UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20222023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to __________________
Commission file number 1-278
EMERSON ELECTRIC CO.
(Exact name of registrant as specified in its charter) | | | | | | | | | | | |
Missouri | | 43-0259330 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
8000 W. Florissant Ave. |
|
P.O. Box 4100 | |
St. Louis, | Missouri | 63136 |
(Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (314) 553-2000
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock of $0.50 par value per share | EMR | New York Stock Exchange |
| | NYSE Chicago |
0.375% Notes due 2024 | EMR 24 | New York Stock Exchange |
1.250% Notes due 2025 | EMR 25A | New York Stock Exchange |
2.000% Notes due 2029 | EMR 29 | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Large accelerated filer | ☒ | | Accelerated filer | ☐ | | | | | |
Non-accelerated filer | ☐ | | | Smaller reporting company | ☐ | |
| | | | Emerging growth company | ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common stock of $0.50 par value per share outstanding at July 31, 2022:June 30, 2023: 591.3571.5 million shares.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings
EMERSON ELECTRIC CO. & SUBSIDIARIES
Three and nine months ended June 30, 20212022 and 20222023
(Dollars in millions, except per share amounts; unaudited)
| | | Three Months Ended June 30, | | Nine Months Ended June 30, | | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2022 | | | 2023 | | | 2022 | | | 2023 | |
Net sales | Net sales | $ | 4,697 | | | 5,005 | | | 13,289 | | | 14,269 | | Net sales | $ | 3,465 | | | 3,946 | | | 9,912 | | | 11,075 | |
| Cost of sales | Cost of sales | 2,715 | | | 2,908 | | | 7,722 | | | 8,398 | | Cost of sales | 1,879 | | | 1,952 | | | 5,435 | | | 5,660 | |
Selling, general and administrative expenses | Selling, general and administrative expenses | 1,073 | | | 1,052 | | | 3,125 | | | 3,112 | | Selling, general and administrative expenses | 894 | | | 1,042 | | | 2,631 | | | 3,072 | |
Gain on subordinated interest | Gain on subordinated interest | — | | | — | | | — | | | (453) | | Gain on subordinated interest | — | | | — | | | (453) | | | — | |
Gain on sale of business | — | | | (483) | | | — | | | (483) | | |
Other deductions, net | Other deductions, net | 88 | | | 283 | | | 243 | | | 374 | | Other deductions, net | 264 | | | 191 | | | 330 | | | 420 | |
Interest expense (net of interest income of $3, $11, $9, and $18, respectively) | 37 | | | 50 | | | 115 | | | 140 | | |
Interest expense (net of interest income of $11, $58, $18 and $96, respectively) | | Interest expense (net of interest income of $11, $58, $18 and $96, respectively) | 50 | | | 10 | | | 140 | | | 111 | |
Interest income from related party | | Interest income from related party | — | | | (10) | | | — | | | (10) | |
| Earnings before income taxes | 784 | | | 1,195 | | | 2,084 | | | 3,181 | | |
Earnings from continuing operations before income taxes | | Earnings from continuing operations before income taxes | 378 | | | 761 | | | 1,829 | | | 1,822 | |
| Income taxes | Income taxes | 151 | | | 243 | | | 431 | | | 659 | | Income taxes | 123 | | | 158 | | | 399 | | | 390 | |
| Earnings from continuing operations | | Earnings from continuing operations | 255 | | | 603 | | | 1,430 | | | 1,432 | |
| Discontinued operations, net of tax: $120, $2,014, $260 and $3,019, respectively | | Discontinued operations, net of tax: $120, $2,014, $260 and $3,019, respectively | 697 | | | 8,763 | | | 1,092 | | | 11,030 | |
| Net earnings | Net earnings | 633 | | | 952 | | | 1,653 | | | 2,522 | | Net earnings | 952 | | | 9,366 | | | 2,522 | | | 12,462 | |
| Less: Noncontrolling interests in subsidiaries | Less: Noncontrolling interests in subsidiaries | 6 | | | 31 | | | 20 | | | 31 | | Less: Noncontrolling interests in subsidiaries | 31 | | | 14 | | | 31 | | | (13) | |
| Net earnings common stockholders | Net earnings common stockholders | $ | 627 | | | 921 | | | 1,633 | | | 2,491 | | Net earnings common stockholders | $ | 921 | | | 9,352 | | | 2,491 | | | 12,475 | |
| Earnings common stockholders: | | Earnings common stockholders: | |
Earnings from continuing operations | | Earnings from continuing operations | 226 | | | 592 | | | 1,400 | | | 1,451 | |
Discontinued operations | | Discontinued operations | 695 | | | 8,760 | | | 1,091 | | | 11,024 | |
Net earnings common stockholders | | Net earnings common stockholders | $ | 921 | | | 9,352 | | | 2,491 | | | 12,475 | |
| Basic earnings per share common stockholders: | | Basic earnings per share common stockholders: | |
Earnings from continuing operations | | Earnings from continuing operations | $ | 0.38 | | | 1.04 | | | 2.36 | | | 2.52 | |
Discontinued operations | | Discontinued operations | 1.17 | | | 15.32 | | | 1.83 | | | 19.15 | |
Basic earnings per common share | | Basic earnings per common share | $ | 1.55 | | | 16.36 | | | 4.19 | | | 21.67 | |
| Earnings per share: | | |
Basic | $ | 1.05 | | | 1.55 | | | 2.73 | | | 4.19 | | |
Diluted | $ | 1.04 | | | 1.54 | | | 2.71 | | | 4.17 | | |
Diluted earnings per share common stockholders: | | Diluted earnings per share common stockholders: | |
Earnings from continuing operations | | Earnings from continuing operations | $ | 0.38 | | | 1.03 | | | 2.34 | | | 2.51 | |
Discontinued operations | | Discontinued operations | 1.16 | | | 15.25 | | | 1.83 | | | 19.05 | |
Diluted earnings per common share | | Diluted earnings per common share | $ | 1.54 | | | 16.28 | | | 4.17 | | | 21.56 | |
| Weighted average outstanding shares: | Weighted average outstanding shares: | | Weighted average outstanding shares: | |
Basic | Basic | 598.2 | | | 592.8 | | | 598.7 | | | 593.6 | | Basic | 592.8 | | | 570.9 | | | 593.6 | | | 575.1 | |
Diluted | Diluted | 602.1 | | | 596.2 | | | 602.3 | | | 596.9 | | Diluted | 596.2 | | | 574.0 | | | 596.9 | | | 578.1 | |
See accompanying Notes to Consolidated Financial Statements.
Consolidated Statements of Comprehensive Income
EMERSON ELECTRIC CO. & SUBSIDIARIES
Three and nine months ended June 30, 20212022 and 20222023
(Dollars in millions; unaudited)
| | | Three Months Ended June 30, | | Nine Months Ended June 30, | | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | | 2022 | | | | 2021 | | | 2022 | | | 2022 | | | 2023 | | | | 2022 | | | 2023 | |
Net earnings | Net earnings | $ | 633 | | | 952 | | | | 1,653 | | | | 2,522 | | Net earnings | $ | 952 | | | 9,366 | | | | 2,522 | | | | 12,462 | |
| Other comprehensive income (loss), net of tax: | Other comprehensive income (loss), net of tax: | | Other comprehensive income (loss), net of tax: | |
Foreign currency translation | Foreign currency translation | (5) | | | (187) | | | 163 | | | (319) | | Foreign currency translation | (187) | | | 86 | | | (319) | | | 437 | |
Pension and postretirement | Pension and postretirement | 27 | | | 18 | | | 81 | | | 54 | | Pension and postretirement | 18 | | | 10 | | | 54 | | | (23) | |
Cash flow hedges | Cash flow hedges | (6) | | | (27) | | | 26 | | | (17) | | Cash flow hedges | (27) | | | (19) | | | (17) | | | 4 | |
Total other comprehensive income (loss) | Total other comprehensive income (loss) | 16 | | | (196) | | | | 270 | | | | (282) | | Total other comprehensive income (loss) | (196) | | | 77 | | | | (282) | | | | 418 | |
| Comprehensive income | Comprehensive income | 649 | | | 756 | | | 1,923 | | | 2,240 | | Comprehensive income | 756 | | | 9,443 | | | 2,240 | | | 12,880 | |
| Less: Noncontrolling interests in subsidiaries | Less: Noncontrolling interests in subsidiaries | 7 | | | 30 | | | 20 | | | 29 | | Less: Noncontrolling interests in subsidiaries | 30 | | | 15 | | | 29 | | | (8) | |
Comprehensive income common stockholders | Comprehensive income common stockholders | $ | 642 | | | 726 | | | | 1,903 | | | | 2,211 | | Comprehensive income common stockholders | $ | 726 | | | 9,428 | | | | 2,211 | | | | 12,888 | |
See accompanying Notes to Consolidated Financial Statements.
Consolidated Balance Sheets
EMERSON ELECTRIC CO. & SUBSIDIARIES
(Dollars and shares in millions, except per share amounts; unaudited) | | | | | | | | | | | |
| Sept 30, 2021 | | June 30, 2022 |
ASSETS | | | |
Current assets | | | |
Cash and equivalents | $ | 2,354 | | | 2,529 | |
Receivables, less allowances of $116 and $112, respectively | 2,971 | | | 2,957 | |
Inventories | 2,050 | | | 2,319 | |
Other current assets | 1,057 | | | 1,570 | |
| | | |
Total current assets | 8,432 | | | 9,375 | |
| | | |
Property, plant and equipment, net | 3,738 | | | 3,359 | |
Other assets | | | |
Goodwill | 7,723 | | | 14,748 | |
Other intangible assets | 2,877 | | | 6,930 | |
Other | 1,945 | | | 2,630 | |
| | | |
Total other assets | 12,545 | | | 24,308 | |
Total assets | $ | 24,715 | | | 37,042 | |
| | | |
LIABILITIES AND EQUITY | | | |
Current liabilities | | | |
Short-term borrowings and current maturities of long-term debt | $ | 872 | | | 3,227 | |
Accounts payable | 2,108 | | | 2,040 | |
Accrued expenses | 3,266 | | | 3,545 | |
| | | |
| | | |
Total current liabilities | 6,246 | | | 8,812 | |
| | | |
Long-term debt | 5,793 | | | 8,367 | |
| | | |
Other liabilities | 2,753 | | | 3,576 | |
| | | |
| | | |
| | | |
Equity | | | |
Common stock, $0.50 par value; authorized, 1,200.0 shares; issued, 953.4 shares; outstanding, 595.8 shares and 592.2 shares, respectively | 477 | | | 477 | |
Additional paid-in-capital | 522 | | | 42 | |
Retained earnings | 26,047 | | | 27,618 | |
Accumulated other comprehensive income (loss) | (872) | | | (1,152) | |
Cost of common stock in treasury, 357.6 shares and 361.2 shares, respectively | (16,291) | | | (16,670) | |
Common stockholders’ equity | 9,883 | | | 10,315 | |
Noncontrolling interests in subsidiaries | 40 | | | 5,972 | |
Total equity | 9,923 | | | 16,287 | |
Total liabilities and equity | $ | 24,715 | | | 37,042 | |
| | | | | | | | | | | |
| Sept 30, 2022 | | June 30, 2023 |
ASSETS | | | |
Current assets | | | |
Cash and equivalents | $ | 1,804 | | | 9,957 | |
Receivables, less allowances of $100 and $100, respectively | 2,261 | | | 2,491 | |
Inventories | 1,742 | | | 2,085 | |
Other current assets | 1,301 | | | 1,227 | |
Current assets held-for-sale | 1,398 | | | — | |
Total current assets | 8,506 | | | 15,760 | |
| | | |
Property, plant and equipment, net | 2,239 | | | 2,268 | |
Other assets | | | |
Goodwill | 13,946 | | | 14,131 | |
Other intangible assets | 6,572 | | | 6,147 | |
Copeland note receivable and equity investment | — | | | 3,359 | |
Other | 2,151 | | | 2,508 | |
Noncurrent assets held-for-sale | 2,258 | | | — | |
Total other assets | 24,927 | | | 26,145 | |
Total assets | $ | 35,672 | | | 44,173 | |
| | | |
LIABILITIES AND EQUITY | | | |
Current liabilities | | | |
Short-term borrowings and current maturities of long-term debt | $ | 2,115 | | | 667 | |
Accounts payable | 1,276 | | | 1,218 | |
Accrued expenses | 3,038 | | | 4,729 | |
Current liabilities held-for-sale | 1,348 | | | — | |
Total current liabilities | 7,777 | | | 6,614 | |
| | | |
Long-term debt | 8,259 | | | 7,642 | |
| | | |
Other liabilities | 3,153 | | | 3,504 | |
| | | |
Noncurrent liabilities held-for-sale | 167 | | | — | |
| | | |
Equity | | | |
Common stock, $0.50 par value; authorized, 1,200.0 shares; issued, 953.4 shares; outstanding, 591.4 shares and 571.5 shares, respectively | 477 | | | 477 | |
Additional paid-in-capital | 57 | | | 112 | |
Retained earnings | 28,053 | | | 39,624 | |
Accumulated other comprehensive income (loss) | (1,485) | | | (1,072) | |
Cost of common stock in treasury, 362.0 shares and 381.9 shares, respectively | (16,738) | | | (18,677) | |
Common stockholders’ equity | 10,364 | | | 20,464 | |
Noncontrolling interests in subsidiaries | 5,952 | | | 5,949 | |
Total equity | 16,316 | | | 26,413 | |
Total liabilities and equity | $ | 35,672 | | | 44,173 | |
See accompanying Notes to Consolidated Financial Statements.
Consolidated Statements of Equity
EMERSON ELECTRIC CO. & SUBSIDIARIES
Three and nine months ended June 30, 20212022 and 20222023
(Dollars in millions; unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Nine Months Ended June 30, |
| 2021 | | | 2022 | | | 2021 | | | 2022 | |
| | | | | | | |
Common stock | $ | 477 | | | 477 | | | 477 | | | 477 | |
| | | | | | | |
Additional paid-in-capital | | | | | | | |
Beginning balance | 511 | | | 579 | | | 470 | | | 522 | |
Stock plans | 7 | | | 13 | | | 48 | | | 70 | |
AspenTech acquisition | — | | | (550) | | | — | | | (550) | |
Ending balance | 518 | | | 42 | | | 518 | | | 42 | |
| | | | | | | |
Retained earnings | | | | | | | |
Beginning balance | 25,354 | | | 27,003 | | | 24,955 | | | 26,047 | |
Net earnings common stockholders | 627 | | | 921 | | | 1,633 | | | 2,491 | |
Dividends paid (per share: $0.505, $0.515, $1.515 and $1.545, respectively) | (303) | | | (306) | | | (909) | | | (920) | |
Adoption of accounting standard | — | | | — | | | (1) | | | — | |
Ending balance | 25,678 | | | 27,618 | | | 25,678 | | | 27,618 | |
| | | | | | | |
Accumulated other comprehensive income (loss) | | | | | | | |
Beginning balance | (1,322) | | | (957) | | | (1,577) | | | (872) | |
Foreign currency translation | (6) | | | (186) | | | 163 | | | (317) | |
Pension and postretirement | 27 | | | 18 | | | 81 | | | 54 | |
Cash flow hedges | (6) | | | (27) | | | 26 | | | (17) | |
Ending balance | (1,307) | | | (1,152) | | | (1,307) | | | (1,152) | |
| | | | | | | |
Treasury stock | | | | | | | |
Beginning balance | (15,890) | | | (16,527) | | | (15,920) | | | (16,291) | |
Purchases | (193) | | | (145) | | | (275) | | | (430) | |
Issued under stock plans | 8 | | | 2 | | | 120 | | | 51 | |
Ending balance | (16,075) | | | (16,670) | | | (16,075) | | | (16,670) | |
| | | | | | | |
Common stockholders' equity | 9,291 | | | 10,315 | | | 9,291 | | | 10,315 | |
| | | | | | | |
Noncontrolling interests in subsidiaries | | | | | | | |
Beginning balance | 50 | | | 39 | | | 42 | | | 40 | |
Net earnings | 6 | | | 31 | | | 20 | | | 31 | |
Stock plans | — | | | 15 | | | — | | | 15 | |
Other comprehensive income | 1 | | | (1) | | | — | | | (2) | |
Dividends paid | (9) | | | (2) | | | (14) | | | (2) | |
AspenTech acquisition | — | | | 5,890 | | | — | | | 5,890 | |
Ending balance | 48 | | | 5,972 | | | 48 | | | 5,972 | |
| | | | | | | |
Total equity | $ | 9,339 | | | 16,287 | | | 9,339 | | | 16,287 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Nine Months Ended June 30, |
| 2022 | | | 2023 | | | 2022 | | | 2023 | |
| | | | | | | |
Common stock | $ | 477 | | | 477 | | | 477 | | | 477 | |
| | | | | | | |
Additional paid-in-capital | | | | | | | |
Beginning balance | 579 | | | 138 | | | 522 | | | 57 | |
Stock plans | 13 | | | 30 | | | 70 | | | 111 | |
AspenTech purchases of common stock | — | | | (56) | | | — | | | (56) | |
AspenTech acquisition | (550) | | | — | | | (550) | | | — | |
Ending balance | 42 | | | 112 | | | 42 | | | 112 | |
| | | | | | | |
Retained earnings | | | | | | | |
Beginning balance | 27,003 | | | 30,571 | | | 26,047 | | | 28,053 | |
Net earnings common stockholders | 921 | | | 9,352 | | | 2,491 | | | 12,475 | |
Dividends paid (per share: $0.515, $0.52 $1.545 and $1.56, respectively) | (306) | | | (299) | | | (920) | | | (904) | |
Ending balance | 27,618 | | | 39,624 | | | 27,618 | | | 39,624 | |
| | | | | | | |
Accumulated other comprehensive income (loss) | | | | | | | |
Beginning balance | (957) | | | (1,148) | | | (872) | | | (1,485) | |
Foreign currency translation | (186) | | | 85 | | | (317) | | | 432 | |
Pension and postretirement | 18 | | | 10 | | | 54 | | | (23) | |
Cash flow hedges | (27) | | | (19) | | | (17) | | | 4 | |
Ending balance | (1,152) | | | (1,072) | | | (1,152) | | | (1,072) | |
| | | | | | | |
Treasury stock | | | | | | | |
Beginning balance | (16,527) | | | (18,678) | | | (16,291) | | | (16,738) | |
Purchases | (145) | | | — | | | (430) | | | (2,000) | |
Issued under stock plans | 2 | | | 1 | | | 51 | | | 61 | |
Ending balance | (16,670) | | | (18,677) | | | (16,670) | | | (18,677) | |
| | | | | | | |
Common stockholders' equity | 10,315 | | | 20,464 | | | 10,315 | | | 20,464 | |
| | | | | | | |
Noncontrolling interests in subsidiaries | | | | | | | |
Beginning balance | 39 | | | 5,987 | | | 40 | | | 5,952 | |
Net earnings (loss) | 31 | | | 14 | | | 31 | | | (13) | |
Stock plans | 15 | | | 21 | | | 15 | | | 79 | |
AspenTech purchases of common stock | — | | | (44) | | | — | | | (44) | |
Other comprehensive income | (1) | | | 1 | | | (2) | | | 5 | |
Dividends paid | (2) | | | (1) | | | (2) | | | (1) | |
AspenTech acquisition | 5,890 | | | — | | | 5,890 | | | — | |
Climate Technologies divestiture | — | | | (29) | | | — | | | (29) | |
Ending balance | 5,972 | | | 5,949 | | | 5,972 | | | 5,949 | |
| | | | | | | |
Total equity | $ | 16,287 | | | 26,413 | | | 16,287 | | | 26,413 | |
See accompanying Notes to Consolidated Financial Statements.
