			Net earnings common stockholders		326						445
Dividends paid (per share: $0.49, $0.50, $1.47, and $1.50, respectively)			(302)						(299)						(909)						(910)
Adoption of accounting standard updates			—						—						25						—
Dividends paid (per share: $0.50 and $0.505, respectively)																								Dividends paid (per share: $0.50 and $0.505, respectively)		(305)						(303)
Adoption of accounting standard																								Adoption of accounting standard		0						(1)
Ending balance	Ending balance		23,777						24,531						23,777						24,531			Ending balance		24,220						25,096

Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)																							Accumulated other comprehensive income (loss)
Beginning balance	Beginning balance		(928)						(1,903)						(1,015)						(1,722)			Beginning balance		(1,722)						(1,577)
Foreign currency translation	Foreign currency translation		(93)						135						(41)						(48)			Foreign currency translation		99						189
Pension and postretirement	Pension and postretirement		13						29						38						87			Pension and postretirement		28						27
Cash flow hedges	Cash flow hedges		(8)						40						2						(16)			Cash flow hedges		19						31
Ending balance	Ending balance		(1,016)						(1,699)						(1,016)						(1,699)			Ending balance		(1,576)						(1,330)

Treasury stock	Treasury stock																							Treasury stock
Beginning balance	Beginning balance		(14,878)						(15,941)						(13,935)						(15,114)			Beginning balance		(15,114)						(15,920)
Purchases	Purchases		—						—						(1,000)						(942)			Purchases		(129)						(13)
Issued under stock plans	Issued under stock plans		8						4						65						119			Issued under stock plans		96						86
Ending balance	Ending balance		(14,870)						(15,937)						(14,870)						(15,937)			Ending balance		(15,147)						(15,847)

Common stockholders' equity	Common stockholders' equity		8,755						7,831						8,755						7,831			Common stockholders' equity		8,421						8,895

Noncontrolling interests in subsidiaries	Noncontrolling interests in subsidiaries																							Noncontrolling interests in subsidiaries
Beginning balance	Beginning balance		46						46						43						40			Beginning balance		40						42
Net earnings	Net earnings		8						8						15						18			Net earnings		3						7
Other comprehensive income			—						(1)						1						—

Dividends paid	Dividends paid		(5)						(6)						(10)						(11)			Dividends paid		(5)						(5)

Ending balance	Ending balance		49						47						49						47			Ending balance		38						44

Total equity	Total equity		$	8,804					7,878						8,804						7,878			Total equity		$	8,459					8,939

See accompanying Notes to Consolidated Financial Statements.

4

Consolidated Statements of Cash Flows

EMERSON ELECTRIC CO. & SUBSIDIARIES

~~Nine~~Three Months Ended ~~June 30,~~December 31, 2019 and 2020

(Dollars in millions; unaudited)


						Nine Months Ended																				Three Months Ended
						June 30,																				December 31,
						2019						2020								2019						2020
Operating activities	Operating activities														Operating activities
Net earnings	Net earnings					$	1,604					1,260			Net earnings					$	329					452

Adjustments to reconcile net earnings to net cash provided by operating activities:	Adjustments to reconcile net earnings to net cash provided by operating activities:														Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization					609						631			Depreciation and amortization					211						244
Stock compensation	Stock compensation					83						69			Stock compensation					56						64
Pension expense	Pension expense					(1)						50			Pension expense					17						8
Changes in operating working capital	Changes in operating working capital					(352)						(86)			Changes in operating working capital					(180)						71

Other, net	Other, net					(141)						(70)			Other, net					(9)						(31)

Cash provided by operating activities	Cash provided by operating activities					1,802						1,854			Cash provided by operating activities					424						808

Investing activities	Investing activities														Investing activities
Capital expenditures	Capital expenditures					(395)						(329)			Capital expenditures					(114)						(122)
Purchases of businesses, net of cash and equivalents acquired	Purchases of businesses, net of cash and equivalents acquired					(385)						(114)			Purchases of businesses, net of cash and equivalents acquired					0						(1,611)
Divestitures of businesses						10						—

Other, net	Other, net					(91)						(65)			Other, net					(17)						13

Cash used in investing activities	Cash used in investing activities					(861)						(508)			Cash used in investing activities					(131)						(1,720)

Financing activities	Financing activities														Financing activities
Net increase in short-term borrowings	Net increase in short-term borrowings					427						269			Net increase in short-term borrowings					754						340
Proceeds from short-term borrowings greater than three months						—						546
Payments of short-term borrowings greater than three months						—						(340)
Proceeds from long-term debt						1,691						1,488

Payments of long-term debt	Payments of long-term debt					(655)						(502)			Payments of long-term debt					(502)						(301)
Dividends paid	Dividends paid					(909)						(910)			Dividends paid					(305)						(303)
Purchases of common stock	Purchases of common stock					(1,000)						(942)			Purchases of common stock					(129)						(13)
Other, net	Other, net					21						28			Other, net					20						42
Cash used in financing activities	Cash used in financing activities					(425)						(363)			Cash used in financing activities					(162)						(235)

Effect of exchange rate changes on cash and equivalents	Effect of exchange rate changes on cash and equivalents					(6)						(27)			Effect of exchange rate changes on cash and equivalents					10						29
Increase in cash and equivalents						510						956
Increase (Decrease) in cash and equivalents															Increase (Decrease) in cash and equivalents					141						(1,118)
Beginning cash and equivalents	Beginning cash and equivalents					1,093						1,494			Beginning cash and equivalents					1,494						3,315
Ending cash and equivalents	Ending cash and equivalents					$	1,603					2,450			Ending cash and equivalents					$	1,635					2,197

Changes in operating working capital	Changes in operating working capital														Changes in operating working capital
Receivables	Receivables					$	178					456			Receivables					$	281					232
Inventories	Inventories					(217)						(218)			Inventories					(167)						(37)
Other current assets	Other current assets					(74)						40			Other current assets					32						18
Accounts payable	Accounts payable					(156)						(439)			Accounts payable					(225)						(37)
Accrued expenses	Accrued expenses					(83)						75			Accrued expenses					(101)						(105)

Total changes in operating working capital	Total changes in operating working capital					$	(352)					(86)			Total changes in operating working capital					$	(180)					71

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) 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, ~~2019.~~2020. Certain prior year amounts have been reclassified to conform to current year presentation. See Note 12.

Effective October 1, 2020, the Company adopted two accounting standard updates and one new accounting standard which had an immaterial impact on the Company's financial statements as of and for the three months ended December 31, 2020. These included:

~~On October 1, 2019,~~•Updates to ASC 350, Intangibles - Goodwill and Other, which eliminate the ~~Company adopted ASC 842,~~ ~~Leases,~~ ~~which requires rights and obligations related~~requirement to ~~lease arrangements to be recognized~~measure impairment based on the ~~balance sheet, using the optional transition method under which prior periods were not adjusted. The Company elected the package~~implied fair value of ~~practical expedients for leases that commenced prior~~goodwill compared to the ~~adoption date, which included~~ carrying ~~forward~~amount of a reporting unit’s goodwill. Instead, goodwill impairment will be measured as the ~~historical lease classification as operating or finance. The adoption~~excess of ASC 842 resulted in the recognition of operating lease right-of-use assets and related lease liabilities of approximately $500 as of October 1, 2019, but did not materially impact the Company's earnings or cash flows for the three and nine months ended June 30, 2020.a reporting unit’s carrying amount over its estimated fair value.

~~On October 1, 2019, the Company adopted updates~~•Updates to ASC ~~815,~~350, ~~Derivatives~~Intangibles - Goodwill and ~~Hedging~~Other, which ~~permit hedging certain contractually specified risk components. Additionally,~~align the ~~updates eliminate~~requirements for capitalizing implementation costs incurred in a software hosting arrangement with the ~~requirement~~requirements for costs incurred to separately measure and report hedge ineffectiveness and simplify hedge documentation and effectiveness assessment requirements. These updates were adopted using a modified retrospective approach and were immaterial to the Company's financial statements for the three and nine months ended June 30, 2020.develop or obtain internal-use software.

~~In June 2016, the FASB issued~~•Adoption of ASC 326, Financial Instruments - Credit Losses, which amends the impairment model by requiring entities to use a forward-looking approach ~~based on expected losses,~~ to estimate lifetime expected credit losses on certain types of financial instruments, including trade receivables. ~~The new standard is effective in the first quarter of fiscal 2021 and is expected to have an immaterial impact on the Company's financial statements.~~

(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 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 1412 for additional information about the Company's revenues.

