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 ~~December~~March 31, ~~2022~~2023

☐ 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 ~~December~~March 31, ~~2022:~~2023: ~~571.4~~571.5 million shares.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Earnings

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three and six months ended ~~December~~March 31, ~~2021~~2022 and ~~2022~~2023

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


		Three Months Ended December 31,			Three Months Ended March 31,					Six Months Ended March 31,
			2021			2022		2022		2023	2022	2023
Net sales	Net sales		$	3,156		3,373	Net sales	$	3,291	3,756	6,447	7,129

Cost of sales	Cost of sales		1,741			1,753	Cost of sales	1,815		1,955	3,556	3,708
Selling, general and administrative expenses	Selling, general and administrative expenses		849			1,030	Selling, general and administrative expenses	888		1,000	1,737	2,030
Gain on subordinated interest	Gain on subordinated interest		(453)			—	Gain on subordinated interest	—		—	(453)	—

Other deductions, net	Other deductions, net		38			120	Other deductions, net	28		109	66	229
Interest expense (net of interest income of $3 and $20, respectively)			39			48
Interest expense (net of interest income of $4, $18, $7 and $38, respectively)							Interest expense (net of interest income of $4, $18, $7 and $38, respectively)	51		53	90	101

Earnings from continuing operations before income taxes	Earnings from continuing operations before income taxes		942			422	Earnings from continuing operations before income taxes	509		639	1,451	1,061

Income taxes	Income taxes		196			98	Income taxes	80		134	276	232

Earnings from continuing operations	Earnings from continuing operations		746			324	Earnings from continuing operations	429		505	1,175	829

Discontinued operations, net of tax: $84 and $966, respectively			149			2,002
Discontinued operations, net of tax: $56, $39, $140 and $1,005, respectively							Discontinued operations, net of tax: $56, $39, $140 and $1,005, respectively	246		265	395	2,267

Net earnings	Net earnings		895			2,326	Net earnings	675		770	1,570	3,096

Less: Noncontrolling interests in subsidiaries	Less: Noncontrolling interests in subsidiaries		(1)			(5)	Less: Noncontrolling interests in subsidiaries	1		(22)	—	(27)

Net earnings common stockholders	Net earnings common stockholders		$	896		2,331	Net earnings common stockholders	$	674	792	1,570	3,123

Earnings common stockholders:	Earnings common stockholders:						Earnings common stockholders:
Earnings from continuing operations	Earnings from continuing operations		746			329	Earnings from continuing operations	428		530	1,174	859
Discontinued operations	Discontinued operations		150			2,002	Discontinued operations	246		262	396	2,264
Net earnings common stockholders	Net earnings common stockholders		$	896		2,331	Net earnings common stockholders	$	674	792	1,570	3,123

Basic earnings per share common stockholders:	Basic earnings per share common stockholders:						Basic earnings per share common stockholders:
Earnings from continuing operations	Earnings from continuing operations		$	1.25		0.56	Earnings from continuing operations	$	0.72	0.93	1.97	1.49
Discontinued operations	Discontinued operations		0.26			3.43	Discontinued operations	0.41		0.46	0.67	3.92
Basic earnings per common share	Basic earnings per common share		$	1.51		3.99	Basic earnings per common share	$	1.13	1.39	2.64	5.41

Diluted earnings per share common stockholders:	Diluted earnings per share common stockholders:						Diluted earnings per share common stockholders:
Earnings from continuing operations	Earnings from continuing operations		$	1.25		0.56	Earnings from continuing operations	$	0.72	0.92	1.96	1.48
Discontinued operations	Discontinued operations		0.25			3.41	Discontinued operations	0.41		0.46	0.67	3.90
Diluted earnings per common share	Diluted earnings per common share		$	1.50		3.97	Diluted earnings per common share	$	1.13	1.38	2.63	5.38

Weighted average outstanding shares:	Weighted average outstanding shares:						Weighted average outstanding shares:
Basic	Basic		594.6			583.6	Basic	593.3		570.9	593.9	577.2
Diluted	Diluted		598.1			586.7	Diluted	596.5		573.6	597.3	580.1

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three and six months ended ~~December~~March 31, ~~2021~~2022 and ~~2022~~2023

(Dollars in millions; unaudited)


		Three Months Ended December 31,			Three Months Ended March 31,							Six Months Ended March 31,
			2021			2022		2022			2023		2022	2023
Net earnings	Net earnings		$	895		2,326	Net earnings	$	675		770		1,570	3,096

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		(72)			241	Foreign currency translation	(60)			110		(132)	351
Pension and postretirement	Pension and postretirement		18			(16)	Pension and postretirement	18			(17)		36	(33)
Cash flow hedges	Cash flow hedges		4			10	Cash flow hedges	6			13		10	23
Total other comprehensive income (loss)	Total other comprehensive income (loss)		(50)			235	Total other comprehensive income (loss)	(36)			106		(86)	341

Comprehensive income	Comprehensive income		845			2,561	Comprehensive income	639			876		1,484	3,437

Less: Noncontrolling interests in subsidiaries	Less: Noncontrolling interests in subsidiaries		(1)			—	Less: Noncontrolling interests in subsidiaries	—			(23)		(1)	(23)
Comprehensive income common stockholders	Comprehensive income common stockholders		$	846		2,561	Comprehensive income common stockholders	$	639		899		1,485	3,460

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, 2022		Dec 31, 2022		Sept 30, 2022		Mar 31, 2023
ASSETS	ASSETS				ASSETS
Current assets	Current assets				Current assets
Cash and equivalents	Cash and equivalents	$	1,804	2,271	Cash and equivalents	$	1,804	2,046
Receivables, less allowances of $100 and $101, respectively		2,261		2,231
Receivables, less allowances of $100 and $102, respectively					Receivables, less allowances of $100 and $102, respectively	2,261		2,330
Inventories	Inventories	1,742		1,999	Inventories	1,742		2,034
Other current assets	Other current assets	1,301		1,290	Other current assets	1,301		1,228
Current assets held-for-sale	Current assets held-for-sale	1,398		1,209	Current assets held-for-sale	1,398		1,347
Total current assets	Total current assets	8,506		9,000	Total current assets	8,506		8,985

Property, plant and equipment, net	Property, plant and equipment, net	2,239		2,263	Property, plant and equipment, net	2,239		2,263
Other assets	Other assets				Other assets
Goodwill	Goodwill	13,946		14,087	Goodwill	13,946		14,097
Other intangible assets	Other intangible assets	6,572		6,460	Other intangible assets	6,572		6,299
Other	Other	2,151		2,268	Other	2,151		2,265
Noncurrent assets held-for-sale	Noncurrent assets held-for-sale	2,258		2,163	Noncurrent assets held-for-sale	2,258		2,238
Total other assets	Total other assets	24,927		24,978	Total other assets	24,927		24,899
Total assets	Total assets	$	35,672	36,241	Total assets	$	35,672	36,147

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY				LIABILITIES AND EQUITY
Current liabilities	Current liabilities				Current liabilities
Short-term borrowings and current maturities of long-term debt	Short-term borrowings and current maturities of long-term debt	$	2,115	1,792	Short-term borrowings and current maturities of long-term debt	$	2,115	1,959
Accounts payable	Accounts payable	1,276		1,219	Accounts payable	1,276		1,207
Accrued expenses	Accrued expenses	3,038		3,949	Accrued expenses	3,038		3,245

Current liabilities held-for-sale	Current liabilities held-for-sale	1,348		1,200	Current liabilities held-for-sale	1,348		1,138
Total current liabilities	Total current liabilities	7,777		8,160	Total current liabilities	7,777		7,549

Long-term debt	Long-term debt	8,259		8,159	Long-term debt	8,259		8,174

Other liabilities	Other liabilities	3,153		3,057	Other liabilities	3,153		2,928

Noncurrent liabilities held-for-sale	Noncurrent liabilities held-for-sale	167		151	Noncurrent liabilities held-for-sale	167		149

