SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________

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

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2020~~2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Commission file number 1-278

(Exact name of registrant as specified in its charter)

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


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 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 31, 2020:~~June 30, 2021: ~~597,591,921~~597.8 million shares.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Earnings

Three and nine months ended June 30, ~~2019~~2020 and ~~2020~~2021

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

Three Months Ended
June 30, Nine Months Ended
June 30,
2019 2020 2019 2020
Net sales $ 4,684 3,914 13,401 12,227
Costs and expenses:
Cost of sales 2,683 2,296 7,714 7,100
Selling, general and administrative expenses 1,126 934 3,348 3,040
Other deductions, net 65 181 172 401
Interest expense (net of interest income of $7, $4, $19 and $16, respectively) 43 45 134 116
Earnings before income taxes 767 458 2,033 1,570
Income taxes 155 51 429 310
Net earnings 612 407 1,604 1,260
Less: Noncontrolling interests in earnings of subsidiaries 8 8 15 18
Net earnings common stockholders $ 604 399 1,589 1,242
Basic earnings per share common stockholders $ 0.98 0.67 2.57 2.05
Diluted earnings per share common stockholders $ 0.97 0.67 2.55 2.04


	Three Months Ended June 30,			Nine Months Ended June 30,
	2020		2021	2020	2021
Net sales	$	3,914	4,697	12,227	13,289

Costs and expenses:
Cost of sales	2,296		2,715	7,100	7,722
Selling, general and administrative expenses	934		1,073	3,040	3,125
Other deductions, net	181		88	401	243
Interest expense (net of interest income of $4, $3, $16 and $9, respectively)	45		37	116	115

Earnings before income taxes	458		784	1,570	2,084

Income taxes	51		151	310	431





Net earnings	407		633	1,260	1,653

Less: Noncontrolling interests in earnings of subsidiaries	8		6	18	20

Net earnings common stockholders	$	399	627	1,242	1,633









Basic earnings per share common stockholders	$	0.67	1.05	2.05	2.73




Diluted earnings per share common stockholders	$	0.67	1.04	2.04	2.71

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income

Three and nine months ended June 30, ~~2019~~2020 and ~~2020~~2021

(Dollars in millions; unaudited)

Three Months Ended June 30, Nine Months Ended June 30,
2019 2020 2019 2020
Net earnings $ 612 407 1,604 1,260
Other comprehensive income (loss), net of tax:
Foreign currency translation (93) 134 (40) (48)
Pension and postretirement 13 29 38 87
Cash flow hedges (8) 40 2 (16)
Total other comprehensive income (loss) (88) 203 — 23
Comprehensive income 524 610 1,604 1,283
Less: Noncontrolling interests in comprehensive income of subsidiaries 8 7 16 18
Comprehensive income common stockholders $ 516 603 1,588 1,265


	Three Months Ended June 30,				Nine Months Ended June 30,
		2020		2021		2020	2021
Net earnings		$	407	633		1,260	1,653

Other comprehensive income (loss), net of tax:
Foreign currency translation		134		(5)		(48)	163
Pension and postretirement		29		27		87	81
Cash flow hedges		40		(6)		(16)	26
Total other comprehensive income (loss)		203		16		23	270

Comprehensive income		610		649		1,283	1,923

Less: Noncontrolling interests in comprehensive income of subsidiaries		7		7		18	20
Comprehensive income common stockholders		$	603	642		1,265	1,903

See accompanying Notes to Consolidated Financial Statements.

Consolidated Balance Sheets

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

Sept 30, 2019 June 30, 2020
ASSETS
Current assets
Cash and equivalents $ 1,494 2,450
Receivables, less allowances of $112 and $109, respectively 2,985 2,512
Inventories 1,880 2,102
Other current assets 780 815
Total current assets 7,139 7,879
Property, plant and equipment, net 3,642 3,565
Other assets
Goodwill 6,536 6,624
Other intangible assets 2,615 2,488
Other 565 1,174
Total other assets 9,716 10,286
Total assets $ 20,497 21,730
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current maturities of long-term debt $ 1,444 1,725
Accounts payable 1,874 1,426
Accrued expenses 2,658 2,834
Total current liabilities 5,976 5,985
Long-term debt 4,277 5,500
Other liabilities 1,971 2,367
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
Additional paid-in-capital 393 459
Retained earnings 24,199 24,531
Accumulated other comprehensive income (loss) (1,722) (1,699)
Cost of common stock in treasury, 342.4 shares and 355.8 shares, respectively (15,114) (15,937)
Common stockholders’ equity 8,233 7,831
Noncontrolling interests in subsidiaries 40 47
Total equity 8,273 7,878
Total liabilities and equity $ 20,497 21,730


	Sept 30, 2020		June 30, 2021
ASSETS
Current assets
Cash and equivalents	$	3,315	2,860
Receivables, less allowances of $138 and $124, respectively	2,802		2,754
Inventories	1,928		2,114
Other current assets	761		1,038

Total current assets	8,806		8,766

Property, plant and equipment, net	3,688		3,664
Other assets
Goodwill	6,734		7,777
Other intangible assets	2,468		2,993
Other	1,186		1,284

Total other assets	10,388		12,054
Total assets	$	22,882	24,484

LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current maturities of long-term debt	$	1,160	1,478
Accounts payable	1,715		1,966
Accrued expenses	2,910		3,226


Total current liabilities	5,785		6,670

Long-term debt	6,326		5,835

Other liabilities	2,324		2,640



Equity
Common stock, $0.50 par value; authorized, 1,200.0 shares; issued, 953.4 shares; outstanding, 598.0 shares and 597.8 shares, respectively	477		477
Additional paid-in-capital	470		518
Retained earnings	24,955		25,678
Accumulated other comprehensive income (loss)	(1,577)		(1,307)
Cost of common stock in treasury, 355.4 shares and 355.6 shares, respectively	(15,920)		(16,075)
Common stockholders’ equity	8,405		9,291
Noncontrolling interests in subsidiaries	42		48
Total equity	8,447		9,339
Total liabilities and equity	$	22,882	24,484

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Equity

Three and nine months ended June 30, ~~2019~~2020 and ~~2020~~2021

(Dollars in millions; unaudited)

Dividends paid (per share: $0.49, $0.50, $1.47, and $1.50,

Dividends paid (per share: $0.50, $0.505, $1.50 and $1.515,

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Cash Flows

Nine Months Ended June 30, ~~2019~~2020 and ~~2020~~2021

(Dollars in millions; unaudited)


	Nine Months Ended
	June 30,
	2020		2021
Operating activities
Net earnings	$	1,260	1,653

Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	631		720
Stock compensation	69		191
Pension expense	50		23
Changes in operating working capital	(86)		246


Other, net	(70)		(113)


Cash provided by operating activities	1,854		2,720

Investing activities
Capital expenditures	(329)		(350)
Purchases of businesses, net of cash and equivalents acquired	(114)		(1,611)

Other, net	(65)		53


Cash used in investing activities	(508)		(1,908)

Financing activities
Net increase in short-term borrowings	269		31
Proceeds from short-term borrowings greater than three months	546		71
Payments of short-term borrowings greater than three months	(340)		0
Proceeds from long-term debt	1,488		0
Payments of long-term debt	(502)		(305)
Dividends paid	(910)		(909)
Purchases of common stock	(942)		(268)
Other, net	28		89
Cash used in financing activities	(363)		(1,291)

Effect of exchange rate changes on cash and equivalents	(27)		24
Increase (Decrease) in cash and equivalents	956		(455)
Beginning cash and equivalents	1,494		3,315
Ending cash and equivalents	$	2,450	2,860

Changes in operating working capital
Receivables	$	456	76
Inventories	(218)		(160)
Other current assets	40		(69)
Accounts payable	(439)		216
Accrued expenses	75		183

Total changes in operating working capital	$	(86)	246

See accompanying Notes to Consolidated Financial Statements.