The following table summarizes the balances of the Company'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, 2019												June 30, 2020											Sept 30, 2020									Dec 31, 2020
Unbilled receivables (contract assets)	Unbilled receivables (contract assets)					$	456								409			Unbilled receivables (contract assets)					$	458								503
Customer advances (contract liabilities)	Customer advances (contract liabilities)					(519)									(613)			Customer advances (contract liabilities)					(583)									(699)
Net contract liabilities	Net contract liabilities					$	(63)								(204)			Net contract liabilities					$	(125)								(196)

The majority of the Company's contract balances relate to arrangements where revenue is recognized over time and payments from customers are made according to a contractual billing schedule. The increase in net contract liabilities was due to customer billings which exceeded revenue recognized for performance completed during the period. Revenue recognized for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020 included approximately ~~$37 and $363, respectively,~~$257 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, 2020 for performance obligations that

6

~~net contract liabilities were immaterial. Revenue recognized for the nine months ended June 30, 2020 for performance obligations that~~ were satisfied in previous periods, including cumulative catchup adjustments on the Company's long-term contracts, was not material.

As of ~~June 30,~~December 31, 2020, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately ~~$5.6~~$6.0 billion. The Company expects to recognize approximately 8580 percent of its remaining performance obligations as revenue over the next 12 months, with the remainder substantially over the subsequent two years thereafter.

(3) WEIGHTED-AVERAGE COMMON SHARES

Reconciliations of weighted-average shares for basic and diluted earnings per common share follow. Earnings allocated to participating securities were inconsequential.


			Three Months Ended June 30,																		Nine Months Ended June 30,																	Three Months Ended December 31,
			2019						2020						2019						2020					2019						2020

Basic shares outstanding	Basic shares outstanding		614.3						596.9						617.4						604.8			Basic shares outstanding		610.0						598.5
Dilutive shares	Dilutive shares		4.7						3.1						4.2						3.6			Dilutive shares		4.1						3.4
Diluted shares outstanding	Diluted shares outstanding		619.0						600.0						621.6						608.4			Diluted shares outstanding		614.1						601.9

(4) ACQUISITIONS AND DIVESTITURES

~~During the first nine months of~~On October 1, 2020, the Company completed the acquisition of Open Systems International, Inc. (OSI), a leading operations technology software provider in the global power industry, for approximately $1.6 billion, net of cash acquired. This business, which has annual sales of approximately $170 and is reported in the Automation Solutions segment, will expand the Company's offerings in the power industry to include the digitization and modernization of the electric grid. The Company recognized goodwill of $966 (NaN of which is expected to be tax deductible), identifiable intangible assets of $768, primarily intellectual property and customer relationships with a weighted-average useful life of approximately 11 years, and deferred tax liabilities of approximately $185. Valuations of these assets and liabilities are in-process and subject to refinement. Results of operations for the three months ended December 31, 2020 included first-year pretax acquisition ~~spending totaled $114,~~accounting charges related to backlog amortization and deferred revenue of $11 and $4, respectively.

On November 17, 2020, the Company acquired the remaining interest of an equity investment for approximately $19, net of cash acquired.

The Company acquired 83 businesses in ~~2019, all~~fiscal 2020, 2 in the Automation Solutions segment and 1 in the Climate Technologies segment, for ~~$469,~~$126, net of cash acquired. These eight businesses had combined annual sales of approximately $300. The Company recognized goodwill of $213 ($158 of which is expected to be tax deductible) and other identifiable intangible assets of $155, primarily customer relationships and intellectual property with a weighted-average life of approximately nine years.

~~Valuations of certain acquired assets and liabilities are in-process and subject to refinement for transactions completed after June 30, 2019.~~

(5) PENSION & POSTRETIREMENT PLANS

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


			Three Months Ended June 30,																														Nine Months Ended June 30,																													Three Months Ended December 31,
						2019									2020									2019									2020								2019									2020
Service cost	Service cost					$	18								21									54									65			Service cost					$	22								21
Interest cost	Interest cost					49									40									149									120			Interest cost					40									32
Expected return on plan assets	Expected return on plan assets					(88)									(84)									(264)									(252)			Expected return on plan assets					(84)									(84)
Net amortization	Net amortization					17									38									50									113			Net amortization					37									35
Total	Total					$	(4)								15									(11)									46			Total					$	15								4

7

(6) OTHER DEDUCTIONS, NET

Other deductions, net are summarized below:


			Three Months Ended June 30,																														Nine Months Ended June 30,																													Three Months Ended December 31,
			2019															2020									2019									2020					2019												2020

Amortization of intangibles (intellectual property and customer relationships)	Amortization of intangibles (intellectual property and customer relationships)					$	60								60									177									178			Amortization of intangibles (intellectual property and customer relationships)					$	59								78
Restructuring costs	Restructuring costs					20									88									40									216			Restructuring costs					97									66
Special advisory fees	Special advisory fees					—									—									—									13			Special advisory fees					13									0
Other	Other					(15)									33									(45)									(6)			Other					9									(22)
Total	Total					$	65								181									172									401			Total					$	178								122

In the ~~third~~first quarter of fiscal ~~2020,~~2021, the ~~change~~increase in intangibles amortization was due to the OSI acquisition, including backlog amortization of $11. Other included an investment gain of $21 and a gain from acquiring the remaining interest of an equity investment of $17. The impact of pensions was favorable by $11, offset by fees related to the OSI acquisition of $6 and an unfavorable ~~impacts~~impact from foreign currency transactions of ~~$25 and pensions of $16. On a year-to-date basis, the change in Other reflects an unfavorable impact from pensions of $46, partially offset by lower litigation costs.~~$7.

(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. ~~The costs~~Costs incurred in the first ~~nine~~three months of fiscal ~~2020 largely~~2021 relate to the Company's initiatives to improve operating margins that began in the third quarter of fiscal 2019 and ~~include~~expanded actions 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 2021 included workforce reductions of approximately ~~3,300~~800 employees. The Company expects fiscal ~~2020~~2021 restructuring expense and related costs to be approximately ~~$300, an increase~~ ~~of $20 compared to its previous estimate,~~$200, including costs to complete actions initiated in the first ~~nine~~three months of the year.

Restructuring expense by business segment follows:


			Three Months Ended June 30,																														Nine Months Ended June 30,																													Three Months Ended December 31,
			2019												2020												2019												2020											2019									2020

Automation Solutions	Automation Solutions					$	15								76									26									182			Automation Solutions					$	83								64

Climate Technologies	Climate Technologies					4									5									8									14			Climate Technologies					7									1
Tools & Home Products	Tools & Home Products					1									4									5									12			Tools & Home Products					3									1
Commercial & Residential Solutions	Commercial & Residential Solutions					5									9									13									26			Commercial & Residential Solutions					10									2

Corporate	Corporate					—									3									1									8			Corporate					4									0

Total	Total					$	20								88									40									216			Total					$	97								66

Details of the change in the liability for restructuring costs during the ~~nine~~three months ended ~~June 30,~~December 31, 2020 follow:


			Sept 30, 2019												Expense												Utilized/Paid												June 30, 2020											Sept 30, 2020									Expense									Utilized/Paid									Dec 31, 2020

Severance and benefits	Severance and benefits					$	62								184									92									154			Severance and benefits					$	176								61									28									209

Other	Other					7									32									34									5			Other					5									5									6									4
Total	Total					$	69								216									126									159			Total					$	181								66									34									213

The tables above do not include ~~$6 and $15~~$3 of costs related to ~~these~~ restructuring actions incurred infor the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020, ~~respectively,~~ that are required to be reported in cost of ~~sales.~~sales and selling, general and administrative expenses.

8

(8) INCOME TAXES

Income taxes were ~~$51~~$111 in the ~~third~~first quarter of fiscal ~~2020~~2021 and ~~$155~~$94 in 2019, resulting in effective tax rates of 11 percent and 20 percent, respectively. The current year rate included $57 ($0.10 per share) of discrete benefits, which decreased the rate 12 percentage points, related to updates to estimates for the prior year U.S. income tax return and the impact of a research and development tax credit study. The prior year rate included favorable discrete tax items, which reduced the rate 3 percentage points, largely due to a tax benefit of $21 ($0.03 per share) from restructuring a foreign subsidiary.

~~Income taxes were $310 for the first nine months of~~ 2020, ~~and $429 for 2019,~~ resulting in effective tax rates of 20 percent and 2122 percent, respectively. The current year and prior year rates included favorable discrete tax items ~~including the items discussed above,~~ which reduced ~~both years'~~the rates ~~approximately 3~~2 percentage ~~points.~~points and 1 percentage point, respectively.

On March 27, 2020, the CARES Act ~~(the "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 ~~expects to defer $75~~deferred $73 of certain payroll taxes through the end of calendar year ~~2020.~~2020, half of which is due in December 2021 with the remainder due in December 2022.

(9) ~~LEASES~~OTHER FINANCIAL INFORMATION


			Sept 30, 2020									Dec 31, 2020
Inventories
Finished products						$	584								621
Raw materials and work in process						1,344									1,392
Total						$	1,928								2,013

The Company leases offices; manufacturing facilities and equipment; and transportation, information technology and office equipment under operating lease arrangements. Finance lease arrangements are immaterial. The Company determines whether an arrangement is, or contains, a lease at contract inception. An arrangement contains a lease if the Company has the right to direct the use of and obtain substantially all of the economic benefits of an identified asset. Right-of-use assets and lease liabilities are recognized at lease commencement based on the present value of lease payments over the lease term. Leases with an initial term of 12 months or less are not recognized on the balance sheet and are recorded as short-term lease expense. The discount rate used to calculate present value is the Company's incremental borrowing rate based on the lease term and the economic environment of the applicable country or region.