Equity	Equity				Equity
Common stock, $0.50 par value; authorized, 1,200.0 shares; issued, 953.4 shares; outstanding, 591.4 shares and 571.4 shares, respectively		477		477
Common stock, $0.50 par value; authorized, 1,200.0 shares; issued, 953.4 shares; outstanding, 591.4 shares and 571.5 shares, respectively					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	Additional paid-in-capital	57		112	Additional paid-in-capital	57		138
Retained earnings	Retained earnings	28,053		30,076	Retained earnings	28,053		30,571
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(1,485)		(1,255)	Accumulated other comprehensive income (loss)	(1,485)		(1,148)
Cost of common stock in treasury, 362.0 shares and 382.0 shares, respectively		(16,738)		(18,683)
Cost of common stock in treasury, 362.0 shares and 381.9 shares, respectively					Cost of common stock in treasury, 362.0 shares and 381.9 shares, respectively	(16,738)		(18,678)
Common stockholders’ equity	Common stockholders’ equity	10,364		10,727	Common stockholders’ equity	10,364		11,360
Noncontrolling interests in subsidiaries	Noncontrolling interests in subsidiaries	5,952		5,987	Noncontrolling interests in subsidiaries	5,952		5,987
Total equity	Total equity	16,316		16,714	Total equity	16,316		17,347
Total liabilities and equity	Total liabilities and equity	$	35,672	36,241	Total liabilities and equity	$	35,672	36,147

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Equity

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three and six months ended ~~December~~March 31, ~~2021~~2022 and ~~2022~~2023

(Dollars in millions; unaudited)

Three Months Ended December 31,
2021 2022
Common stock $ 477 477
Additional paid-in-capital
     Beginning balance 522 57
     Stock plans 42 55
        Ending balance 564 112
Retained earnings
     Beginning balance 26,047 28,053
     Net earnings common stockholders 896 2,331
Dividends paid (per share: $0.515 and $0.52, respectively) (307) (308)
        Ending balance 26,636 30,076
Accumulated other comprehensive income (loss)
     Beginning balance (872) (1,485)
     Foreign currency translation (72) 236
     Pension and postretirement 18 (16)
     Cash flow hedges 4 10
        Ending balance (922) (1,255)
Treasury stock
     Beginning balance (16,291) (16,738)
     Purchases (258) (2,000)
     Issued under stock plans 43 55
        Ending balance (16,506) (18,683)
Common stockholders' equity 10,249 10,727
Noncontrolling interests in subsidiaries
     Beginning balance 40 5,952
     Net earnings (1) (5)
     Stock plans — 35
     Other comprehensive income — 5
        Ending balance 39 5,987
Total equity $ 10,288 16,714


	Three Months Ended March 31,			Six Months Ended March 31,
	2022		2023	2022	2023

Common stock	$	477	477	477	477

Additional paid-in-capital
Beginning balance	564		112	522	57
Stock plans	15		26	57	81

Ending balance	579		138	579	138

Retained earnings
Beginning balance	26,636		30,076	26,047	28,053
Net earnings common stockholders	674		792	1,570	3,123
Dividends paid (per share: $0.515, $0.52 $1.03 and $1.04, respectively)	(307)		(297)	(614)	(605)

Ending balance	27,003		30,571	27,003	30,571

Accumulated other comprehensive income (loss)
Beginning balance	(922)		(1,255)	(872)	(1,485)
Foreign currency translation	(59)		111	(131)	347
Pension and postretirement	18		(17)	36	(33)
Cash flow hedges	6		13	10	23
Ending balance	(957)		(1,148)	(957)	(1,148)

Treasury stock
Beginning balance	(16,506)		(18,683)	(16,291)	(16,738)
Purchases	(27)		—	(285)	(2,000)
Issued under stock plans	6		5	49	60
Ending balance	(16,527)		(18,678)	(16,527)	(18,678)

Common stockholders' equity	10,575		11,360	10,575	11,360

Noncontrolling interests in subsidiaries
Beginning balance	39		5,987	40	5,952
Net earnings	1		(22)	—	(27)
Stock plans	—		23	—	58
Other comprehensive income	(1)		(1)	(1)	4


Ending balance	39		5,987	39	5,987

Total equity	$	10,614	17,347	10,614	17,347

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Cash Flows

EMERSON ELECTRIC CO. & SUBSIDIARIES

~~Three~~Six Months Ended ~~December~~March 31, ~~2021~~2022 and ~~2022~~2023

(Dollars in millions; unaudited)
Three Months Ended
December 31,
2021 2022
Operating activities
Net earnings $ 895 2,326
Earnings from discontinued operations, net of tax (149) (2,002)
Adjustments to reconcile net earnings to net cash provided by operating activities:
        Depreciation and amortization 178 260
        Stock compensation 34 102
        Changes in operating working capital (125) (289)
        Gain on subordinated interest (453) —
        Other, net (3) (95)
            Cash from continuing operations 377 302
            Cash from discontinued operations 146 116
            Cash provided by operating activities 523 418
Investing activities
Capital expenditures (73) (59)
Purchases of businesses, net of cash and equivalents acquired (39) —
Proceeds from subordinated interest 438 15
Other, net 3 (23)
    Cash from continuing operations 329 (67)
    Cash from discontinued operations (44) 2,953
    Cash provided by investing activities 285 2,886
Financing activities
Net increase in short-term borrowings (335) (539)
Proceeds from long-term debt 2,975 —
Payments of long-term debt (501) (9)
Dividends paid (307) (306)
Purchases of common stock (253) (2,000)
Other, net 22 (41)
    Cash provided by (used in) financing activities 1,601 (2,895)
Effect of exchange rate changes on cash and equivalents (37) 58
Increase in cash and equivalents 2,372 467
Beginning cash and equivalents 2,354 1,804
Ending cash and equivalents $ 4,726 2,271
Changes in operating working capital
Receivables $ 172 78
Inventories (177) (193)
Other current assets 7 14
Accounts payable (15) (58)
Accrued expenses (112) (130)
Total changes in operating working capital $ (125) (289)


	Six Months Ended
	March 31,
	2022		2023
Operating activities
Net earnings	$	1,570	3,096
Earnings from discontinued operations, net of tax	(395)		(2,267)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	349		523
Stock compensation	77		142


Changes in operating working capital	(298)		(390)
Gain on subordinated interest	(453)		—


Other, net	(94)		(227)
Cash from continuing operations	756		877
Cash from discontinued operations	209		(391)
Cash provided by operating activities	965		486

Investing activities
Capital expenditures	(140)		(121)
Purchases of businesses, net of cash and equivalents acquired	(35)		—

Proceeds from subordinated interest	438		15
Other, net	(16)		(76)
Cash from continuing operations	247		(182)
Cash from discontinued operations	(88)		2,916
Cash provided by investing activities	159		2,734

Financing activities
Net increase (decrease) in short-term borrowings	871		(31)
Proceeds from short-term borrowings greater than three months	1,040		395

Proceeds from long-term debt	2,975		—
Payments of long-term debt	(504)		(742)
Dividends paid	(613)		(603)
Purchases of common stock	(285)		(2,000)
Other, net	15		(55)
Cash provided by (used in) financing activities	3,499		(3,036)

Effect of exchange rate changes on cash and equivalents	(48)		58
Increase in cash and equivalents	4,575		242
Beginning cash and equivalents	2,354		1,804
Ending cash and equivalents	$	6,929	2,046

Changes in operating working capital
Receivables	$	45	(63)
Inventories	(262)		(219)
Other current assets	(10)		22
Accounts payable	(4)		(98)
Accrued expenses	(67)		(32)

Total changes in operating working capital	$	(298)	(390)

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, 2022.

Over the past ~~18 months,~~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, ~~and~~ the sale of a majority stake in its Climate Technologies business, which was announced on October 31, 2022, and is expected to close in the ~~first half~~Company's third quarter of ~~calendar year~~fiscal 2023, subject to regulatory approvals and customary closing ~~conditions.~~conditions, and the pending acquisition of National Instruments Corporation ("NI"), which was announced on April 12, 2023, and is expected to close in the first half of Emerson’s fiscal 2024, subject to the completion of customary closing conditions, including regulatory approvals and approval by NI shareholders.

Certain prior year amounts have been reclassified to conform to the current year presentation. This includes reporting financial results for Climate Technologies, InSinkErator and Therm-O-Disc as discontinued operations for all periods presented, and the assets and liabilities of Climate Technologies and InSinkErator (prior to completion of the divestiture) as held-for-sale (see Note 5). In addition, as a result of its portfolio transformation, the Company now reports six segments and two business groups (see Note 13).