Nine Months Ended
June 30,
2019 2020
Operating activities
Net earnings $ 1,604 1,260
Adjustments to reconcile net earnings to net cash provided by operating activities:
        Depreciation and amortization 609 631
        Stock compensation 83 69
        Pension expense (1) 50
        Changes in operating working capital (352) (86)
        Other, net (141) (70)
            Cash provided by operating activities 1,802 1,854
Investing activities
Capital expenditures (395) (329)
Purchases of businesses, net of cash and equivalents acquired (385) (114)
Divestitures of businesses 10 —
Other, net (91) (65)
    Cash used in investing activities (861) (508)
Financing activities
Net increase in short-term borrowings 427 269
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 (655) (502)
Dividends paid (909) (910)
Purchases of common stock (1,000) (942)
Other, net 21 28
    Cash used in financing activities (425) (363)
Effect of exchange rate changes on cash and equivalents (6) (27)
Increase in cash and equivalents 510 956
Beginning cash and equivalents 1,093 1,494
Ending cash and equivalents $ 1,603 2,450
Changes in operating working capital
Receivables $ 178 456
Inventories (217) (218)
Other current assets (74) 40
Accounts payable (156) (439)
Accrued expenses (83) 75
Total changes in operating working capital $ (352) (86)

~~See accompanying Notes to Consolidated Financial Statements.~~

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.~~presentation - see Note 12.

OnEffective October 1, ~~2019,~~2020, the Company adopted ~~ASC 842,~~ ~~Leases,~~ two accounting standard updates and one new accounting standard which ~~requires rights and obligations related to lease arrangements to be recognized~~had an immaterial impact on the balance sheet, using the optional transition method under which prior periods were not adjusted. The Company elected the package of practical expedients for leases that commenced prior to the adoption date, which included carrying forward the historical lease classification as operating or finance. The adoption of ASC 842 resulted in the recognition of operating lease right-of-use assets and related lease liabilities of approximately $500Company's financial statements as of ~~October 1, 2019, but did not materially impact the Company's earnings or cash flows~~and for the ~~three and~~ nine months ended June 30, ~~2020.~~2021. These included:

•Updates to ASC 350, Intangibles - Goodwill and Other, which eliminate the requirement to measure impairment based on the implied fair value of goodwill compared to the carrying amount of a reporting unit’s goodwill. Instead, goodwill impairment will be measured as the excess of 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
Unbilled receivables (contract assets) $ 456 409
Customer advances (contract liabilities) (519) (613)
Net contract liabilities $ (63) (204)


	Sept 30, 2020			June 30, 2021
Unbilled receivables (contract assets)		$	458		500
Customer advances (contract liabilities)		(583)			(774)
Net contract liabilities		$	(125)		(274)

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, ~~2020~~2021 included ~~approximately $37~~$53 and ~~$363, respectively,~~$415 that was included in the beginning contract liability balance. Other factors that impacted the change in net contract liabilities were immaterial. Revenue recognized for the three and nine months ended June 30, 2021 for performance obligations that

~~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, ~~2020,~~2021, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately ~~$5.6~~$6.6 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,
2019 2020 2019 2020
Basic shares outstanding 614.3 596.9 617.4 604.8
Dilutive shares 4.7 3.1 4.2 3.6
Diluted shares outstanding 619.0 600.0 621.6 608.4


	Three Months Ended June 30,		Nine Months Ended June 30,
	2020	2021	2020	2021

Basic shares outstanding	596.9	598.2	604.8	598.7
Dilutive shares	3.1	3.9	3.6	3.6
Diluted shares outstanding	600.0	602.1	608.4	602.3

(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, expands the Company's offerings in the power industry to include the digitization and modernization of the electric grid. The Company recognized goodwill of $960 (NaN of which is expected to be tax deductible), identifiable intangible assets of $783, primarily intellectual property and customer relationships with a weighted-average useful life of approximately 11 years, and deferred tax liabilities of approximately $185. Results of operations for the three months ended June 30, 2021 included first-year pretax acquisition ~~spending totaled $114,~~accounting charges related to backlog amortization and deferred revenue of $7 and $3, respectively, while year-to-date results included $24 and $11, 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~~As previously disclosed, the Company sold its network power systems business (rebranded as Vertiv, now a publicly traded company, symbol VRT) in 2017 and retained a subordinated interest contingent upon the equity holders first receiving a threshold return on their initial investment. As of ~~certain acquired assets~~August 4, 2021, the equity holders have received a return on their investment substantially up to the threshold. Based on the terms of the agreement and ~~liabilities~~the current calculation, the Company could receive approximately $600 on a pretax basis through periodic distributions over the next two years. However, the distributions are ~~in-process~~contingent on the timing and ~~subject~~price at which Vertiv shares are sold by the equity holders and therefore, there can be no assurance as to ~~refinement for transactions completed after~~the amount or timing of the distributions to the Company. As of June 30, ~~2019.~~2021, no amounts have been recognized in the financial statements related to this gain contingency.

~~(5) PENSION & POSTRETIREMENT PLANS~~

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

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

(5) PENSION & POSTRETIREMENT PLANS

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


	Three Months Ended June 30,				Nine Months Ended June 30,
		2020		2021		2020	2021
Service cost		$	21	21		65	63
Interest cost		40		32		120	96
Expected return on plan assets		(84)		(84)		(252)	(252)
Net amortization		38		35		113	105
Total		$	15	4		46	12

(6) OTHER DEDUCTIONS, NET

Other deductions, net are summarized below:

Three Months Ended
June 30, Nine Months Ended
June 30,
2019 2020 2019 2020
Amortization of intangibles (intellectual property and customer
relationships) $ 60 60 177 178
Restructuring costs 20 88 40 216
Special advisory fees — — — 13
Other (15) 33 (45) (6)
Total $ 65 181 172 401


	Three Months Ended June 30,				Nine Months Ended June 30,
	2020			2021		2020	2021

Amortization of intangibles (intellectual property and customer relationships)		$	60	71		178	223
Restructuring costs		88		28		216	111
Special advisory fees		0		0		13	0
Other		33		(11)		(6)	(91)
Total		$	181	88		401	243

InThe increase in intangibles amortization for the three and nine months ended June 30, 2021 was due to the OSI acquisition, including backlog amortization of $7 and $24, respectively. The change in Other for the third quarter of fiscal ~~2020, the change in Other~~2021 included ~~unfavorable impacts~~a favorable impact from foreign currency transactions of $25 due to losses in the prior year and ~~pensions of $16. On~~ a ~~year-to-date basis,~~favorable impact from pensions. For the nine months ended June 30, 2021, the change in Other reflects ~~an unfavorable~~a favorable impact from pensions and investment-related gains, including gains in the first quarter of ~~$46, partially offset by lower litigation costs.~~fiscal 2021 of $21 from an investment sale and $17 from the acquisition of the remaining interest of an equity investment, and a gain in the second quarter of $31 from the sale of an equity investment.