Property, plant and equipment, net
Property, plant and equipment, at cost						$	9,055								9,196
Less: Accumulated depreciation						5,367									5,503
Total						$	3,688								3,693

Certain leases contain renewal options or options to terminate prior to lease expiration, which are included in the measurement of right-of-use assets and lease liabilities when it is reasonably certain they will be exercised. The Company has elected to account for lease and non-lease components as a single lease component for its offices and manufacturing facilities. Some lease arrangements include payments that are adjusted periodically based on actual charges incurred for common area maintenance, utilities, taxes and insurance, or changes in an index or rate referenced in the lease. The fixed portion of these payments is included in the measurement of right-of-use assets and lease liabilities at lease commencement, while the variable portion is recorded as variable lease expense. The Company's leases typically do not contain material residual value guarantees or restrictive covenants.



Goodwill by business segment
Automation Solutions						$	5,583								6,638

Climate Technologies						730									757
Tools & Home Products						421									437
Commercial & Residential Solutions						1,151									1,194

Total						$	6,734								7,832

~~The components~~



Other intangible assets
Gross carrying amount						$	5,106								5,964
Less: Accumulated amortization						2,638									2,768
Net carrying amount						$	2,468								3,196

Other intangible assets include customer relationships, net of ~~lease expense for the three~~$1,328 and ~~nine months ended June~~$1,635 as of September 30, 2020 ~~were as follows:~~and December 31, 2020, respectively. The increases in goodwill and other intangible assets reflect the acquisition of OSI. See Note 4.

Three Months Ended Nine Months Ended
June 30, 2020
Operating lease expense $ 50 156
Variable lease expense $ 4 14



Other assets include the following:
Operating lease right-of-use assets						$	508								534
Pension assets						265									322
Deferred income taxes						99									102
Asbestos-related insurance receivables						100									98

Short-term lease expense and sublease income were immaterial for the three and nine months ended June 30, 2020. Cash paid for operating leases is classified within operating cash flows and was $155 for the nine months ended June 30, 2020. Operating lease right-of-use asset additions were $172 for the nine months ended June 30, 2020.

9

The following table summarizes the balances of the Company's operating lease right-of-use assets and operating lease liabilities as of June 30, 2020, the vast majority of which relates to offices and manufacturing facilities:

~~June 30, 2020~~

~~Right-of-use assets (Other assets)~~

$

~~500~~

~~Current lease liabilities (Accrued expenses)~~

$

~~149~~

~~Noncurrent lease liabilities (Other liabilities)~~

$

~~359~~


			Sept 30, 2020									Dec 31, 2020
Accrued expenses include the following:
Customer advances (contract liabilities)						$	583								699
Employee compensation						577									443
Product warranty						148									154
Operating lease liabilities (current)						148									152

~~The weighted-average remaining lease term for operating leases was 5.2 years and the weighted-average discount rate was 3.0 percent as of June 30, 2020.~~

~~Future maturities of operating lease liabilities as of June 30, 2020 are summarized below:~~

June 30, 2020
Remainder of 2020 $ 44
2021 143
2022 110
2023 83
2024 58
Thereafter 115
Total lease payments 553
Less: Interest 45
Total lease liabilities $ 508

~~Lease commitments that have not yet commenced were immaterial as of June 30, 2020.~~

~~The future minimum annual rentals under noncancelable long-term leases as of September 30, 2019 were as follows: $159 in 2020, $112 in 2021, $82 in 2022, $57 in 2023, $38 in 2024 and $63 thereafter.~~

~~(10) OTHER FINANCIAL INFORMATION~~

Sept 30, 2019 June 30, 2020
Inventories
Finished products $ 578 624
Raw materials and work in process 1,302 1,478
Total $ 1,880 2,102

Property, plant and equipment, net
Property, plant and equipment, at cost $ 8,671 8,835
Less: Accumulated depreciation 5,029 5,270
Total $ 3,642 3,565

Goodwill by business segment
Automation Solutions $ 5,467 5,492
Climate Technologies 668 727
Tools & Home Products 401 405
Commercial & Residential Solutions 1,069 1,132
Total $ 6,536 6,624

10

Sept 30, 2019 June 30, 2020
Other intangible assets
Gross carrying amount $ 4,872 5,019
Less: Accumulated amortization 2,257 2,531
Net carrying amount $ 2,615 2,488

~~Other intangible assets include customer relationships, net of $1,391 and $1,298 as of September 30, 2019 and June 30, 2020, respectively.~~

Other assets include the following:
Operating lease right-of-use assets $ — 500
Pension assets 164 294
Asbestos-related insurance receivables 115 102
Deferred income taxes 97 96

Accrued expenses include the following:
Customer advances (contract liabilities) $ 519 613
Employee compensation 606 570
Operating lease liabilities (current) — 149
Product warranty 140 138


Other liabilities include the following:	Other liabilities include the following:																	Other liabilities include the following:
Pension and postretirement liabilities	Pension and postretirement liabilities					$	775								781			Pension and postretirement liabilities					$	769								790
Deferred income taxes																		Deferred income taxes					261									411
Operating lease liabilities (noncurrent)	Operating lease liabilities (noncurrent)					—									359			Operating lease liabilities (noncurrent)					373									398
Deferred income taxes						327									361
Asbestos litigation	Asbestos litigation					313									302			Asbestos litigation					295									276

~~(11) LONG-TERM DEBT~~

~~In April 2020, the Company issued $500 of 1.8% notes due October 2027, $500 of 1.95% notes due October 2030 and $500 of 2.75% notes due October 2050.~~

~~(12)~~(10) FINANCIAL INSTRUMENTS

Following is a discussion regarding the Company’s use of financial instruments:

Hedging Activities – As of ~~June 30,~~December 31, 2020, the notional amount of foreign currency hedge positions was approximately $2.2 billion, and commodity hedge contracts totaled approximately ~~$96~~$81 (primarily 3933 million pounds of copper and aluminum). All derivatives receiving hedge accounting are cash flow hedges. The majority of hedging gains and losses deferred as of ~~June 30,~~December 31, 2020 are expected to be recognized over the next 12 months as the underlying forecasted transactions occur. Gains and losses on foreign currency derivatives reported in Other deductions, net reflect hedges of balance sheet exposures that do not receive hedge accounting.

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.

11

The following gains and losses are included in earnings and other comprehensive income (OCI) for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020 and 2019:


												Into Earnings																																										Into OCI																																																		Into Earnings												Into OCI
												3rd Quarter																		Nine Months																		3rd Quarter																		Nine Months																										1st Quarter																		1st Quarter
Gains (Losses)	Gains (Losses)					Location						2019						2020						2019						2020						2019						2020						2019						2020			Gains (Losses)					Location						2019						2020																		2019						2020
Commodity	Commodity					Cost of sales						$	(2)					(4)						(8)						(8)						(8)						17						(5)						1			Commodity					Cost of sales						$	(3)					3																		7						13
Foreign currency	Foreign currency					Sales						(2)						(2)						(5)						(5)						(3)						6						(5)						1			Foreign currency					Sales						(2)						1																		3						5
Foreign currency	Foreign currency					Cost of sales						6						(3)						15						8						3						21						15						(28)			Foreign currency					Cost of sales						7						0																		17						27
Foreign currency	Foreign currency					Other deductions, net						3						(26)						43						(5)																											Foreign currency					Other deductions, net						8						(4)

Net Investment Hedges	Net Investment Hedges																																																														Net Investment Hedges
Euro denominated debt	Euro denominated debt																																			6						(72)						12						(41)			Euro denominated debt																																			(26)						(80)
Total	Total											$	5					(35)						45						(10)						(2)						(28)						17						(67)			Total											$	10					0																		1						(35)

Regardless of whether derivatives and non-derivative financial instruments receive hedge 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 hedge accounting are highly effective and no amounts were excluded from the assessment of hedge effectiveness.

Fair Value Measurement – Valuations for all derivatives and the Company's long-term debt fall within Level 2 of the GAAP valuation hierarchy. As of ~~June 30,~~December 31, 2020, the fair value of long-term debt was ~~$6.4~~$7.1 billion, which exceeded the carrying value by ~~$596.~~$704. The fair values of commodity and foreign currency contracts were reported in Other current assets and Accrued expenses and did not materially change since September 30, ~~2019.~~2020.

10

Counterparties to derivatives arrangements 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. NaN collateral was posted with counterparties and NaN was held by the Company as of ~~June 30,~~December 31, 2020.