(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 13 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, 2022			Dec 31, 2022			Sept 30, 2022			Mar 31, 2023
Unbilled receivables (contract assets)	Unbilled receivables (contract assets)		$	1,390		1,412	Unbilled receivables (contract assets)		$	1,390		1,342
Customer advances (contract liabilities)	Customer advances (contract liabilities)		(776)			(938)	Customer advances (contract liabilities)		(776)			(975)
Net contract assets (liabilities)	Net contract assets (liabilities)		$	614		474	Net contract assets (liabilities)		$	614		367

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 decrease in net contract assets was due to customer billings exceeding revenue recognized for performance completed during the period. Revenue recognized for the three and six months ended ~~December~~March 31, ~~2022~~2023 included ~~$335~~$106 and $441, 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 six months ended ~~December~~March 31, ~~2022 for performance obligations that were satisfied in previous periods, including cumulative catchup adjustments on the Company's long-term contracts, was not material.~~

2023 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 ~~December~~March 31, ~~2022,~~2023, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately ~~$7.8~~$8.1 billion (of which,$1.2 billion was attributable to AspenTech). The Company expects to recognize approximately 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 December 31,		Three Months Ended March 31,				Six Months Ended March 31,
			2021		2022		2022	2023	2022	2023

Basic shares outstanding	Basic shares outstanding		594.6		583.6	Basic shares outstanding	593.3	570.9	593.9	577.2
Dilutive shares	Dilutive shares		3.5		3.1	Dilutive shares	3.2	2.7	3.4	2.9
Diluted shares outstanding	Diluted shares outstanding		598.1		586.7	Diluted shares outstanding	596.5	573.6	597.3	580.1

(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 (hereinafter referred to as "AspenTech"). Upon closing of the transaction, Emerson 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 AspenTech common stock. AspenTech and its subsidiaries now operate under Heritage AspenTech’s previous name “Aspen Technology, Inc.” and AspenTech common stock is traded on NASDAQ under AspenTech’s previous stock ticker symbol “AZPN.”

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 continue at their historical basis. The Company recorded a noncontrolling interest of $5.9 billion for the 45 percent ownership interest of former Heritage AspenTech stockholders in 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 allocated to assets and liabilities as follows.


Cash and equivalents	$	274
Receivables	43
Other current assets	280
Property, plant equipment	4
Goodwill ($34 expected to be tax-deductible)	7,225
Other intangible assets	4,390
Other assets	513
Total assets	12,729

Short-term borrowings	27
Accounts payable	8
Accrued expenses	~~113~~115
Long-term debt	255
Deferred taxes and other liabilities	~~1,138~~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 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 ~~first quarter of~~three and six months ended March 31, 2023 attributable to the Heritage AspenTech acquisition include sales of ~~$168~~$151 and $319, respectively, 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 December 31,~~

~~2021~~

~~Net Sales~~

~~3,327~~

~~Net earnings from continuing operations common stockholders~~

~~734~~

~~Diluted earnings per share from continuing operations~~

~~1.23~~


	Three Months Ended March 31,			Six Months Ended March 31,
		2022			2022
Net Sales		$	3,478		$	6,806
Net earnings from continuing operations common stockholders		$	423		$	1,158
Diluted earnings per share from continuing operations		$	0.71		$	1.94

The pro forma results for the ~~three~~six months ended ~~December~~March 31, ~~2021~~2022 include ~~$32~~$44 of transaction costs which were assumed to be incurred in the first fiscal quarter of 2021. Of these transaction costs, ~~$22~~$7 and $30 were included in the Company's reported results for the three and six months ended ~~December~~March 31, ~~2021,~~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 six months ended ~~December~~March 31, ~~2021~~2022 include estimated interest expense of ~~$37~~$19 and $56, respectively, related to the issuance of $3 billion of term debt and increased commercial paper borrowings to fund the acquisition.

Other Transactions

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 11. 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. The transaction is expected to close in the first half of Emerson’s fiscal 2024, subject to the completion of customary closing conditions, including regulatory approvals and approval by NI shareholders.

On July 27, 2022, 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 based on exchange rates when the transaction was announced). The ~~transaction~~closing of the acquisition is ~~expected~~subject to ~~close as soon as the remaining~~ regulatory ~~approval is obtained.~~approval.

On ~~May 4, 2022,~~March 31, 2023, Emerson ~~announced its intention to exit business operations in Russia and divest~~completed the divestiture of Metran, its Russia-based manufacturing ~~subsidiary, and on September 27, 2022, announced an agreement to sell the business to the local management group.~~subsidiary. In the first quarter of fiscal 2023, the Company recognized a pretax loss of $47 in Other deductions ($47 after-tax, in total $0.08 per share) related to its exit of business operations in Russia. The transaction will be subject to regulatory and government approvals, and other customary closing conditions. Emerson will work closely with the local Russia management group to help ensure a smooth transition for employees through the sale process.

In the first quarter of fiscal 2022, the Company received a distribution of $438 related to its subordinated interest in Vertiv (in total, a pretax gain of $453 was recognized in the first quarter, $358 after-tax, $0.60 per share). Based on the terms of the agreement and the current calculation, the Company could receive additional distributions of approximately $75 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.

(5) DISCONTINUED OPERATIONS

In October 2022, the Board of Directors approved the Company's ~~announced~~ agreement to sell 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 will receive upfront, pre-tax cash proceeds of approximately $9.5 billion and a note of $2.25 billion at close (which will accrue 5 percent interest payable in kind by capitalizing interest), while retaining a 45 percent non-controlling interest 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 transaction is expected to close in the ~~first half~~Company's third quarter of ~~calendar year~~fiscal 2023, subject to regulatory approvals and customary closing conditions.

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. This business had net sales of $630 and pretax earnings of $152 in fiscal 2022. The Company recognized a pretax gain of $2.8 billion (approximately $2.1 billion after-tax) in the first quarter of fiscal 2023.

On May 31, 2022 the 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 six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021~~2022 and were as follows:


		Climate Technologies				ISE and TOD				Total			Climate Technologies				ISE and TOD				Total
		Three Months Ended December 31,				Three Months Ended December 31,			Three Months Ended December 31,				Three Months Ended March 31,				Three Months Ended March 31,			Three Months Ended March 31,
			2021		2022		2021	2022		2021	2022			2022		2023		2022	2023		2022	2023
Net sales	Net sales		$	1,079	1,064		238	49		1,317	1,113	Net sales		$	1,255	1,245		245	—		1,500	1,245
Cost of sales	Cost of sales		762		702		148	29		910	731	Cost of sales		866		782		158	—		1,024	782
SG&A	SG&A		127		142		35	8		162	150	SG&A		127		127		34	—		161	127
Gain on sale of business	Gain on sale of business		—		—		—	(2,780)		—	(2,780)	Gain on sale of business		—		—		—	(3)		—	(3)
Other deductions, net	Other deductions, net		6		32		6	12		12	44	Other deductions, net		6		35		7	—		13	35
Earnings (Loss) before income taxes			184		188		49	2,780		233	2,968
Earnings before income taxes												Earnings before income taxes		256		301		46	3		302	304
Income taxes	Income taxes		39		313		45	653		84	966	Income taxes		56		39		—	—		56	39
Earnings (Loss), net of tax			$	145	(125)		4	2,127		149	2,002
Earnings, net of tax												Earnings, net of tax		$	200	262		46	3		246	265

													Climate Technologies				ISE and TOD				Total
													Six Months Ended March 31,				Six Months Ended March 31,			Six Months Ended March 31,
														2022		2023		2022	2023		2022	2023
Net sales												Net sales		$	2,334	2,309		483	49		2,817	2,358
Cost of sales												Cost of sales		1,628		1,484		306	29		1,934	1,513
SG&A												SG&A		254		269		69	8		323	277
Gain on sale of business												Gain on sale of business		—		—		—	(2,783)		—	(2,783)
Other deductions, net												Other deductions, net		12		67		13	12		25	79
Earnings before income taxes												Earnings before income taxes		440		489		95	2,783		535	3,272
Income taxes												Income taxes		95		352		45	653		140	1,005
Earnings, net of tax												Earnings, net of tax		$	345	137		50	2,130		395	2,267

Climate Technologies' results for the three and six months ended ~~December~~March 31, ~~2022~~2023 include lower expense of ~~$27~~$43 and $70, respectively, due to ceasing depreciation and amortization upon the held-for-sale classification. Other deductions, net for Climate Technologies included ~~$27~~ $28 and $55 of transaction-related costs for the three and six months ended ~~December~~March 31, ~~2022.~~2023, respectively. Income taxes for the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 included approximately ~~$275~~$245 for Climate Technologies subsidiary restructurings and approximately $660 related to the gain on the InSinkErator divestiture.