(7) RESTRUCTURING COSTS

Restructuring expense reflects costs associated with the Company’s ongoing efforts to improve operational efficiency and deploy assets globally in order to remain competitive on a worldwide basis. ~~The costs~~Costs incurred in the first nine 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 to improve operating margins and ~~include~~were increased in response to the effects of the COVID-19 pandemic on demand for the Company's products. Expenses incurred in the first nine months of fiscal 2021 included costs related to workforce reductions of approximately ~~3,300~~1,900 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 months of the year.

Restructuring expense by business segment follows:

Three Months Ended
June 30, Nine Months Ended
June 30,
2019 2020 2019 2020
Automation Solutions $ 15 76 26 182
Climate Technologies 4 5 8 14
Tools & Home Products 1 4 5 12
Commercial & Residential Solutions 5 9 13 26
Corporate — 3 1 8
Total $ 20 88 40 216


	Three Months Ended June 30,					Nine Months Ended June 30,
	2020			2021		2020		2021

Automation Solutions		$	76		18		182		94

Climate Technologies		5			4		14		8
Tools & Home Products		4			2		12		4
Commercial & Residential Solutions		9			6		26		12

Corporate		3			4		8		5

Total		$	88		28		216		111

Details of the change in the liability for restructuring costs during the nine months ended June 30, ~~2020~~2021 follow:


		Sept 30, 2019			Expense		Utilized/Paid			June 30, 2020			Sept 30, 2020	Expense	Utilized/Paid	June 30, 2021

Severance and benefits	Severance and benefits		$	62	184	92		154	Severance and benefits		$	176	87	95	168

Other	Other		7		32	34		5	Other		5		24	22	7
Total	Total		$	69	216	126		159	Total		$	181	111	117	175

The tables above do not include $6 and ~~$15~~$4 of costs related to ~~these~~ restructuring actions incurred infor the three ~~and nine~~ months ended June 30, 2020 and 2021, respectively, that are required to be reported in cost of ~~sales.~~ sales and selling, general and administrative expenses; year-to-date amounts are $15 and $11, respectively.

(8) TAXES

~~(8) INCOME TAXES~~

Income taxes were ~~$51~~$151 in the third quarter of fiscal ~~2020~~2021 and ~~$155~~$51 in ~~2019,~~2020, resulting in effective tax rates of 1119 percent and 2011 percent, respectively. The current year rate included $24 of favorable net discrete tax items which decreased the rate 3 percentage points. The prior 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~~$431 for the first nine months of ~~2020~~2021 and ~~$429~~$310 for ~~2019,~~2020, resulting in effective tax rates of 2021 percent and 2120 percent, respectively. The current year and prior year rates included favorable net discrete items ~~including the items discussed above,~~ which reduced ~~both years'~~the rates ~~approximately~~1 percentage point and 3 percentage ~~points.~~points, 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			June 30, 2021
Inventories
Finished products		$	584		666
Raw materials and work in process		1,344			1,448
Total		$	1,928		2,114



Property, plant and equipment, net
Property, plant and equipment, at cost	$	9,055	9,318
Less: Accumulated depreciation	5,367		5,654
Total	$	3,688	3,664

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.

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.

~~The components of lease expense for the three and nine months ended June 30, 2020 were as follows:~~

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

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.

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:



	Sept 30, 2020		June 30, 2021
Goodwill by business segment
Automation Solutions	$	5,583	6,594

Climate Technologies	730		757
Tools & Home Products	421		426
Commercial & Residential Solutions	1,151		1,183

Total	$	6,734	7,777

~~June 30, 2020~~

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

~~500~~

~~Current lease liabilities (Accrued expenses)~~

~~149~~

~~Noncurrent lease liabilities (Other liabilities)~~

~~359~~

~~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


		Sept 30, 2019			June 30, 2020
Other intangible assets	Other intangible assets							Other intangible assets
Gross carrying amount	Gross carrying amount		$	4,872	5,019	Gross carrying amount	$	5,106	5,971
Less: Accumulated amortization	Less: Accumulated amortization		2,257		2,531	Less: Accumulated amortization	2,638		2,978
Net carrying amount	Net carrying amount		$	2,615	2,488	Net carrying amount	$	2,468	2,993

Other intangible assets include customer relationships, net, of ~~$1,391~~$1,328 and ~~$1,298~~$1,554 as of September 30, ~~2019~~2020 and June 30, ~~2020,~~2021, respectively. The increases in goodwill and other intangible assets reflect the acquisition of OSI. See Note 4.


Other assets include the following:	Other assets include the following:						Other assets include the following:
Operating lease right-of-use assets	Operating lease right-of-use assets	$	—	500	Operating lease right-of-use assets	$	508	503
Pension assets	Pension assets	164		294	Pension assets	265		415
Deferred income taxes					Deferred income taxes	99		110
Asbestos-related insurance receivables	Asbestos-related insurance receivables	115		102	Asbestos-related insurance receivables	100		96
Deferred income taxes		97		96



Accrued expenses include the following:
Customer advances (contract liabilities)	$	583	774
Employee compensation	577		629
Product warranty	148		155
Operating lease liabilities (current)	148		151

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:
Pension and postretirement liabilities	$	769	781
Deferred income taxes	261		555
Operating lease liabilities (noncurrent)	373		366
Asbestos litigation	295		267

Other liabilities include the following:
Pension and postretirement liabilities $ 775 781
Operating lease liabilities (noncurrent) — 359
Deferred income taxes 327 361
Asbestos litigation 313 302
The increase in deferred income taxes is largely due to the OSI acquisition.

~~(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, ~~2020,~~2021, the notional amount of foreign currency hedge positions was approximately ~~$2.2~~$1.9 billion, and commodity hedge contracts totaled approximately ~~$96~~$139 (primarily 3942 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, ~~2020~~2021 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.

The following gains and losses are included in earnings and other comprehensive income (OCI) for the three and nine months ended June 30, ~~2020~~2021 and ~~2019:~~2020:


			Into Earnings								Into OCI												Into Earnings			Into OCI
			3rd Quarter				Nine Months			3rd Quarter					Nine Months						3rd Quarter		Nine Months		3rd Quarter	Nine Months
Gains (Losses)	Gains (Losses)	Location	2019		2020	2019	2020	2019	2020	2019	2020	Gains (Losses)	Location			2020		2021	2020	2021	2020	2021	2020	2021
Commodity	Commodity	Cost of sales	$	(2)	(4)	(8)	(8)	(8)	17	(5)	1	Commodity	Cost of sales			$	(4)	13	(8)	24	17	8	1	34
Foreign currency	Foreign currency	Sales	(2)		(2)	(5)	(5)	(3)	6	(5)	1	Foreign currency	Sales			(2)		0	(5)	2	6	0	1	3
Foreign currency	Foreign currency	Cost of sales	6		(3)	15	8	3	21	15	(28)	Foreign currency	Cost of sales			(3)		3	8	5	21	1	(28)	28
Foreign currency	Foreign currency	Other deductions, net	3		(26)	43	(5)					Foreign currency	Other deductions, net			(26)		8	(5)	33

Net Investment Hedges	Net Investment Hedges													Net Investment Hedges
Euro denominated debt	Euro denominated debt							6	(72)	12	(41)	Euro denominated debt									(72)	6	(41)	(21)
Total	Total		$	5	(35)	45	(10)	(2)	(28)	17	(67)	Total				$	(35)	24	(10)	64	(28)	15	(67)	44

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.~~hierarchy. As of June 30, ~~2020,~~2021, the fair value of long-term debt was ~~$6.4~~$6.9 billion, which exceeded the carrying value by ~~$596.~~$526. 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.