12

~~(13)~~(11) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Activity in Accumulated other comprehensive income (loss) for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020 and 2019 is shown below, net of income taxes:


			Three Months Ended June 30,																														Nine Months Ended June 30,																													Three Months Ended December 31,
						2019									2020									2019									2020								2019									2020
Foreign currency translation	Foreign currency translation																																			Foreign currency translation
Beginning balance	Beginning balance					$	(548)								(977)									(600)									(794)			Beginning balance					$	(794)								(711)
Other comprehensive income (loss), net of tax of $(2), $17, $(3) and $10, respectively						(93)									135									(41)									(48)
Other comprehensive income (loss), net of tax of $6 and $19, respectively																																				Other comprehensive income (loss), net of tax of $6 and $19, respectively					99									189

Ending balance	Ending balance					(641)									(842)									(641)									(842)			Ending balance					(695)									(522)

Pension and postretirement	Pension and postretirement																																			Pension and postretirement
Beginning balance	Beginning balance					(395)									(870)									(420)									(928)			Beginning balance					(928)									(864)
Amortization of deferred actuarial losses into earnings, net of tax of $(4), $(9), $(12) and $(26), respectively						13									29									38									87
Amortization of deferred actuarial losses into earnings, net of tax of $(9) and $(8), respectively																																				Amortization of deferred actuarial losses into earnings, net of tax of $(9) and $(8), respectively					28									27

Ending balance	Ending balance					(382)									(841)									(382)									(841)			Ending balance					(900)									(837)

Cash flow hedges	Cash flow hedges																																			Cash flow hedges
Beginning balance	Beginning balance					15									(56)									5									—			Beginning balance					0									(2)
Deferral of gains (losses) arising during the period, net of tax of $2, $(11), $(1) and $6, respectively						(6)									33									4									(20)
Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $0, $(2), $0 and $(1), respectively						(2)									7									(2)									4
Deferral of gains (losses) arising during the period, net of tax of $(6) and $(11), respectively																																				Deferral of gains (losses) arising during the period, net of tax of $(6) and $(11), respectively					21									34
Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $0 and $1, respectively																																				Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $0 and $1, respectively					(2)									(3)
Ending balance	Ending balance					7									(16)									7									(16)			Ending balance					19									29

Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)					$	(1,016)								(1,699)									(1,016)									(1,699)			Accumulated other comprehensive income (loss)					$	(1,576)								(1,330)

~~(14)~~(12) BUSINESS SEGMENTS

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

Three Months Ended June 30, Nine Months Ended June 30,
Sales Earnings Sales Earnings
2019 2020 2019 2020 2019 2020 2019 2020
Automation Solutions $ 3,025 2,589 477 311 8,834 8,150 1,328 1,012
Climate Technologies 1,199 970 278 195 3,171 2,869 650 563
Tools & Home Products 463 357 93 58 1,390 1,219 286 233
Commercial & Residential Solutions 1,662 1,327 371 253 4,561 4,088 936 796
Stock compensation (31) (51) (83) (69)
Unallocated pension and
postretirement costs 27 12 81 37
Corporate and other (34) (22) (95) (90)
Eliminations/Interest (3) (2) (43) (45) 6 (11) (134) (116)
Total $ 4,684 3,914 767 458 13,401 12,227 2,033 1,570

~~The increase in stock compensation expense for the three months ended June 30, 2020 was due to an increase in the Company's stock price.~~


			Three Months Ended December 31,
			Sales												Earnings
			2019						2020						2019						2020

Automation Solutions			$	2,852					2,692						310						361

Climate Technologies			873						1,031						151						212
Tools & Home Products			430						445						86						98
Commercial & Residential Solutions			1,303						1,476						237						310

Stock compensation															(56)						(64)
Unallocated pension and postretirement costs															13						24
Corporate and other															(46)						(28)
Eliminations/Interest			(4)						(7)						(35)						(40)
Total			$	4,151					4,161						423						563

13

11

In fiscal 2021, the Company reclassified certain software product sales that were previously reported in Measurement and Analytical Instrumentation to Systems & Software (previously described as Process Control Systems & Solutions). Automation Solutions sales by major product offering are summarized ~~below:~~below, including the reclassification of prior year amounts to reflect this change.


			Three Months Ended June 30,																														Nine Months Ended June 30,																													Three Months Ended December 31,
						2019									2020									2019									2020								2019									2020

Measurement & Analytical Instrumentation	Measurement & Analytical Instrumentation					$	945								735									2,730									2,381			Measurement & Analytical Instrumentation					$	795								698
Valves, Actuators & Regulators	Valves, Actuators & Regulators					941									842									2,752									2,609			Valves, Actuators & Regulators					913									806
Industrial Solutions	Industrial Solutions					548									469									1,664									1,470			Industrial Solutions					507									508
Process Control Systems & Solutions						591									543									1,688									1,690
Systems & Software																																				Systems & Software					637									680
Automation Solutions	Automation Solutions					$	3,025								2,589									8,834									8,150			Automation Solutions					$	2,852								2,692

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

Three Months Ended June 30, Nine Months Ended June 30,
2019 2020 2019 2020
Automation Solutions $ 133 137 393 414
Climate Technologies 42 44 132 133
Tools & Home Products 18 20 54 58
Commercial & Residential Solutions 60 64 186 191
Corporate and other 10 8 30 26
Total $ 203 209 609 631


			Three Months Ended December 31,
						2019						2020
Automation Solutions						$	139					156

Climate Technologies						44						49
Tools & Home Products						19						19
Commercial & Residential Solutions						63						68

Corporate and other						9						20
Total						$	211					244

Sales by geographic destination are summarized below:


			Three Months Ended June 30,																																																																	Three Months Ended December 31,
			2019																														2020																													2019																		2020
			Automation Solutions						Commercial & Residential Solutions						Total						Automation Solutions						Commercial & Residential Solutions						Total					Automation Solutions						Commercial & Residential Solutions						Total						Automation Solutions						Commercial & Residential Solutions						Total

Americas	Americas		$	1,448					1,164						2,612						1,159						915						2,074			Americas		$	1,410					863						2,273						1,168						981						2,149
Asia, Middle East & Africa	Asia, Middle East & Africa		970						313						1,283						893						253						1,146			Asia, Middle East & Africa		896						277						1,173						942						308						1,250
Europe	Europe		607						185						792						537						159						696			Europe		546						163						709						582						187						769
Total	Total		$	3,025					1,662						4,687						2,589						1,327						3,916			Total		$	2,852					1,303						4,155						2,692						1,476						4,168

			Nine Months Ended June 30,
			2019																														2020
			Automation Solutions						Commercial & Residential Solutions						Total						Automation Solutions						Commercial & Residential Solutions						Total

Americas			$	4,376					3,153						7,529						3,915						2,815						6,730
Asia, Middle East & Africa			2,721						863						3,584						2,619						765						3,384
Europe			1,737						545						2,282						1,616						508						2,124
Total			$	8,834					4,561						13,395						8,150						4,088						12,238

14

12

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

~~The Company's results for~~For the ~~third~~first quarter of fiscal 2020 were negatively impacted by the global outbreak and rapid spread of the novel coronavirus (COVID-19). The outbreak began in the Company's second fiscal quarter and as expected, resulted in a rapid decline in demand which impacted most of the Company's end markets and geographies in the third quarter, particularly in North America. These conditions are expected to negatively impact many of our end markets for the remainder of the fiscal year, but demand has stabilized and the Company has taken actions to protect its operating results and support its financial condition and liquidity. See the "Financial Condition", "Outlook" and "Part II - Other Information, Item 1A, Risk Factors" sections below for additional details.

~~For the third quarter of fiscal 2020, consolidated~~2021, net sales were ~~$3.9~~$4.2 billion, ~~down 16 percent~~flat compared with the prior year, ~~adversely affected~~supported by foreign currency translation which ~~deducted~~added 1 percent and the Open Systems International, Inc. (OSI) acquisition which added 1 percent. Underlying sales, which exclude foreign currency translation, acquisitions and divestitures, were down 152 percent. Automation Solutions sales were down high single-digits, reflecting continued demand challenges in North American automation markets due to COVID-19, with sales down 20 percent, while Europe and Asia, Middle East & Africa improved and were up modestly. Commercial & Residential Solutions sales were up sharply, reflecting robust demand for residential-oriented products and solutions in North America and strong growth in Europe and Asia, Middle East & Africa.