Consolidated Statements of Cash Flows
EMERSON ELECTRIC CO. & SUBSIDIARIES
Nine Months Ended June 30, 20212022 and 20222023
(Dollars in millions; unaudited) | | | | | | | | | | | | | | |
| | Nine Months Ended |
| | June 30, |
| | 2021 | | | 2022 | |
Operating activities | | | | |
Net earnings | | $ | 1,653 | | | 2,522 | |
| | | | |
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | |
Depreciation and amortization | | 720 | | | 722 | |
Stock compensation | | 191 | | | 107 | |
Pension expense | | 23 | | | 2 | |
Changes in operating working capital | | 246 | | | (706) | |
Gain on subordinated interest | | — | | | (453) | |
| | | | |
Gain on sale of business | | — | | | (428) | |
| | | | |
Other, net | | (113) | | | (61) | |
| | | | |
| | | | |
Cash provided by operating activities | | 2,720 | | | 1,705 | |
| | | | |
Investing activities | | | | |
Capital expenditures | | (350) | | | (335) | |
Purchases of businesses, net of cash and equivalents acquired | | (1,611) | | | (5,615) | |
Divestitures of businesses | | — | | | 578 | |
Proceeds from subordinated interest | | — | | | 438 | |
Other, net | | 53 | | | (41) | |
| | | | |
| | | | |
Cash used in investing activities | | (1,908) | | | (4,975) | |
| | | | |
Financing activities | | | | |
Net increase in short-term borrowings | | 31 | | | 1,633 | |
Proceeds from short-term borrowings greater than three months | | 71 | | | 1,162 | |
Payments of short-term borrowings greater than three months | | — | | | (445) | |
Proceeds from long-term debt | | — | | | 2,975 | |
Payments of long-term debt | | (305) | | | (512) | |
Dividends paid | | (909) | | | (918) | |
Purchases of common stock | | (268) | | | (418) | |
Other, net | | 89 | | | 80 | |
Cash provided by (used in) financing activities | | (1,291) | | | 3,557 | |
| | | | |
Effect of exchange rate changes on cash and equivalents | | 24 | | | (112) | |
Increase (Decrease) in cash and equivalents | | (455) | | | 175 | |
Beginning cash and equivalents | | 3,315 | | | 2,354 | |
Ending cash and equivalents | | $ | 2,860 | | | 2,529 | |
| | | | |
Changes in operating working capital | | | | |
Receivables | | $ | 76 | | | (118) | |
Inventories | | (160) | | | (513) | |
Other current assets | | (69) | | | (86) | |
Accounts payable | | 216 | | | 80 | |
Accrued expenses | | 183 | | | (69) | |
| | | | |
Total changes in operating working capital | | $ | 246 | | | (706) | |
| | | | | | | | | | | | | | |
| | Nine Months Ended |
| | June 30, |
| | 2022 | | | 2023 | |
Operating activities | | | | |
Net earnings | | $ | 2,522 | | | 12,462 | |
Earnings from discontinued operations, net of tax | | (1,092) | | | (11,030) | |
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | |
Depreciation and amortization | | 571 | | | 780 | |
Stock compensation | | 91 | | | 198 | |
Changes in operating working capital | | (361) | | | (369) | |
Gain on subordinated interest | | (453) | | | — | |
Other, net | | (43) | | | (322) | |
Cash from continuing operations | | 1,235 | | | 1,719 | |
Cash from discontinued operations | | 470 | | | (439) | |
Cash provided by operating activities | | 1,705 | | | 1,280 | |
| | | | |
Investing activities | | | | |
Capital expenditures | | (199) | | | (194) | |
Purchases of businesses, net of cash and equivalents acquired | | (5,615) | | | — | |
Proceeds from subordinated interest | | 438 | | | 15 | |
Proceeds from related party note receivable | | — | | | 918 | |
Other, net | | (38) | | | (124) | |
Cash from continuing operations | | (5,414) | | | 615 | |
Cash from discontinued operations | | 439 | | | 12,485 | |
Cash provided by (used in) investing activities | | (4,975) | | | 13,100 | |
| | | | |
Financing activities | | | | |
Net increase (decrease) in short-term borrowings | | 1,633 | | | (1,476) | |
Proceeds from short-term borrowings greater than three months | | 1,162 | | | 395 | |
Payments of short-term borrowings greater than three months | | (445) | | | (400) | |
Proceeds from long-term debt | | 2,975 | | | — | |
Payments of long-term debt | | (512) | | | (744) | |
Dividends paid | | (918) | | | (900) | |
Purchases of common stock | | (418) | | | (2,000) | |
AspenTech purchases of common stock | | — | | | (100) | |
Payment of related party note payable | | — | | | (918) | |
Other, net | | 80 | | | (159) | |
Cash provided by (used in) financing activities | | 3,557 | | | (6,302) | |
| | | | |
Effect of exchange rate changes on cash and equivalents | | (112) | | | 75 | |
Increase in cash and equivalents | | 175 | | | 8,153 | |
Beginning cash and equivalents | | 2,354 | | | 1,804 | |
Ending cash and equivalents | | $ | 2,529 | | | 9,957 | |
| | | | |
Changes in operating working capital | | | | |
Receivables | | $ | 31 | | | (114) | |
Inventories | | (353) | | | (259) | |
Other current assets | | (75) | | | 27 | |
Accounts payable | | 64 | | | (71) | |
Accrued expenses | | (28) | | | 48 | |
Total changes in operating working capital | | $ | (361) | | | (369) | |
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, 2021. 2022.
Over the past two years, Emerson Electric Co. ("Emerson" or the "Company") has taken significant actions to accelerate the transformation of its portfolio through the completion of strategic acquisitions and divestitures of non-core businesses. The Company's recent portfolio actions include the combination of its industrial software businesses with Aspen Technology, Inc., with the Company owning 55 percent of the outstanding shares of the combined entity on a fully diluted basis upon closing of the transaction on May 16, 2022, the sale of its Therm-O-Disc business, which was completed on May 31, 2022, the sale of its InSinkErator business, which was completed on October 31, 2022, the sale of a majority stake in its Climate Technologies business, which was completed on May 31, 2023, and the pending acquisition of National Instruments Corporation ("NI"), which was approved by NI shareholders on June 29, 2023 and is expected to close in the first half of Emerson’s fiscal 2024, subject to the completion of customary closing conditions and regulatory approvals.
Certain prior year amounts have been reclassified to conform to the current year presentation to reflect the business combination with AspenTech (see Note 4), which is reportedpresentation. This includes reporting financial results for Climate Technologies, InSinkErator and Therm-O-Disc as a new segment and includes the historical results of Open Systems International, Inc.discontinued operations for all periods presented, and the Geological Simulation Software business. These businesses were previously reported in the Automation Solutions segment (see Note 13).
Effective October 1, 2021, the Company adopted three accounting standard updates which had an immaterial or no impact on the Company's financial statements as of and for the nine months ended June 30, 2022. These included:
•Updates to ASC 805, Business Combinations, which clarify the accounting for contract assets and liabilities assumed in a business combination.of Climate Technologies and InSinkErator (prior to completion of the divestitures) as held-for-sale (see Note 5). In general, this will result in contract liabilities being recognized at their historical amounts under ASC 606, rather than at fair value in accordance with the general requirements of ASC 805.
•Updates to ASC 740, Income Taxes, which require the recognition of a franchise tax that is partially based on income as an income-based tax with any incremental amountaddition, as a non-income based tax. These updates also make certain changes to intra-period tax allocation principlesresult of its portfolio transformation, the Company now reports six segments and interim tax calculations.
•Updates to ASC 321, Equity Securities, ASC 323 Investments - Equity Method and Joint Ventures, and ASC 815, Derivatives and Hedging, which clarify how to account for the transition into and out of the equity method of accounting when evaluating observable transactions.two business groups (see Note 14).
(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 1314 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 assets (current and noncurrent), and its customer advances (contract liabilities), which are reported in Accrued expenses and Other liabilities. | | | Sept 30, 2021 | | June 30, 2022 | | Sept 30, 2022 | | June 30, 2023 |
Unbilled receivables (contract assets) | Unbilled receivables (contract assets) | | $ | 528 | | | | 1,323 | | Unbilled receivables (contract assets) | | $ | 1,390 | | | | 1,385 | |
Customer advances (contract liabilities) | Customer advances (contract liabilities) | | (730) | | | (917) | | Customer advances (contract liabilities) | | (776) | | | (985) | |
Net contract assets (liabilities) | Net contract assets (liabilities) | | $ | (202) | | | 406 | | Net contract assets (liabilities) | | $ | 614 | | | 400 | |
The majority of the Company's contract balances relate to (1) arrangements where revenue is recognized over time and payments from customers are made according to a contractual billing schedule, and (2) revenue from term software license arrangements sold by AspenTech where the license revenue is recognized upfront upon delivery. The changedecrease in the net contract balance was due to the AspenTech acquisition, which added net contract assets of approximately $700, partially offset by an increase in net contract liabilities for the Company's existing businesseswas due to customer billings exceeding revenue recognized for performance completed during the period. Revenue recognized for the three and nine months ended June 30, 2023 included $59 and $500, respectively, that was included in the beginning contract liability balance. Other factors that impacted the change in net contract assets were immaterial. Revenue recognized for the three and nine months ended June 30,
Revenue recognized for the three and nine months ended June 30, 2022 included $63 and $519 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, 20222023 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, 2022,2023, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately $8.5$8.2 billion (of which includes approximately $700 related$1.3 billion was attributable to the AspenTech acquisition. AspenTech's remaining performAspenTech)ance obligations primarily relate to software maintenance in long-term contracts for unspecified future software updates provided on a when-and-if available basis.. The Company expects to recognize approximatelyapproximately 80 percent of its remaining performance obligations as revenue over the next 12 months, with the remainder substantially over the following two years.
(3) COMMON SHARES AND SHARE-BASED COMPENSATION
Reconciliations of weighted-average shares for basic and diluted earnings per common share follow. Earnings allocated to participating securities were inconsequential. | | | Three Months Ended June 30, | | Nine Months Ended June 30, | | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2022 | | | 2023 | | | 2022 | | | 2023 | |
| Basic shares outstanding | Basic shares outstanding | 598.2 | | | 592.8 | | | 598.7 | | | 593.6 | | Basic shares outstanding | 592.8 | | | 570.9 | | | 593.6 | | | 575.1 | |
Dilutive shares | Dilutive shares | 3.9 | | | 3.4 | | | 3.6 | | | 3.3 | | Dilutive shares | 3.4 | | | 3.1 | | | 3.3 | | | 3.0 | |
Diluted shares outstanding | Diluted shares outstanding | 602.1 | | | 596.2 | | | 602.3 | | | 596.9 | | Diluted shares outstanding | 596.2 | | | 574.0 | | | 596.9 | | | 578.1 | |
The Company changed the terms of its annual performance share awards issued in the first quarter of fiscal 2022. The new terms meet the criteria for equity classification in accordance with ASC 718, Compensation - Stock Compensation, and therefore expense will be recognized on a fixed basis over the three-year performance period. The terms of the performance share awards issued in fiscal 2020 and 2021 are unchanged and will therefore continue to be accounted for as liability awards and marked-to-market each period based on changes in the stock price.
As discussed in Note 4, Emerson completed the acquisition of AspenTech in the third quarter of fiscal 2022. New AspenTech, as defined in Note 4, operates as a separate publicly traded company and has various stock-based compensation plans, including stock options and restricted stock units, which are settled in their own common stock and are accounted for as equity awards. Stock compensation expense for New AspenTech was $15 for the three and nine months ended June 30, 2022.
(4) ACQUISITIONS AND DIVESTITURES
Aspen Technology
On May 16, 2022, the Company completed the transactions contemplated by its definitive agreement with Aspen Technology, Inc. ("Heritage AspenTech") to contribute two of Emerson's stand-alone industrial software businesses, Open Systems International, Inc. and the Geological Simulation Software business (collectively, the “Emerson Industrial Software Business”), along with approximately $6.0 billion in cash to Heritage AspenTech stockholders, to create "New AspenTech", a diversified, high-performance industrial software leader with greater scale, capabilities and technologies.technologies (defined as "AspenTech" herein). Upon closing of the transaction, Emerson beneficially owned 55 percent of the outstanding shares of New AspenTech common stock (on a fully diluted basis) and former Heritage AspenTech stockholders owned the remaining outstanding shares of New AspenTech common stock. New AspenTech and its subsidiaries now operate under Heritage AspenTech’s previous name “Aspen Technology, Inc.” and New AspenTech common stock is traded on NASDAQ under AspenTech’s previous stock ticker symbol “AZPN.”
The business combination has been accounted for using the acquisition method of accounting with Emerson considered the accounting acquirer of Heritage AspenTech. The net assets of Heritage AspenTech were recorded at their estimated fair value and for the Emerson Industrial Software Business continuescontinue at itstheir historical basis. The Company recorded a noncontrolling interest of $5.9 billion for the 45 percent ownership interest of former Heritage AspenTech stockholders in New AspenTech. The noncontrolling interest associated with the Heritage AspenTech acquired net assets was recorded at fair value determined using the closing market price per share of Heritage AspenTech as of May 16, 2022, while the portion attributable
to the Emerson Industrial Software business was recorded at its historical carrying amount. The impact of recognizing the noncontrolling interest in the Emerson Industrial Software Business resulted in a decrease to additional paid-in-capital of $550.
The following table summarizes the components of the purchase consideration reflected in the acquisition accounting using Heritage AspenTech's shares outstanding and closing market price per share as of May 16, 2022 (in millions except share and per share data):
| | | | | | | | |
Heritage AspenTech shares outstanding | | 66,662,482 | |
Heritage AspenTech share price | | $ | 166.30 | |
Purchase price | | $ | 11,086 | |
Value of stock-based compensation awards attributable to pre-combination service | | 102 | |
Total purchase consideration | | $ | 11,188 | |
The total purchase consideration for Heritage AspenTech was preliminarily allocated to assets and liabilities as follows. Valuations of acquired assets and liabilities are in-process and subject to refinement.
| | | | | | | | |
Cash and equivalents | | $ | 274 | |
Receivables | | 6143 | |
Other current assets | | 262280 | |
Property, plant equipment | | 4 | |
Goodwill ($34 expected to be tax-deductible) | | 7,2237,225 | |
Other intangible assets | | 4,390 | |
Other assets | | 511513 | |
Total assets | | 12,72512,729 | |
| | |
Short-term borrowings | | 27 | |
Accounts payable | | 8 | |
Accrued expenses | | 113115 | |
Long-term debt | | 253255 | |
Deferred taxes and other liabilities | | 1,136 | |
Total purchase consideration | | $ | 11,188 | |
Emerson's cash contribution of approximately $6.0 billion was paid out at approximately $87.69 per share (on a fully diluted basis) to holders of issued and outstanding shares of Heritage AspenTech common stock as of the closing of the transactions, with $168 of cash remaining on New AspenTech's balance sheet as of the closing which is not included in the allocation of purchase consideration above.
The estimated intangible assets attributable to the transaction are comprised of the following (in millions):
| | | | | | | | | | | | | | |
| | Amount | | Estimated Weighted Average Life (Years) |
Developed technology | | $ | 1,350 | | | 10 |
Customer relationships | | 2,300 | | | 15 |
Trade names | | 430 | | | Indefinite-lived |
Backlog | | 310 | | | 3 |
Total | | $ | 4,390 | | | |
Results of operations for the third quarter of 2022three and nine months ended June 30, 2023 attributable to the Heritage AspenTech acquisition include sales of $257 and $576, respectively, compared to $173 for the three and nine months ended June 30, 2022, while the impact to GAAP net earnings was not material.
Pro Forma Financial Information
The following unaudited proforma consolidated condensed financial results of operations are presented as if the acquisition of Heritage AspenTech occurred on October 1, 2020. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved had the acquisition occurred as of that time ($ in millions, except per share amounts).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | | | 2022 | | | | 2021 | | | | 2022 | |
Net Sales | | $ | 4,895 | | | | 5,060 | | | | 13,884 | | | | 14,683 | |
Net earnings common stockholders | | $ | 614 | | | | 964 | | | | 1,480 | | | | 2,517 | |
Diluted earnings per share | | $ | 1.02 | | | | 1.62 | | | | 2.46 | | | | 4.21 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2022 | | | | | | | 2022 | | |
Net Sales | | $ | 3,520 | | | | | | | $ | 10,326 | | |
Net earnings from continuing operations common stockholders | | $ | 268 | | | | | | | $ | 1,426 | | |
Diluted earnings per share from continuing operations | | $ | 0.45 | | | | | | | $ | 2.39 | | |
The pro forma results for the nine months ended June 30, 20212022 include $159 of transaction costs which were assumed to be incurred in the first fiscal quarter of 2021.Of these transaction costs, $61 and $91 were included in the Company's reported results for the three and nine months ended June 30, 2022, respectively, but have been excluded from the fiscal 2022 pro forma results above. In addition, Heritage AspenTech incurred $68 of transaction costs prior to the completion of the acquisition that were not included in Emerson's reported results. The pro forma results for the three and nine months ended June 30, 20212022 include estimated interest expenseexpense of $37 and $110, respectively, $56 related to the issuance of $3 billion of term debt and increased commercial paper borrowings to fund the acquisition, while results for the nine months ended June 30, 2022 include additional interest expense of $56 to reflect the increased borrowings as if they were outstanding for the entire fiscal year.acquisition.
Other Transactions
On August 8, 2022 the CompanyApril 12, 2023, Emerson announced an agreement to sell its InSinkErator business,acquire National Instruments Corporation ("NI") for $60 per share in cash at an equity value of $8.2 billion. The effective price per share is $59.61 considering shares previously acquired by Emerson, see Note 12. NI, which manufactures food waste disposersprovides software-connected automated test and is reportedmeasurement systems that enable enterprises to bring products to market faster and at a lower cost, had revenues of $1.66 billion in 2022. On June 29, 2023, NI's shareholders voted to approve the Tools & Home Products segment, to Whirlpool Corporation for $3.0 billion. This business had salesproposed transaction and pretax earnings of $565 and $143 in fiscal 2021 and $480 and $117 for the nine months ended June 30, 2022. The assets and liabilities of InSinkErator were classified as held-for-sale as of June 30, 2022 and are included in other current assets, other assets, accrued expenses and other liabilities in the consolidated balance sheet. The transactionit is expected to close in the first half of Emerson’s fiscal 2023,2024, subject to regulatory approvals and otherthe completion of customary closing conditions.conditions and regulatory approvals.
On July 27, 2022, New AspenTech entered into an agreement to acquire Micromine, a global leader in design and operational solutions for the mining industry, for AU$900 (approximately $623 USD)USD based on exchange rates when the transaction was announced). The transaction is expectedOn August 1, 2023, AspenTech announced the termination of the agreement to close bypurchase Micromine. AspenTech, along with the endsellers of calendar 2022, subjectMicromine, had been waiting to varioussecure a final Russian regulatory approvals.approval as a condition to the closing of the transaction. As this process continued, the timing and requirements necessary to get this approval became increasingly unclear. This lack of clarity on the potential for, and timing of, a successful review led AspenTech and the sellers of Micromine to this mutual course of action. AspenTech will not pay any termination fee as part of this arrangement.
On MayMarch 31, 2022 the Company2023, Emerson completed the divestiture of Metran, its Therm-O-Disc sensing and protection technologies business, which was reported inRussia-based manufacturing subsidiary. In the Climate Technologies segment, to an affiliatefirst quarter of One Rock Capital Partners, LLC. Thefiscal 2023, the Company recognized a pretax gainloss of $483$47 in Other deductions ($42847 after-tax, $0.72in total $0.08 per share).
On May 4, related to its exit of business operations in Russia. In the third quarter of fiscal 2022, Emersonthe Company announced its intention to exit business operations in Russia and divest Metran, its Russia-based manufacturing subsidiary. Emerson's historical net sales in Russia were principally in the Automation Solutions segment and in total, represented approximately 1.5 percent of consolidated annual sales. In the third quarter of fiscal 2022, the Company recognized a pretax loss of $162 ($174 after-tax, in total $0.29 per share) related to its exit of business operations in Russia.. This charge which included a loss of $32 in operations and $130 reported in Other deductions ($9 of which is reported in restructuring costs), is and was primarily non-cash. Emerson is committed to an orderly transfer of these assets and will support its employees through this process.