Counterparties to derivatives ~~arrangements~~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, ~~2020.~~2021.

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

Activity in Accumulated other comprehensive income (loss) for the three and nine months ended June 30, ~~2020~~2021 and ~~2019~~2020 is shown below, net of income taxes:

Three Months Ended June 30, Nine Months Ended June 30,
2019 2020 2019 2020
Foreign currency translation
   Beginning balance $ (548) (977) (600) (794)
   Other comprehensive income (loss), net of tax of $(2), $17, $(3)
     and $10, respectively
(93) 135 (41) (48)
   Ending balance (641) (842) (641) (842)
Pension and postretirement
   Beginning balance (395) (870) (420) (928)
Amortization of deferred actuarial losses into earnings, net of tax
  of $(4), $(9), $(12) and $(26), respectively
13 29 38 87
   Ending balance (382) (841) (382) (841)
Cash flow hedges
   Beginning balance 15 (56) 5 —
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
   Ending balance 7 (16) 7 (16)
Accumulated other comprehensive income (loss) $ (1,016) (1,699) (1,016) (1,699)


	Three Months Ended June 30,				Nine Months Ended June 30,
		2020		2021		2020	2021
Foreign currency translation
Beginning balance		$	(977)	(542)		(794)	(711)
Other comprehensive income (loss), net of tax of $17, $(1), $10 and $5, respectively		135		(6)		(48)	163


Ending balance		(842)		(548)		(842)	(548)

Pension and postretirement
Beginning balance		(870)		(810)		(928)	(864)
Amortization of deferred actuarial losses into earnings, net of tax of $(9), $(8), $(26) and $(24), respectively		29		27		87	81

Ending balance		(841)		(783)		(841)	(783)

Cash flow hedges
Beginning balance		(56)		30		0	(2)
Deferral of gains (losses) arising during the period, net of tax of $(11), $(2), $6 and $(15), respectively		33		7		(20)	50
Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $(2), $3, $(1) and $7, respectively		7		(13)		4	(24)
Ending balance		(16)		24		(16)	24

Accumulated other comprehensive income (loss)		$	(1,699)	(1,307)		(1,699)	(1,307)

~~(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 June 30,					Nine Months Ended June 30,
	Sales			Earnings		Sales		Earnings
	2020		2021	2020	2021	2020	2021	2020	2021

Automation Solutions	$	2,589	2,947	311	521	8,150	8,432	1,012	1,353

Climate Technologies	970		1,268	195	274	2,869	3,459	563	731
Tools & Home Products	357		489	58	101	1,219	1,419	233	311
Commercial & Residential Solutions	1,327		1,757	253	375	4,088	4,878	796	1,042

Stock compensation				(51)	(66)			(69)	(191)
Unallocated pension and postretirement costs				12	24			37	71
Corporate and other				(22)	(33)			(90)	(76)
Eliminations/Interest	(2)		(7)	(45)	(37)	(11)	(21)	(116)	(115)
Total	$	3,914	4,697	458	784	12,227	13,289	1,570	2,084

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 June 30,		Nine Months Ended June 30,
			2019		2020	2019	2020		2020		2021	2020		2021

Measurement & Analytical Instrumentation	Measurement & Analytical Instrumentation		$	945	735	2,730	2,381	Measurement & Analytical Instrumentation	$	709	781	2,280		2,211
Valves, Actuators & Regulators	Valves, Actuators & Regulators		941		842	2,752	2,609	Valves, Actuators & Regulators	842		880	2,609		2,522
Industrial Solutions	Industrial Solutions		548		469	1,664	1,470	Industrial Solutions	469		593	1,470		1,656
Process Control Systems & Solutions			591		543	1,688	1,690
Systems & Software								Systems & Software	569		693	1,791		2,043
Automation Solutions	Automation Solutions		$	3,025	2,589	8,834	8,150	Automation Solutions	$	2,589	2,947	8,150		8,432

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 June 30,				Nine Months Ended June 30,
		2020		2021		2020	2020
Automation Solutions		$	137	152		414	464

Climate Technologies		44		48		133	144
Tools & Home Products		20		20		58	59
Commercial & Residential Solutions		64		68		191	203

Corporate and other		8		17		26	53
Total		$	209	237		631	720

Sales by geographic destination are summarized below:

Three Months Ended June 30,
2019 2020
Automation Solutions Commercial & Residential Solutions Total Automation Solutions Commercial & Residential Solutions Total
Americas $ 1,448 1,164 2,612 1,159 915 2,074
Asia, Middle East & Africa 970 313 1,283 893 253 1,146
Europe 607 185 792 537 159 696
Total $ 3,025 1,662 4,687 2,589 1,327 3,916
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


	Three Months Ended June 30,
	2020				2021
	Automation Solutions		Commercial & Residential Solutions	Total	Automation Solutions	Commercial & Residential Solutions	Total

Americas	$	1,159	915	2,074	1,321	1,190	2,511
Asia, Middle East & Africa	893		253	1,146	1,011	331	1,342
Europe	537		159	696	615	236	851
Total	$	2,589	1,327	3,916	2,947	1,757	4,704

	Nine Months Ended June 30,
	2020				2021
	Automation Solutions		Commercial & Residential Solutions	Total	Automation Solutions	Commercial & Residential Solutions	Total

Americas	$	3,915	2,815	6,730	3,711	3,290	7,001
Asia, Middle East & Africa	2,619		765	3,384	2,907	944	3,851
Europe	1,616		508	2,124	1,814	644	2,458
Total	$	8,150	4,088	12,238	8,432	4,878	13,310

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

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

The Company's results for the third 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~~$4.7 billion, ~~down 16~~up 20 percent compared with the prior year, ~~adversely affected~~supported by foreign currency translation which ~~deducted~~added 4 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~~up 15 percent. Automation Solutions underlying sales were up high single digits, as all businesses turned positive and all geographies were up mid-to-high single digits. Commercial & Residential Solutions underlying sales were up sharply, reflecting strong growth across all businesses and geographies including robust demand in North American residential markets and global cold chain markets. Both business platforms also benefited from the impact of COVID-19 on prior year comparisons.