Net earnings common stockholders were ~~$399 million, down 34~~$445, up 36 percent, and diluted earnings per share were ~~$0.67, down 31~~$0.74, up 40 percent compared with ~~$0.97~~$0.53 in the prior year. Operating results ~~declined $0.20~~increased $0.10 per share, ~~reflecting~~as significant savings from the ~~sharp decline in~~Company's restructuring and cost reset actions more than offset deleverage on lower sales volume ~~from the negative effects of COVID-19~~in Automation Solutions. Lower restructuring and ~~general decline in economic activity. Higher stock compensation (due to~~advisory fees ($0.05 per share), an ~~increase in the Company's stock price) and pension expense of $0.05~~investment gain ($0.03 per ~~share and unfavorable foreign currency transactions of $0.04 per share also contributed to the decline. Discrete~~share), a lower tax ~~benefits~~rate ($~~0.10~~0.02 per share) and share repurchases ($0.02 per share) ~~favorably impacted~~also benefited results, while ~~restructuring~~higher interest expense deducted $0.01 per share. In addition, the Company recognized a gain from acquiring the remaining interest of an equity investment ($0.03 per share), which was offset by first year acquisition accounting charges and fees related to the ~~Company's initiatives to improve operating margins reduced earnings $0.13~~OSI acquisition of $0.03 per ~~share in the current quarter.~~share.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED ~~JUNE 30~~DECEMBER 31

Following is an analysis of the Company’s operating results for the ~~third~~first quarter ended ~~June 30,~~December 31, 2020, compared with the ~~third~~first quarter ended ~~June 30,~~December 31, 2019.


			2019						2020						Change					2019						2020						Change
(dollars in millions, except per share amounts)

Net sales	Net sales		$	4,684					3,914						(16)		%	Net sales		$	4,151					4,161						flat
Gross profit	Gross profit		$	2,001					1,618						(19)		%	Gross profit		$	1,759					1,723						(2)		%
Percent of sales	Percent of sales		42.7		%				41.3		%							Percent of sales		42.4		%				41.4		%

SG&A	SG&A		$	1,126					934						(17)		%	SG&A		$	1,123					998						(11)		%
Percent of sales	Percent of sales		24.0		%				23.8		%							Percent of sales		27.1		%				24.0		%

Other deductions, net	Other deductions, net		$	65					181									Other deductions, net		$	178					122
Amortization of intangibles																		Amortization of intangibles		$	59					78
Restructuring costs																		Restructuring costs		$	97					66

Interest expense, net	Interest expense, net		$	43					45									Interest expense, net		$	35					40

Earnings before income taxes	Earnings before income taxes		$	767					458						(40)		%	Earnings before income taxes		$	423					563						33		%
Percent of sales	Percent of sales		16.4		%				11.7		%							Percent of sales		10.2		%				13.5		%

Net earnings common stockholders	Net earnings common stockholders		$	604					399						(34)		%	Net earnings common stockholders		$	326					445						36		%
Percent of sales	Percent of sales		12.9		%				10.2		%							Percent of sales		7.9		%				10.7		%

Diluted earnings per share	Diluted earnings per share		$	0.97					0.67						(31)		%	Diluted earnings per share		$	0.53					0.74						40		%

Net sales for the ~~third~~first quarter of fiscal ~~2020~~2021 were ~~$3.9~~$4.2 billion, ~~a decrease of $770 million, or 16 percent~~essentially flat compared with ~~2019.~~2020. Automation Solutions sales were down $160 while Commercial & Residential Solutions sales were up $173. Underlying sales were down 152 percent, ~~($691 million) on lower volume,~~ as ~~COVID-19 negatively impacted nearly all end markets and geographies. Foreign~~foreign currency translation ~~subtracted~~added 1 percent ~~($70 million)~~ and ~~divestitures subtracted $9 million.~~the OSI acquisition added 1 percent. Underlying sales were down 208 percent in the U.S. and 10up 2 percent internationally. The Americas was down 207 percent, Europe was ~~down 9~~up 4 percent and Asia, Middle East & Africa was ~~down 9~~up 3 percent (China up 37 percent).

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Cost of sales for the ~~third~~first quarter of fiscal ~~2020~~2021 were ~~$2.3 billion, a decrease~~$2,438, an increase of ~~$387 million~~$46 compared with ~~2019, primarily due to lower volume.~~2020. Gross margin of ~~41.3~~41.4 percent decreased ~~1.4~~1.0 percentage points compared with the prior year, reflecting deleverage on lower sales volume in Automation Solutions and unfavorable ~~mix primarily within Automation Solutions, offset by favorable price-cost.~~mix.

Selling, general and administrative (SG&A) expenses of ~~$934 million~~$998 decreased ~~$192 million~~$125 compared with the prior year and SG&A as a percent of sales decreased ~~0.2~~3.1 percentage points to ~~23.8~~24.0 percent, ~~primarily due to~~reflecting significant savings from the Company's restructuring and cost reset actions, which more than offset inflation and deleverage on the lower sales ~~volume. The Company's ongoing restructuring initiatives are expected to yield improved operating margins as sales volumes recover. The Company also benefited from further actions taken~~volume in response to the effects of COVID-19 on profitability, including the impact of curtailed travel, meetings and discretionary spending, a salary and hiring freeze, furloughs, and compensation reductions for the Board of Directors and key executives across Emerson.Automation Solutions.

Other deductions, net were ~~$181 million~~$122 in ~~2020, an increase~~2021, a decrease of ~~$116 million~~$56 compared with the prior year, reflecting ~~increased~~lower restructuring costs of ~~$68 million~~$44 (including special advisory fees in the prior year), an investment gain of $21 and ~~unfavorable impacts on comparisons~~a gain from ~~foreign currency transactions~~the acquisition of ~~$25 million~~the remaining interest of an equity investment of $17, offset by backlog amortization and ~~pensions~~fees related to the OSI acquisition of ~~$16 million.~~$17. See Notes 6 and 7.

Pretax earnings of ~~$458 million decreased $309 million,~~$563 increased $140, or 4033 percent compared with the prior year. Earnings ~~decreased $166 million~~increased $51 in Automation Solutions and ~~$118 million~~$73 in Commercial & Residential Solutions. Costs reported at Corporate ~~increased $23 million~~decreased $21 due to ~~higher stock compensation (reflecting an increase in~~ the ~~Company's stock price) and~~investment gain noted above, while lower unallocated pension and postretirement costs ~~which together increased $35 million,~~of $11 were largely offset by ~~a decline~~an increase of $12 million for all other corporate costs. Pretax earnings margin decreased 4.7 percentage points to 11.7 percent. The decline reflected increased restructuring costs, which negatively impacted comparisons by 2.0 percentage points. Higher $8 in stock ~~compensation and pension expense and unfavorable foreign currency transactions also impacted comparisons by 1.8 percentage points.~~compensation. See the Business discussion that follows and Note ~~14.~~12.

Income taxes were ~~$51 million~~$111 for ~~2020~~2021 and ~~$155 million~~$94 for ~~2019,~~2020, resulting in effective tax rates of 1120 percent and 2022 percent, respectively. The current year ~~rate included $57 million ($0.10 per share) of discrete benefits, which decreased the rate 12 percentage points,~~ ~~related to updates to estimates for the~~and prior year ~~U.S. income tax return and the impact of a research and development tax credit study. The prior year rate~~rates included favorable discrete tax items which reduced the ~~rate 3~~rates 2 percentage points ~~largely due to a tax benefit of $21 million ($0.03 per share) from restructuring a foreign subsidiary.~~

~~On March 27, 2020, the CARES Act (the "Act") was enacted in response to the COVID-19 pandemic,~~ and among other things, provides tax relief to businesses. Tax provisions of the Act include the deferral of certain payroll taxes, relief for retaining employees, and other provisions. The Company expects to defer $75 million of certain payroll taxes through the end of calendar year 2020.1 percentage point, respectively.

Net earnings common stockholders in the ~~third~~first quarter of fiscal ~~2020~~2021 were ~~$399 million, down 34~~$445, up 36 percent, compared with ~~$604 million~~$326 in the prior year, and earnings per share were ~~$0.67, down 31~~$0.74, up 40 percent compared with ~~$0.97~~$0.53 in the prior year. See discussion in the Overview above for further details.

Business Segments

Following is an analysis of operating results for the Company’s business segments for the ~~third~~first quarter ended ~~June 30,~~December 31, 2020, compared with the ~~third~~first quarter ended ~~June 30,~~December 31, 2019. The Company defines segment earnings as earnings before interest and taxes. See Note 1412 for a discussion of the Company's business segments.