On October 1, 2020, the Company completed the acquisition of Open Systems International, Inc. ("OSI"), a leading operations technology software provider in the global power industry, for approximately $1.6 billion, net of cash acquired. This business, which had net sales of $191 in fiscal 2021 and is now reported in the AspenTech segment, expanded the Company's offerings in the power industry to include the digitization and modernization of the electric grid. The Company recognized goodwill of $967 (none of which is expected to be tax deductible), identifiable intangible assets of $783, primarily intellectual property and customer relationships with a weighted-average useful life
of approximately 11 years, and deferred tax liabilities of approximately $193. Results of operations for the three months ended June 30, 2021 included first year pre-tax acquisition accounting charges related to backlog amortization and deferred revenue of $7 and $3, respectively, while year-to-date results included $24 and $11, respectively.
As previously disclosed, the Company sold its network power systems business (rebranded as Vertiv, now a publicly traded company, symbol VRT) in 2017 and retained a subordinated interest contingent upon the equity holders first receiving a threshold cash return on their initial investment. In the first quarter of fiscal 2022, the equity holders' cumulative cash return exceeded the threshold and as a result, the Company received a distribution of $438 related to its subordinated interest in November 2021Vertiv (in total, a pretax gain of $453 was recognized in the first quarter). quarter of fiscal 2022, $358 after-tax, $0.60 per share) and received the remaining $15 related to the pretax gain in the first quarter of fiscal 2023. Based on the terms of the agreement and the current calculation, the Company could receive additional distributions of approximately $75$150 which are expected to be received over the next two-to-three-to-three years. However, the distributions are contingent on the timing and price at which Vertiv shares are sold by the equity holders and therefore, there can be no assurance as to the amount or timing of the remaining distributions to the Company.
(5) PENSION & POSTRETIREMENT PLANSDISCONTINUED OPERATIONS
On May 31, 2023, the Company completed the previously announced sale of a majority stake in its Climate Technologies business (which constitutes the former Climate Technologies segment, excluding Therm-O-Disc which was divested earlier in fiscal 2022) to private equity funds managed by Blackstone in a $14.0 billion transaction. Emerson received upfront, pre-tax cash proceeds of approximately $9.7 billion (an increase of $0.2 billion from when the transaction was announced due to Blackstone's decision to purchase an additional 5 percent of the common equity) and a note receivable with a face value of $2.25 billion (which will accrue 5 percent interest payable in kind by capitalizing interest), while retaining a 40 percent non-controlling common equity interest (down from 45 percent when the transaction was announced) in a new standalone joint venture between Emerson and Blackstone. The Climate Technologies business, which includes the Copeland compressor business and the entire portfolio of products and services across all residential and commercial HVAC and refrigeration end-markets, had fiscal 2022 net sales of approximately $5.0 billion and pretax earnings of $1.0 billion. The Company recognized a pretax gain of approximately $10.6 billion (approximately $8.4 billion after-tax including tax expense recognized in prior quarters related to subsidiary restructurings). The new standalone business is named Copeland. See Note 10 for further details.
Total periodic pension and postretirement (income) expense is summarized below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | | | 2022 | | | | 2021 | | | | 2022 | |
Service cost | | $ | 21 | | | | 19 | | | | 63 | | | | 57 | |
Interest cost | | 32 | | | | 34 | | | | 96 | | | | 102 | |
Expected return on plan assets | | (84) | | | | (78) | | | | (252) | | | | (234) | |
Net amortization | | 35 | | | | 23 | | | | 105 | | | | 69 | |
Total | | $ | 4 | | | | (2) | | | | 12 | | | | (6) | |
(6) OTHER DEDUCTIONS, NET
Other deductions, net are summarized below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Nine Months Ended June 30, |
| 2021 | | | | 2022 | | | | 2021 | | | | 2022 | |
| | | | | | | | | | | |
Amortization of intangibles (intellectual property and customer relationships) | | $ | 71 | | | | 98 | | | | 223 | | | | 223 | |
Restructuring costs | | 28 | | | | 31 | | | | 111 | | | | 50 | |
Acquisition/divestiture costs | | 2 | | | | 61 | | | | 11 | | | | 97 | |
Foreign currency transaction (gains) losses | | 1 | | | | (13) | | | | 7 | | | | (41) | |
Investment-related gains & gains from sales of capital assets | | — | | | | — | | | | (69) | | | | (15) | |
Russia business exit | | — | | | | 121 | | | | — | | | | 121 | |
Other | | (14) | | | | (15) | | | | (40) | | | | (61) | |
Total | | $ | 88 | | | | 283 | | | | 243 | | | | 374 | |
9
In
On October 31, 2022, the thirdCompany completed the divestiture of its InSinkErator business, which manufactures food waste disposers, to Whirlpool Corporation for $3.0 billion. This business had net sales of $630 and pretax earnings of $152 in fiscal 2022. The Company recognized a pretax gain of approximately $2.8 billion (approximately $2.1 billion after-tax) in the first quarter of fiscal 2023.
On May 31, 2022 intangibles amortizationthe Company completed the divestiture of its Therm-O-Disc sensing and protection technologies business to an affiliate of One Rock Capital Partners, LLC. The Company recognized a pretax gain of $486 ($429 after-tax) in the third fiscal quarter of 2022.
The financial results of Climate Technologies, InSinkErator ("ISE") and Therm-O-Disc ("TOD") (through the completion of the divestitures), are reported as discontinued operations for the three and nine months ended June 30, 2023 and 2022 and were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Climate Technologies | | ISE and TOD | | | Total |
| Three Months Ended June 30, | | Three Months Ended June 30, | | Three Months Ended June 30, |
| | 2022 | | | | 2023 | | | | 2022 | | | | 2023 | | | | 2022 | | | | 2023 | |
Net sales | | $ | 1,325 | | | | 847 | | | | 215 | | | | — | | | | 1,540 | | | | 847 | |
Cost of sales | | 892 | | | | 516 | | | | 137 | | | | — | | | | 1,029 | | | | 516 | |
SG&A | | 129 | | | | 122 | | | | 29 | | | | — | | | | 158 | | | | 122 | |
Gain on sale of business | | — | | | | (10,576) | | | | — | | | | — | | | | — | | | | (10,576) | |
Other deductions, net | | 14 | | | | 8 | | | | (478) | | | | — | | | | (464) | | | | 8 | |
Earnings before income taxes | | 290 | | | | 10,777 | | | | 527 | | | | — | | | | 817 | | | | 10,777 | |
Income taxes | | 63 | | | | 2,014 | | | | 57 | | | | — | | | | 120 | | | | 2,014 | |
Earnings, net of tax | | $ | 227 | | | | 8,763 | | | | 470 | | | | — | | | | 697 | | | | 8,763 | |
| | | | | | | | | | | | | | | | | |
| Climate Technologies | | ISE and TOD | | | Total |
| Nine Months Ended June 30, | | Nine Months Ended June 30, | | Nine Months Ended June 30, |
| | 2022 | | | | 2023 | | | | 2022 | | | | 2023 | | | | 2022 | | | | 2023 | |
Net sales | | $ | 3,659 | | | | 3,156 | | | | 698 | | | | 49 | | | | 4,357 | | | | 3,205 | |
Cost of sales | | 2,520 | | | | 2,000 | | | | 443 | | | | 29 | | | | 2,963 | | | | 2,029 | |
SG&A | | 383 | | | | 391 | | | | 98 | | | | 8 | | | | 481 | | | | 399 | |
Gain on sale of business | | — | | | | (10,576) | | | | — | | | | (2,783) | | | | — | | | | (13,359) | |
Other deductions, net | | 26 | | | | 75 | | | | (465) | | | | 12 | | | | (439) | | | | 87 | |
Earnings before income taxes | | 730 | | | | 11,266 | | | | 622 | | | | 2,783 | | | | 1,352 | | | | 14,049 | |
Income taxes | | 158 | | | | 2,366 | | | | 102 | | | | 653 | | | | 260 | | | | 3,019 | |
Earnings, net of tax | | $ | 572 | | | | 8,900 | | | | 520 | | | | 2,130 | | | | 1,092 | | | | 11,030 | |
Climate Technologies' results for the three and nine months ended June 30, 2023 include lower expense of $26 and $96, respectively, due to ceasing depreciation and amortization upon the held-for-sale classification. Other deductions, net for Climate Technologies included $32$57 of transaction-related costs for the nine months ended June 30, 2023. Income taxes for the nine months ended June 30, 2023 included approximately $2.2 billion for the gain on the Copeland transaction and subsidiary restructurings in prior quarters, and approximately $660 related to the AspenTech acquisition, whilegain on the prior year included backlog amortization related to the OSI acquisition of $7 and $24, respectively. Other is composed of several items, including pension expense, litigation costs, provision for bad debt and other items, none of which is individually significant.
InSinkErator divestiture.
The aggregate carrying amounts of the major classes of assets and liabilities classified as held-for-sale as of June 30, 2023 and September 30, 2022 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Climate Technologies | | ISE | | Total |
| | Sept. 30, | | | June 30, | | | Sept. 30, | | | June 30, | | | Sept. 30, | | | June 30, |
Assets | | 2022 | | | | 2023 | | | | 2022 | | | | 2023 | | | | 2022 | | | | 2023 | |
Receivables | | $ | 747 | | | | — | | | | 68 | | | | — | | | | 815 | | | | — | |
Inventories | | 449 | | | | — | | | | 81 | | | | — | | | | 530 | | | | — | |
Other current assets | | 49 | | | | — | | | | 4 | | | | — | | | | 53 | | | | — | |
Property, plant & equipment, net | | 1,122 | | | | — | | | | 141 | | | | — | | | | 1,263 | | | | — | |
Goodwill | | 716 | | | | — | | | | 2 | | | | — | | | | 718 | | | | — | |
Other noncurrent assets | | 265 | | | | — | | | | 12 | | | | — | | | | 277 | | | | — | |
Total assets held-for-sale | | $ | 3,348 | | | | — | | | | 308 | | | | — | | | | 3,656 | | | | — | |
| | | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | |
Accounts payable | | $ | 752 | | | | — | | | | 60 | | | | — | | | | 812 | | | | — | |
Other current liabilities | | 475 | | | | — | | | | 61 | | | | — | | | | 536 | | | | — | |
Deferred taxes and other noncurrent liabilities | | 154 | | | | — | | | | 13 | | | | — | | | | 167 | | | | — | |
Total liabilities held-for-sale | | $ | 1,381 | | | | — | | | | 134 | | | | — | | | | 1,515 | | | | — | |
Net cash from operating and investing activities for Climate Technologies, InSinkErator and Therm-O-Disc for the nine months ended June 30, 2023 and 2022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Climate Technologies | | ISE and TOD | | | Total |
| Nine Months Ended June 30, | | Nine Months Ended June 30, | | Nine Months Ended June 30, | |
| | 2022 | | | | 2023 | | | | 2022 | | | | 2023 | | | | 2022 | | | | 2023 | | |
Cash from operating activities | | $ | 486 | | | | 156 | | | | (16) | | | | (595) | | | | 470 | | | | (439) | | |
Cash from investing activities | | $ | (112) | | | | 9,430 | | | | 551 | | | | 3,055 | | | | 439 | | | | 12,485 | | |
Cash from operating activities for the nine months ended June 30, 2023 reflects approximately $750 of income taxes paid related to the gain on the InSinkErator divestiture and the Climate Technologies subsidiary restructurings and the impact from transaction fees. Cash from investing activities for the nine months ended June 30, 2023 reflects the proceeds of approximately $9.7 billion related to the Copeland transaction and approximately $3.0 billion related to the InSinkErator divestiture.
(6) PENSION & POSTRETIREMENT PLANS
Total periodic pension and postretirement (income) expense is summarized below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2022 | | | | 2023 | | | | 2022 | | | | 2023 | |
Service cost | | $ | 19 | | | | 12 | | | | $ | 57 | | | | 36 | |
Interest cost | | 34 | | | | 54 | | | | 102 | | | | 162 | |
Expected return on plan assets | | (78) | | | | (71) | | | | (234) | | | | (213) | |
Net amortization | | 23 | | | | (18) | | | | 69 | | | | (58) | |
Total | | $ | (2) | | | | (23) | | | | $ | (6) | | | | (73) | |
(7) OTHER DEDUCTIONS, NET
Other deductions, net are summarized below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Nine Months Ended June 30, |
| 2022 | | | | 2023 | | | | 2022 | | | | 2023 | |
| | | | | | | | | | | |
Amortization of intangibles (intellectual property and customer relationships) | | $ | 93 | | | | 120 | | | | 207 | | | | 357 | |
Restructuring costs | | 29 | | | | 12 | | | | 44 | | | | 41 | |
Acquisition/divestiture costs | | 61 | | | | 38 | | | | 91 | | | | 48 | |
Foreign currency transaction (gains) losses | | (11) | | | | 22 | | | | (38) | | | | 41 | |
Investment-related gains & gains from sales of capital assets | | — | | | | (26) | | | | (16) | | | | (63) | |
Loss on Copeland equity method investment | | — | | | | 61 | | | | — | | | | 61 | |
Russia business exit | | 121 | | | | — | | | | 121 | | | | 47 | |
Other | | (29) | | | | (36) | | | | (79) | | | | (112) | |
Total | | $ | 264 | | | | 191 | | | | 330 | | | | 420 | |
Intangibles amortization for the three and nine months ended June 30, 2023 included $65 and $193, respectively, related to the Heritage AspenTech acquisition, compared to $32 for the three and nine months ended June 30, 2022. Foreign currency transaction gains/losses for the three and nine months ended June 30, 2023 included a mark-to-market gain of $3 and $24, respectively, related to foreign currency forward contracts entered into by AspenTech to mitigate the impact of foreign currency exchange associated with the Micromine purchase price. On June 21, 2023, AspenTech terminated all outstanding foreign currency forward contracts. The Company recognized a mark-to-market gain of $12 and $47 for the three and nine months ended June 30, 2023, respectively, related to its equity investment in National Instruments Corporation (see Note 12 for further information). Other is composed of several items, including pension expense, litigation costs, provision for bad debt and other items, none of which is individually significant.
(8) 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. Expenses incurred in the first nine months of fiscal 2022 included costs related to workforce reductions of approximately 1,400 employees. The Company expects fiscal 20222023 restructuring expense and related costs to be approximately $150,$110, 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, |
| 2021 | | | 2022 | | | 2021 | | | 2022 | |
| | | | | | | | | | | |
Automation Solutions | | $ | 20 | | | | 20 | | | | 92 | | | | 33 | |
| | | | | | | | | | | |
AspenTech | | (2) | | | | 1 | | | | 2 | | | | 1 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Climate Technologies | | 4 | | | | 2 | | | | 8 | | | | 5 | |
Tools & Home Products | | 2 | | | | (1) | | | | 4 | | | | 1 | |
Commercial & Residential Solutions | | 6 | | | | 1 | | | | 12 | | | | 6 | |
| | | | | | | | | | | |
Corporate | | 4 | | | | 9 | | | | 5 | | | | 10 | |
| | | | | | | | | | | |
Total | | $ | 28 | | | | 31 | | | | 111 | | | | 50 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Nine Months Ended June 30, | |
| 2022 | | | 2023 | | | 2022 | | | 2023 | | |
| | | | | | | | | | | | |
Final Control | | $ | 8 | | | | (2) | | | | 12 | | | | (1) | | |
Measurement & Analytical | | 4 | | | | 1 | | | | 9 | | | | 2 | | |
Discrete Automation | | 1 | | | | 12 | | | | 4 | | | | 20 | | |
Safety & Productivity | | (1) | | | | (1) | | | | — | | | | 1 | | |
Intelligent Devices | | 12 | | | | 10 | | | | 25 | | | | 22 | | |
| | | | | | | | | | | | |
Control Systems & Software | | 7 | | | | 1 | | | | 8 | | | | 7 | | |
AspenTech | | 1 | | | | — | | | | 1 | | | | — | | |
Software and Control | | 8 | | | | 1 | | | | 9 | | | | 7 | | |
| | | | | | | | | | | | |
Corporate | | 9 | | | | 1 | | | | 10 | | | | 12 | | |
| | | | | | | | | | | | |
Total | | $ | 29 | | | | 12 | | | | 44 | | | | 41 | | |
Details of the change in the liability for restructuring costs during the nine months ended June 30,
20222023 follow:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Sept 30, 2021 | | Expense | | Utilized/Paid | | June 30, 2022 |
| | | | | | | | | | | |
Severance and benefits | | $ | 172 | | | | 20 | | | | 52 | | | | 140 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Other | | 4 | | | | 30 | | | | 29 | | | | 5 | |
Total | | $ | 176 | | | | 50 | | | | 81 | | | | 145 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Sept 30, 2022 | | Expense | | Utilized/Paid | | June 30, 2023 |
| | | | | | | | | | | |
Severance and benefits | | $ | 117 | | | | 18 | | | | 49 | | | | 86 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Other | | 5 | | | | 23 | | | | 26 | | | | 2 | |
Total | | $ | 122 | | | | 41 | | | | 75 | | | | 88 | |
The tables above do not include $4$11 and $12$1 of costs related to restructuring actions incurred for the three months ended June 30, 20212022 and 2022,2023, respectively, that are required to be reported in cost of sales and selling, general and administrative expenses; year-to-date amounts are $11$24 and $26,$13, respectively.
(8)(9) TAXES
Income taxes were $243 in the third quarter of fiscal 2022 and $151 in 2021, resulting in effective tax rates of 20 percent and 19 percent, respectively. Favorable net discrete tax items decreased the tax rates by 2 and 3 percentage points, respectively.
Income taxes were $659 for$158 in the first nine monthsthird quarter of 2022fiscal 2023 and $431 for 2021,$123 in 2022, resulting in effective tax rates of 21 percent and 33 percent, respectively. The prior year rate reflected a 12 percentage point impact from the Russia business exit.
Income taxes were $390 in the first nine of months of fiscal 2023 and $399 in 2022, resulting in effective tax rates of 21 percent and 22 percent, respectively. The currentprior year rate includedreflected the impact of the Russia business exit which was essentially offset by a 2 percentage point benefit related to the completion of tax examinations, partially offset by portfolio restructuring activities which negatively impacted the rate by 1 percentage points, while the prior year had favorable netexaminations. discrete items which reduced the rate 1 percentage point.
On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic, and among other things, provides tax relief to businesses. Tax provisions of the CARES Act include the deferral of certain payroll taxes, relief for retaining employees, and other provisions. The Company deferred $73 of certain payroll taxes through the end of calendar year 2020, of which approximately $37 was paid in December 2021 with andthe remaining amount dueremainder was paid in December 2022.
(10) EQUITY METHOD INVESTMENT AND NOTE RECEIVABLE
As discussed in Note 5, the Company completed the divestiture of a majority stake in Copeland on May 31, 2023, and received upfront, pre-tax cash proceeds of approximately $9.7 billion and a note receivable with a face value of $2.25 billion, while retaining a 40 percent non-controlling common equity interest in Copeland. As a result of the transaction, the Company deconsolidated Copeland from its financial statements, as it no longer has a controlling interest, and initially recognized its common equity investment and note receivable at fair values of $1,359 and $2,052, respectively. The fair value of the common equity investment was determined using a discounted cash flow model, which included estimating financial projections for Copeland and applying an appropriate discount rate, and an option pricing model based on various assumptions. Fair value for the note receivable was determined using a market approach primarily based on interest rates for companies with similar credit quality and the expected duration of the note.
The Company records its share of Copeland's income or loss using the equity method of accounting. For the three and nine months ended June 30, 2023 the Company recorded a loss of $61 in Other deductions to reflect its share of Copeland's reported GAAP losses and a tax benefit of $10 in Income taxes related to Copeland's U.S. business, which is taxed as a partnership (in total, $0.09 per share). The Company recognized non-cash interest income on the note receivable of $10, which is reported in Interest income from related party and capitalized to the carrying value of the note.
As of June 30, 2023, the carrying values of the retained equity investment and note receivable were $1,296 and $2,063, respectively. During the three months ended June 30, 2023, the Company settled a note receivable and note payable with Copeland of $918, which is reported in Investing and Financing cash flows, respectively.