~~The aggregate carrying amounts of the major classes of assets and liabilities classified as held-for-sale as of December 31, 2022 and September 30, 2022 are summarized as follows:~~

Climate Technologies ISE Total
Sept. 30, Dec. 31, Sept. 30, Dec. 31, Sept. 30, Dec. 31,
Assets 2022 2022 2022 2022 2022 2022
   Receivables $ 747 608 68 — 815 608
   Inventories 449 541 81 — 530 541
   Other current assets 49 60 4 — 53 60
   Property, plant & equipment, net 1,122 1,093 141 — 1,263 1,093
   Goodwill 716 720 2 — 718 720
   Other noncurrent assets 265 350 12 — 277 350
Total assets held-for-sale $ 3,348 3,372 308 — 3,656 3,372
Liabilities
   Accounts payable $ 752 733 60 — 812 733
   Other current liabilities 475 467 61 — 536 467
   Deferred taxes and other
     noncurrent liabilities
154 151 13 — 167 151
Total liabilities held-for-sale $ 1,381 1,351 134 — 1,515 1,351

The aggregate carrying amounts of the major classes of assets and liabilities classified as held-for-sale as of March 31, 2023 and September 30, 2022 are summarized as follows:


	Climate Technologies				ISE			Total
		Sept. 30,		March 31,		Sept. 30,	March 31,		Sept. 30,	March 31,
Assets		2022		2023		2022	2023		2022	2023
Receivables		$	747	780		68	—		815	780
Inventories		449		505		81	—		530	505
Other current assets		49		62		4	—		53	62
Property, plant & equipment, net		1,122		1,171		141	—		1,263	1,171
Goodwill		716		720		2	—		718	720
Other noncurrent assets		265		347		12	—		277	347
Total assets held-for-sale		$	3,348	3,585		308	—		3,656	3,585

Liabilities
Accounts payable		$	752	644		60	—		812	644
Other current liabilities		475		494		61	—		536	494
Deferred taxes and other noncurrent liabilities		154		149		13	—		167	149
Total liabilities held-for-sale		$	1,381	1,287		134	—		1,515	1,287

Net cash from operating and investing activities for Climate Technologies, InSinkErator and Therm-O-Disc for the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021~~2022 were as follows:


		Climate Technologies				ISE and TOD				Total			Climate Technologies				ISE and TOD				Total
		Three Months Ended December 31,				Three Months Ended December 31,			Three Months Ended December 31,				Six Months Ended March 31,				Six Months Ended March 31,			Six Months Ended March 31,
			2021		2022		2021	2022		2021	2022			2022		2023		2022	2023		2022	2023
Cash from operating activities	Cash from operating activities		$	132	205		14	(89)		146	116	Cash from operating activities		$	234	44		(25)	(435)		209	(391)
Cash from investing activities	Cash from investing activities		$	(35)	(43)		(9)	2,996		(44)	2,953	Cash from investing activities		$	(69)	(139)		(19)	3,055		(88)	2,916

Cash from operating activities for the six months ended March 31, 2023 reflects approximately $575 of income taxes paid related to the ~~payment~~gain on the InSinkErator divestiture and the Climate Technologies subsidiary restructurings (the remainder of ~~ISE~~which is expected to be paid by the end of fiscal 2023), transaction fees and unfavorable working capital. Cash from investing activities for the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 reflects the proceeds of $3.0 billion~~$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 December 31,			Three Months Ended March 31,					Six Months Ended March 31,
			2021			2022		2022			2023	2022		2023
Service cost	Service cost		$	19		12	Service cost	$	19		12	$	38	24
Interest cost	Interest cost		34			54	Interest cost	34			54	68		108
Expected return on plan assets	Expected return on plan assets		(78)			(71)	Expected return on plan assets	(78)			(71)	(156)		(142)
Net amortization	Net amortization		23			(20)	Net amortization	23			(20)	46		(40)
Total	Total		$	(2)		(25)	Total	$	(2)		(25)	$	(4)	(50)

(7) OTHER DEDUCTIONS, NET

Other deductions, net are summarized below:


		Three Months Ended December 31,				Three Months Ended March 31,							Six Months Ended March 31,
			2021				2022		2022					2023		2022		2023

Amortization of intangibles (intellectual property and customer relationships)	Amortization of intangibles (intellectual property and customer relationships)			$	57			118		Amortization of intangibles (intellectual property and customer relationships)	$	57			119		114		237
Restructuring costs	Restructuring costs			6				10		Restructuring costs	9				19		15		29
Acquisition/divestiture costs	Acquisition/divestiture costs			23				—		Acquisition/divestiture costs	7				10		30		10
Foreign currency transaction (gains) losses	Foreign currency transaction (gains) losses			(7)				(7)		Foreign currency transaction (gains) losses	(20)				26		(27)		19
Investment-related gains & gains from sales of capital assets	Investment-related gains & gains from sales of capital assets			(15)				(4)		Investment-related gains & gains from sales of capital assets	—				(35)		(15)		(39)
Russia business exit	Russia business exit			—				47		Russia business exit	—				—		—		47
Other	Other			(26)				(44)		Other	(25)				(30)		(51)		(74)
Total	Total			$	38			120		Total	$	28			109		66		229

~~In the first quarter of fiscal 2023, intangibles~~Intangibles amortization for the three and six months ended ~~December~~March 31, ~~2022~~2023 included $64 and $128, respectively, related to the Heritage AspenTech ~~acquisition and foreign~~acquisition. Foreign currency transaction ~~gains~~ gains/losses for the three and six months ended March 31, 2023 included a mark-to-market loss of $14 and a gain of ~~$35~~$21, 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. The Company recognized a mark-to-market gain of $35 for the three months ended March 31, 2023 related to its equity investment in National Instruments Corporation (see Note 11 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.

1112

(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. The Company expects fiscal 2023 restructuring expense and related costs to be approximately $90, including costs to complete actions initiated in the first ~~three~~six months of the year.

Restructuring expense by business segment follows:


		Three Months Ended December 31,				Three Months Ended March 31,						Six Months Ended March 31,
			2021	2022			2022			2023			2022	2023

Final Control	Final Control			$	—			(1)	Final Control	$	3		2	4	1
Measurement & Analytical	Measurement & Analytical			2				1	Measurement & Analytical	4			—	5	1
Discrete Automation	Discrete Automation			2				1	Discrete Automation	1			7	3	8
Safety & Productivity	Safety & Productivity			—				—	Safety & Productivity	1			2	1	2
Intelligent Devices	Intelligent Devices			4				1	Intelligent Devices	9			11	13	12

Control Systems & Software	Control Systems & Software			1				1	Control Systems & Software	—			5	1	6
AspenTech	AspenTech			—				—	AspenTech	—			—	—	—
Software and Control	Software and Control			1				1	Software and Control	—			5	1	6

Corporate	Corporate			1				8	Corporate	—			3	1	11

Total	Total			$	6			10	Total	$	9		19	15	29

Details of the change in the liability for restructuring costs during the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 follow:


		Sept 30, 2022			Expense		Utilized/Paid		Dec 31, 2022			Sept 30, 2022			Expense		Utilized/Paid		Mar 31, 2023

Severance and benefits	Severance and benefits		$	117		(2)		1		114	Severance and benefits		$	117		10		21		106

Other	Other		5			12		11		6	Other		5��			19		21		3
Total	Total		$	122		10		12		120	Total		$	122		29		42		109

The tables above do not include $8$5 and $5$7 of costs related to restructuring actions incurred for the three months ended ~~December~~March 31, ~~2021~~2022 and ~~2022,~~2023, respectively, that are required to be reported in cost of sales and selling, general and administrative ~~expenses.~~expenses; year-to-date amounts are $13 and $12, respectively.

(9) TAXES

Income taxes were ~~$98~~$134 in the ~~first~~second quarter of fiscal 2023 and ~~$196~~$80 in 2022, resulting in effective tax rates of 2321 percent and 2116 percent, respectively. The ~~current~~prior year rate included a 26 percentage point ~~unfavorable impact~~net benefit related to the ~~Russia charge, which had no~~completion of tax examinations partially offset by unfavorable discrete tax items.

Income taxes were $232 in the first six of months of fiscal 2023 and $276 in 2022, resulting in effective tax rates of 22 percent and 19 percent, respectively. The prior year rate included a 3 percentage point benefit related to the completion of tax ~~benefit.~~examinations.

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 and the remainder was paid in December 2022.