Net earnings common stockholders were ~~$399 million, down 34~~$627, up 57 percent, and diluted earnings per share were ~~$0.67, down 31~~$1.04, up 55 percent compared with ~~$0.97~~$0.67 in the prior year. Operating results ~~declined $0.20~~increased $0.33 per share, reflecting ~~the sharp decline in~~higher sales ~~volume~~and strong segment margins due to significant savings from the ~~negative effects of COVID-19~~Company's restructuring and ~~general decline in economic activity. Higher stock compensation (due to an increase in the Company's stock price)~~cost reset actions. Third quarter results also benefited from lower restructuring costs ($0.09 per share) and ~~pension expense of $0.05 per share and unfavorable~~favorable foreign currency ~~transactions of $0.04 per share also contributed~~translation ($0.06), offset by a higher tax rate compared to the ~~decline. Discrete tax benefits~~prior year ($0.10 per share) and ~~share repurchases ($0.02 per share) favorably impacted results, while restructuring~~first year acquisition accounting charges related to the ~~Company's initiatives to improve operating margins reduced earnings $0.13~~OSI acquisition ($0.01 per ~~share in the current quarter.~~share).

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30

Following is an analysis of the Company’s operating results for the third quarter ended June 30, ~~2020,~~2021, compared with the third quarter ended June 30, ~~2019.~~

2019 2020 Change
(dollars in millions, except per share amounts)
Net sales $ 4,684 3,914 (16) %
Gross profit $ 2,001 1,618 (19) %
Percent of sales 42.7 % 41.3 %
SG&A $ 1,126 934 (17) %
Percent of sales 24.0 % 23.8 %
Other deductions, net $ 65 181
Interest expense, net $ 43 45
Earnings before income taxes $ 767 458 (40) %
Percent of sales 16.4 % 11.7 %
Net earnings common stockholders $ 604 399 (34) %
Percent of sales 12.9 % 10.2 %
Diluted earnings per share $ 0.97 0.67 (31) %
2020.


	2020			2021		Change


Net sales	$	3,914		4,697		20	%
Gross profit	$	1,618		1,982		23	%
Percent of sales	41.3		%	42.2	%

SG&A	$	934		1,073		15	%
Percent of sales	23.8		%	22.9	%



Other deductions, net	$	181		88
Amortization of intangibles	$	60		71
Restructuring costs	$	88		28

Interest expense, net	$	45		37

Earnings before income taxes	$	458		784		71	%
Percent of sales	11.7		%	16.7	%

Net earnings common stockholders	$	399		627		57	%
Percent of sales	10.2		%	13.3	%


Diluted earnings per share	$	0.67		1.04		55	%

Net sales for the third quarter of fiscal ~~2020~~2021 were ~~$3.9~~$4.7 billion, ~~a decrease of $770 million, or 16~~up 20 percent compared with ~~2019.~~2020. Automation Solutions sales were up 14 percent and Commercial & Residential Solutions sales were up 32 percent. Underlying sales were ~~down~~up 15 percent, ~~($691 million) on lower volume,~~ as ~~COVID-19 negatively impacted nearly all end markets and geographies. Foreign~~foreign currency translation ~~subtracted~~added 4 percent and the OSI acquisition added 1 ~~percent ($70 million) and divestitures subtracted $9 million.~~ percent. Underlying sales were ~~down 20~~up 18 percent in the U.S. and 10up 13 percent internationally. The Americas was ~~down 20~~up 18 percent, Europe was ~~down 9~~up 13 percent and Asia, Middle East & Africa was ~~down 9~~up 11 percent (China up 37 percent).

Cost of sales for the third quarter of fiscal ~~2020~~2021 were ~~$2.3 billion, a decrease~~$2,715, an increase of ~~$387 million~~$419 compared with ~~2019, primarily~~2020, due to ~~lower volume.~~higher sales volume, the impact of foreign currency translation and the OSI acquisition. Gross margin of ~~41.3~~42.2 percent ~~decreased 1.4~~

increased 0.9 percentage points compared with the prior year reflecting ~~deleverage~~leverage on ~~lower~~higher sales volume, ~~and unfavorable mix primarily within Automation Solutions,~~partially offset by ~~favorable price-cost.~~unfavorable price-cost in Commercial & Residential Solutions.

Selling, general and administrative (SG&A) expenses of ~~$934 million decreased $192 million~~$1,073 increased $139 compared with the prior year on increased sales volume and higher stock and other performance-based compensation expense. SG&A as a percent of sales decreased ~~0.2~~0.9 percentage points to ~~23.8~~22.9 percent ~~primarily due to significant~~reflecting savings from the Company's restructuring and cost reset actions, which offset 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 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.actions.

Other deductions, net were ~~$181 million~~$88 in ~~2020, an increase~~2021, a decrease of ~~$116 million~~$93 compared with the prior year, reflecting ~~increased~~lower restructuring costs of ~~$68 million and unfavorable impacts on comparisons~~$60, a favorable impact from foreign currency transactions of $25 ~~million~~due to losses in the prior year, and a favorable impact from pensions, partially offset by higher intangibles amortization of ~~$16 million.~~$11, primarily related to the OSI acquisition. See Notes 6 and 7.

Pretax ~~earnings~~earnings of ~~$458 million decreased $309 million, or 40~~$784 increased $326, up 71 percent compared with the prior year. Earnings ~~decreased $166 million~~increased $210 in Automation Solutions and ~~$118 million~~$122 in ~~Commercial~~Commercial & Residential ~~Solutions. Costs~~Solutions, while costs reported at Corporate increased $23 million due to higher stock compensation (reflecting an increase in the Company's stock price) and unallocated pension and postretirement costs which together increased $35 million, offset by a decline 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 stock compensation and pension expense and unfavorable foreign currency transactions also impacted comparisons by 1.8 percentage points.$14. See the Business Segments discussion that follows and Note ~~14.~~12.

Income taxes were $151 for 2021 and $51 ~~million~~ for 2020, ~~and $155 million for 2019,~~ resulting in effective tax rates of 19 percent and 11 percent, ~~and 20 percent,~~ respectively. The current year rate included $24 of favorable net discrete tax items which decreased the rate 3 percentage points, while the prior year rate included $57 ~~million ($0.10 per share)~~ of discrete benefits which decreased the rate 12 percentage ~~points,~~ 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 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.

Net earnings common stockholders in the third quarter of fiscal ~~2020~~2021 were ~~$399 million, down 34~~$627, up 57 percent, compared with ~~$604 million~~$399 in the prior year, and earnings per share were ~~$0.67, down 31~~$1.04, up 55 percent, compared with ~~$0.97~~$0.67 in the prior year. See discussion in the Overview above for further details.

Following is an analysis of operating results for the Company’s business segments for the third quarter ended June 30, ~~2020,~~2021, compared with the third quarter ended June 30, ~~2019.~~2020. The Company defines segment earnings as earnings before interest and taxes. See Note 1412 for a discussion of the Company's business segments.