AUTOMATION SOLUTIONS


Three Months Ended June 30			2019						2020						Change
(dollars in millions)
Three Months Ended Dec 31																		Three Months Ended Dec 31		2019						2020						Change

Sales	Sales		$	3,025					2,589						(14)		%	Sales		$	2,852					2,692						(6)		%
Earnings	Earnings		$	477					311						(35)		%	Earnings		$	310					361						17		%
Margin	Margin		15.7		%				12.0		%							Margin		10.9		%				13.4		%

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Sales by Major Product Offering	Sales by Major Product Offering																	Sales by Major Product Offering
Measurement & Analytical Instrumentation	Measurement & Analytical Instrumentation		$	945					735						(22)		%	Measurement & Analytical Instrumentation		$	795					698						(12)		%
Valves, Actuators & Regulators	Valves, Actuators & Regulators		941						842						(11)		%	Valves, Actuators & Regulators		913						806						(12)		%
Industrial Solutions	Industrial Solutions		548						469						(14)		%	Industrial Solutions		507						508						—		%
Process Control Systems & Solutions			591						543						(8)		%
Systems & Software																		Systems & Software		637						680						7		%
Total	Total		$	3,025					2,589						(14)		%	Total		$	2,852					2,692						(6)		%

Automation Solutions sales were ~~$2.6~~$2.7 billion in the ~~third~~first quarter, a decrease of ~~$436 million~~$160 or 146 percent. Underlying sales decreased 139 percent ~~($380 million)~~ on lower volume. Foreign currency translation had a 2 percent favorable impact and the OSI acquisition had a 1 percent ~~($56 million) unfavorable impact. All businesses were negatively impacted by the effects of COVID-19, which resulted in continued broad-based industrial weakness.~~favorable impact. Underlying sales decreased 1920 percent in the Americas (U.S. down 2022 percent), Europe ~~decreased 8~~increased 2 percent and Asia, Middle East & Africa ~~decreased 6~~increased 2 percent (China up 96 percent). Sales for Measurement & Analytical Instrumentation decreased ~~$210 million,~~$97, or 2212 percent, due to ~~global~~continued weakness ~~across most geographies, particularly~~ in North American process industries, wh~~ile China rebounded from a sharp decline~~partially offset by moderate growth in ~~the previous quarter~~Europe and ~~was up moderately.~~Asia. Valves, Actuators & Regulators decreased ~~$99 million,~~$107, or 1112 percent, reflecting ~~weakness across~~slower demand in most end markets, particularly in North America and Europe, partially offset by ~~a sharp rebound~~strong growth in ~~China sales.~~Asia. Industrial Solutions sales ~~decreased $79 million, or 14 percent, on~~were flat as weakness in ~~global~~ discrete end markets ~~excluding China which~~in North America was ~~up low double-digits. Process Control~~offset by robust demand in China. Systems & ~~Solutions decreased $48 million,~~Software increased $43, or 87 percent, due to ~~weakness~~the OSI acquisition. Strength in power end markets in Asia and process end markets in the U.S. Earnings were $311 million, a decrease of $166 million, or 35 percent, primarily due to lower volume, higher restructuring expenses of $65 million and an unfavorable impact on comparisons from foreign currency transactions of $18 million. Margin decreased 3.7 percentage points to 12.0 percent, reflecting a negative impact from restructuring expenses of 2.5 percentage points and unfavorable foreign currency transactions of 0.7 percentage points. Savings from the restructuring and cost reset actions were significant and largely offset deleverage on the lower sales volume, while favorable price-cost offset unfavorable mix.

~~COMMERCIAL & RESIDENTIAL SOLUTIONS~~

Three Months Ended June 30 2019 2020 Change
(dollars in millions)
Sales:
  Climate Technologies $ 1,199 970 (19) %
  Tools & Home Products 463 357 (23) %
     Total $ 1,662 1,327 (20) %
Earnings:
  Climate Technologies $ 278 195 (30) %
  Tools & Home Products 93 58 (38) %
     Total $ 371 253 (32) %
     Margin 22.4 % 19.1 %

Commercial & Residential Solutions sales were $1.3 billion in the third quarter, down $335 million, or 20 percent compared to the prior year. Underlying sales decreased 19 percent ($312 million) due to lower volume, reflecting sharply lower demand due to the effects of COVID-19, especially in North America. Foreign currency translation subtracted 1 percent ($14 million) and the divestiture of two small non-core businesses subtracted $9 million. Overall, underlying sales decreased 20 percent in the Americas (U.S. down 21 percent), Europe decreased 12 percent and Asia, Middle East & Africa was down 18 percent (China down 9 percent). Climate Technologies sales were $970 million in the third quarter, a decrease of $229 million, or 19 percent. Air conditioning and heating sales were down sharply, reflecting significant declines in Asia and North America with smaller declines in China and Europe. Cold chain sales were down sharply, driven by slower global market conditions. Tools & Home Products sales were $357 million in the third quarter, a decrease of $106 million, or 23 percent. Global professional tools end markets were down sharply, while food waste disposers and wet/dry vacuums decreased in the low-to-mid teens. Earnings were $253 million, down 32 percent compared with the prior year, and margin decreased 3.3 points to 19.1 percent. Significant deleverage on the lower sales volume negatively impacted margins and higher restructuring expenses deducted 0.6 percentage points, partially offset by savings from cost reduction actions and favorable price-cost.

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~~RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30~~

~~Following is an analysis of the Company’s operating results for the nine months ended June 30, 2020, compared with the nine months ended June 30, 2019.~~

2019 2020 Change
(dollars in millions, except per share amounts)
Net sales $ 13,401 12,227 (9) %
Gross profit $ 5,687 5,127 (10) %
Percent of sales 42.4 % 41.9 %
SG&A $ 3,348 3,040 (9) %
Percent of sales 24.9 % 24.8 %
Other deductions, net $ 172 401
Interest expense, net $ 134 116
Earnings before income taxes $ 2,033 1,570 (23) %
Percent of sales 15.2 % 12.8 %
Net earnings common stockholders $ 1,589 1,242 (22) %
Percent of sales 11.9 % 10.2 %
Diluted earnings per share $ 2.55 2.04 (20) %

Net sales for the first nine months of 2020 were $12.2 billion, a decrease of $1.2 billion, or 9 percent compared with 2019. Underlying sales were down 8 percent ($993 million) on lower volume. Divestitures net of acquisitions subtracted $3 million and foreign currency translation subtracted 1 percent ($178 million). Underlying sales decreased 11 percent in the U.S. and 5 percent internationally. The Americas was ~~down 10 percent, Europe was down 4 percent and Asia, Middle East & Africa was down 4 percent.~~

Cost of sales for 2020 were $7.1 billion, a decrease of $614 million versus $7.7 billion in 2019, primarily due to lower volume. Gross margin decreased 0.5 percentage points to 41.9 percent, reflecting deleverage on lower sales volume and unfavorable mix primarily within Automation Solutions, partially offset by favorable price-cost.

SG&A expenses of $3.0 billion decreased $308 million and SG&A as a percent of sales decreased 0.1 percentage points to 24.8 percent. Significant savings from the Company's restructuring and cost reset actions offset deleverage on the lower sales volume.

Other deductions, net were $401 million in 2020, an increase of $229 million compared with the prior year, reflecting increased restructuring costs of $176 million and an unfavorable impact on comparisons from pensions of $46 million, partially offset by lower litigation costs. See Notes 6 and 7.

~~Pretax earnings of $1.6 billion decreased $463 million, or 23 percent. Earnings decreased $316 million in Automation Solutions and $140 million in Commercial & Residential Solution~~s. Costs reported at Corporate increased $25 million due to higher unallocated pension and postretirement costs which increased $44 million, partially offset by lower stock compensation expense of $14 million and a decline of $5 million for all other corporate costs. Pretax earnings margin decreased 2.4 percentage points to 12.8 percent. The decline was largely due to higher restructuring costs, which negatively impacted comparisons by 1.6 percentage points. Higher pension expense also impacted comparisons by 0.5 percentage points. See the Business discussion that follows and Note 14.

Income taxes were $310 million for 2020 and $429 million for 2019, resulting in effective tax rates of 20 percent and 21 percent, respectively. The current year and prior year rates included favorable discrete items, which reduced both years' rates approximately 3 percentage points. See Note 8.

Net earnings common stockholders in 2020 were $1.2 billion, down 22 percent compared with the prior year, and earnings per share were $2.04, down 20 percent compared with $2.55 in 2019. The decline in sales volume, largely attributable to the negative effects of COVID-19 and oil price volatility, resulted in a decline in operating results of

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$0.27 per share, while restructuring costs and special advisory fees reduced earnings by $0.32 per share in the current year. Higher pension expense partially offset by lower stock compensation expense negatively affected comparisons by $0.04 per share and unfavorable foreign currency deducted $0.03 per share. Results were favorably impacted by discrete tax items ($0.09 per share) and a combined benefit from share repurchases and lower interest expense of $0.06 per share.

~~Business Segments~~

Following is an analysis of operating results for the Company’s business segments for the nine months ended June 30, 2020, compared with the nine months ended June 30, 2019. The Company defines segment earnings as earnings before interest and taxes.