Summarized financial information for Copeland for the three and nine months ended June 30, 2023 is as follows. Copeland's results only reflect activity subsequent to the Company's divestiture of its majority stake.
| | | | | |
| Three and Nine Months Ended June 30, |
| 2023 | |
Net sales | $ | 435 | |
Gross profit | $ | 108 | |
Income (loss) from continuing operations | $ | (150) | |
Net income (loss) | $ | (150) | |
Net income (loss) attributable to shareholders | $ | (153) | |
(9)(11) OTHER FINANCIAL INFORMATION |
|
| Sept 30, 2021 | | June 30, 2022 |
| Sept 30, 2022 | | June 30, 2023 |
Inventories | Inventories | | | | Inventories | | | |
Finished products | Finished products | | $ | 616 | | | 681 | | Finished products | | $ | 417 | | | 486 | |
Raw materials and work in process | Raw materials and work in process | | 1,434 | | | 1,638 | | Raw materials and work in process | | 1,325 | | | 1,599 | |
Total | Total | | $ | 2,050 | | | 2,319 | | Total | | $ | 1,742 | | | 2,085 | |
| | Property, plant and equipment, net | Property, plant and equipment, net | | | | | Property, plant and equipment, net | | | | |
Property, plant and equipment, at cost | Property, plant and equipment, at cost | | $ | 9,427 | | | 8,824 | | | Property, plant and equipment, at cost | | $ | 5,390 | | | 5,486 | | |
Less: Accumulated depreciation | Less: Accumulated depreciation | | 5,689 | | | 5,465 | | | Less: Accumulated depreciation | | 3,151 | | | 3,218 | | |
Total | Total | | $ | 3,738 | | | 3,359 | | | Total | | $ | 2,239 | | | 2,268 | | |
| | | | | | | | | | | | | | | | | | |
| | | | |
| | | | |
Goodwill by business segment | | | | | | |
Final Control | | $ | 2,605 | | | | 2,689 | | |
Measurement & Analytical | | 1,112 | | | | 1,191 | | |
Discrete Automation | | 807 | | | | 851 | | |
Safety & Productivity | | 364 | | | | 398 | | |
Intelligent Devices | | 4,888 | | | | 5,129 | | |
| | | | | | |
| | | | | | |
Control Systems & Software | | 732 | | | | 672 | | |
AspenTech | | 8,326 | | | | 8,330 | | |
Software and Control | | 9,058 | | | | 9,002 | | |
| | | | | | |
Total | | $ | 13,946 | | | | 14,131 | | |
| | | | | | | | | | | | | | | | | | |
| | | | |
| | | | |
Goodwill by business segment | | | | | | |
Automation Solutions | | $ | 5,508 | | | | 5,378 | | |
| | | | | | |
AspenTech | | 1,044 | | | | 8,266 | | |
| | | | | | |
| | | | | | |
Climate Technologies | | 753 | | | | 719 | | |
Tools & Home Products | | 418 | | | | 385 | | |
Commercial & Residential Solutions | | 1,171 | | | | 1,104 | | |
| | | | | | |
Total | | $ | 7,723 | | | | 14,748 | | |
| | Other intangible assets | Other intangible assets | | | | Other intangible assets | | | |
Gross carrying amount | Gross carrying amount | | $ | 5,911 | | | 10,215 | | Gross carrying amount | | $ | 9,671 | | | 9,839 | |
Less: Accumulated amortization | Less: Accumulated amortization | | 3,034 | | | 3,285 | | Less: Accumulated amortization | | 3,099 | | | 3,692 | |
Net carrying amount | Net carrying amount | | $ | 2,877 | | | 6,930 | | Net carrying amount | | $ | 6,572 | | | 6,147 | |
Other intangible assets include customer relationships, net, of $1,495$3,436 and $3,614$3,261 and intellectual property, net, of $2,934 and $2,685 as of September 30, 20212022 and June 30, 2022,2023, respectively.
The increase in goodwill and intangibles was primarily due to the AspenTech acquisition. See Note 4.
| | | Three Months Ended June 30, | | Nine Months Ended June 30, | | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2022 | | | 2023 | | | 2022 | | | 2023 | |
Depreciation and amortization expense include the following: | Depreciation and amortization expense include the following: | | | | | | | | Depreciation and amortization expense include the following: | | | | | | | |
Depreciation expense | Depreciation expense | $ | 123 | | | 117 | | | 369 | | | 366 | | Depreciation expense | $ | 77 | | | 67 | | | 240 | | | 213 | |
Amortization of intangibles (includes $14, $31, $42, and $59 reported in Cost of Sales, respectively) | 86 | | | 129 | | | 266 | | | 282 | | |
Amortization of intangibles (includes $31, $49, $59 and $147 reported in Cost of Sales, respectively) | | Amortization of intangibles (includes $31, $49, $59 and $147 reported in Cost of Sales, respectively) | 124 | | | 169 | | | 266 | | | 504 | |
Amortization of capitalized software | Amortization of capitalized software | 28 | | | 24 | | | 85 | | | 74 | | Amortization of capitalized software | 21 | | | 21 | | | 65 | | | 63 | |
Total | Total | $ | 237 | | | 270 | | | 720 | | | 722 | | Total | $ | 222 | | | 257 | | | 571 | | | 780 | |
Amortization of intangibles included $49$99 and $297, related to the Heritage AspenTech acquisition for the three and nine months ended June 30, 2021, while the prior year included backlog amortization of $7 and $24 related2023, respectively, compared to the OSI acquisition$49 for the three and nine months ended June 30, 2021, respectively.2022. For the three and nine months ended June 30, 2022, $5 of amortization of intangibles included in the table above is reported as a restructuring related cost.
| | | Sept 30, 2021 | | June 30, 2022 | | Sept 30, 2022 | | June 30, 2023 |
Other assets include the following: | Other assets include the following: | | | | Other assets include the following: | | | |
Pension assets | Pension assets | | $ | 1,015 | | | 1,083 | | Pension assets | | $ | 865 | | | 998 | |
Unbilled receivables (contract assets) | | Unbilled receivables (contract assets) | | 428 | | | 536 | |
Operating lease right-of-use assets | Operating lease right-of-use assets | | 558 | | | 531 | | Operating lease right-of-use assets | | 439 | | | 508 | |
Unbilled receivables (contract assets) | | — | | | 475 | | |
Deferred income taxes | Deferred income taxes | | 115 | | | 98 | | Deferred income taxes | | 85 | | | 100 | |
Asbestos-related insurance receivables | Asbestos-related insurance receivables | | 95 | | | 87 | | Asbestos-related insurance receivables | | 68 | | | 66 | |
| | | | | | | | | | | | | | | | | |
| | | |
Accrued expenses include the following: | | | | | |
Customer advances (contract liabilities) | | $ | 730 | | | | 886 | |
Employee compensation | | 690 | | | | 574 | |
Operating lease liabilities (current) | | 155 | | | | 154 | |
Product warranty | | 146 | | | | 119 | |
| | | | | | | | | | | | | | | | | |
| | | | |
Other liabilities include the following: | | | | | |
Deferred income taxes | | $ | 711 | | | | 1,736 | |
Pension and postretirement liabilities | | 676 | | | | 656 | |
Operating lease liabilities (noncurrent) | | 413 | | | | 384 | |
Asbestos litigation | | 256 | | | | 230 | |
| | | | | |
| | | | | |
| | | | | | | | | | | | | | | | | |
| | | |
Accrued expenses include the following: | | | | | |
Customer advances (contract liabilities) | | $ | 751 | | | | 946 | |
Employee compensation | | 523 | | | | 531 | |
Income taxes | | 125 | | | | 1,721 | |
Operating lease liabilities (current) | | 128 | | | | 146 | |
Product warranty | | 84 | | | | 90 | |
The increasesincrease in Unbilled receivables and DeferredIncome taxes was due to remaining income taxes were primarily duepayable of approximately $1.5 billion related to the AspenTech acquisition. See Notes 2 and 4.
(10) DEBT
In December 2021, the Company issued $1 billion of 2.0% notes due December 2028, $1 billion of 2.2% notes due December 2031, and $1 billion of 2.8% notes due December 2051. The Company's commercial paper borrowings also increased by approximately $2.4 billion compared to September 30, 2021. The Company used the net proceeds from the sale of the notesCopeland transaction and the increased commercial paper borrowingsgain on the InSinkErator divestiture, which are largely expected to fundbe paid by the majorityend of its contribution of approximately $6.0 billion to existing stockholders of AspenTech as part of the transaction discussed further infiscal 2023. See Note 4.5.
In | | | | | | | | | | | | | | | | | |
| | | | |
Other liabilities include the following: | | | | | |
Deferred income taxes | | $ | 1,714 | | | | 2,006 | |
Pension and postretirement liabilities | | 427 | | | | 452 | |
Operating lease liabilities (noncurrent) | | 312 | | | | 360 | |
Asbestos litigation | | 205 | | | | 178 | |
| | | | | |
| | | | | |
Deferred income taxes included approximately $540 related to the first quarterCopeland transaction as of fiscal 2022, the Company repaid $500 of 2.625% notes that matured.
In the third quarter of fiscal 2022, the acquisition of AspenTech increased the Company's long-term debt by approximately $250. See Note 4.June 30, 2023.
(11)(12) FINANCIAL INSTRUMENTS
Hedging Activities – As of June 30, 2022,2023, the notional amount of foreign currency hedge positions was approximately $2.1 billion, and commodity hedge contracts totaled approximately $170 (primarily 45 million pounds of copper and aluminum).$2.3 billion. All derivatives receiving hedge accounting are cash flow hedges. The majority of hedging gains and losses deferred as of June 30, 20222023 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, 20212022 and 2022:2023: | | | 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 | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | Gains (Losses) | | Location | | 2022 | | | 2023 | | | 2022 | | | 2023 | | | 2022 | | | 2023 | | | 2022 | | | 2023 | |
Commodity | Commodity | | Cost of sales | | $ | 13 | | | 5 | | | 24 | | | 18 | | | 8 | | | (32) | | | 34 | | | (9) | | Commodity | | Cost of sales | | $ | 5 | | | (9) | | | 18 | | | (19) | | | (32) | | | (13) | | | (9) | | | 6 | |
Foreign currency | Foreign currency | | Sales | | — | | | (1) | | | 2 | | | — | | | — | | | (3) | | | 3 | | | (5) | | Foreign currency | | Sales | | (1) | | | — | | | — | | | (2) | | | (3) | | | (2) | | | (5) | | | 1 | |
Foreign currency | Foreign currency | | Cost of sales | | 3 | | | 10 | | | 5 | | | 21 | | | 1 | | | 15 | | | 28 | | | 32 | | Foreign currency | | Cost of sales | | 10 | | | 42 | | | 21 | | | 60 | | | 15 | | | 24 | | | 32 | | | 38 | |
Foreign currency | Foreign currency | | Other deductions, net | | 8 | | | 56 | | | 33 | | | 108 | | | Foreign currency | | Other deductions, net | | 56 | | | (91) | | | 108 | | | (108) | | |
| Net Investment Hedges | Net Investment Hedges | | Net Investment Hedges | |
Euro denominated debt | Euro denominated debt | | 6 | | | 84 | | | (21) | | | 163 | | Euro denominated debt | | 16 | | | 16 | | | 84 | | | (46) | | | 163 | | | (183) | |
Total | Total | | | | $ | 24 | | | 70 | | | 64 | | | 147 | | | 15 | | | 64 | | | 44 | | | 181 | | Total | | | | $ | 70 | | | (42) | | | 147 | | | (53) | | | 64 | | | (37) | | | 181 | | | (138) | |
Regardless of whether derivatives and non-derivative financial instruments receive hedge accounting, the Company expects hedging gains or losses to be 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 assessmentassessment of hedge effectiveness.
Equity Investment– The Company has an equity investment in National Instruments Corporation ("NI"), valued at $128 as of June 30, 2023 (reported in Other current assets), and recognized a mark-to-market gain of $12 and $47 for the three and nine months ended June 30, 2023, respectively. On April 12, 2023, Emerson announced an agreement to acquire NI for $60 per share in cash for the remaining shares not already owned by Emerson. See Note 4.
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, 2022,2023, the fair value of long-term debt was $8.1approximately $7.2 billion, which was lower than the carrying value by $816.$1,055. The fair valuesvalue of commodity and foreign currency contracts, werewhich are reported in Other current assets and Accrued expenses, and did not materially change since September 30, 2021.2022. Commodity contracts, which related to discontinued operations, were novated to Copeland upon the completion of the transaction and therefore no amounts are reported in the Company's balance sheet as of June 30, 2023. The fair value of the Company's equity investment in National Instruments falls within Level 1 and was based on the most recent quoted closing market price from its principal exchange for the period ended June 30, 2023.
Counterparties to derivatives arrangements are companies with investment-grade credit ratings. The Company has bilateral collateral arrangements with counterparties with credit rating-based posting thresholds that vary depending on the arrangement. If credit ratings on the Company's debt fall below pre-established levels, counterparties can require immediate full collateralization of all derivatives in net liability positions. The maximum amount that could potentially have been required was immaterial. The Company also can demand full collateralization of derivatives in net asset positions should any counterparty credit ratings fall below certain thresholds. No collateral was posted with counterparties and none was held by the Company as of June 30, 2022.2023.
(12)(13) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
| Activity in Accumulated other comprehensive income (loss) for the three and nine months ended June 30, 2021 and 2022 is shown below, net of income taxes: | |
Activity in Accumulated other comprehensive income (loss) for the three and nine months ended June 30, 2022 and 2023 is shown below, net of income taxes: | | Activity in Accumulated other comprehensive income (loss) for the three and nine months ended June 30, 2022 and 2023 is shown below, net of income taxes: |
| | Three Months Ended June 30, | | Nine Months Ended June 30, | | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | | 2021 | | | 2022 | | | | 2021 | | | 2022 | | | | 2022 | | | 2023 | | | | 2022 | | | 2023 | |
Foreign currency translation | Foreign currency translation | | | | | | | | Foreign currency translation | | | | | | | |
Beginning balance | Beginning balance | | $ | (542) | | | (760) | | | (711) | | | (629) | | Beginning balance | | $ | (760) | | | (918) | | | (629) | | | (1,265) | |
Other comprehensive income (loss), net of tax of $(1), $(20), $5 and $(38), respectively | | (6) | | | (186) | | | 163 | | | (317) | | |
| Other comprehensive income (loss), net of tax of $(8), $3, $(18) and $35, respectively | | Other comprehensive income (loss), net of tax of $(8), $3, $(18) and $35, respectively | | (186) | | | (10) | | | (317) | | | 337 | |
Reclassified to gain on sale of business | | Reclassified to gain on sale of business | | — | | | 95 | | | — | | | 95 | |
Ending balance | Ending balance | | (548) | | | (946) | | | (548) | | | (946) | | Ending balance | | (946) | | | (833) | | | (946) | | | (833) | |
| Pension and postretirement | Pension and postretirement | | Pension and postretirement | |
Beginning balance | Beginning balance | | (810) | | | (223) | | | (864) | | | (259) | | Beginning balance | | (223) | | | (255) | | | (259) | | | (222) | |
Amortization of deferred actuarial losses into earnings, net of tax of $(8), $(5), $(24) and $(15), respectively | | 27 | | | 18 | | | 81 | | | 54 | | |
| Amortization of deferred actuarial losses into earnings, net of tax of $(5), $6, $(10) and $13, respectively | | Amortization of deferred actuarial losses into earnings, net of tax of $(5), $6, $(10) and $13, respectively | | 18 | | | (12) | | | 54 | | | (45) | |
Reclassified to gain on sale of business | | Reclassified to gain on sale of business | | — | | | 22 | | | — | | | 22 | |
Ending balance | Ending balance | | (783) | | | (205) | | | (783) | | | (205) | | Ending balance | | (205) | | | (245) | | | (205) | | | (245) | |
| Cash flow hedges | Cash flow hedges | | Cash flow hedges | |
Beginning balance | Beginning balance | | 30 | | | 26 | | | (2) | | | 16 | | Beginning balance | | 26 | | | 25 | | | 16 | | | 2 | |
Gains deferred during the period, net of taxes of $(2), $5, $(15) and $(4), respectively | | 7 | | | (15) | | | 50 | | | 14 | | |
Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $3, $4, $7 and $10, respectively | | (13) | | | (12) | | | (24) | | | (31) | | |
Gains deferred during the period, net of taxes of $5, $(2), $(4) and $(11), respectively | | Gains deferred during the period, net of taxes of $5, $(2), $(4) and $(11), respectively | | (15) | | | 7 | | | 14 | | | 34 | |
Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $4, $1, $10 and $3, respectively | | Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $4, $1, $10 and $3, respectively | | (12) | | | (7) | | | (31) | | | (11) | |
Reclassified to gain on sale of business | | Reclassified to gain on sale of business | | — | | | (19) | | | — | | | (19) | |
| Ending balance | Ending balance | | 24 | | | (1) | | | 24 | | | (1) | | Ending balance | | (1) | | | 6 | | | (1) | | | 6 | |
| Accumulated other comprehensive income (loss) | Accumulated other comprehensive income (loss) | | $ | (1,307) | | | (1,152) | | | (1,307) | | | (1,152) | | Accumulated other comprehensive income (loss) | | $ | (1,152) | | | (1,072) | | | (1,152) | | | (1,072) | |
|
(13)(14) BUSINESS SEGMENTS
As disclosed in Note 5, the financial results of Climate Technologies, InSinkErator and Therm-O-Disc are reported as discontinued operations for all periods presented. As a result of the AspenTech acquisition,these portfolio actions, the Company has realigned its business segments and now reports six segments and two business groups, which are highlighted in the table below. The Company also reclassified certain product sales that were previously reported in Control Systems & Software to Discrete Automation.
| | | | | | | | | | | | | | |
| | | | |
| INTELLIGENT DEVICES | | SOFTWARE AND CONTROL | |
| | | | |
| •Final Control | | •Control Systems & Software | |
| •Measurement & Analytical | | •AspenTech | |
| •Discrete Automation | | | |
| •Safety & Productivity | | | |
| | | | |
The new segments were previously described as follows: Final Control was the Valves, Actuators & Regulators product offering; Measurement & Analytical was the Measurement & Analytical instrumentation product offering; Discrete Automation was the Industrial Solutions product offering; Safety & Productivity was the Tools & Home Products segment, excluding the divested InSinkErator business; Control Systems & Software was the Systems & Software product offering; and, AspenTech remains unchanged. The AspenTech segment was identified one additional segment in the third quarter of fiscal 2022. The new segment, referred to2022 as "AspenTech,"a result of the Heritage AspenTech acquisition and reflects the combined results of Heritage AspenTech and the Emerson Industrial Software Business (see Note 4 for further details). The results for this new segment include the historical results of the Emerson Industrial Software Business (which were previously reported in
the Automation SolutionsControl Systems & Software segment), while results related to the Heritage AspenTech business only include periods subsequent to the close of the transaction. Prior year amounts for the Automation Solutions segment have been reclassified to conform to the current year presentation.