Sales by Major Product Offering
Measurement & Analytical Instrumentation	$	709	781	10	%
Valves, Actuators & Regulators	842		880	5	%
Industrial Solutions	469		593	26	%
Systems & Software	569		693	22	%
Total	$	2,589	2,947	14	%

Automation Solutions sales were $2.9 billion in the third quarter, an increase of $358 or 14 percent. Underlying sales increased 8 percent on 7 percent higher volume and 1 percent higher price, reflecting recovery in global markets from the impacts of COVID-19. Foreign currency translation had a 4 percent favorable impact and the OSI acquisition had a 2 percent favorable impact. Underlying sales turned positive and increased 9 percent in the Americas (U.S. up 9 percent), as process end markets recovered, while Europe increased 6 percent and Asia, Middle East & Africa increased 7 percent (China up 5 percent). Sales for Measurement & Analytical Instrumentation increased $72, or 10 percent, and Valves, Actuators & Regulators increased $38, or 5 percent, as market conditions continued to improve for North American process industries. Measurement & Analytical sales were strong in Asia, Middle East & Africa, while demand in Europe for both businesses was soft. Industrial Solutions sales were up $124, or 26 percent, reflecting strong global demand in discrete end markets. Systems & Software increased $124, or 22 percent, on strength in process end markets in North America and Europe and solid growth in Asia, Middle East & Africa, while power end markets were strong in North America, and the OSI acquisition added $51. Earnings were $521, an increase of $210, or 67 percent, and margin increased 5.7 percentage points to 17.7 percent, reflecting leverage on

Sales by Major Product Offering
Measurement & Analytical Instrumentation $ 945 735 (22) %
Valves, Actuators & Regulators 941 842 (11) %
Industrial Solutions 548 469 (14) %
Process Control Systems & Solutions 591 543 (8) %
Total $ 3,025 2,589 (14) %

~~Automation Solutions sales were $2.6 billion in the third quarter, a decrease of $436 million or 14 percent. Underlying sales decreased 13 percent ($380 million) on~~higher volume, lower volume. Foreign currency translation 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. Underlying sales decreased 19 percent in the Americas (U.S. down 20 percent), Europe decreased 8 percent and Asia, Middle East & Africa decreased 6 percent (China up 9 percent). Sales for Measurement & Analytical Instrumentation decreased $210 million, or 22 percent, ~~due to global weakness across most geographies, particularly in North American process industries, wh~~ile China rebounded from a sharp decline in the previous quarter and was up moderately. Valves, Actuators & Regulators decreased $99 million, or 11 percent, reflecting weakness across most end markets, particularly in North America, partially offset by a sharp rebound in China sales. Industrial Solutions sales decreased $79 million, or 14 percent, on weakness in global discrete end markets, excluding China which was up low double-digits. Process Control Systems & Solutions decreased $48 million, or 8 percent, due to weakness 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 ofwhich benefited margins 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.

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.


Three Months Ended June 30	2020			2021		Change


Sales:
Climate Technologies	$	970		1,268		31	%
Tools & Home Products	357			489		37	%
Total	$	1,327		1,757		32	%

Earnings:
Climate Technologies	$	195		274		40	%
Tools & Home Products	58			101		74	%
Total	$	253		375		48	%
Margin	19.1		%	21.3	%

Commercial & Residential Solutions sales were $1.8 billion in the third quarter, up $430, or 32 percent compared to the prior year. Underlying sales increased 29 percent due to strong growth across all businesses and geographies while foreign currency translation added 3 percent. Results also benefited from comparisons to prior year results which were negatively impacted by COVID-19. Overall, underlying sales increased 29 percent in the Americas (U.S. up 28 percent), 37 percent in Europe and 25 percent in Asia, Middle East & Africa (China up 15 percent). Climate Technologies sales were $1.3 billion in the third quarter, an increase of $298, or 31 percent. Air conditioning and heating sales were up 20 percent and cold chain sales were up over 40 percent, reflecting strong global demand across all end markets, especially food service, food retail and aftermarket. Tools & Home Products sales were $489 in the third quarter, an increase of $132, or 37 percent. Sales of wet/dry vacuums were robust in part due to competitor outages, while professional tools and food waste disposers were up sharply. Earnings were $375, up 48 percent compared with the prior year, and margin increased 2.2 percentage points to 21.3 percent due to leverage on higher sales volume and savings from cost reduction actions, partially offset by unfavorable price-cost.

Following is an analysis of the Company’s operating results for the nine months ended June 30, ~~2020,~~2021, 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) %
2020.


	2020			2021		Change


Net sales	$	12,227		13,289		9	%
Gross profit	$	5,127		5,567		9	%
Percent of sales	41.9		%	41.9	%

SG&A	$	3,040		3,125		3	%
Percent of sales	24.8		%	23.5	%


Other deductions, net	$	401		243
Amortization of intangibles	$	178		223
Restructuring costs	$	216		111

Interest expense, net	$	116		115

Earnings before income taxes	$	1,570		2,084		33	%
Percent of sales	12.8		%	15.7	%

Net earnings common stockholders	$	1,242		1,633		31	%
Percent of sales	10.2		%	12.3	%


Diluted earnings per share	$	2.04		2.71		33	%

Net sales for the first nine months of ~~2020~~2021 were ~~$12.2~~$13.3 billion, ~~a decrease of $1.2 billion, or~~up 9 percent compared with ~~2019.~~2020. Automation Solutions sales were up 3 percent while Commercial & Residential Solutions sales were up 19 percent. Underlying sales were ~~down 8~~up 5 percent, ~~($993 million) on lower volume. Divestitures net of acquisitions subtracted $3 million and~~as foreign currency translation ~~subtracted~~added 3 percent and acquisitions added 1 ~~percent ($178 million).~~percent. Underlying sales ~~decreased 11~~increased 1 percent in the U.S. and 5increased 8 percent internationally. The Americas was ~~down 10~~up 2 percent, Europe was ~~down 4~~up 8 percent and Asia, Middle East & Africa was ~~down 4 percent.~~up 9 percent (China up 16 percent).

Cost of sales for ~~2020~~2021 were ~~$7.1 billion, a decrease~~$7,722, an increase of ~~$614 million~~$622 versus ~~$7.7 billion~~$7,100 in ~~2019,~~2020, primarily due to ~~lower volume.~~the impact of higher sales volume in Commercial & Residential Solutions, foreign currency translation, and the OSI acquisition. Gross margin ~~decreased 0.5 percentage points to~~was 41.9 percent, ~~reflecting deleverage~~flat compared to the prior year, as leverage on ~~lower~~higher sales volume was offset by unfavorable mix and unfavorable ~~mix primarily within Automation Solutions, partially offset by favorable price-cost.~~price-cost in Commercial & Residential Solutions.

SG&A expenses of ~~$3.0 billion decreased $308 million and~~$3,125 increased $85 compared with the prior year on higher stock compensation expense, as well as increased sales volume. SG&A as a percent of sales decreased ~~0.1~~1.3 percentage points to ~~24.8 percent. Significant~~23.5 percent, reflecting significant savings from the Company's restructuring and cost reset actions, partially offset ~~deleverage on~~by higher stock compensation expense of $122 (0.8 percentage points) due to a higher share price in the ~~lower sales volume.~~current year.

Other deductions, net were ~~$401 million~~$243 in ~~2020, an increase~~2021, a decrease of ~~$229 million~~$158 compared with the prior year, reflecting ~~increased~~lower restructuring costs of ~~$176 million~~$105, investment-related gains, including gains in the first quarter of fiscal 2021 of $21 from an investment sale and $17 from the acquisition of the remaining interest of an ~~unfavorable~~equity investment, and a gain in the second quarter of $31 from the sale of an equity investment, and a favorable impact ~~on comparisons~~ from ~~pensions of $46 million,~~pensions. These items were partially offset by ~~lower litigation costs. See~~higher intangibles amortization of $45, primarily related to the OSI acquisition. See Notes 6 and 7.