~~(10) OTHER FINANCIAL INFORMATION~~

Sept 30, 2022 Dec 31, 2022
Inventories
Finished products $ 417 456
Raw materials and work in process 1,325 1,543
Total $ 1,742 1,999

Property, plant and equipment, net
Property, plant and equipment, at cost $ 5,390 5,373
Less: Accumulated depreciation 3,151 3,110
Total $ 2,239 2,263

Goodwill by business segment
Final Control $ 2,605 2,659
Measurement & Analytical 1,112 1,131
Discrete Automation 807 839
Safety & Productivity 364 389
Intelligent Devices 4,888 5,018
Control Systems & Software 732 740
AspenTech 8,326 8,329
Software and Control 9,058 9,069
Total $ 13,946 14,087

Other intangible assets
Gross carrying amount $ 9,671 9,767
Less: Accumulated amortization 3,099 3,307
Net carrying amount $ 6,572 6,460

~~Other intangible assets include customer relationships, net, of $3,436 and $3,399 and intellectual property, net, of $2,934 and $2,860 as of September 30, 2022 and December 31, 2022, respectively.~~

Three Months Ended December 31,
2021 2022
Depreciation and amortization expense include the following:
Depreciation expense $ 84 74
Amortization of intangibles (includes $14 and $49 reported in Cost of Sales, respectively) 71 167
Amortization of capitalized software 23 19
Total $ 178 260

~~Amortization of intangibles included $99 related to the Heritage AspenTech acquisition for the three months ended December 31, 2022.~~

Sept 30, 2022 Dec 31, 2022
Other assets include the following:
Pension assets $ 865 912
Unbilled receivables (contract assets) 428 516
Operating lease right-of-use assets 439 434
Deferred income taxes 85 73
Asbestos-related insurance receivables 68 68
(10) OTHER FINANCIAL INFORMATION


	Sept 30, 2022			Mar 31, 2023
Inventories
Finished products		$	417		473
Raw materials and work in process		1,325			1,561
Total		$	1,742		2,034

Accrued expenses include the following:
Income taxes $ 125 1,080
Customer advances (contract liabilities) 751 901
Employee compensation 523 372
Operating lease liabilities (current) 128 131
Product warranty 84 89




Property, plant and equipment, net
Property, plant and equipment, at cost	$	5,390	5,445
Less: Accumulated depreciation	3,151		3,182
Total	$	2,239	2,263




Goodwill by business segment
Final Control	$	2,605	2,676
Measurement & Analytical	1,112		1,190
Discrete Automation	807		843
Safety & Productivity	364		391
Intelligent Devices	4,888		5,100


Control Systems & Software	732		670
AspenTech	8,326		8,327
Software and Control	9,058		8,997

Total	$	13,946	14,097



Other intangible assets
Gross carrying amount	$	9,671	9,800
Less: Accumulated amortization	3,099		3,501
Net carrying amount	$	6,572	6,299

Other intangible assets include customer relationships, net, of $3,436 and $3,329 and intellectual property, net, of $2,934 and $2,770 as of September 30, 2022 and March 31, 2023, respectively.


	Three Months Ended March 31,			Six Months Ended March 31,
	2022		2023	2022	2023
Depreciation and amortization expense include the following:
Depreciation expense	$	79	72	163	146
Amortization of intangibles (includes $14, $49, $28 and $98 reported in Cost of Sales, respectively)	71		168	142	335
Amortization of capitalized software	21		23	44	42
Total	$	171	263	349	523

Amortization of intangibles included $99 and $198, related to the Heritage AspenTech acquisition for the three and six months ended March 31, 2023, respectively.


	Sept 30, 2022			Mar 31, 2023
Other assets include the following:
Pension assets		$	865		933
Unbilled receivables (contract assets)		428			471
Operating lease right-of-use assets		439			436
Deferred income taxes		85			83
Asbestos-related insurance receivables		68			67



Accrued expenses include the following:
Customer advances (contract liabilities)	$	751	940
Employee compensation	523		445
Income taxes	125		390
Operating lease liabilities (current)	128		132
Product warranty	84		91

The increase in Income taxes was due to remaining income taxes payable of approximately ~~$660~~$330 related to the gain on the InSinkErator divestiture ~~of InSinkErator~~ and ~~approximately $275 related to~~ subsidiary restructurings at Climate ~~Technologies.~~Technologies, which are expected to be paid by the end of fiscal 2023. See Note 5.

Other liabilities include the following:
Deferred income taxes $ 1,714 1,694
Pension and postretirement liabilities 427 441
Operating lease liabilities (noncurrent) 312 306
Asbestos litigation 205 200

~~Debt:~~

On January 17, 2023, AspenTech paid off the outstanding balance of its existing term loan facility of $264, plus accrued interest, which resulted in the long-term portion being reclassified and reported as short-term borrowings as of December 31, 2022.



Other liabilities include the following:
Deferred income taxes	$	1,714	1,585
Pension and postretirement liabilities	427		440
Operating lease liabilities (noncurrent)	312		305
Asbestos litigation	205		194

(11) FINANCIAL INSTRUMENTS

Hedging Activities – As of ~~December~~March 31, ~~2022,~~2023, the notional amount of foreign currency hedge positions was approximately ~~$5.2~~$5.0 billion, and commodity hedge contracts totaled approximately ~~$115~~$136 (primarily 3340 million pounds of copper and aluminum). All derivatives receiving hedge accounting are cash flow hedges. The majority of hedging gains and losses deferred as of ~~December~~March 31, ~~2022~~2023 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.

1415

The following gains and losses are included in earnings and other comprehensive income (OCI) for the three and six months ended ~~December~~March 31, ~~2021~~2022 and ~~2022:~~2023:


			Into Earnings				Into OCI					Into Earnings					Into OCI
			1st Quarter			1st Quarter			2nd Quarter			Six Months			2nd Quarter		Six Months
Gains (Losses)	Gains (Losses)	Location	2021		2022		2021	2022		Gains (Losses)	Location	2022		2023	2022	2023	2022	2023	2022	2023
Commodity	Commodity	Cost of sales	$	7	(8)		13	11		Commodity	Cost of sales	$	6	(2)	13	(10)	10	8	23	19
Foreign currency	Foreign currency	Sales	1		(1)		—	4		Foreign currency	Sales	—		(1)	1	(2)	(2)	(1)	(2)	3
Foreign currency	Foreign currency	Cost of sales	2		8		3	(3)		Foreign currency	Cost of sales	9		10	11	18	14	17	17	14
Foreign currency	Foreign currency	Other deductions, net	44		5					Foreign currency	Other deductions, net	8		(22)	52	(17)

Net Investment Hedges	Net Investment Hedges									Net Investment Hedges
Euro denominated debt	Euro denominated debt						44	(123)		Euro denominated debt							35	(14)	79	(137)
Total	Total		$	54	4		60	(111)		Total		$	23	(15)	77	(11)	57	10	117	(101)

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 assessment of hedge effectiveness.

Equity Investment – The Company has an equity investment in National Instruments Corporation ("NI"), valued at ~~$82~~$117 as of ~~December~~March 31, ~~2022, and reported~~2023 (reported in Other current ~~assets.~~assets), and recognized a mark-to-market gain of $35 in the second quarter of fiscal 2023. On ~~January 17,~~April 12, 2023, ~~the Company~~Emerson announced ~~a proposal~~an agreement to acquire ~~National Instruments~~NI for ~~$53~~$60 per share in cash at an implied enterprise value of $7.6 billion. National Instruments, which had fiscal 2021 sales of approximately $1.5 billion, announced on January 13, 2023 it was undertaking a strategic review which could includefor the ~~solicitation of interest from other potential acquirors.~~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. As of ~~December~~March 31, ~~2022,~~2023, the fair value of long-term debt was ~~$7.7~~$7.2 billion, which was lower than the carrying value by ~~$1,169.~~$943. The fair values of commodity and foreign currency contracts did not materially change since September 30, 2022. Foreign currency contracts were reported in Other current assets and Accrued expenses, while commodity contracts, which primarily relate to discontinued operations, were reported in Current assets and liabilities held-for-sale. 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.~~exchange for the period ended March 31, 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 ~~December~~March 31, ~~2022.~~2023.