Summarized information about the Company's results of operations by business segment follows: | | | Three Months Ended June 30, | | Nine Months Ended June 30, | | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | Sales | | Earnings | | Sales | | Earnings | | Sales | | Earnings | | Sales | | Earnings |
| | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2022 | | | 2023 | | | 2022 | | | 2023 | | | 2022 | | | 2023 | | | 2022 | | | 2023 | |
| Automation Solutions | $ | 2,865 | | | 2,872 | | | 519 | | | 530 | | | 8,193 | | | 8,451 | | | 1,354 | | | 1,618 | | |
Final Control | | Final Control | $ | 905 | | | 1,035 | | | 150 | | | 245 | | | 2,606 | | | 2,889 | | | 424 | | | 618 | |
Measurement & Analytical | | Measurement & Analytical | 788 | | | 913 | | | 189 | | | 257 | | | 2,294 | | | 2,550 | | | 535 | | | 661 | |
Discrete Automation | | Discrete Automation | 633 | | | 668 | | | 115 | | | 124 | | | 1,894 | | | 1,969 | | | 365 | | | 378 | |
Safety & Productivity | | Safety & Productivity | 360 | | | 363 | | | 69 | | | 82 | | | 1,066 | | | 1,034 | | | 199 | | | 228 | |
Intelligent Devices | | Intelligent Devices | 2,686 | | | 2,979 | | | 523 | | | 708 | | | 7,860 | | | 8,442 | | | 1,523 | | | 1,885 | |
| Control Systems & Software | | Control Systems & Software | 568 | | | 663 | | | 77 | | | 144 | | | 1,711 | | | 1,892 | | | 294 | | | 378 | |
AspenTech | AspenTech | 82 | | | 239 | | | 2 | | | 57 | | | 239 | | | 405 | | | (1) | | | 51 | | AspenTech | 239 | | | 320 | | | 57 | | | 27 | | | 405 | | | 793 | | | 51 | | | (60) | |
| | Climate Technologies | 1,268 | | | 1,380 | | | 274 | | | 300 | | | 3,459 | | | 3,884 | | | 731 | | | 754 | | |
Tools & Home Products | 489 | | | 522 | | | 101 | | | 107 | | | 1,419 | | | 1,546 | | | 311 | | | 317 | | |
Commercial & Residential Solutions | 1,757 | | | 1,902 | | | 375 | | | 407 | | | 4,878 | | | 5,430 | | | 1,042 | | | 1,071 | | |
Software and Control | | Software and Control | 807 | | | 983 | | | 134 | | | 171 | | | 2,116 | | | 2,685 | | | 345 | | | 318 | |
| Stock compensation | Stock compensation | | (66) | | | (16) | | | (191) | | | (107) | | Stock compensation | | (15) | | | (56) | | | (92) | | | (198) | |
Unallocated pension and postretirement costs | Unallocated pension and postretirement costs | | 24 | | | 25 | | | 71 | | | 76 | | Unallocated pension and postretirement costs | | 25 | | | 42 | | | 76 | | | 133 | |
Corporate and other | Corporate and other | | (33) | | | (241) | | | (76) | | | (324) | | Corporate and other | | (239) | | | (43) | | | (336) | | | (154) | |
Gain on subordinated interest | Gain on subordinated interest | | — | | | — | | | — | | | 453 | | Gain on subordinated interest | | — | | | — | | | 453 | | | — | |
Gain on sale of business | | — | | | 483 | | | — | | | 483 | | |
Loss on Copeland equity method investment | | Loss on Copeland equity method investment | | — | | | (61) | | | — | | | (61) | |
Eliminations/Interest | Eliminations/Interest | (7) | | | (8) | | | (37) | | | (50) | | | (21) | | | (17) | | | (115) | | | (140) | | Eliminations/Interest | (28) | | | (16) | | | (50) | | | (10) | | | (64) | | | (52) | | | (140) | | | (111) | |
Interest income from related party | | Interest income from related party | | — | | | 10 | | | 10 | |
Total | Total | $ | 4,697 | | | 5,005 | | | 784 | | | 1,195 | | | 13,289 | | | 14,269 | | | 2,084 | | | 3,181 | | Total | $ | 3,465 | | | 3,946 | | | 378 | | | 761 | | | 9,912 | | | 11,075 | | | 1,829 | | | 1,822 | |
Corporate and other for the three and nine months ended June 30, 2022 includesincluded a loss of $162 related to the Company's exit of business operations in Russia and acquisition/divestiture costsa loss of $61 and $97, respectively.$47 for the nine months ended June 30, 2023.
Automation Solutions sales by major product offering are summarized below. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | | | 2022 | | | | 2021 | | | | 2022 | |
| | | | | | | | | | | |
Measurement & Analytical Instrumentation | | $ | 781 | | | | 785 | | | | 2,211 | | | | 2,287 | |
Valves, Actuators & Regulators | | 880 | | | | 905 | | | | 2,522 | | | | 2,604 | |
Industrial Solutions | | 593 | | | | 575 | | | | 1,656 | | | | 1,743 | |
Systems & Software | | 611 | | | | 607 | | | | 1,804 | | | | 1,817 | |
Automation Solutions | | $ | 2,865 | | | | 2,872 | | | | 8,193 | | | | 8,451 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
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, |
| | 2021 | | | 2022 | | | | 2021 | | | 2022 | |
Automation Solutions | | $ | 128 | | | 127 | | | | 393 | | | 383 | |
| | | | | | | | | |
AspenTech | | 24 | | | 73 | | | | 71 | | | 119 | |
| | | | | | | | | |
| | | | | | | | | |
Climate Technologies | | 48 | | | 43 | | | | 144 | | | 136 | |
Tools & Home Products | | 20 | | | 19 | | | | 59 | | | 58 | |
Commercial & Residential Solutions | | 68 | | | 62 | | | | 203 | | | 194 | |
| | | | | | | | | |
Corporate and other | | 17 | | | 8 | | | | 53 | | | 26 | |
Total | | $ | 237 | | | 270 | | | | 720 | | | 722 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2022 | | | 2023 | | | | 2022 | | | 2023 | |
Final Control | | $ | 53 | | | 39 | | | | 156 | | | 129 | |
Measurement & Analytical | | 27 | | | 26 | | | | 88 | | | 84 | |
Discrete Automation | | 22 | | | 20 | | | | 67 | | | 63 | |
Safety & Productivity | | 15 | | | 15 | | | | 44 | | | 44 | |
Intelligent Devices | | 117 | | | 100 | | | | 355 | | | 320 | |
| | | | | | | | | |
Control Systems & Software | | 24 | | | 22 | | | | 71 | | | 67 | |
AspenTech | | 72 | | | 123 | | | | 119 | | | 369 | |
Software and Control | | 96 | | | 145 | | | | 190 | | | 436 | |
| | | | | | | | | |
Corporate and other | | 9 | | | 12 | | | | 26 | | | 24 | |
Total | | $ | 222 | | | 257 | | | | 571 | | | 780 | |
Sales by geographic destination, Americas, Asia, Middle East & Africa ("AMEA") and Europe, are summarized below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2021 | | 2022 |
| Automation Solutions | | Aspen Tech | | Commercial & Residential Solutions | | Total | | Automation Solutions | | Aspen Tech | | Commercial & Residential Solutions | | Total |
| | | | | | | | | | | | | | | |
Americas | $ | 1,269 | | | 52 | | | 1,190 | | | 2,511 | | | 1,418 | | | 131 | | | 1,362 | | | 2,911 | |
Asia, Middle East & Africa | 997 | | | 14 | | | 331 | | | 1,342 | | | 929 | | | 50 | | | 321 | | | 1,300 | |
Europe | 599 | | | 16 | | | 236 | | | 851 | | | 525 | | | 58 | | | 219 | | | 802 | |
Total | $ | 2,865 | | | 82 | | | 1,757 | | | 4,704 | | | 2,872 | | | 239 | | | 1,902 | | | 5,013 | |
| | | | | | | | | | | | | | | |
| Nine Months Ended June 30, |
| 2021 | | 2022 |
| Automation Solutions | | Aspen Tech | | Commercial & Residential Solutions | | Total | | Automation Solutions | | Aspen Tech | | Commercial & Residential Solutions | | Total |
| | | | | | | | | | | | | | | |
Americas | $ | 3,561 | | | 150 | | | 3,290 | | | 7,001 | | | 3,942 | | | 234 | | | 3,789 | | | 7,965 | |
Asia, Middle East & Africa | 2,861 | | | 46 | | | 944 | | | 3,851 | | | 2,894 | | | 85 | | | 981 | | | 3,960 | |
Europe | 1,771 | | | 43 | | | 644 | | | 2,458 | | | 1,615 | | | 86 | | | 660 | | | 2,361 | |
Total | $ | 8,193 | | | 239 | | | 4,878 | | | 13,310 | | | 8,451 | | | 405 | | | 5,430 | | | 14,286 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Three Months Ended June 30, |
| 2022 | | 2023 |
| | Americas | | AMEA | | Europe | | Total | | Americas | | AMEA | | Europe | | Total |
Final Control | | $ | 434 | | | 338 | | | 133 | | | 905 | | | 498 | | | 399 | | | 138 | | | 1,035 | |
Measurement & Analytical | | 397 | | | 274 | | | 117 | | | 788 | | | 482 | | | 303 | | | 128 | | | 913 | |
Discrete Automation | | 320 | | | 150 | | | 163 | | | 633 | | | 312 | | | 180 | | | 176 | | | 668 | |
Safety & Productivity | | 270 | | | 20 | | | 70 | | | 360 | | | 269 | | | 18 | | | 76 | | | 363 | |
Intelligent Devices | | 1,421 | | | 782 | | | 483 | | | 2,686 | | | 1,561 | | | 900 | | | 518 | | | 2,979 | |
| | | | | | | | | | | | | | | | |
Control Systems & Software | | 289 | | | 166 | | | 113 | | | 568 | | | 322 | | | 207 | | | 134 | | | 663 | |
AspenTech | | 131 | | | 50 | | | 58 | | | 239 | | | 111 | | | 104 | | | 105 | | | 320 | |
Software and Control | | 420 | | | 216 | | | 171 | | | 807 | | | 433 | | | 311 | | | 239 | | | 983 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total | | $ | 1,841 | | | 998 | | | 654 | | | 3,493 | | | 1,994 | | | 1,211 | | | 757 | | | 3,962 | |
| | | | | | | | | | | | | | | | |
| Nine Months Ended June 30, | | Nine Months Ended June 30, |
| 2022 | | 2023 |
| | Americas | | AMEA | | Europe | | Total | | Americas | | AMEA | | Europe | | Total |
Final Control | | $ | 1,197 | | | 1,012 | | | 397 | | | 2,606 | | | 1,438 | | | 1,069 | | | 382 | | | 2,889 | |
Measurement & Analytical | | 1,069 | | | 865 | | | 360 | | | 2,294 | | | 1,333 | | | 853 | | | 364 | | | 2,550 | |
Discrete Automation | | 890 | | | 504 | | | 500 | | | 1,894 | | | 914 | | | 539 | | | 516 | | | 1,969 | |
Safety & Productivity | | 801 | | | 52 | | | 213 | | | 1,066 | | | 777 | | | 51 | | | 206 | | | 1,034 | |
Intelligent Devices | | 3,957 | | | 2,433 | | | 1,470 | | | 7,860 | | | 4,462 | | | 2,512 | | | 1,468 | | | 8,442 | |
| | | | | | | | | | | | | | | | |
Control Systems & Software | | 839 | | | 514 | | | 358 | | | 1,711 | | | 930 | | | 578 | | | 384 | | | 1,892 | |
AspenTech | | 233 | | | 85 | | | 87 | | | 405 | | | 337 | | | 228 | | | 228 | | | 793 | |
Software and Control | | 1,072 | | | 599 | | | 445 | | | 2,116 | | | 1,267 | | | 806 | | | 612 | | | 2,685 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total | | $ | 5,029 | | | 3,032 | | | 1,915 | | | 9,976 | | | 5,729 | | | 3,318 | | | 2,080 | | | 11,127 | |
Items 2 and 3.
Management's Discussion and Analysis of Financial Condition and Results of Operations
(Dollars are in millions, except per share amounts or where noted)
OVERVIEW
On April 12, 2023, Emerson announced an agreement to acquire National Instruments Corporation ("NI") for $60 per share in cash at an equity value of $8.2 billion. The effective price per share is $59.61 considering shares previously acquired by Emerson, see Note 12. NI, which provides software-connected automated test and measurement systems that enable enterprises to bring products to market faster and at a lower cost, had revenues of $1.66 billion in 2022. On June 29, 2023, NI's shareholders voted to approve the proposed transaction and it is expected to close in the first half of Emerson’s fiscal 2024, subject to the completion of customary closing conditions and regulatory approvals.
On May 31, 2023, the Company completed the previously announced sale of a majority stake in its Climate Technologies business (which constitutes the former Climate Technologies segment, excluding Therm-O-Disc which was divested earlier in fiscal 2022) to private equity funds managed by Blackstone in a $14.0 billion transaction. The Company recognized a pretax gain of approximately $10.6 billion (approximately $8.4 billion after-tax including tax expense recognized in prior quarters related to subsidiary restructurings). The new standalone business is named Copeland. See Notes 5 and 10 for further details.
On October 31, 2022, the Company completed the divestiture of its InSinkErator business, which manufactures food waste disposers, to Whirlpool Corporation for $3.0 billion, and the Company recognized a pretax gain of approximately $2.8 billion (approximately $2.1 billion after-tax) in the first quarter of fiscal 2023.
Climate Technologies, Therm-O-Disc and InSinkErator are reported within discontinued operations for all periods presented. See Note 5.
On May 16, 2022, the Company completed the transactions contemplated by its definitive agreement with Aspen Technology, Inc. ("Heritage AspenTech") to contribute two of Emerson's stand-alone industrial software businesses, Open Systems International, Inc. and the Geological Simulation Software business, along with approximately $6.0 billion in cash to Heritage AspenTech stockholders, to create "New AspenTech" (defined as "AspenTech" herein). Upon closing of the transaction, Emerson owned 55 percent of the outstanding shares of AspenTech common stock (on a fully diluted basis). See Note 4. Due to the timing of the acquisition in the prior year, the results for the first half of fiscal 2022 do not include the results of Heritage AspenTech.
For the third quarter of fiscal 2022,2023, net sales from continuing operations were $5.0$3.9 billion, up 714 percent compared with the prior year. Underlying sales, which exclude foreign currency translation, acquisitions and divestitures, were up 714 percent. The AspenTech acquisition added 4 percent and divestitures deducted 1 percent, while foreignForeign currency translation had a 31 percent unfavorable impact.impact, the AspenTech acquisition added 2 percent and the divestiture of Metran, Emerson's Russia-based manufacturing subsidiary, deducted 1 percent. Sales growth continuedwas strong across the majority of the Company's business segments and all geographies were up double digits.
Earnings from continuing operations attributable to be strong in the quarter, benefiting from strong results in North America, despite headwinds due to the impact of lockdowns in China and supply chain and logistics constraints.
Net earnings common stockholders were $921,$592, up 47162 percent, and diluted earnings per share from continuing operations were $1.54,$1.03, up 48171 percent compared with $1.04$0.38 in the prior year. Adjusted diluted earnings per share from continuing operations were $1.38$1.29 compared with $1.19$0.92 in the prior year, reflecting the strong sales growth and operating results and a $0.08 benefit related to the AspenTech acquisition.performance.
The table below presents the Company's diluted earnings per share from continuing operations on an adjusted basis to facilitate period-to-period comparisons and provide additional insight into the underlying, ongoing operating performance of the Company. Adjusted diluted earnings per share from continuing operations excludes intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction-related costs, interest income on undeployed proceeds related to the Copeland transaction, and AspenTech pre-closing costs,gains or losses on the Copeland equity method investment, and certain gains, losses or impairments.
| | | | | | | | | | | | | | | | | | | | |
Three Months Ended June 30 | | | | 2021 | | 2022 |
| | | | | | |
Diluted earnings per share | | | | $ | 1.04 | | | 1.54 | |
| | | | | | |
Restructuring and related costs | | | | 0.04 | | | 0.05 | |
Amortization of intangibles | | | | 0.10 | | | 0.13 | |
| | | | | | |
Gain on sale of business | | | | — | | | (0.72) | |
Russia business exit | | | | — | | | 0.29 | |
Acquisition/divestiture costs and pre-acquisition interest on AspenTech debt | | | | — | | | 0.09 | |
OSI first year acquisition accounting charges | | | | 0.01 | | | — | |
| | | | | | |
| | | | | | |
Adjusted diluted earnings per share | | | | $ | 1.19 | | | 1.38 | |
| | | | | | | | | | | | | | | | | | | | |
Three Months Ended June 30 | | | | 2022 | | 2023 |
| | | | | | |
Diluted earnings from continuing operations per share | | | | $ | 0.38 | | | 1.03 | |
| | | | | | |
Amortization of intangibles | | | | 0.12 | | | 0.15 | |
Restructuring and related costs | | | | 0.04 | | | 0.02 | |
Acquisition/divestiture costs and pre-acquisition interest on AspenTech debt | | | | 0.09 | | | 0.07 | |
National Instruments investment gain | | | | — | | | (0.02) | |
Interest income on undeployed proceeds from Copeland transaction | | | | — | | | (0.05) | |
Loss on Copeland equity method investment | | | | — | | | 0.09 | |
Russia business exit | | | | 0.29 | | | — | |
| | | | | | |
Adjusted diluted earnings from continuing operations per share | | | | $ | 0.92 | | | 1.29 | |
The table below summarizes the changes in adjusted diluted earnings per share.share from continuing operations. The items identified below are discussed throughout MD&A, see further discussion above and in the Business Segments and Financial Position sections below.
| | | | | | | | |
| | Three Months Ended |
Adjusted diluted earnings from continuing operations per share - June 30, 20212022 | | $ | 1.190.92 | |
| | |
Operations | | 0.09 | |
AspenTech acquisition | | 0.080.29 | |
Corporate and& other | | (0.03)0.03 | |
Stock compensation | | 0.08(0.06) | |
Pensions | | 0.02 | |
| | |
| | |
| | |
Foreign currency | | (0.02) | |
Higher effectiveEffective tax rate | | (0.03)0.03 | |
| | |
| | |
Share repurchasescount | | 0.04 | |
Interest income on Copeland note receivable | | 0.02 | |
| | |
Adjusted diluted earnings from continuing operations per share - June 30, 20222023 | | $ | 1.381.29 | |
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, 2021,2022, compared with the third quarter ended June 30, 2022.2023. | | | 2021 | | 2022 | | Change | | 2022 | | 2023 | | Change |
(dollars in millions, except per share amounts) | (dollars in millions, except per share amounts) | | | | | | (dollars in millions, except per share amounts) | | | | | |
| Net sales | Net sales | $ | 4,697 | | | 5,005 | | | 7 | % | Net sales | $ | 3,465 | | | 3,946 | | | 14 | % |
Gross profit | Gross profit | $ | 1,982 | | | 2,097 | | | 6 | % | Gross profit | $ | 1,586 | | | 1,994 | | | 26 | % |
Percent of sales | Percent of sales | 42.2 | % | | 41.9 | % | | (0.3) pts | Percent of sales | 45.8 | % | | 50.5 | % | | 4.7 pts |
| SG&A | SG&A | $ | 1,073 | | | 1,052 | | | (2) | % | SG&A | $ | 894 | | | 1,042 | | | 16 | % |
Percent of sales | Percent of sales | 22.9 | % | | 21.0 | % | | (1.9) pts | Percent of sales | 25.8 | % | | 26.4 | % | | 0.6 pts |
| | Gain on sale of business | $ | — | | | (483) | | | |
| | | Other deductions, net | Other deductions, net | $ | 88 | | | 283 | | | | Other deductions, net | $ | 264 | | | 191 | | | |
Amortization of intangibles | Amortization of intangibles | $ | 71 | | | 98 | | | Amortization of intangibles | $ | 93 | | | 120 | | |
Restructuring costs | Restructuring costs | $ | 28 | | | 31 | | | Restructuring costs | $ | 29 | | | 12 | | |
| Interest expense, net | Interest expense, net | $ | 37 | | | 50 | | | | Interest expense, net | $ | 50 | | | 10 | | | |
Interest income from related party | | Interest income from related party | $ | — | | | (10) | | |
| Earnings before income taxes | $ | 784 | | | 1,195 | | | 52 | % | |
Earnings from continuing operations before income taxes | | Earnings from continuing operations before income taxes | $ | 378 | | | 761 | | | 101 | % |
Percent of sales | Percent of sales | 16.7 | % | | 23.9 | % | | 7.2 pts | Percent of sales | 10.9 | % | | 19.3 | % | | 8.4 pts |
| Earnings from continuing operations common stockholders | | Earnings from continuing operations common stockholders | $ | 226 | | | 592 | | | 162 | % |
Percent of sales | | Percent of sales | 6.5 | % | | 15.1 | % | | 8.6 pts |
Net earnings common stockholders | Net earnings common stockholders | $ | 627 | | | 921 | | | 47 | % | Net earnings common stockholders | $ | 921 | | | 9,352 | | | 914 | % |
Percent of sales | 13.3 | % | | 18.4 | % | | 5.1 pts | |
| | Diluted earnings per share | $ | 1.04 | | | 1.54 | | | 48 | % | |
Diluted EPS - Earnings from continuing operations | | Diluted EPS - Earnings from continuing operations | $ | 0.38 | | | 1.03 | | | 171 | % |
Diluted EPS - Net earnings | | Diluted EPS - Net earnings | $ | 1.54 | | | 16.28 | | | 957 | % |
|
Net sales for the third quarter of fiscal 20222023 were $5.0$3.9 billion, up 714 percent compared with 2021. Automation Solutions sales were flat, Commercial & Residential Solutions2022. Intelligent Devices sales were up 811 percent, while Software and AspenTechControl sales were up 189 percent.22 percent, which included the impact of the Heritage AspenTech acquisition. Underlying sales were up 714 percent on 19 percent higher volume and 65 percent higher price, while forprice. Foreign currency translation had a 31 percent negative impact. Theimpact, the Heritage AspenTech acquisition added 42 percent while divestituresand the divestiture of Metran, Emerson's Russia-based manufacturing subsidiary, deducted 1 percent. Underlying sales were up 1510 percent in the U.S. and up 117 percent internationally. The Americas was up 1411 percent, Europe was flatup 13 percent, and Asia, Middle East & Africa was down 1up 20 percent (China down 6 percent due to the impact of lockdowns)up 24 percent).