~~AUTOMATION SOLUTIONS~~

Nine Months Ended June 30 2019 2020 Change
(dollars in millions)
Sales $ 8,834 8,150 (8) %
Earnings $ 1,328 1,012 (24) %
Margin 15.0 % 12.4 %

Sales by Major Product Offering
Measurement & Analytical Instrumentation $ 2,730 2,381 (13) %
Valves, Actuators & Regulators 2,752 2,609 (5) %
Industrial Solutions 1,664 1,470 (12) %
Process Control Systems & Solutions 1,688 1,690 — %
Total $ 8,834 8,150 (8) %

Automation Solutions sales were $8.2 billion in the first nine months of 2020, a decrease of $684 million, or 8 percent. Underlying sales decreased 7 percent ($591 million) on lower volume. The Machine Automation Solutions acquisition added 1 percent ($47 million) and foreign currency translation had a 2 percent ($140 million) unfavorable impact. Underlying sales decreased 11 percent in the Americas, 4 percent in Europe and 2 percent in Asia, Middle East & Africa (China down 1 percent). Sales for Measurement & Analytical Instrumentation decreased $349 million, or 13 percent~~, due to weakness in process industries, primarily in North America. Val~~ves, Actuators & Regulators decreased $143 million, or 5 percent, reflecting slower demand in most end markets. Industrial Solutions sales decreased $194 million, or 12 percent, on lower global demand in discrete end markets. Process Control Systems & Solutions increased $2 million due to the Machine Automation Solutions acquisition which added $47 million, largely offset by weakness in power end markets in China and process end markets in the U.S. Earnings were $1.0 billion, a decrease of $316 million, or 24 percent, primarily due to higher restructuring expenses of $166 million and lower volume. Margin decreased 2.6 percentage points to 12.4 percent, reflecting a negative impact from restructuring expenses of 2.1 percentage points and unfavorable mix. Savings from cost reduction actions offset deleverage on lower sales volume.Asia, while

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process end markets were strong in Europe and Asia, offset by declines in North America and Middle East & Africa. Earnings were $361, an increase of $51, or 17 percent, and margin increased 2.5 percentage points to 13.4 percent, as significant savings from cost reduction actions and favorable price-cost more than offset deleverage on lower volume. Lower restructuring expense also benefited margins (0.5 percentage points), which was offset by unfavorable mix.

COMMERCIAL & RESIDENTIAL SOLUTIONS


Three Months Ended Dec 31			2019						2020						Change


Sales:
Climate Technologies			$	873					1,031						18		%
Tools & Home Products			430						445						3		%
Total			$	1,303					1,476						13		%

Earnings:
Climate Technologies			$	151					212						40		%
Tools & Home Products			86						98						14		%
Total			$	237					310						31		%
Margin			18.2		%				21.0		%

Commercial & Residential Solutions sales were $1.5 billion in the first quarter, up $173, or 13 percent compared to the prior year. Underlying sales increased 12 percent due to higher volume and foreign currency translation added 1 percent. Overall, underlying sales increased 14 percent in the Americas (U.S. up 14 percent), Europe increased 8 percent and Asia, Middle East & Africa was up 7 percent (China up 10 percent). Climate Technologies sales were $1.0 billion in the first quarter, an increase of $158, or 18 percent. Air conditioning and heating sales were up significantly, reflecting robust demand for residential-oriented products and solutions in North America and strength in Europe and China. Cold chain sales were strong, driven by favorable global market conditions. Tools & Home Products sales were $445 in the first quarter, an increase of $15, or 3 percent. Sales for wet/dry vacuums were robust due to competitor outages and food waste disposers were up modestly, while global professional tools end markets were down mid single-digits reflecting lower overall industrial activity. Earnings were $310, up 31 percent compared with the prior year, and margin increased 2.8 points to 21.0 percent, due to leverage on higher volume and savings from cost reduction actions, partially offset by unfavorable mix.

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~~COMMERCIAL & RESIDENTIAL SOLUTIONS~~

Nine Months Ended June 30 2019 2020 Change
(dollars in millions)
Sales:
  Climate Technologies $ 3,171 2,869 (10) %
  Tools & Home Products 1,390 1,219 (12) %
     Total $ 4,561 4,088 (10) %
Earnings:
  Climate Technologies $ 650 563 (13) %
  Tools & Home Products 286 233 (19) %
     Total $ 936 796 (15) %
     Margin 20.5 % 19.5 %

Commercial & Residential Solutions sales were $4.1 billion in the first nine months of 2020, a decrease of $473 million, or 10 percent compared to the prior year. Underlying sales were down 9 percent ($402 million) on lower volume. The divestiture of two small non-core businesses subtracted $33 million and foreign currency translation subtracted $38 million, a combined decrease of 1 percent. Overall, underlying sales decreased 10 percent in the Americas, 4 percent in Europe and 10 percent in Asia, Middle East & Africa (China down 11 percent). Climate Technologies sales were $2.9 billion in the first nine months of 2020, a decrease of $302 million, or 10 percent. Air conditioning and heating sales were down sharply, reflecting significant declines in Asia and the U.S. due to the effects of COVID-19. Global cold chain sales were down sharply on significant declines in Asia and Europe, while North America was down moderately. Tools & Home Products sales were $1.2 billion in the first nine months of 2020, down $171 million, or 12 percent compared to the prior year, reflecting sharp declines in global professional tools markets. Sales for wet/dry vacuums and food waste disposers were down moderately. Earnings were $796 million, down 15 percent compared to the prior year, and margin decreased 1.0 percentage points, due to deleverage on lower sales volume and higher restructuring expenses which negatively impacted margins by 0.4 percentage points, partially offset by savings from cost reduction actions and favorable price-cost.

FINANCIAL CONDITION

Key elements of the Company's financial condition for the ~~nine~~three months ended ~~June 30,~~December 31, 2020 as compared to the year ended September 30, 2020 and the three months ended December 31, 2019 follow.


			Sept 30, 2019						June 30, 2020					Dec 31, 2019						Sept 30, 2020						Dec 31, 2020
Working capital (in millions)			$	1,163					$	1,894
Operating working capital												Operating working capital		$	1,205					$	866					$	825
Current ratio	Current ratio		1.2						1.3			Current ratio		1.1						1.5						1.2
Total debt-to-total capital	Total debt-to-total capital		41.0		%				48.0		%	Total debt-to-total capital		41.6		%				47.1		%				46.1		%
Net debt-to-net capital	Net debt-to-net capital		33.9		%				37.9		%	Net debt-to-net capital		34.1		%				33.2		%				37.8		%
Interest coverage ratio	Interest coverage ratio		15.2		X				12.9		X	Interest coverage ratio		11.2		X				14.4		X				14.2		X

The Company's operating working capital decreased nearly $400 compared to the same quarter last year largely due to timing-related reductions reflecting current business conditions. The interest coverage ratio (earnings before income taxes plus interest expense, divided by interest expense) of 14.2X for the first three months of fiscal 2021 compares to 11.2X for the three months ended December 31, 2019. The increase reflects higher pretax earnings in the current year.

Operating cash flow for the first three months of fiscal 2021 was $808, an increase of $384 compared with $424 in the prior year due to favorable operating working capital and higher earnings. Free cash flow of $686 in the first three months of fiscal 2021 (operating cash flow of $808 less capital expenditures of $122) increased $376 compared to free cash flow of $310 in 2020 (operating cash flow of $424 less capital expenditures of $114), reflecting the increase in operating cash flow. Cash used for investing activities was $1.7 billion largely due to the OSI acquisition.

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, half of which is due in December 2021 with the remainder due in December 2022.

Emerson maintains a conservative financial structure to provide the strength and flexibility necessary to achieve our strategic objectives and has been successful in efficiently deploying cash where needed worldwide to fund operations, complete acquisitions and sustain long-term growth. During fiscal 2020, the Company increased its cash holdings to support liquidity in response to the potential effects of COVID-19. In April 2020, the Company issued $1.5 billion of long-term debt to further manage its liquidity and balance sheet. The net proceeds were used to reduce commercial paper borrowings and for general corporate purposes. The Company has also taken actions to conservatively manage its cash through planned reductions in capital expenditures for fiscal 2020 and by suspending its share repurchases for the remainder of the fiscal year. No changes have been made to the dividend plan for the year. The Company's long-term debt ratings, which are A2 by Moody's Investors Service and A by Standard and Poor's, remain unchanged. The Company currently believes that sufficient funds will be available to meet its needs for the foreseeable future through operating cash flow, existing resources, short- and long-term debt capacity, or its $3.5 billion revolving backup credit facility under which it has not incurred any borrowings.

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Emerson is in a strong financial position, with total assets of ~~$22~~$24 billion and stockholders' equity of $8$9 billion, and has the resources available for reinvestment in existing businesses, strategic acquisitions and managing its capital structure on a short- and long-term basis. ~~The Company continues to generate substantial operating cash flow, with a full-year outlook of approximately $2.8 billion.~~

The Company's total working capital increased approximately $750 million compared to the same quarter last year, reflecting the net proceeds from the debt issuance in May, while operating working capital declined due to lower business levels. The interest coverage ratio (earnings before income taxes plus interest expense, divided by interest expense) of 12.9X for the first nine months of fiscal 2020 compares to 14.3X for the nine months ended June 30, 2019. The decrease reflects lower pretax earnings in the current year, partially offset by lower interest expense.