1516

(12) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)


Activity in Accumulated other comprehensive income (loss) for the three months ended December 31, 2021 and 2022 is shown below, net of income taxes:
Activity in Accumulated other comprehensive income (loss) for the three and six months ended March 31, 2022 and 2023 is shown below, net of income taxes:							Activity in Accumulated other comprehensive income (loss) for the three and six months ended March 31, 2022 and 2023 is shown below, net of income taxes:
		Three Months Ended December 31,			Three Months Ended March 31,					Six Months Ended March 31,
			2021			2022		2022			2023	2022	2023
Foreign currency translation	Foreign currency translation						Foreign currency translation
Beginning balance	Beginning balance		$	(629)		(1,265)	Beginning balance	$	(701)		(1,029)	(629)	(1,265)
Other comprehensive income (loss), net of tax of $(10) and $28, respectively			(72)			236
Other comprehensive income (loss), net of tax of $(8), $4, $(18) and $32, respectively							Other comprehensive income (loss), net of tax of $(8), $4, $(18) and $32, respectively	(59)			111	(131)	347

Ending balance	Ending balance		(701)			(1,029)	Ending balance	(760)			(918)	(760)	(918)

Pension and postretirement	Pension and postretirement						Pension and postretirement
Beginning balance	Beginning balance		(259)			(222)	Beginning balance	(241)			(238)	(259)	(222)
Amortization of deferred actuarial losses into earnings, net of tax of $(5) and $4, respectively			18			(16)
Amortization of deferred actuarial losses into earnings, net of tax of $(5), $3, $(10) and $7, respectively							Amortization of deferred actuarial losses into earnings, net of tax of $(5), $3, $(10) and $7, respectively	18			(17)	36	(33)

Ending balance	Ending balance		(241)			(238)	Ending balance	(223)			(255)	(223)	(255)

Cash flow hedges	Cash flow hedges						Cash flow hedges
Beginning balance	Beginning balance		16			2	Beginning balance	20			12	16	2
Gains deferred during the period, net of taxes of $(4) and $(3), respectively			12			9
Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $2 and $—, respectively			(8)			1
Gains deferred during the period, net of taxes of $(5), $(6), $(9) and $(9), respectively							Gains deferred during the period, net of taxes of $(5), $(6), $(9) and $(9), respectively	17			18	29	27
Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $4, $2, $6 and $2, respectively							Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $4, $2, $6 and $2, respectively	(11)			(5)	(19)	(4)
Ending balance	Ending balance		20			12	Ending balance	26			25	26	25

Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)		$	(922)		(1,255)	Accumulated other comprehensive income (loss)	$	(957)		(1,148)	(957)	(1,148)

(13) 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 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 in the third quarter of fiscal 2022 as 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 Control Systems & Software segment), while results related to the Heritage AspenTech business only include periods subsequent to the close of the transaction. Prior year amounts have been reclassified to conform to the current year presentation.

1617

Three Months Ended December 31,
Sales Earnings
2021 2022 2021 2022
Final Control $ 817 862 122 158
Measurement & Analytical 737 749 170 175
Discrete Automation 617 618 120 121
Safety & Productivity 351 310 65 63
Intelligent Devices 2,522 2,539 477 517
Control Systems & Software 570 606 116 107
AspenTech 82 243 (2) (33)
Software and Control 652 849 114 74
Stock compensation (34) (102)
Unallocated pension and postretirement costs 26 45
Corporate and other (55) (64)
Gain on subordinated interest 453 —
Eliminations/Interest (18) (15) (39) (48)
Total $ 3,156 3,373 942 422

~~Corporate and other for the three months ended December 31, 2022 included a~~ ~~loss of $47 related to the Company's exit of business operations in Russia and~~ ~~a mark-to-market~~ ~~gain of $35 related to foreign currency forward contracts entered into by AspenTech to mitigate the impact of foreign currency exchange associated with the Micromine purchase price, while the three months ended December 31, 2021 included acquisition/divestiture costs of $23.~~


	Three Months Ended March 31,					Six Months Ended March 31,
	Sales			Earnings		Sales		Earnings
	2022		2023	2022	2023	2022	2023	2022	2023

Final Control	$	884	992	152	215	1,701	1,854	274	373
Measurement & Analytical	769		888	176	229	1,506	1,637	346	404
Discrete Automation	644		683	130	133	1,261	1,301	250	254
Safety & Productivity	355		361	65	83	706	671	130	146
Intelligent Devices	2,652		2,924	523	660	5,174	5,463	1,000	1,177

Control Systems & Software	573		623	101	127	1,143	1,229	217	234
AspenTech	84		230	(4)	(54)	166	473	(6)	(87)
Software and Control	657		853	97	73	1,309	1,702	211	147

Stock compensation				(43)	(40)			(77)	(142)
Unallocated pension and postretirement costs				25	46			51	91
Corporate and other				(42)	(47)			(97)	(111)
Gain on subordinated interest				—	—			453	—

Eliminations/Interest	(18)		(21)	(51)	(53)	(36)	(36)	(90)	(101)
Total	$	3,291	3,756	509	639	6,447	7,129	1,451	1,061

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


		Three Months Ended December 31,			Three Months Ended March 31,					Six Months Ended March 31,
			2021			2022		2022			2023	2022	2023
Final Control	Final Control		$	53		45	Final Control	$	50		45	103	90
Measurement & Analytical	Measurement & Analytical		31			30	Measurement & Analytical	30			28	61	58
Discrete Automation	Discrete Automation		23			21	Discrete Automation	22			22	45	43
Safety & Productivity	Safety & Productivity		15			14	Safety & Productivity	14			15	29	29
Intelligent Devices	Intelligent Devices		122			110	Intelligent Devices	116			110	238	220

Control Systems & Software	Control Systems & Software		25			21	Control Systems & Software	22			24	47	45
AspenTech	AspenTech		23			123	AspenTech	24			123	47	246
Software and Control	Software and Control		48			144	Software and Control	46			147	94	291

Corporate and other	Corporate and other		8			6	Corporate and other	9			6	17	12
Total	Total		$	178		260	Total	$	171		263	349	523

1718

Sales by geographic destination, Americas, Asia, Middle East & Africa ("AMEA") and Europe, are summarized below:


		Three Months Ended December 31,						Three Months Ended December 31,					Three Months Ended March 31,						Three Months Ended March 31,
			2021					2022					2022						2023
			Americas		AMEA	Europe	Total	Americas	AMEA	Europe	Total			Americas		AMEA	Europe	Total	Americas	AMEA	Europe	Total
Final Control	Final Control		$	352	336	129	817	446	308	108	862	Final Control		$	412	337	135	884	494	362	136	992
Measurement & Analytical	Measurement & Analytical		311		296	130	737	396	246	107	749	Measurement & Analytical		361		295	113	769	455	304	129	888
Discrete Automation	Discrete Automation		274		183	160	617	291	175	152	618	Discrete Automation		296		171	177	644	311	184	188	683
Safety & Productivity	Safety & Productivity		270		16	65	351	236	17	57	310	Safety & Productivity		260		17	78	355	272	16	73	361
Intelligent Devices	Intelligent Devices		1,207		831	484	2,522	1,369	746	424	2,539	Intelligent Devices		1,329		820	503	2,652	1,532	866	526	2,924

Control Systems & Software	Control Systems & Software		268		173	129	570	294	185	127	606	Control Systems & Software		282		175	116	573	314	186	123	623
AspenTech	AspenTech		54		16	12	82	112	63	68	243	AspenTech		48		19	17	84	114	61	55	230
Software and Control	Software and Control		322		189	141	652	406	248	195	849	Software and Control		330		194	133	657	428	247	178	853

Total	Total		$	1,529	1,020	625	3,174	1,775	994	619	3,388	Total		$	1,659	1,014	636	3,309	1,960	1,113	704	3,777

													Six Months Ended March 31,						Six Months Ended March 31,
													2022						2023
														Americas		AMEA	Europe	Total	Americas	AMEA	Europe	Total
Final Control												Final Control		$	764	673	264	1,701	940	670	244	1,854
Measurement & Analytical												Measurement & Analytical		672		591	243	1,506	851	550	236	1,637
Discrete Automation												Discrete Automation		570		354	337	1,261	602	359	340	1,301
Safety & Productivity												Safety & Productivity		530		33	143	706	508	33	130	671
Intelligent Devices												Intelligent Devices		2,536		1,651	987	5,174	2,901	1,612	950	5,463

Control Systems & Software												Control Systems & Software		550		348	245	1,143	608	371	250	1,229
AspenTech												AspenTech		102		35	29	166	226	124	123	473
Software and Control												Software and Control		652		383	274	1,309	834	495	373	1,702

Total												Total		$	3,188	2,034	1,261	6,483	3,735	2,107	1,323	7,165

1819

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

AsOn 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 ~~disclosed,~~acquired by Emerson, see Note 11. 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. The transaction is expected to close in the first half of Emerson’s fiscal 2024, subject to the completion of customary closing conditions, including regulatory approvals and approval by NI shareholders.

In October 2022, the Board of Directors approved the Company's ~~announced~~ agreement to sell a majority stake in its Climate Technologies business (which constitutes the historical Climate Technologies segment, excluding Therm-O-Disc which was divested in fiscal 2022) to private equity funds managed by Blackstone in a $14.0 billion transaction. The transaction is expected to close in the ~~first half~~Company's third quarter of ~~calendar year~~fiscal 2023, subject to regulatory approvals and customary closing conditions.