Cost of sales for the third quarter of fiscal 20222023 were $2,908,$1,952, an increase of $193$73 compared with 2021, due to higher sales volume and higher materials costs.2022. Gross margin of 41.950.5 percent decreased 0.3increased 4.7 percentage points as freight and other inflation negatively impacted margins, whiledue to favorable price less net material inflation, was favorable but had a dilutivethe impact on margins. Theof the Heritage AspenTech acquisition which benefited gross marginmargins by 1.6 0.6 percentage points, while the Russia business exit negatively impacted gross margin by 0.6 percentage points.and favorable mix.
Selling, general and administrative (SG&A) expensesexpenses of $1,052 decreased $21$1,042 increased $148 and SG&A as a percent of sales decreased 1.9increased 0.6 percentage points to 21.026.4 percent compared with the prior year, reflecting higher stock compensation expense due to a higher share price and the impact of the Heritage AspenTech acquisition, partially offset by strong operating leverage on higher sales and lower stock compensation expense of $50, partially offset by higher wage and other inflation.
On May 31, 2022, the Company completed the sale of its Therm-O-Disc sensing and protection technologies business to an affiliate of One Rock Capital Partners, LLC. The Company recognized a pretax gain of $483 ($428 after-tax, $0.72 per share). See Note 4.
sales.
Other deductions, net were $283$191 in 2022, an increase2023, a decrease of $195$73 compared with the prior year. The prior year reflecting included a charge of $130 related to the Company exiting its business in Russia ($9 of which is reported in restructuring costs). Acquisition/divestiture costs of $61 and a favorable impact from foreign currency transactions of $14 also impacted comparisons. Intangibles amortization was higher by $27, as while the current year included $32 related toa loss of $61 on the AspenTech acquisition, whileCompany's equity method investment in Copeland. See Note 7 and Note 10.
Pretax earnings from continuing operations of $761 increased $383, up 101 percent compared with the prior year, included backlog amortization of $7 related toreflecting strong operating leverage on higher sales. Earnings increased $185 in Intelligent Devices and increased $37 in Software and Control, see the OSI acquisition. See Notes 6Business Segments discussion that follows and 7.Note 14.
Pretax earnings of $1,195 increased $411, up 52 percent compared with the prior year. Earnings increased $11 in Automation Solutions, $55 in AspenTech and $32 in Commercial & Residential Solutions, while costs reported at Corporate increased $157 largely due to the Russia business exit loss. See the Business Segments discussion that follows and Note 13.
Income taxes were $243$158 in the third quarter of fiscal 20222023 and $151$123 in 2021,2022, resulting in effective tax rates of 2021 percent and 1933 percent, respectively. Favorable net discrete tax items decreasedThe prior year rate reflected a 12 percentage point impact from the tax rates by 2Russia business exit.
Earnings from continuing operations attributable to common stockholders were $592, up 162 percent, and 3 percentage points, respectively.diluted earnings per share from continuing operations were $1.03, up 171 percent compared with $0.38 in the prior year. Adjusted diluted earnings per share from continuing operations were $1.29 compared with $0.92 in the prior year, reflecting strong operating results. See the analysis above of adjusted earnings per share for further details.
Earnings from discontinued operations were $8,760 ($15.25 per share) compared to $695 ($1.16 per share) in the prior year, reflecting the gain on the Copeland transaction. See Note 5.
Net earnings common stockholders in the third quarter of fiscal 20222023 were $921, up 47 percent,$9,352 compared with $627$921 in the prior year, and earnings per share were $1.54, up 48 percent,$16.28 compared with $1.04$1.54 in the prior year. See discussion in the Overview above and the analysis below of adjusted earnings per share for further details.
The table below, which shows results from continuing operations on an adjusted EBITA basis, is intended to supplement the Company's discussion of its results of operations herein. The Company defines adjusted EBITA as earnings from continuing operations excluding interest expense, net, income taxes, intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees,transaction-related costs, gains or losses on the Copeland equity method investment, and certain gains, losses or impairments. Adjusted EBITA and adjusted EBITA margin are measures used by management and may be useful for investors to evaluate the Company's operational performance.
| | | | | | | | | | | | | | | | | |
Three Months Ended June 30 | 2021 | | 2022 | | Change |
| | | | | |
Earnings before income taxes | $ | 784 | | | 1,195 | | | 52 | % |
Percent of sales | 16.7 | % | | 23.9 | % | | 7.2 pts |
Interest expense, net | 37 | | | 50 | | | |
Restructuring and related costs | 32 | | | 34 | | | |
Amortization of intangibles | 79 | | | 124 | | | |
| | | | | |
Gain on sale of business | — | | | (483) | | | |
Russia business exit | — | | | 162 | | | |
Acquisition/divestiture costs | — | | | 61 | | | |
| | | | | |
OSI first year acquisition accounting charges | 10 | | | — | | | |
Adjusted EBITA | $ | 942 | | | 1,143 | | | 21 | % |
Percent of sales | 20.1 | % | | 22.8 | % | | 2.7 pts |
| | | | | | | | | | | | | | | | | |
Three Months Ended June 30 | 2022 | | 2023 | | Change |
| | | | | |
Earnings from continuing operations before income taxes | $ | 378 | | | 761 | | | 101 | % |
Percent of sales | 10.9 | % | | 19.3 | % | | 8.4 pts |
Interest expense, net | 50 | | | 10 | | | |
Interest income from related party | — | | | (10) | | | |
Amortization of intangibles | 119 | | | 169 | | | |
Restructuring and related costs | 31 | | | 13 | | | |
Acquisition/divestiture costs | 61 | | | 38 | | | |
National Instruments investment gain | — | | | (12) | | | |
Loss on Copeland equity method investment | — | | | 61 | | | |
Russia business exit | 162 | | | — | | | |
AspenTech Micromine purchase price hedge gain | — | | | (3) | | | |
Adjusted EBITA from continuing operations | $ | 801 | | | 1,027 | | | 28 | % |
Percent of sales | 23.1 | % | | 26.0 | % | | 2.9 pts |
Business Segments
Following is an analysis of operating results for the Company’s business segments for the third quarter ended June 30, 2021,2022, compared with the third quarter ended June 30, 2022.2023. The Company defines segment earnings as earnings before interest and taxes. See Note 1314 for a discussion of the Company's business segments.
AUTOMATION SOLUTIONSINTELLIGENT DEVICES
| | | | | | | | | | | | | | | | | |
Three Months Ended June 30 | 2021 | | 2022 | | Change |
| | | | | |
| | | | | |
| | | | | |
Sales | $ | 2,865 | | | 2,872 | | | — | % |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Earnings | $ | 519 | | | 530 | | | 2 | % |
| | | | | |
| | | | | |
Margin | 18.1 | % | | 18.5 | % | | 0.4 pts |
| | | | | |
Restructuring and related costs | $ | 20 | | | 31 | | | |
Amortization of intangibles | $ | 44 | | | 41 | | | |
| | | | | |
Adjusted EBITA | $ | 583 | | | 602 | | | 3% |
Adjusted EBITA Margin | 20.3 | % | | 21.0 | % | | 0.7 pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 | | 2023 | | Change | | FX | | Acq/Div | | U/L |
| | | | | | | | | | | |
| | | | | | | | | | | |
Sales: | | | | | | | | | | | |
Final Control | $ | 905 | | | 1,035 | | | 14 | % | | 1 | % | | 1 | % | | 16 | % |
Measurement & Analytical | 788 | | | 913 | | | 16 | % | | 1 | % | | 3 | % | | 20 | % |
Discrete Automation | 633 | | | 668 | | | 6 | % | | — | % | | — | % | | 6 | % |
Safety & Productivity | 360 | | | 363 | | | 1 | % | | (1) | % | | — | % | | — | % |
Total | $ | 2,686 | | | 2,979 | | | 11 | % | | 1 | % | | 1 | % | | 13 | % |
| | | | | | | | | | | |
Earnings: | | | | | | | | | | | |
Final Control | $ | 150 | | | 245 | | | 63 | % | | | | | | |
Measurement & Analytical | 189 | | | 257 | | | 36 | % | | | | | | |
Discrete Automation | 115 | | | 124 | | | 8 | % | | | | | | |
Safety & Productivity | 69 | | | 82 | | | 18 | % | | | | | | |
Total | $ | 523 | | | 708 | | | 35 | % | | | | | | |
Margin | 19.5 | % | | 23.7 | % | | 4.2 pts | | | | | | |
| | | | | | | | | | | |
Amortization of intangibles: | | | | | | | | | | | |
Final Control | $ | 23 | | | 22 | | | | | | | | | |
Measurement & Analytical | 4 | | | 5 | | | | | | | | | |
Discrete Automation | 8 | | | 8 | | | | | | | | | |
Safety & Productivity | 7 | | | 7 | | | | | | | | | |
Total | $ | 42 | | | 42 | | | | | | | | | |
| | | | | | | | | | | |
Restructuring and related costs: | | | | | | | | | | | |
Final Control | $ | 18 | | | (1) | | | | | | | | | |
Measurement & Analytical | 4 | | | 1 | | | | | | | | | |
Discrete Automation | 1 | | | 12 | | | | | | | | | |
Safety & Productivity | (1) | | | (1) | | | | | | | | | |
Total | $ | 22 | | | 11 | | | | | | | | | |
| | | | | | | | | | | |
Adjusted EBITA | $ | 587 | | | 761 | | | 29 | % | | | | | | |
Adjusted EBITA Margin | 21.9 | % | | 25.5 | % | | 3.6 pts | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | |
| | | | | |
| | | | | |
Sales by Major Product Offering | | | | | |
Measurement & Analytical Instrumentation | $ | 781 | | | 785 | | | 1 | % |
Valves, Actuators & Regulators | 880 | | | 905 | | | 3 | % |
Industrial Solutions | 593 | | | 575 | | | (3) | % |
Systems & Software | 611 | | | 607 | | | (1) | % |
Total | $ | 2,865 | | | 2,872 | | | — | % |
Automation SolutionsIntelligent Devices sales were $2,872$3.0 billion in the third quarter essentially flat compared with the prior year. Foreign currency translation had a 4 percent unfavorable impact.of 2023, an increase of $293, or 11 percent. Underlying sales increased 413 percent on 18 percent higher volume and 35 percent higher price, reflecting strength in North America partially offset by softness in Asia, Middle East & Africa. Overall, demand remained steady during the quarter, but lockdowns in China, electronic component shortages, and other supply chain and logistics constraints unfavorably impacted sales. Underlyingprice. Underlying sales increased 1210 percent in the Americas, (U.S. up 14 percent), as process end markets remained strong, while Europe which was negatively impacted by the business exit from Russia, was down 2increased 11 percent and Asia, Middle East & Africa decreased 3was up 19 percent (China down 2 percent)up 20 percent).Final Control sales increased $130, or 14 percent, while underlying sales were up 16 percent, reflecting strength in energy and chemical end markets, with broad-based strength across geographies. Sales for Measurement & Analytical Instrumentation increased $4,$125, or 16 percent, and underlying sales were up 20 percent, reflecting robust growth in all geographies due to strong demand across industries and backlog conversion. Discrete Automation sales increased $35, or 6 percent due to higher price and slightly higher volume, reflecting moderating demand, particularly in the Americas and Europe. Safety & Productivity sales increased $3, or 1 percent as market conditions remained strong for North American process industries,, and underlying sales were flat, reflecting softening global demand offset by weakness in Asia, Middle East & Africa due to component shortages and other supply chain constraints. Valves, Actuators & Regulators increased $25, or 3 percent, reflecting strength in chemical end markets, partially offset by the impact of lockdowns in China. Industrial Solutions saleshigher price. Earnings for Intelligent Devices were down $18, or 3 percent, reflecting unfavorable currency translation and the impact of lockdowns in China, partially offset by strength in North America. Systems & Software decreased $4, or 1 percent, reflecting unfavorable currency translation and the impact of component shortages. Results were strong in North America, offset by weakness in Europe. Earnings were $530,$708, an increase of $11,$185, or 235 percent, and margin increased 0.44.2 percentage points to 18.523.7 percent, reflecting leverage on higher volume, favorable mix and savings from cost reduction actions. Priceprice less net material inflation was slightly favorable, while freightand leverage on higher sales, partially offset by wage and other inflation negatively impacted margin.inflation. Adjusted EBITA margin was 25.5 percent, an increase of 3.6 percentage points.
ASPENTECHSOFTWARE AND CONTROL
| | | | | | | | | | | | | | | | | |
Three Months Ended June 30 | 2021 | | 2022 | | Change |
| | | | | |
| | | | | |
| | | | | |
Sales | $ | 82 | | | 239 | | | 189 | % |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Earnings | $ | 2 | | | 57 | | | 2,950 | % |
| | | | | |
| | | | | |
Margin | 2.2 | % | | 23.7 | % | | 21.5 pts |
| | | | | |
Restructuring and related costs | $ | (2) | | | 1 | | | |
Amortization of intangibles | $ | 22 | | | 71 | | | |
| | | | | |
Adjusted EBITA | $ | 22 | | | 129 | | | 483% |
Adjusted EBITA Margin | 26.7 | % | | 53.8 | % | | 27.1 pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 | | 2023 | | Change | | FX | | Acq/Div | | U/L |
| | | | | | | | | | | |
| | | | | | | | | | | |
Sales: | | | | | | | | | | | |
Control Systems & Software | $ | 568 | | | 663 | | | 17 | % | | 1 | % | | 1 | % | | 19 | % |
AspenTech | 239 | | | 320 | | | 34 | % | | — | % | | 34 | % | | — | % |
Total | $ | 807 | | | 983 | | | 22 | % | | — | % | | (3) | % | | 19 | % |
| | | | | | | | | | | |
Earnings: | | | | | | | | | | | |
Control Systems & Software | $ | 77 | | | 144 | | | 89 | % | | | | | | |
AspenTech | 57 | | | 27 | | | (54) | % | | | | | | |
Total | $ | 134 | | | 171 | | | 28 | % | | | | | | |
Margin | 16.5 | % | | 17.4 | % | | 0.9 pts | | | | | | |
| | | | | | | | | | | |
Amortization of intangibles: | | | | | | | | | | | |
Control Systems & Software | $ | 6 | | | 6 | | | | | | | | | |
AspenTech | 71 | | | 121 | | | | | | | | | |
Total | $ | 77 | | | 127 | | | | | | | | | |
| | | | | | | | | | | |
Restructuring and related costs: | | | | | | | | | | | |
Control Systems & Software | $ | 7 | | | 1 | | | | | | | | | |
AspenTech | 1 | | | — | | | | | | | | | |
Total | $ | 8 | | | 1 | | | | | | | | | |
| | | | | | | | | | | |
Adjusted EBITA | $ | 219 | | | 299 | | | 38 | % | | | | | | |
Adjusted EBITA Margin | 27.0 | % | | 30.4 | % | | 3.4 pts | | | | | | |
Software and Control sales were $983 in tAs a result of the AspenTech acquisition, the Company identified one additional segment in thehe third quarter of fiscal 2022. The new segment, referred to as "AspenTech," reflects the combined results of AspenTech and the Emerson Industrial Software Business (see Note 4 for further details). The results for this new segment include the historical results of the Emerson Industrial Software Business (which were previously reported in the Automation Solutions segment), while results related to the AspenTech business include only periods subsequent to the close of the transaction on May 16, 2022.
AspenTech sales were $239 in the third quarter,2023, an increase of $157$176, or 189% due22 percent compared to the acquisition of AspenTech. Earnings were $57, an increase of $55, and margin improved to 23.7 percent,prior year, reflecting the impact of the AspenTech acquisition. Results for the third quarter of fiscal 2022 included intangibles amortization of $49 related to theHeritage AspenTech acquisition ($17 of which was reportedand strong growth in Cost of sales). See Note 4.
COMMERCIALControl Systems & RESIDENTIAL SOLUTIONS
| | | | | | | | | | | | | | | | | |
Three Months Ended June 30 | 2021 | | 2022 | | Change |
| | | | | |
| | | | | |
Sales: | | | | | |
Climate Technologies | $ | 1,268 | | | 1,380 | | | 9 | % |
Tools & Home Products | 489 | | | 522 | | | 7 | % |
Total | $ | 1,757 | | | 1,902 | | | 8 | % |
| | | | | |
Earnings: | | | | | |
Climate Technologies | $ | 274 | | | 300 | | | 10 | % |
Tools & Home Products | 101 | | | 107 | | | 5 | % |
Total | $ | 375 | | | 407 | | | 8 | % |
Margin | 21.3 | % | | 21.4 | % | | 0.1 pts |
| | | | | |
Restructuring and related costs | $ | 7 | | | 1 | | | |
Amortization of intangibles | $ | 13 | | | 12 | | | |
| | | | | |
Adjusted EBITA | $ | 395 | | | 420 | | | 6 | % |
Adjusted EBITA Margin | 22.5 | % | | 22.0 | % | | (0.5) pts |
Commercial & Residential SolutionsSoftware. Underlying sales were $1.9 billion in the third quarter, up $145, or 8 percent compared to the prior year. Foreign currency translation had a 2 percent unfavorable impact and divestitures deducted 3 percent. Underlying sales increased 1319 percent on 116 percent higher volume and 123 percent higher price. U Overall, underlyingnderlying sales increased 1612 percent in the Americas, (U.S. up 16 percent), 623 percent in Europe and 528 percent in Asia, Middle East & Africa (China down 18(China up 48 percent). Climate TechnologiesControl Systems & Software sales were $1.4 billionincreased $95, or 17 percent, while underlying sales increased 19 percent, reflecting robust global demand in the third quarter, an increase of $112,process end markets. AspenTech sales increased $81, or 9 percent. Air conditioning, heating and refrigeration sales were strong across all end markets except for China which was negatively impacted by lockdowns. Tools & Home Products sales were $522 in the third quarter, an increase of $33, or 7 percent. Sales of food waste disposers and professional tools were strong while wet/dry vacuums sales decreased modestly34 percent, due to difficult comparisons.the acquisition of Heritage AspenTech. Earnings were $407,for Software and Control increased $37, up 828 percent, compared with the prior year, and margin increased 0.10.9 percentage points, which included the impact from $50 of incremental intangibles amortization related to 21.4 percent, asthe Heritage AspenTech acquisition. Adjusted EBITA margin increased 3.4 percentage points, reflecting leverage on higher sales and favorable price less net material inflation and savings from cost reduction actions were mostlymix, partially offset by freight and other inflation and unfavorable mix.foreign currency transactions.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30
Following is an analysis of the Company’s operating results for the nine months ended June 30, 2021,2022, compared with the nine months ended June 30, 2022.2023. | | | 2021 | | 2022 | | Change | | 2022 | | 2023 | | Change |
| (dollars in millions, except per share amounts) | | (dollars in millions, except per share amounts) | | | | | |
| Net sales | Net sales | $ | 13,289 | | | 14,269 | | | 7 | % | Net sales | $ | 9,912 | | | 11,075 | | | 12 | % |
Gross profit | Gross profit | $ | 5,567 | | | 5,871 | | | 5 | % | Gross profit | $ | 4,477 | | | 5,415 | | | 21 | % |
Percent of sales | Percent of sales | 41.9 | % | | 41.1 | % | | (0.8) pts | Percent of sales | 45.2 | % | | 48.9 | % | | 3.7 pts |
| SG&A | SG&A | $ | 3,125 | | | 3,112 | | | — | % | SG&A | $ | 2,631 | | | 3,072 | | | 17 | % |
Percent of sales | Percent of sales | 23.5 | % | | 21.8 | % | | (1.7) pts | Percent of sales | 26.6 | % | | 27.7 | % | | 1.1 pts |
| | Gain on subordinated interest | Gain on subordinated interest | $ | — | | | (453) | | | Gain on subordinated interest | $ | (453) | | | — | | |
Gain on sale of business | $ | — | | | (483) | | | |
| Other deductions, net | Other deductions, net | $ | 243 | | | 374 | | | | Other deductions, net | $ | 330 | | | 420 | | | |
Amortization of intangibles | Amortization of intangibles | $ | 223 | | | 223 | | | Amortization of intangibles | $ | 207 | | | 357 | | |
Restructuring costs | Restructuring costs | $ | 111 | | | 50 | | | Restructuring costs | $ | 44 | | | 41 | | |
| Interest expense, net | Interest expense, net | $ | 115 | | | 140 | | | | Interest expense, net | $ | 140 | | | 111 | | | |
Interest income from related party | | Interest income from related party | $ | — | | | (10) | | |
| Earnings before income taxes | $ | 2,084 | | | 3,181 | | | 53 | % | |
Earnings from continuing operations before income taxes | | Earnings from continuing operations before income taxes | $ | 1,829 | | | 1,822 | | | — | % |
Percent of sales | Percent of sales | 15.7 | % | | 22.3 | % | | 6.6 pts | Percent of sales | 18.5 | % | | 16.5 | % | | (2.0) pts |
Earnings from continuing operations common stockholders | | Earnings from continuing operations common stockholders | $ | 1,400 | | | 1,451 | | | 4 | % |
Percent of sales | | Percent of sales | 14.1 | % | | 13.1 | % | | (1.0) pts |
Net earnings common stockholders | | Net earnings common stockholders | $ | 2,491 | | | 12,475 | | | 401 | % |
| Net earnings common stockholders | $ | 1,633 | | | 2,491 | | | 53 | % | |
Percent of sales | 12.3 | % | | 17.5 | % | | 5.2 pts | |
| | Diluted earnings per share | $ | 2.71 | | | 4.17 | | | 54 | % | |
| Diluted EPS - Earnings from continuing operations | | Diluted EPS - Earnings from continuing operations | $ | 2.34 | | | 2.51 | | | 7 | % |
Diluted EPS - Net earnings | | Diluted EPS - Net earnings | $ | 4.17 | | | 21.56 | | | 417 | % |
Net sales for the first nine months of 20222023 were $14.3$11.1 billion, up 12 percent compared with 2022. Intelligent Devices sales were up 7 percent, compared with 2021. Automation Solutionswhile Software and Control sales were up 327 percent, Commercial & Residential Solutions sales were up 11 percent andwhich included the impact of the Heritage AspenTech sales were up 69 percent.acquisition. Underlying sales were up 912 percent on 57 percent higher volume and 45 percent higher price, and foreignprice. Foreign currency translation subtracted 23 percent, the Heritage AspenTech acquisition added 4 percent and the divestiture of Metran deducted 1 percent. Underlying sales increased 1413 percent in the U.S. and increased 111 percent internationally. The Americas was up 13 percent, Europe was up 110 percent and Asia, Middle East & Africa was up 411 percent (China was up 67 percent).