FISCAL 2021 OUTLOOK

As macroeconomic uncertainties related to COVID-19 begin to slowly wane, the Company expects to see a slow but steady improvement in industrial demand and continued robust demand in many key residential markets around the world. Key North American markets remain challenged for the Automation Solutions business, but appear to be turning. For the full year, consolidated net sales are expected to be up 4 to 8 percent, with underlying sales flat to up 4 percent excluding a 3 percent favorable impact from foreign currency translation and a 1 percent favorable impact from the OSI acquisition. Automation Solutions net sales are expected to be up 2 to 6 percent, with underlying sales down 3 to up 1 percent excluding a 3 percent favorable impact from foreign currency translation and a 2 percent favorable impact from the OSI acquisition. Commercial & Residential Solutions net sales are expected to be up 10 to 12 percent, with underlying sales up 8 to 10 percent excluding a 2 percent impact from favorable foreign currency translation. Earnings per share are expected to be $3.29 to $3.49, while adjusted earnings per share, which exclude a $0.27 per share impact from restructuring actions, a $0.07 per share impact from OSI first year acquisition accounting charges and fees, and a $0.03 per share equity investment gain, are expected to be $3.60 to $3.80. Operating cash flow ~~for the first nine months of fiscal 2020 was $1.9~~is expected to be approximately $3.15 billion an increase of $52 million compared with $1.8 billion in the prior year, as operating working capital declined due to lower business levels, partially offset by lower earnings. Free cash flow of $1.5 billion in the first nine months of fiscal 2020 (operating cash flow of $1.9 billion less capital expenditures of $329 million) increased $118 million compared toand free cash flow, which excludes targeted capital spending of ~~$1.4 billion in 2019 (operating cash flow of $1.8 billion less capital expenditures of $395 million), reflecting the increase in operating cash flow and lower capital investment.~~

~~FISCAL 2020 OUTLOOK~~

Emerson's operations and supply chain stabilized during the quarter, with an emphasis on safety and productivity. The primary focus continues to be keeping employees safe and healthy, and serving customers in their essential industries with the vital technologies and services that they rely upon. The Company has implemented recommended policies and practices to protect its workforce so they can safely and effectively carry out their work. The Company is following guidelines from global health experts and has taken stringent steps to protect its employees.

~~Our outlook reflects the dynamic demand environment associated with COVID-19 and significant savings from the Com~~pany's cost reduction and COVID-19 related cost containment actions. The guidance assumes, among other items, a continued challenging but steadily improving demand environment in the fourth quarter. North America$600 million, is expected to ~~remain~~be approximately $2.55 billion. Fiscal 2021 share repurchases and acquisition activity are expected to be in the ~~key challenge from a demand perspective.~~amount of $500 million to $1 billion, excluding the OSI acquisition which closed on October 1, 2020. The guidance ~~also~~discussed herein assumes no major operational or supply chain ~~disruptions. Lastly, the outlook assumes no changes in discrete tax items~~disruptions and ~~assumes~~ oil prices ~~remain~~ in the ~~$35~~$45 to ~~$45~~$55 range ~~for the same time~~during this period. However, future developments related to COVID-19, including further actions taken by governmental ~~authorities,~~authorities, potential shutdowns of our operations, or delays in the stabilization and recovery of economic conditions could further adversely affect our operations and financial results, as well as those of our customers and suppliers. See ~~"Part II - Other Information,~~ Item 1A ~~Risk Factors."~~

Consolidated fiscal 2020 net sales are expected to be down 9 to 10 percent, with underlying sales down 7.5 to 9 percent excluding a 1 to 1.5 percent unfavorable impact from foreign currency translation. Automation Solutions net sales are expected to be down 8 to 10 percent, with underlying sales down 7 to 9 percent excluding a 1 percent unfavorable impact from foreign currency translation. The midpoint of this outlook assumes a reduction of backlog of approximately $300 million by the end of the fiscal year. Commercial & Residential Solutions net sales are expected to be down 9 to 11 percent, with underlying sales down 8 to 10 percent excluding an impact from unfavorable foreign currency translation of 1 percent. Earnings per share are expected to be $2.80 to $2.95, while adjusted earnings per share, which exclude a $0.40 per share impact from restructuring actions and related costs for the year, are expected to be $3.20 to $3.35. Operating cash flow is expected to be approximately $2.8 billion and free cash flow, which excludes targeted capital spending of $550 million, is expected to be approximately $2.25 billion. The Company's share repurchases for the nine months ended June 30, 2020 were $942 million and additional repurchases have been suspended for the remainder of the fiscal year. The Company has made no changes to its dividend plan for fiscal 2020.– “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.

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These risks and uncertainties include 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, cybersecurity, 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, ~~2019, "Risk Factors" of Part II - Other Information, Item 1A of the Company's Quarterly Report on Form 10-Q for the three-month period ended June 30,~~ 2020 and in subsequent reports filed with the SEC, which are hereby incorporated by reference.

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The United Kingdom's (UK) withdrawal from the European Union (EU), commonly known as "Brexit", was completed on January 31, 2020. ~~The UK is now in a transition period and has begun negotiating~~Negotiations over the terms of a trade ~~agreement~~ and other laws and regulations ~~with~~took place during 2020 and an agreement between the ~~EU.~~EU and the UK was reached on December 24, 2020, which included zero tariffs and quotas on goods. The Company's net sales in the UK are principally in the Automation Solutions segment and represent less than two percent of consolidated sales. Sales of products manufactured in the UK and sold within the EU are immaterial. The Company is evaluating several potential outcomes of the UK's negotiations with the EU and believes the direct cost ofWhile there could be certain incremental ~~tariffs,~~costs for logistics and other items, ~~would~~the Company expects any impact of these items will be immaterial.

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.

PART II. OTHER INFORMATION

~~Item 1A. Risk Factors~~

The following risk factor supplements the “Risk Factors” section in Part 1, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended September 30, 2019 (our “Form 10-K). The following risk factor disclosure should be read in conjunction with the other risk factors set out in our Form 10-K.

The Recent Coronavirus (COVID-19) Outbreak Has Adversely Impacted our Business and Could in the Future Have a Material Adverse Impact on our Business, Results of Operation, Financial Condition and Liquidity, the Nature and Extent of Which is Highly Uncertain

The global outbreak of the coronavirus (COVID-19) has significantly increased economic, demand and operational uncertainty. We have global operations, customers and suppliers, including in countries most impacted by COVID-19. Authorities around the world have taken a variety of measures to slow the spread of COVID-19, including travel bans or restrictions, increased border controls or closures, quarantines, shelter-in-place orders and business shutdowns and such authorities may impose additional restrictions. We have also taken actions to protect our employees and to mitigate the spread of COVID-19, including embracing guidelines set by the World Health Organization and the Centers for Disease Control and Prevention on social distancing, good hygiene, restrictions on employee travel and in-person meetings, and changes to employee work arrangements including remote work arrangements. The actions taken around the world to slow the spread of COVID-19 have also impacted our customers and suppliers, and future developments could cause further disruptions to Emerson due to the interconnected nature of our business relationships.

The impact of COVID-19 on the global economy and our customers, as well as recent volatility in commodity markets (including oil prices), has negatively impacted demand for our products and could continue to do so in the future. Its effects could also result in further disruptions to our manufacturing operations, including higher rates of employee absenteeism, and supply chain, which could continue to negatively impact our ability to meet customer demand. Additionally, the potential deterioration and volatility of credit and financial markets could limit our ability to obtain external financing. The extent to which COVID-19 will impact our business, results of operations, financial condition or liquidity is highly uncertain and will depend on future developments, including the spread and duration of the virus, potential actions taken by governmental authorities, and how quickly economic conditions stabilize and recover.

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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 2020						56									$63.90									56									65,471
November 2020						121									$72.73									121									65,350
December 2020						11									$74.87									11									65,339
Total						188									$70.21									188									65,339

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 a total of approximately ~~65.5~~65.3 million shares remain available for purchase under the authorizations. ~~No shares were repurchased in the third quarter of 2020.~~

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Item 6. Exhibits

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


43			Bylaws of Emerson ~~agrees to furnish~~Electric Co., as amended through November 3, 2020, incorporated by reference to the Securities and Exchange Commission, upon request, copies of any long-term debt instruments that authorize an amount of securities constituting 10 percent or less of the total assets of Emerson and its subsidiariesCompany's Form 8-K dated November 6, 2020, filed on ~~a consolidated basis.~~November 6, 2020, File No. 1-278, Exhibit 3.1.

31			Certifications pursuant to Exchange Act Rule 13a-14(a).

32			Certifications pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350.

101			Attached as Exhibit 101 to this report are the following documents formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Statements of Earnings for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020 and 2019, (ii) Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020 and 2019, (iii) Consolidated Balance Sheets as of September 30, ~~2019~~2020 and ~~June 30,~~December 31, 2020, (iv) Consolidated Statements of Equity for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020 and 2019, (v) Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~June 30,~~December 31, 2020 and 2019, and (vi) Notes to Consolidated Financial Statements for the three ~~and nine~~ months ended ended ~~June 30,~~December 31, 2020 and 2019.

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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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/ Frank J. Dellaquila

Frank J. Dellaquila

Senior Executive Vice President and Chief Financial Officer

(on behalf of the registrant and as Chief Financial Officer)

~~August 5, 2020~~February 3, 2021

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