~~Additionally, on~~On October 31, 2022, the Company completed the divestiture of its InSinkErator business, which manufactures food waste disposers, to Whirlpool Corporation for ~~$3.0~~$3.0 billion, and the Company recognized a pretax gain of $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" (hereinafter referred to as "AspenTech"). Upon closing of the transaction, Emerson owned 55 percent of the outstanding shares of ~~New~~ 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 quarter of fiscal~~three and six months ended March 31, 2022 do not include the results of Heritage AspenTech.

For the ~~first~~second quarter of fiscal 2023, net sales from continuing operations were ~~$3.4~~$3.8 billion, up 714 percent compared with the prior year. Underlying sales, which exclude foreign currency translation, acquisitions and divestitures, were up ~~6 percent. The AspenTech acquisition added 5~~14 percent, while foreign currency translation had a 43 percent unfavorable impact. The AspenTech acquisition added 4 percent and the divestiture of Metran, Emerson's Russia-based manufacturing subsidiary, deducted 1 percent. Sales growth ~~continued to be~~was strong ~~in North America, while Asia, Middle East & Africa was essentially flat and Europe was down modestly due to~~across the ~~negative impact~~majority of the Company's business ~~exit from Russia.~~segments and all geographies were up double digits.

Earnings from continuing operations attributable to common stockholders were ~~$329, down 56~~$530, up 24 percent, and diluted earnings per share from continuing operations were ~~$0.56, down 55~~$0.92, up 28 percent compared with ~~$1.25~~$0.72 in the prior year. ~~The prior year included a $0.60 gain related to the Company's subordinated interest in Vertiv.~~ Adjusted diluted earnings per share from continuing operations were ~~$0.78~~$1.09 compared with ~~$0.79~~$0.87 in the prior year, reflecting the strong sales growth and operating ~~results offset by higher stock compensation expense due to an increasing stock price in the current year.~~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, and certain gains, losses or impairments.

Three Months Ended Dec 31 2021 2022
Diluted earnings from continuing operations per share $ 1.25 0.56
Amortization of intangibles 0.09 0.15
Restructuring and related costs 0.02 0.02
Gain on subordinated interest (0.60) —
Acquisition/divestiture costs 0.03 —
Russia business exit — 0.08
AspenTech Micromine purchase price hedge — (0.03)
Adjusted diluted earnings from continuing operations per share $ 0.79 0.78

1920


Three Months Ended Mar 31	2022		2023

Diluted earnings from continuing operations per share	$	0.72	0.92

Amortization of intangibles	0.09		0.16
Restructuring and related costs	0.02		0.04


National Instruments investment gain	—		(0.05)
Acquisition/divestiture costs	0.04		0.01

AspenTech Micromine purchase price hedge loss	—		0.01


Adjusted diluted earnings from continuing operations per share	$	0.87	1.09

The table below summarizes the changes in adjusted diluted earnings per 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 - ~~Dec~~Mar 31, ~~2021~~2022	$	~~0.79~~0.87

Operations ~~excluding impact of acquisitions~~	~~0.10~~0.26
~~Heritage AspenTech acquisition~~	~~0.05~~
Stock compensation	~~(0.09)~~0.01
Foreign currency	~~(0.09)~~(0.03)
~~Pensions~~	~~0.02~~




~~Interest expense, net~~Effective tax rate	~~(0.01)~~(0.06)


Share ~~repurchases~~count	~~0.01~~0.04

Adjusted diluted earnings from continuing operations per share - ~~Dec~~Mar 31, ~~2022~~2023	$	~~0.78~~1.09

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED ~~DECEMBER~~MARCH 31

Following is an analysis of the Company’s operating results for the ~~first~~second quarter ended ~~December~~March 31, ~~2021,~~2022, compared with the ~~first~~second quarter ended ~~December~~March 31, ~~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	$	3,156		3,373		7	%	Net sales	$	3,291		3,756		14	%
Gross profit	Gross profit	$	1,415		1,620		14	%	Gross profit	$	1,476		1,801		22	%
Percent of sales	Percent of sales	44.9		%	48.0	%	3.1 pts		Percent of sales	44.8		%	47.9	%	3.1 pts

SG&A	SG&A	$	849		1,030		21	%	SG&A	$	888		1,000		13	%
Percent of sales	Percent of sales	27.0		%	30.5	%	3.5 pts		Percent of sales	26.9		%	26.7	%	(0.2) pts

Gain on subordinated interest		$	(453)		—

Other deductions, net	Other deductions, net	$	38		120				Other deductions, net	$	28		109
Amortization of intangibles	Amortization of intangibles	$	57		118				Amortization of intangibles	$	57		119
Restructuring costs	Restructuring costs	$	6		10				Restructuring costs	$	9		19

Interest expense, net	Interest expense, net	$	39		48				Interest expense, net	$	51		53

Earnings from continuing operations before income taxes	Earnings from continuing operations before income taxes	$	942		422		(55)	%	Earnings from continuing operations before income taxes	$	509		639		25	%
Percent of sales	Percent of sales	29.8		%	12.5	%	(17.3) pts		Percent of sales	15.5		%	17.0	%	1.5 pts
Earnings from continuing operations common stockholders	Earnings from continuing operations common stockholders	$	746		329		(56)	%	Earnings from continuing operations common stockholders	$	428		530		24	%
Percent of sales	Percent of sales	23.6		%	9.8	%	(13.8) pts		Percent of sales	13.0		%	14.2	%	1.2 pts
Net earnings common stockholders	Net earnings common stockholders	$	896		2,331		160	%	Net earnings common stockholders	$	674		792		18	%

Diluted EPS - Earnings from continuing operations	Diluted EPS - Earnings from continuing operations	$	1.25		0.56		(55)	%	Diluted EPS - Earnings from continuing operations	$	0.72		0.92		28	%
Diluted EPS - Net Earnings	Diluted EPS - Net Earnings	$	1.50		3.97		165	%	Diluted EPS - Net Earnings	$	1.13		1.38		22	%

Net sales for the ~~first~~second quarter of fiscal 2023 were ~~$3.4~~$3.8 billion, up 714 percent compared with 2022. Intelligent Devices sales were up 110 percent, while Software and Control sales were up 30 percent, which included the impact of the Heritage AspenTech acquisition. Underlying sales were up 614 percent on 29 percent higher volume and 45 percent higher price, while foreign currency translation had a 43 percent negative impact. The Heritage AspenTech acquisition added 54 percent and the divestiture of Metran, Emerson's Russia-based manufacturing subsidiary, deducted 1 percent. Underlying sales were up 1216 percent in the U.S. and up 212 percent internationally. The Americas was up 1315 percent, ~~while~~Europe was up 14 percent, and Asia, Middle East & Africa was ~~flat~~up 11 percent (China ~~down~~up 7 percent). ~~Europe decreased 2 percent, but was up 7 percent excluding the negative impact of the business exit from Russia.~~

Cost of sales for the ~~first~~second quarter of fiscal 2023 were ~~$1,753,~~$1,955, an increase of ~~$12~~$140 compared with 2022. Gross margin of ~~48.0~~47.9 percent increased 3.1 percentage points due to favorable price less net material inflation, the impact of the Heritage AspenTech acquisition which benefited margins by 0.8 ~~1.3~~ percentage points, and favorable mix.

Selling, general and administrative (SG&A) expenses of ~~$1,030~~$1,000 increased ~~$181~~$112 and SG&A as a percent of sales ~~increased 3.5~~decreased 0.2 percentage points to ~~30.5~~26.7 percent compared with the prior year, reflecting strong operating leverage on higher sales, partially offset by the Heritage AspenTech acquisition and higher stock compensation expense of $68, of which $45 related to Emerson stock plans due to an increasing stock price in the current year and $23 was attributable to AspenTech stock plans.

In the first quarter of fiscal 2022, the Company received a distribution of $438 related to its subordinated interest in Vertiv (in total, a gain of $453 was recognized in the first quarter, $358 after-tax, $0.60 per share). Based on the terms of the agreement and the current calculation, the Company could receive additional distributions of approximately $75 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.acquisition.

Other deductions, net were ~~$120~~$109 in 2023, an increase of ~~$82~~$81 compared with the prior year, reflecting higher intangibles amortization of $6162 primarily related to the Heritage AspenTech acquisition, ~~and~~ ~~a charge of $47 related to the Company exiting its business in Russia, partially offset by lower acquisition/divestiture costs of $23. The current year also included~~ a mark-to-market ~~gain~~loss of ~~$35~~$14 related to foreign currency forward contracts entered into by AspenTech to mitigate the impact of foreign currency exchange associated with the Micromine purchase price, ~~which was largely offset by~~and an unfavorable impact from foreign currency ~~transaction~~transactions of $32, reflecting losses in the current year compared to gains in the prior year. These items were partially offset by a mark-to-market gain of $35 on the Company's equity investment in NI. See Note 7.