Cost of sales for 20222023 were $8,398,$5,660, an increase of $676$225 versus $7,722$5,435 in 2021, primarily due to higher sales volume and higher materials costs.2022. Gross margin of 41.148.9 percent decreased 0.8increased 3.7 percentage points compareddue to the prior year, asfavorable price less net material inflation, was slightly favorable but had a dilutivethe impact on margins and higher freight and other inflation also negatively impacted margins, partially offset by favorable mix. Theof the Heritage AspenTech acquisition which benefited gross marginmargins by 0.60.9 percentage points, while the Russia business exit negatively impacted gross margin by 0.2 percentage points.and favorable mix.
SG&A expenses of $3,112 decreased $13 compared with the prior year, reflecting lower stock compensation expense of $84, partially offset by the impact of higher sales.$3,072 increased $441 and SG&A as a percent of sales increased decreased 1.71.1 percentage points to 21.827.7 percent, reflecting the Heritage AspenTech acquisition and higher stock compensation expense of $106, of which $55 related to Emerson stock plans due to a decreasing stock price in the prior year compared to an increasing stock price in the current year, and $51 was attributable to AspenTech stock plans. These items were partially offset by strong operating leverage on higher sales and lower stock compensation expensesales. .
As previously disclosed, the Company sold its network power systems business (rebranded as Vertiv, now a publicly traded company, symbol VRT) in 2017 and retained a subordinated interest contingent upon the equity holders first receiving a threshold cash return on their initial investment. In the first quarter of fiscal 2022, the equity holders' cumulative cash return exceeded the threshold and as a result, the Company received a distribution of $438 related to its subordinated interest in November 2021Vertiv (in total, a pretax gain of $453 was recognized in the first quarter). quarter of fiscal 2022, $358 after-tax, $0.60 per share) and received the remaining $15 related to the pretax gain in the first quarter of fiscal 2023. Based on the terms of the agreement and the current calculation, the Company could receive additional distributions of approximately $75$150 which are expected to be received over the next two-to-three years. However, the distributions are contingent on the timing and price at which Vertiv shares are sold by the equity holders and therefore, there can be no assurance as to the amount or timing of the remaining distributions to the Company.
On May 31, 2022, the Company completed the sale of its Therm-O-Disc sensing and protection technologies business to an affiliate of One Rock Capital Partners, LLC. The Company recognized a pretax gain of $483 ($428 after-tax, $0.72 per share). See Note 4
Other deductions, net were $374$420 in 2022,2023, an increase of $131$90 compared with the prior year, reflecting higher intangibles amortization of $150 primarily related to the Heritage AspenTech acquisition, a loss of $61 on the Company's equity method investment in Copeland, and an unfavorable impact from foreign currency transactions of $103 reflecting losses in the current year compared to gains in the prior year. The prior year included a charge of $130 related to the Company exiting its business in Russia ($9 of which is reported in restructuring costs) and acquisition/divestiture costscompared to a charge of $97. These items were partially offset by a favorable impact from foreign currency transactions of $48 and gains from the sales of capital assets of $15$47 in the first quarter of fiscal 2022. current year. The priorcurrent year also included investment-related gains, including a mark-to-market gain of $21 from an investment sale, a $17 gain from$47 on the acquisition of full ownership of anCompany's equity investment in NI and a mark-to-market gain of $31 on the sale of an equity investment. Intangibles amortization was flat as the current year included $32 related to the AspenTech acquisition, while the prior year included backlog amortization of $24 related to foreign currency forward contracts entered into by AspenTech to mitigate the OSI acquisition. impact of foreign currency exchange associated with the Micromine purchase price. On June 21, 2023, AspenTech terminated all outstanding foreign currency forward contracts. See Notes 6 andNote 7.
Pretax earnings from continuing operations of $3,181 increased $1,097, or 53 percent. Earnings increased $264 in Automation Solutions, $52 in AspenTech and $29 in Commercial & Residential Solutions, while costs reported at Corporate increased $159$1,822 decreased $7 largely due to the Russia business exit loss. SeeVertiv gain discussed above offset by strong operating results in the current year. Earnings increased $362 in Intelligent Devices and decreased $27 in Software and Control (reflecting the impact of higher intangibles amortization due to the Heritage AspenTech acquisition), see the Business Segments discussion that follows and Note 13.14.
Income taxes were $659$390 for the first nine months of 20222023 and $431$399 for 2021,2022, resulting in effective tax rates of 21 percent and 2122 percent, respectively. The currentprior year rate includedreflected the impact of the Russia business exit which was essentially offset by a 2 percentage point benefit related to the completion of tax examinations, partially offset by portfolio restructuring activities which negatively impacted the rate by 1 percentage points, while the prior year had favoraexaminations.ble net discrete items which reduced the rate 1 percentage point.
Net earningsEarnings from continuing operations attributable to common stockholders in 2022 were $2,491,$1,451, up 534 percent compared with the prior year, and diluted earnings per share from continuing operations were $4.17,$2.51, up 547 percent compared with $2.71$2.34 in 2021. Results reflected strong operating results and2022. The prior year included a pretax$0.60 gain of $453 ($358 after-tax, $0.60 per share) related to the Company's subordinated interest in Vertiv and a pretax gain of $483 ($428 after-tax, $0.72Vertiv. Adjusted diluted earnings per share) related toshare from continuing operations were $3.15 compared with $2.57 in the Therm-O-Disc divestiture.prior year, reflecting strong operating results. See the analysis below of adjusted earnings per share for further details.
The table below,Earnings from discontinued operations were $11,024 ($19.05 per share) which shows resultsincluded the $8.4 billion after-tax gain on an adjusted EBITA basis, is intendedthe Copeland transaction and the $2.1 billion after-tax gain on the divestiture of InSinkErator, compared to supplement$1,091 ($1.83 per share) in the Company's discussion of its results of operations herein.
| | | | | | | | | | | | | | | | | |
Nine Months Ended June 30 | 2021 | | 2022 | | Change |
| | | | | |
Earnings before income taxes | $ | 2,084 | | | 3,181 | | | 53 | % |
Percent of sales | 15.7 | % | | 22.3 | % | | 6.6 pts |
Interest expense, net | 115 | | | 140 | | | |
Restructuring and related costs | 122 | | | 67 | | | |
Amortization of intangibles | 242 | | | 277 | | | |
Gain on subordinated interest | — | | | (453) | | | |
Gain on sale of business | — | | | (483) | | | |
Russia business exit | — | | | 162 | | | |
Acquisition/divestiture costs | — | | | 97 | | | |
Gain on acquisition of full ownership of equity investment | (17) | | | — | | | |
OSI first year acquisition accounting charges and fees | 41 | | | — | | | |
Adjusted EBITA | $ | 2,587 | | | 2,988 | | | 16 | % |
Percent of sales | 19.5 | % | | 20.9 | % | | 1.4 pts |
prior year. See Note 5.
Net earnings common stockholders were $12,475 ($21.56 per share) compared with $2,491 ($4.17 per share) in the prior year.
24
The table below presents the Company's diluted earnings per share on an adjusted basis to facilitate period-to-period comparisons and provide additional insight into the underlying, ongoing operating performance of the Company.
| | | | | | | | | | | | | | | | | | | | |
Nine Months Ended June 30 | | | | 2021 | | 2022 |
| | | | | | |
Diluted earnings per share | | | | $ | 2.71 | | | 4.17 | |
| | | | | | |
Restructuring and related costs | | | | 0.16 | | | 0.09 | |
Amortization of intangibles | | | | 0.30 | | | 0.33 | |
Gain on subordinated interest | | | | — | | | (0.60) | |
Gain on sale of business | | | | — | | | (0.72) | |
Russia business exit | | | | — | | | 0.29 | |
Acquisition/divestiture costs and pre-acquisition interest on AspenTech debt | | | | — | | | 0.16 | |
Gain on acquisition of full ownership of equity investment | | | | (0.03) | | | — | |
OSI first year acquisition accounting charges and fees | | | | 0.05 | | | — | |
| | | | | | |
Adjusted diluted earnings per share | | | | $ | 3.19 | | | 3.72 |
| | | | | | | | | | | | | | | | | | | | |
Nine Months Ended June 30 | | | | 2022 | | 2023 |
| | | | | | |
Diluted earnings from continuing operations per share | | | | $ | 2.34 | | | 2.51 | |
| | | | | | |
Amortization of intangibles | | | | 0.30 | | | 0.46 | |
Restructuring and related costs | | | | 0.08 | | | 0.07 | |
Acquisition/divestiture costs and pre-acquisition interest on AspenTech debt | | | | 0.16 | | | 0.07 | |
Gain on subordinated interest | | | | (0.60) | | | — | |
National Instruments investment gain | | | | — | | | (0.06) | |
AspenTech Micromine purchase price hedge gain | | | | — | | | (0.02) | |
Interest income on undeployed proceeds from Copeland transaction | | | | — | | | (0.05) | |
Loss on Copeland equity method investment | | | | — | | | 0.09 | |
Russia business exit charge | | | | 0.29 | | | 0.08 | |
| | | | | | |
Adjusted diluted earnings from continuing operations per share | | | | $ | 2.57 | | | 3.15 |
The table below summarizes the changes in adjusted diluted earnings per share. The items identified below are discussed throughout MD&A, see further discussion above and in the Business Segments and Financial Position sections below.
| | | | | | | | |
| | Nine Months Ended |
Adjusted diluted earnings from continuing operations per share - June 30, 20212022 | | $ | 3.192.57 | |
| | |
Operations | | 0.30 | |
AspenTech acquisition | | 0.080.68 | |
Corporate and other | | (0.03)0.03 | |
Stock compensation | | 0.13(0.13) | |
Foreign currency | | (0.10) | |
Pensions | | 0.040.06 | |
Gains on sales of investments - prior yearEffective tax rate | | (0.07)(0.03) | |
GainsInterest expense, net | | (0.03) | |
Share count | | 0.08 | |
Interest income on sales of capital assets - current yearCopeland note receivable | | 0.02 | |
| | |
| | |
| | |
| | |
Share repurchases/other | | 0.06 | |
| | |
Adjusted diluted earnings from continuing operations per share - June 30, 20222023 | | $ | 3.723.15 | |
The table below, which shows results on an adjusted EBITA basis, is intended to supplement the Company's discussion of its results of operations herein.
| | | | | | | | | | | | | | | | | |
Nine Months Ended June 30 | 2022 | | 2023 | | Change |
| | | | | |
Earnings from continuing operations before income taxes | $ | 1,829 | | | 1,822 | | | — | % |
Percent of sales | 18.5 | % | | 16.5 | % | | (2.0) pts |
Interest expense, net | 140 | | | 111 | | | |
Interest income from related party | — | | | (10) | | | |
Amortization of intangibles | 261 | | | 504 | | | |
Restructuring and related costs | 59 | | | 54 | | | |
Acquisition/divestiture costs | 91 | | | 48 | | | |
Gain on subordinated interest | (453) | | | — | | | |
National Instruments investment gain | — | | | (47) | | | |
AspenTech Micromine purchase price hedge gain | — | | | (24) | | | |
Loss on Copeland equity method investment | — | | | 61 | | | |
Russia business exit charge | 162 | | | 47 | | | |
Adjusted EBITA from continuing operations | $ | 2,089 | | | 2,566 | | | 23 | % |
Percent of sales | 21.1 | % | | 23.2 | % | | 2.1 pts |
25
Business Segments
Following is an analysis of operating results for the Company’s business segments for the nine months ended June 30, 2021,2022, compared with the nine months ended June 30, 2022.2023. The Company defines segment earnings as earnings before interest and taxes. As a result of the Company's portfolio transformation, the Company has realigned its business segments and now reports six segments and two business groups. See Note 14.
AUTOMATION SOLUTIONS
| | | | | | | | | | | | | | | | | |
Nine Months Ended June 30 | 2021 | | 2022 | | Change |
| | | | | |
| | | | | |
Sales | $ | 8,193 | | | 8,451 | | | 3 | % |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Earnings | $ | 1,354 | | | 1,618 | | | 19 | % |
| | | | | |
| | | | | |
Margin | 16.5 | % | | 19.1 | % | | 2.6 pts |
| | | | | |
Restructuring and related costs | $ | 94 | | | 54 | | | |
Amortization of intangibles | $ | 136�� | | | 125 | | | |
| | | | | |
Adjusted EBITA | $ | 1,584 | | | 1,797 | | | 14 | % |
Adjusted EBITA Margin | 19.3 | % | | 21.3 | % | | 2.0 pts |
| | | | | | | | | | | | | | | | | |
| | | | | |
| | | | | |
| | | | | |
Sales by Major Product Offering | | | | | |
Measurement & Analytical Instrumentation | $ | 2,211 | | | 2,287 | | | 3 | % |
Valves, Actuators & Regulators | 2,522 | | | 2,604 | | | 3 | % |
Industrial Solutions | 1,656 | | | 1,743 | | | 5 | % |
Systems & Software | 1,804 | | | 1,817 | | | 1 | % |
Total | $ | 8,193 | | | 8,451 | | | 3 | % |
Automation Solutions
29
INTELLIGENT DEVICES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 | | 2023 | | Change | | FX | | Acq/Div | | U/L | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Sales: | | | | | | | | | | | | |
Final Control | $ | 2,606 | | | 2,889 | | | 11 | % | | 3 | % | | 1 | % | | 15 | % | |
Measurement & Analytical | 2,294 | | | 2,550 | | | 11 | % | | 3 | % | | 2 | % | | 16 | % | |
Discrete Automation | 1,894 | | | 1,969 | | | 4 | % | | 3 | % | | — | % | | 7 | % | |
Safety & Productivity | 1,066 | | | 1,034 | | | (3) | % | | 1 | % | | — | % | | (2) | % | |
Total | $ | 7,860 | | | 8,442 | | | 7 | % | | 3 | % | | 1 | % | | 11 | % | |
| | | | | | | | | | | | |
Earnings: | | | | | | | | | | | | |
Final Control | $ | 424 | | | 618 | | | 46 | % | | | | | | | |
Measurement & Analytical | 535 | | | 661 | | | 24 | % | | | | | | | |
Discrete Automation | 365 | | | 378 | | | 4 | % | | | | | | | |
Safety & Productivity | 199 | | | 228 | | | 15 | % | | | | | | | |
Total | $ | 1,523 | | | 1,885 | | | 24 | % | | | | | | | |
Margin | 19.4 | % | | 22.3 | % | | 2.9 pts | | | | | | | |
| | | | | | | | | | | | |
Amortization of intangibles: | | | | | | | | | | | | |
Final Control | $ | 71 | | | 66 | | | | | | | | | | |
Measurement & Analytical | 15 | | | 15 | | | | | | | | | | |
Discrete Automation | 23 | | | 22 | | | | | | | | | | |
Safety & Productivity | 20 | | | 20 | | | | | | | | | | |
Total | $ | 129 | | | 123 | | | | | | | | | | |
| | | | | | | | | | | | |
Restructuring and related costs: | | | | | | | | | | | | |
Final Control | $ | 33 | | | 12 | | | | | | | | | | |
Measurement & Analytical | 9 | | | 2 | | | | | | | | | | |
Discrete Automation | 4 | | | 20 | | | | | | | | | | |
Safety & Productivity | — | | | 1 | | | | | | | | | | |
Total | $ | 46 | | | 35 | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Adjusted EBITA | $ | 1,698 | | | 2,043 | | | 20 | % | | | | | | | |
Adjusted EBITA Margin | 21.6 | % | | 24.2 | % | | 2.6 pts | | | | | | | |
Intelligent Devices sales were $8.5$8.4 billion in the first nine months of 2022,2023, an increase of $258,$582, or 37 percent. Foreign currency translation had a 2 percent unfavorable impact. Underlying sales increased 511 percent on 36 percent higher volume and 25 percent higher price, reflecting strength in process end markets and sustained demand in discrete and hybrid end markets, despite supply chain and logistics constraints and the impact of lockdowns in China which unfavorably impacted sales. price. UndeUnderlyingrlying sales increased 1113 percent in the Americas, while Europe which was negatively impacted by the business exit from Russia, decreased 2increased 9 percent, and Asia, Middle East & Africa was up 39 percent (China up 10 percent)5 percent).Final Control sales increased $283, or 11 percent. Underlying sales were up 15 percent, reflecting strength in energy and chemical end markets, particularly in the Americas and Asia, Middle East & Africa, while Europe was up moderately. Sales for Measurement & Analytical Instrumentation increased $76,$256, or 311 percent. Sales were strong in China and North America, whileUnderlying sales were down moderately in Europe due to supply chain constraints. Valves, Actuators & Regulators increased $82, or 3up 16 percent,, reflecting strong demandrobust growth in the Americas and China, partially offset by softness in the rest ofEurope due to strong demand, while Asia, Middle East & Africa. Industrial SolutionsAfrica was up moderately due to softness in China. Discrete Automation sales increased $87,$75, or 54 percent, while underlying sales increased 7 percent, reflecting strong demand in North AmericaAsia, Middle East & Africa and Europe. Systems & Software increased $13, or 1 percent, reflecting strength in process end markets in North America and China, partially offset by weakness in Europe, while power end marketsthe Americas was up modestly. Safety & Productivity sales decreased $32, or 3 percent, and underlying sales decreased 2 percent, reflecting softness in the Americas while Europe and Asia, Middle East & Africa were solid in North America.up slightly. Earnings for Intelligent Devices were $1,618,$1,885, an increase of $264,$362, or 1924 percent, and margin increased 2.62.9 percentage points to 19.122.3 percent, reflecting leverage on higher volume, favorable mix, lower restructuring expense which benefited margins 0.4 percentage points, and savings from cost reduction actions, partially offset by higher inflation. Priceprice less net material inflation, leverage on higher sales and favorable mix, partially offset by wage and other inflation. Adjusted EBITA margin was slightly favorable and foreign currency transactions benefited margins by 0.324.2 percent, an increase of 2.6 percentage points.