Pretax earnings of ~~$1.6 billion decreased $463 million,~~$2,084 increased $514, or 2333 percent. Earnings ~~decreased $316 million~~increased $341 in Automation Solutions and ~~$140 million~~$246 in Commercial & Residential ~~Solution~~s.Solutions. Costs reported at Corporate increased ~~$25 million due~~$74, reflecting higher stock compensation expense of $122 and first year acquisition accounting charges and fees related to ~~higher~~the OSI acquisition of $41, partially offset by the investment-related gains discussed above and lower unallocated pension and postretirement costs which ~~increased $44 million, partially offset~~decreased 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.$34. See the Business Segments discussion that follows and Note ~~14.~~12.

Income taxes were $431 for 2021 and $310 ~~million~~ for 2020, ~~and $429 million for 2019,~~ resulting in effective tax rates of 2021 percent and 2120 percent, respectively. The current year and prior year rates included favorable net discrete items which reduced ~~both years'~~the rates ~~approximately~~1 percentage point and 3 percentage ~~points. See Note 8.~~points, respectively.

Net earnings common stockholders in ~~2020~~2021 were ~~$1.2 billion, down 22~~$1,633, up 31 percent compared with the prior year, and earnings per share were ~~$2.04, down 20~~$2.71, up 33 percent compared with ~~$2.55~~$2.04 in ~~2019. The decline in~~2020. Operating results increased $0.54 per share, reflecting significant savings from the Company's restructuring and cost reset actions and leverage on higher sales volume ~~largely attributable to the negative effects of COVID-19~~in Commercial & Residential Solutions. Lower restructuring and ~~oil price volatility, resulted in a decline in~~advisory fees ($0.16 per share), favorable foreign currency translation ($0.05 per share), lower pension expense ($0.03 per share) and share repurchases ($0.02 per share) also benefited operating results, of

~~$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~~higher stock compensation expense ~~negatively affected comparisons by $0.04~~deducted $0.15 per share and ~~unfavorable foreign currency~~a higher tax rate deducted $0.03 per share. ~~Results were favorably impacted by discrete tax items~~The Company recognized several investment-related gains in the current year ($~~0.09~~0.10 per share), while first year acquisition accounting charges and ~~a combined benefit from share repurchases and lower interest expense of $0.06~~fees related to the OSI acquisition deducted $0.05 per share.

Following is an analysis of operating results for the Company’s business segments for the nine months ended June 30, ~~2020,~~2021, compared with the nine months ended June 30, ~~2019.~~2020. The Company defines segment earnings as earnings before interest and taxes.

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


Nine Months Ended June 30	2020			2021		Change

Sales	$	8,150		8,432		3	%
Earnings	$	1,012		1,353		34	%
Margin	12.4		%	16.0	%





Sales by Major Product Offering
Measurement & Analytical Instrumentation	$	2,280	2,211	(3)	%
Valves, Actuators & Regulators	2,609		2,522	(3)	%
Industrial Solutions	1,470		1,656	13	%
Systems & Software	1,791		2,043	14	%
Total	$	8,150	8,432	3	%

Automation Solutions sales were ~~$8.2~~$8.4 billion in the first nine months of ~~2020, a decrease~~2021, an increase of ~~$684 million,~~$282, or 83 percent. Underlying sales decreased 71 percent ~~($591 million) on~~as lower ~~volume. The Machine Automation Solutions~~volume was partially offset by slightly higher price. Foreign currency translation had a 3 percent favorable impact and the OSI acquisition added 1 percent ~~($47 million) and foreign currency translation had a 2 percent ($140 million) unfavorable impact.~~. Underlying sales decreased 119 percent in the Americas, 4while Europe increased 5 percent ~~in Europe~~ and ~~2 percent in~~ Asia, Middle East & Africa was up 6 percent (China ~~down 1~~up 14 percent). Sales for Measurement & Analytical Instrumentation decreased ~~$349 million,~~$69, or 133 percent,~~, due to weakness in~~ as process industries ~~primarily~~were weak in ~~North America.~~the first half of the year, but have improved sequentially as markets continue to recover from the impacts of COVID-19. Valves, Actuators & Regulators decreased ~~$143 million,~~$87, or 53 percent, reflecting slower demand in most end ~~markets.~~markets, particularly in North America and Europe, partially offset by strength in Asia. Industrial Solutions sales ~~decreased $194 million,~~increased $186, or 1213 percent, on ~~lower global demand~~strong growth in Europe and robust growth in China, while North American discrete end ~~markets. Process Control~~markets were down slightly but continued to improve sequentially. Systems & ~~Solutions~~Software increased ~~$2 million due to~~$252, or 14 percent, reflecting the ~~Machine Automation Solutions~~impact of the OSI acquisition which added ~~$47 million, largely~~$141. Process end markets were strong in Europe and had solid growth in Asia while North America declined. Power end markets were solid in North America, partially offset by ~~weakness~~softness in ~~power end markets in China and process end markets in the U.S.~~Asia. Earnings were ~~$1.0 billion, a decrease~~$1,353, an increase of ~~$316 million,~~$341, or 2434 percent, ~~primarily due to higher restructuring expenses of $166 million~~ and ~~lower volume. Margin decreased 2.6~~margin increased 3.6 percentage points to ~~12.4~~16.0 percent, ~~reflecting a negative impact from restructuring expenses of 2.1 percentage points and unfavorable mix. Savings~~as significant savings from cost reduction actions and favorable price-cost more than offset ~~deleverage on~~unfavorable mix, while lower ~~sales volume.~~restructuring expense benefited margins 1.3 percentage points.

1918

COMMERCIAL & RESIDENTIAL SOLUTIONS


Nine Months Ended June 30	Nine Months Ended June 30	2019			2020		Change		Nine Months Ended June 30	2020			2021		Change
(dollars in millions)

Sales:	Sales:								Sales:
Climate Technologies	Climate Technologies	$	3,171		2,869		(10)	%	Climate Technologies	$	2,869		3,459		21	%
Tools & Home Products	Tools & Home Products	1,390			1,219		(12)	%	Tools & Home Products	1,219			1,419		16	%
Total	Total	$	4,561		4,088		(10)	%	Total	$	4,088		4,878		19	%

Earnings:	Earnings:								Earnings:
Climate Technologies	Climate Technologies	$	650		563		(13)	%	Climate Technologies	$	563		731		30	%
Tools & Home Products	Tools & Home Products	286			233		(19)	%	Tools & Home Products	233			311		34	%
Total	Total	$	936		796		(15)	%	Total	$	796		1,042		31	%
Margin	Margin	20.5		%	19.5	%			Margin	19.5		%	21.4	%