ASPENTECHSOFTWARE AND CONTROL
| | | | | | | | | | | | | | | | | |
Nine Months Ended June 30 | 2021 | | 2022 | | Change |
| | | | | |
| | | | | |
Sales | $ | 239 | | | 405 | | | 69 | % |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Earnings | $ | (1) | | | 51 | | | (3,687) | % |
| | | | | |
| | | | | |
Margin | (0.6) | % | | 12.5 | % | | 13.1 pts |
| | | | | |
Restructuring and related costs | $ | 2 | | | 1 | | | |
Amortization of intangibles | $ | 67 | | | 116 | | | |
| | | | | |
Adjusted EBITA | $ | 68 | | | 168 | | | 149 | % |
Adjusted EBITA Margin | 28.0 | % | | 41.2 | % | | 13.2 pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2023 | | Change | | FX | | Acq/Div | | U/L |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Sales: | | | | | | | | | | | | |
Control Systems & Software | | $ | 1,711 | | | 1,892 | | | 11 | % | | 3 | % | | 1 | % | | 15 | % |
AspenTech | | 405 | | | 793 | | | 96 | % | | — | % | | (96) | % | | — | % |
Total | | $ | 2,116 | | | 2,685 | | | 27 | % | | 3 | % | | (15) | % | | 15 | % |
| | | | | | | | | | | | |
Earnings: | | | | | | | | | | | | |
Control Systems & Software | | $ | 294 | | | 378 | | | 29 | % | | | | | | |
AspenTech | | 51 | | | (60) | | | (220) | % | | | | | | |
Total | | $ | 345 | | | 318 | | | (8) | % | | | | | | |
Margin | | 16.3 | % | | 11.8 | % | | (4.5) pts | | | | | | |
| | | | | | | | | | | | |
Amortization of intangibles: | | | | | | | | | | | | |
Control Systems & Software | | $ | 16 | | | 17 | | | | | | | | | |
AspenTech | | 116 | | | 364 | | | | | | | | | |
Total | | $ | 132 | | | 381 | | | | | | | | | |
| | | | | | | | | | | | |
Restructuring and related costs: | | | | | | | | | | | | |
Control Systems & Software | | $ | 8 | | | 7 | | | | | | | | | |
AspenTech | | 1 | | | — | | | | | | | | | |
Total | | $ | 9 | | | 7 | | | | | | | | | |
| | | | | | | | | | | | |
Adjusted EBITA | | $ | 486 | | | 706 | | | 46 | % | | | | | | |
Adjusted EBITA Margin | | 22.9 | % | | 26.3 | % | | 3.4 pts | | | | | | |
AspenTechSoftware and Control sales were $405$2,685 in thethe first nine months of 2022,2023, an increase of $166,$569, or 6927 percent duecompared to the acquisition of AspenTech. Earnings were $51, an increase of $52, and margin improved to 12.5 percent,prior year, reflecting the impact of the AspenTech acquisition. Results for fiscal 2022 included intangibles amortization of $49 related to theHeritage AspenTech acquisition ($17 of which was reportedand strong growth in Cost of sales). See Note 4.
COMMERCIALControl Systems & RESIDENTIAL SOLUTIONS
| | | | | | | | | | | | | | | | | |
Nine Months Ended June 30 | 2021 | | 2022 | | Change |
| | | | | |
| | | | | |
Sales: | | | | | |
Climate Technologies | $ | 3,459 | | | 3,884 | | | 12 | % |
Tools & Home Products | 1,419 | | | 1,546 | | | 9 | % |
Total | $ | 4,878 | | | 5,430 | | | 11 | % |
| | | | | |
Earnings: | | | | | |
Climate Technologies | $ | 731 | | | 754 | | | 3 | % |
Tools & Home Products | 311 | | | 317 | | | 2 | % |
Total | $ | 1,042 | | | 1,071 | | | 3 | % |
Margin | 21.4 | % | | 19.7 | % | | (1.7) pts |
| | | | | |
Restructuring and related costs | $ | 15 | | | 8 | | | |
Amortization of intangibles | $ | 39 | | | 36 | | | |
| | | | | |
Adjusted EBITA | $ | 1,096 | | | 1,115 | | | 2 | % |
Adjusted EBITA Margin | 22.5 | % | | 20.5 | % | | (2.0) pts |
Commercial & Residential Solutions sales were $5.4 billion in the first nine months of 2022, an increase of $552, or 11 percent compared to the prior year. Foreign currency translation had a 1 percent unfavorable impact and divestitures deducted 2 percent. Software. Underlying sales were up 1415 percent on 613 percent higher volume and 82 percent higher price. UOverall, underlyingnderlying sales increased 1612 percent in the Americas, 1117 percent in Europe and 718 percent in Asia, Middle East & Africa (China down 7(China up 24 percent). Climate TechnologiesControl Systems & Software sales were $3.9 billion in the first nine months of 2022, an increase of $425,increased $181, or 1211 percent. Air conditioning, heating and refrigerationUnderlying sales were strong,increased 15 percent, reflecting global demand across allstrength in process end markets. Tools & Home Productsmarkets while power end markets were up moderately. AspenTech sales were $1.5 billion in the first nine months of 2022, up $127,increased $388, or 9 percent. Sales of professional tools and food waste disposers were both up low teens, while wet/dry vacuums were flat96 percent, due to difficult comparisons.the acquisition of Heritage AspenTech. Earnings were $1,071, up 3for Software and Control decreased $27, down 8 percent, and margin decreased 1.74.5 percentage points, as price less net material inflation was favorable but had a dilutivereflecting the impact on margins and higher freight and other inflation also negatively impacted margins, partially offset byfrom $248 of incremental intangibles amortization related to the Heritage AspenTech acquisition. Adjusted EBITA margin increased 3.4 percentage points, reflecting leverage on higher sales and savings from cost reduction actions.favorable mix, partially offset by inflation and unfavorable foreign currency transactions.
FINANCIAL CONDITION
Key elements of the Company's financial condition for the nine months ended June 30, 20222023 as compared to the year ended September 30, 20212022 and the nine months ended June 30, 20212022 follow. | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | Sept 30, 2021 | | June 30, 2022 |
Operating working capital | $ | 714 | | | $ | 704 | | | $ | 1,261 | |
Current ratio | 1.3 | | | 1.3 | | | 1.1 | |
Total debt-to-total capital | 44.0 | % | | 40.3 | % | | 52.9 | % |
Net debt-to-net capital | 32.4 | % | | 30.4 | % | | 46.8 | % |
Interest coverage ratio | 17.8 | X | | 18.6 | X | | 21.1 | X |
| | | | | | | | | | | | | | | | | |
| June 30, 2022 | | Sept 30, 2022 | | June 30, 2023 |
Operating working capital | $ | 1,081 | | | $ | 990 | | | $ | (144) | |
Current ratio | 1.1 | | | 1.1 | | | 2.4 | |
Total debt-to-total capital | 52.9 | % | | 50.0 | % | | 28.9 | % |
Net debt-to-net capital | 46.8 | % | | 45.3 | % | | (8.8) | % |
Interest coverage ratio | 12.6 | X | | 11.7 | X | | 9.8 | X |
The Company's operating working capital increased comparedcapital as of June 30, 2023 includes remaining income taxes payable of approximately $1.5 billion related to the same quarter last yearCopeland transaction and comparedthe gain on the InSinkErator divestiture, which is largely expected to September 30, 2021be paid by the end of fiscal 2023. Excluding these income taxes payable related to discontinued operations, operating working capital remained elevated due to higher inventory levels to support sales growth and reflecting ongoing supply chain and logistics constraints. In addition, the AspenTech acquisition increased operating working capital by approximately $250.higher receivables. As of June 30, 2022,2023, Emerson's cash and equivalents totaled $2,529,$9,957, which included $450reflected approximately $9.7 billion of proceeds related to the Copeland transaction which are expected to be used along with other available cash and liquidity to fund the proposed National Instruments transaction. Going forward, Copeland is not expected to issue dividends to the Company but will distribute cash for the Company to pay its share of U.S. taxes. The Company's cash also includes $289 attributable to New AspenTech. The cash held by New AspenTech which is intended to be used for its own purposes and is not a readily available source of liquidity for other Emerson general business purposes or to return to Emerson shareholders.
The decrease in the current ratio reflectsincreased compared to September 30, 2022, reflecting the increase in commercial paper borrowings discussed below.proceeds from the Copeland transaction. The interest coverage ratio (earnings before income taxes plus interest expense, divided by interest expense) of 21.1X9.8X for the first nine months of fiscal 20222023 compares to 17.8X12.6X for the nine months ended June 30, 2021. The increase reflects2022, reflecting higher pretaxinterest expense. Pretax earnings in the currentprior year which included the Vertiv subordinated interest gain of $453,453. Excluding the gain, on the Therm-O-Disc divestiture of $483, and the Russia business exit loss of $162. Excluding these items, the interest coverage ratio was 16.2X, reflecting higher interest expense due to9.7X for the increased long-term debt and commercial paper borrowings to fund the AspenTech acquisition.
In December 2021, the Company issued $1 billion of 2.0% notes due December 2028, $1 billion of 2.2% notes due December 2031, and $1 billion of 2.8% notes due December 2051. The Company's commercial paper borrowings also increased by approximately $2.4 billion compared to Septembernine months ended June 30, 2021. The Company used the net proceeds from the sale of the notes and the increased commercial paper borrowings to fund the majority of its contribution of approximately $6.0 billion to existing stockholders of AspenTech as part of the transaction. See Note 4 and Note 10.2022.
Operating cash flow from continuing operations for the first nine months of fiscal 20222023 was $1,705, a decrease$1,719, an increase of $1,015$484 compared with $2,720$1,235 in the prior year, reflecting higher working capital due to increased sales and continued supply chain constraints. Operating cash flow was also negatively impacted by approximately $68earnings (excluding the prior year impact of taxes paid on the Vertiv subordinated interest gain. The remaining taxes owed ongain and the gain arecurrent year impact from Heritage AspenTech intangibles amortization). Operating cash flow included approximately $27 and are expected to be paid$295 generated by the end of fiscal 2022.AspenTech. Free cash flow from continuing operations of $1,370$1,525 in the first nine months of fiscal 2023 (operating cash flow of $1,719 less capital expenditures of $194) increased $489 compared to free cash flow of $1,036 in 2022 (operating cash flow of $1,705$1,235 less capital expenditures of $335) decreased $1,000 compared to free cash flow of $2,370 in 2021 (operating cash flow of $2,720 less capital expenditures of $350)$199), reflecting the decreaseincrease in operating cash flow. Cash provided by investing activities from continuing operations was $615. Cash used in investingfinancing activities from continuing operations was $6,302 and included Emerson share repurchases of $2.0 billion (and AspenTech repurchases of $100, which increased the Company's common ownership percentage to approximately 56 percent), a net reduction in short-term borrowings of approximately $1.5 billion, repayments of long-term debt of $744 (including $264 related to AspenTech's repayment of the outstanding balance on its existing term loan facility plus accrued interest), and dividend payments of $900.
Total cash provided by operating activities was $4,975, reflecting $5.6 billion$1,280 including the impact of cashdiscontinued operations, and decreased $425 compared with $1,705 in the prior year due to approximately $750 of incomes taxes paid net of cash acquired related to the AspenTech acquisition, partially offset bygain on the Vertiv gainInSinkErator divestiture and subsidiary restructurings related to the Copeland transaction. Investing cash flow from discontinued operations was $12.5 billion, reflecting proceeds from the Therm-O-DiscCopeland transaction and InSinkErator divestiture. Cash provided
As of June 30, 2023, goodwill attributable to AspenTech was approximately $8.3 billion. AspenTech conducted its annual impairment test as of May 31, 2023 and determined that the carrying value of its stockholders' equity exceeded its market capitalization. Accordingly, to further validate the reasonableness of the initial qualitative assessment and evaluation, a reconciliation of AspenTech's market capitalization was performed by financing activitiescalculating an implied control premium. The Company concluded that the implied control premium was $3,557, primarily duereasonable based on a comparison to proceedsactual control premiums realized in recent comparable market transactions. If AspenTech's stock price declines and is sustained, further evaluation would be necessary and an impairment of nearly $3goodwill attributable to AspenTech may result. No impairment of goodwill attributable to AspenTech was recorded in fiscal 2022 or for the nine months ended June 30, 2023.
In February 2023, the Company entered into a $3.5 billion fromfive-year revolving backup credit facility with various banks, which replaced the December 2021 debt issuance and increasedMay 2018 $3.5 billion facility. The credit facility is maintained to support general corporate purposes, including commercial paper borrowings. The Company has not incurred any borrowings under this or previous facilities. The credit facility contains no financial covenants and is not subject to termination based on a change of $2.4 billioncredit rating or material adverse changes. The facility is unsecured and may be accessed under various interest rate alternatives at the Company’s option. Fees to fundmaintain the AspenTech transaction, partially offset by the repayment of $500 of long-term debt, dividend payments, and share repurchases.facility are immaterial.
On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic, and amongamong other things, provides tax relief to businesses. Tax provisions of the CARES Act include the deferral of certain payroll taxes, relief for retaining employees, and other provisions. The Company deferred $73 of certain payroll taxes through the end of calendar year 2020, of which approximately $37 was paid in December 2021 withand the remaining amount dueremainder paid 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. Emerson is in a strong financial position, with total assets of $37$44 billion and common stockholders' equity of $10$20 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.
FISCAL 20222023 OUTLOOK
Emerson continues to see strong demand for the Company's technology, software and solutions. The outlook for fiscal 2022 reflects the impacts of the AspenTech and Therm-O-Disc transactions and write-offs associated with the Russia business exit, and considers continued macroeconomic and geopolitical uncertainty, supply chain constraints, exchange rate fluctuations and challenges related to COVID-19. For the full year, consolidated net sales from continuing operations are expected to be up 7 to 8approximately 10.5 percent, with underlying sales up 9 toapproximately 10 percent excluding a 2 to 3 percent unfavorable impact from foreign currency translation, a 1 to 2 percent favorable impact from acquisitions and a 1 percent deduction from divestitures. Automation Solutions net sales are expected to be up 4 to 5 percent, with underlying sales up 6 to 7 percent excluding a 2 percent unfavorable impact from foreign currency translation. Commercial & Residential Solutions net sales are expected to be up 9 to 10 percent with underlying sales up 13 to 14 percent excluding a 11.5 percent unfavorable impact from foreign currency translation and a 32.0 percent negative impact from acquisitions net of divestitures. Earnings per share from continuing operations are expected to be $5.25$3.54 to $5.35,$3.59, while adjusted earnings per share from continuing operations are expected to be $5.05$4.40 to $5.15. Adjusted earnings per share exclude a $0.20 impact$4.45 (see the following reconciliation).
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Outlook for Fiscal 2023 Earnings Per Share | | 2023 |
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Diluted earnings from continuing operations per share | | $3.54 - $3.59 |
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Amortization of intangibles | | 0.61 | |
Restructuring and related costs | | 0.16 | |
Acquisition/divestiture costs | | 0.10 | |
National Instruments investment gain | | (0.07) | |
AspenTech Micromine purchase price hedge gain | | (0.02) | |
Interest income on undeployed proceeds from Copeland transaction | | (0.19) | |
Loss on Copeland equity method investment | | 0.19 | |
Russia business exit charge | | 0.08 | |
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Adjusted diluted earnings from continuing operations per share | | $4.40 - $4.45 |
Earnings from restructuring actions, a $0.47 impact from amortization of intangibles, a $0.60 gaindiscontinued operations are not expected to change materially from the Vertiv subordinated interest (see Note 4), a $0.72 gain fromamount reported for the sale of Therm-O-Disc (see Note 4), a $0.29 loss fromnine months ended June 30, 2023 now that the Company exiting business in Russia (see Note 4) and a $0.16 impact fromCopeland transaction and AspenTech pre-closing costs.has been completed. Operating cash flow from continuing operations is expected to be approximately $3.0$2.5 to $2.6 billion and free cash flow from continuing operations, which excludes projected capital spending of $525$300 million, is expected to be $2.2 to $2.3 billion. The fiscal 2023 outlook includes $2 billion returned to shareholders through share repurchases completed in the first quarter and approximately $2.5 billion. Share repurchases are expected to be approximately $500 million in fiscal 2022.$1.2 billion of dividend payments.
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 the Company's ability to successfully complete on the terms and conditions contemplated, and the financial impact of, the proposed sale of its InSinkErator food waste disposal business, the financial impact of the AspenTech acquisition,National Instruments transaction, the scope, duration and ultimate impacts of the COVID-19 pandemic and the Russia-Ukraine conflict, 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, inflation, 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, 20212022 and in subsequent reports filed with the SEC, which are hereby incorporated by reference.
Item 4. Controls and Procedures
The Company maintains a system of disclosure controls and procedures designed to ensure that information required to be disclosed in its reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported in a timely manner. This system also is designed to ensure information is accumulated and communicated to management, including the Company's certifying officers, to allow timely decisions regarding required disclosure. Based on an evaluation performed, the certifying officers have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.
Notwithstanding the foregoing, there can be no assurance that the Company's disclosure controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiaries to report material information otherwise required to be set forth in the Company's reports.
There was no change in the Company's internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
ItemItem 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) Issuer PurchasesNeither the Company nor any “affiliated purchaser” repurchased any shares of Equity Securities (shares in 000s). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |
April 2022 | | 17 | | | | $89.97 | | | 17 | | | | 57,159 |
May 2022 | | 845 | | | | $84.02 | | | 845 | | | | 56,315 |
June 2022 | | 891 | | | | $81.41 | | | 891 | | | | 55,423 |
Total | | 1,753 | | | | $82.75 | | | 1,753 | | | | 55,423 |
In November 2015,Company common stock during the Board of Directors authorized the purchase of up to 70 million shares.three-month period ended June 30, 2023. In March 2020, the Board of Directors authorized the purchase of an additional 60 million shares and a total of approximately 55.4 million33.3 shares remain available for purchase under the authorizations.authorization.
Item 5. Other Information
During the three-month period ended June 30, 2023, none of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement.
Item 6. Exhibits
(a) Exhibits (Listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K).
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2.1** | Agreement and Plan of Merger, dated as of April 12, 2023, among Emerson Electric Co., Emersub CXIV, Inc., and National Instruments Corporation, incorporated by reference to the Company,s Form 8-K filed on April 12, 2023, File No. 1-278, Exhibit 2.1. |
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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, 20222023 and 2021,2022, (ii) Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 20222023 and 2021,2022, (iii) Consolidated Balance Sheets as of September 30, 20212022 and June 30, 2022,2023, (iv) Consolidated Statements of Equity for the three and nine months ended June 30, 20222023 and 2021,2022, (v) Consolidated Statements of Cash Flows for the nine months ended June 30, 20222023 and 2021,2022, and (vi) Notes to Consolidated Financial Statements for the three and nine months ended June 30, 20222023 and 2021.2022.
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104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
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** | Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Emerson agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | EMERSON ELECTRIC CO. | |
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| | By | /s/ F.M. J. DellaquilaBaughman | |
| | | FrankMike J. DellaquilaBaughman | |
| | | Senior Executive Vice President and Chief Financial Officer | |
| | | (on behalf of the registrant and as Chief Financial Officer) | |
| | | August 9, 20222, 2023 | |