Commercial & Residential Solutions sales were ~~$4.1~~$4.9 billion in the first nine months of ~~2020, a decrease~~2021, an increase of ~~$473 million,~~$790, or 1019 percent compared to the prior year. Underlying sales were ~~down 9~~up 17 percent ~~($402 million) on lower volume. The divestiture of two small non-core businesses subtracted $33 million and~~due to strong global demand while foreign currency translation ~~subtracted $38 million, a combined decrease of 1 percent.~~added 2 percent. Overall, underlying sales ~~decreased 10~~increased 17 percent in the Americas, 417 percent in Europe and 1018 percent in Asia, Middle East & Africa (China ~~down 11~~up 22 percent). Climate Technologies sales were ~~$2.9~~$3.5 billion in the first nine months of ~~2020, a decrease~~2021, an increase of ~~$302 million,~~$590, or 1021 percent. Air conditioning ~~and~~and heating sales were ~~down sharply,~~up mid-teens, reflecting ~~significant declines~~strong demand for residential-oriented products and solutions in ~~Asia~~North America and ~~the U.S. due to the effects of COVID-19. Global cold~~robust growth in Europe and China. Cold chain sales were ~~down sharply on significant declines~~up over 20 percent, driven by favorable global market conditions and strength in ~~Asia~~food retail and ~~Europe, while North America was down moderately.~~aftermarket. Tools & Home Products sales were ~~$1.2~~$1.4 billion in the first nine months of ~~2020, down $171 million,~~2021, up $200, or ~~12 percent compared~~16 percent. Sales of wet/dry vacuums were robust in part due to ~~the prior year, reflecting sharp declines in~~competitor outages, while sales were strong for food waste disposers and global professional tools, ~~markets. Sales for wet/dry vacuums and food waste disposers were down moderately.~~partially due to easier comparisons in the third quarter. Earnings were ~~$796 million, down 15~~$1,042, up 31 percent compared to the prior year, and margin ~~decreased 1.0~~increased 1.9 percentage points, ~~due to deleverage~~reflecting leverage on ~~lower sales~~higher volume and ~~higher restructuring expenses which negatively impacted margins by 0.4 percentage points, partially offset by~~ savings from cost reduction actions, partially offset by unfavorable price-cost and ~~favorable price-cost.~~mix.

FINANCIAL CONDITION

Key elements of the Company's financial condition for the nine months ended June 30, ~~2020~~2021 as compared to the year ended September 30, ~~2019~~2020 and the nine months ended June 30, 2020 follow.


	June 30, 2020			Sept 30, 2020			June 30, 2021
Operating working capital	$	1,169		$	866		$	714
Current ratio	1.3			1.5			1.3
Total debt-to-total capital	48.0		%	47.1		%	44.0		%
Net debt-to-net capital	37.9		%	33.2		%	32.4		%
Interest coverage ratio	12.9		X	14.4		X	17.8		X

Sept 30, 2019 June 30, 2020
Working capital (in millions) $ 1,163 $ 1,894
Current ratio 1.2 1.3
Total debt-to-total capital 41.0 % 48.0 %
Net debt-to-net capital 33.9 % 37.9 %
Interest coverage ratio 15.2 X 12.9 X
The Company's operating working capital decreased $455 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 17.8X for the first nine months of fiscal 2021 compares to 12.9X for the nine months ended June 30, 2020. The increase reflects higher pretax earnings in the current year.

Operating cash flow for the first nine months of fiscal 2021 was $2.7 billion, an increase of $866 compared with $1.9 billion in the prior year due to higher earnings and favorable operating working capital. Free cash flow of $2.4 billion in the first nine months of fiscal 2021 (operating cash flow of $2.7 billion less capital expenditures of $350) increased $845 compared to free cash flow of $1.5 billion in 2020 (operating cash flow of $1.9 billion less capital expenditures of $329), reflecting the increase in operating cash flow. Cash used for investing activities was $1.9 billion largely due to the OSI acquisition. Cash used for financing activities was $1.3 billion, primarily due to dividends and share repurchases.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic, and among other things, provides tax relief to businesses. Tax provisions of the CARES Act include the deferral of certain payroll taxes, relief for retaining employees, and other provisions. The Company deferred $73 of certain payroll taxes through the end of calendar year 2020, 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.

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.

~~Operating cash flow for the first nine months of fiscal 2020 was $1.9 billion, an increase of $52 million compared with $1.8 billion~~

FISCAL 2021 OUTLOOK

The Company delivered strong financial performance in the ~~prior year, as operating working capital declined due to lower business levels, partially offset by lower earnings. Free cash flow~~quarter, despite pandemic and operating-related challenges, including material costs, availability, logistics, and labor constraints. Overall, the Company expects continued improvement in industrial and commercial demand over the remainder 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 to free cash flow 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~~2021. Operational, 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 Americamaterials inflation is expected to remain challenging through the ~~key challenge~~remainder of the fiscal year. For the full year, consolidated net sales are expected to be up 9 to 10 percent, with underlying sales up 5 to 6 percent excluding a 3 percent favorable impact from foreign currency translation and a ~~demand perspective. The guidance also assumes no major operational or supply chain disruptions. Lastly,~~1 percent favorable impact from the ~~outlook assumes no changes in discrete tax items~~OSI acquisition. Automation Solutions net sales are expected to be up 5 to 6 percent, with underlying sales flat to up 1 percent excluding a 3 percent favorable impact from foreign currency translation and ~~assumes oil prices remain~~a 2 percent favorable impact from the OSI acquisition. Commercial & Residential Solutions net sales are expected to be up 17 to 18 percent, with underlying sales up 15 to 16 percent excluding a 2 percent impact from favorable foreign currency translation. Earnings per share are expected to be $3.78 to $3.80, while adjusted earnings per share, which exclude a $0.24 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 $4.06 to $4.08. Operating cash flow is expected to be approximately $3.6 billion and free cash flow, which excludes targeted capital spending of $600 million, is expected to be approximately $3.0 billion. Fiscal 2021 share repurchases are expected to be in the ~~$35 to $45 range for the same time period.~~amount of $500 million. 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. 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.

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.

2220

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


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
April 2021		803	$91.52		803	63,756
May 2021		467	$93.14		467	63,289
June 2021		801	$95.96		801	62,488
Total		2,071	$93.60		2,071	62,488

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~~62.5 million shares remain available for purchase under the authorizations. ~~No shares were repurchased in the third quarter of 2020.~~

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 May 4, 2021, 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 May 4, 2021, filed on ~~a consolidated basis.~~May 4, 2021, 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, ~~2020~~2021 and ~~2019,~~2020, (ii) Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, ~~2020~~2021 and ~~2019,~~2020, (iii) Consolidated Balance Sheets as of September 30, ~~2019~~2020 and June 30, ~~2020,~~2021, (iv) Consolidated Statements of Equity for the three and nine months ended June 30, ~~2020~~2021 and ~~2019,~~2020, (v) Consolidated Statements of Cash Flows for the nine months ended June 30, ~~2020~~2021 and ~~2019,~~2020, and (vi) Notes to Consolidated Financial Statements for the three and nine months ended ended June 30, ~~2020~~2021 and ~~2019.~~2020.

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

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.

/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~~4, 2021


	Three Months Ended			Nine Months Ended
	June 30, 2020

Operating lease expense		$	50	156
Variable lease expense		$	4	14


	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



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


	Sept 30, 2019			June 30, 2020
Working capital (in millions)	$	1,163		$	1,894
Current ratio	1.2			1.3
Total debt-to-total capital	41.0		%	48.0		%
Net debt-to-net capital	33.9		%	37.9		%
Interest coverage ratio	15.2		X	12.9		X