Pretax earnings from continuing operations of ~~$422 decreased $520, down 55~~$639 increased $130, up 25 percent compared with the prior year, ~~largely due to the Vertiv gain discussed above.~~reflecting strong operating leverage on higher sales. Earnings increased ~~$40~~$137 in Intelligent Devices and decreased ~~$40~~$24 in Software and Control (reflecting the impact of higher intangibles amortization due to the Heritage AspenTech acquisition), while costs reported at Corporate ~~increased $58 largely due to higher stock compensation expense of $68 and the $47 Russia business exit loss, partially offset by the $~~decreased $1935 ~~gain on the Micromine~~ ~~foreign currency forward contracts.~~. See the Business Segments discussion that follows and Note 13.

Income taxes were ~~$98~~$134 in the ~~first~~second quarter of fiscal 2023 and ~~$196~~$80 in 2022, resulting in effective tax rates of 2321 percent and 2116 percent, respectively. The ~~current~~prior year rate included a 26 percentage point ~~unfavorable impact~~net benefit related to the ~~Russia charge, which had no related~~completion of tax ~~benefit.~~examinations partially offset by unfavorable discrete tax items.

Earnings from continuing operations attributable to common stockholders were ~~$329, down 56~~$530, up 24 percent, and diluted earnings per share from continuing operations were ~~$0.56, down 55~~$0.92, up 28 percent compared with ~~$1.25~~$0.72 in the prior year. ~~The prior year included a $0.60 gain related to the Company's subordinated interest in Vertiv.~~ Adjusted diluted earnings per share from continuing operations were ~~$0.78~~$1.09 compared with ~~$0.79~~$0.87 in the prior year, reflecting strong operating ~~results offset by higher stock compensation expense due to an increasing stock price in the current year.~~results. See the analysis above of adjusted earnings per share for further details.

Earnings from discontinued operations were ~~$2,002~~$262 ($~~3.41~~0.46 per share) ~~which included the $2.1 billion after-tax gain on the divestiture of InSinkErator,~~ compared to ~~$149~~$246 ($~~0.25~~0.41 per share) in the prior year. Earnings from discontinued operations were negatively impacted in the current year by approximately $275 of income taxes within Climate Technologies related to subsidiary restructurings and $27 of transaction-related costs. See Note 5.

Net earnings common stockholders in the ~~first~~second quarter of fiscal 2023 were ~~$2,331,~~$792, up ~~160~~18 percent, compared with ~~$896~~$674 in the prior year, and earnings per share were ~~$3.97,~~$1.38, up ~~165~~22 percent, compared with ~~$1.50~~$1.13 in the prior year.

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-related costs, 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.

2122

Three Months Ended Dec 31 2021 2022 Change
Earnings from continuing operations before income taxes $ 942 422 (55) %
      Percent of sales 29.8 % 12.5 % (17.3) pts
    Interest expense, net 39 48
    Amortization of intangibles 71 167
    Restructuring and related costs 14 15
    Gain on subordinated interest (453) —
    Acquisition/divestiture costs 23 —
    Russia business exit — 47
    AspenTech Micromine purchase price hedge — (35)
Adjusted EBITA from continuing operations $ 636 664 5 %
      Percent of sales 20.1 % 19.7 % (0.4) pts

~~Other Items~~

The Company has an equity investment in National Instruments, valued at $82 as of December 31, 2022. On January 17, 2023, the Company announced a proposal to acquire National Instruments for $53 per share in cash at an implied enterprise value of $7.6 billion. National Instruments, which had fiscal 2021 sales of approximately $1.5 billion, announced on January 13, 2023 it was undertaking a strategic review which could include the solicitation of interest from other potential acquirors.


Three Months Ended Mar 31	2022			2023		Change

Earnings from continuing operations before income taxes	$	509		639		25	%
Percent of sales	15.5		%	17.0	%	1.5 pts
Interest expense, net	51			53
Amortization of intangibles	71			168
Restructuring and related costs	14			26


National Instruments investment gain	—			(35)
Acquisition/divestiture costs	7			10


AspenTech Micromine purchase price hedge loss	—			14
Adjusted EBITA from continuing operations	$	652		875		34	%
Percent of sales	19.8		%	23.3	%	3.5 pts

Business Segments

Following is an analysis of operating results for the Company’s business segments for the ~~three months~~second quarter ended ~~December~~March 31, ~~2021,~~2022, compared with the ~~three months~~second quarter ended ~~December~~March 31, ~~2022.~~2023. The Company defines segment earnings as earnings before interest and taxes. AsSee Note 13 for a ~~result~~discussion of the Company's ~~portfolio transformation, the Company has realigned its~~ business ~~segments and now reports six segments and two business groups. See Note 13.~~segments.

INTELLIGENT DEVICES


	2022			2023		Change		FX		Acq/Div		U/L


Sales:
Final Control	$	884		992		12	%	3	%	1	%	16	%
Measurement & Analytical	769			888		15	%	3	%	2	%	20	%
Discrete Automation	644			683		6	%	3	%	—	%	9	%
Safety & Productivity	355			361		2	%	1	%	—	%	3	%
Total	$	2,652		2,924		10	%	3	%	1	%	14	%

Earnings:
Final Control	$	152		215		41	%
Measurement & Analytical	176			229		30	%
Discrete Automation	130			133		2	%
Safety & Productivity	65			83		29	%
Total	$	523		660		26	%
Margin	19.7		%	22.6	%	2.9 pts

Amortization of intangibles:
Final Control	$	24		22
Measurement & Analytical	5			5
Discrete Automation	7			7
Safety & Productivity	7			7
Total	$	43		41

Restructuring and related costs:
Final Control	$	8		9
Measurement & Analytical	3			—
Discrete Automation	1			7
Safety & Productivity	—			2
Total	$	12		18

Adjusted EBITA	$	578		719		24	%
Adjusted EBITA Margin	21.8		%	24.6	%	2.8 pts

Intelligent Devices sales were $2.9 billion in

the second quarter

of 2023, an increase of $272, or 10 percent. Underlying sales increased 14 percent

on 9 percent higher volume and 5 percent higher price. Unde

rlying sales increased 16 percent in the Americas, Europe increased 14 percent and Asia, Middle East & Africa was up 11 percent (China up 8 percent

inal Control sales increased

$108

, or

12 percent, while u

nderlying sales were up 16 percent, reflecting strength in energy and chemical end markets, with broad-based strength across all geographies. Sales for Measurement & Analytical increased

$119

, or

15 percent, and u

nderlying sales were up

20 percent

, reflecting robust growth in the Americas and Europe and strong growth in Asia, Middle East & Africa, due to strong demand and backlog conversion. Discrete Automation sales increased $39, or 6 percent, while underlying sales increased 9 percent, reflecting broad-based demand across end markets and all geographies, with particular strength in Asia, Middle East & Africa and Europe. Safety & Productivity sales increased

, or

2 percent

, and underlying sales were up 3 percent, reflecting modest improvement compared to the prior year and strong growth sequentially, particularly in the Americas. Earnings for Intelligent Devices were

$660

, an increase of

$137

, or

26 percent, and margin increased 2.9 percentage points to 22.6 percent, reflecting favorable price less net material inflation, leverage on higher sales

2224

~~INTELLIGENT DEVICES~~

2021 2022 Change FX Acq/Div U/L
Sales:
Final Control $ 817 862 6 % 4 % — % 10 %
Measurement & Analytical 737 749 2 % 4 % — % 6 %
Discrete Automation 617 618 — % 6 % — % 6 %
Safety & Productivity 351 310 (12) % 2 % — % (10) %
     Total $ 2,522 2,539 1 % 4 % — % 5 %
Earnings:
Final Control $ 122 158 30 %
Measurement & Analytical 170 175 3 %
Discrete Automation 120 121 1 %
Safety & Productivity 65 63 (3) %
     Total $ 477 517 9 %
     Margin 18.9 % 20.4 % 1.5 pts
Amortization of intangibles:
Final Control $ 24 22
Measurement & Analytical 6 5
Discrete Automation 8 7
Safety & Productivity 6 6
     Total $ 44 40
Restructuring and related costs:
Final Control $ 7 4
Measurement & Analytical 2 1
Discrete Automation 2 1
Safety & Productivity 1 —
     Total $ 12 6
Adjusted EBITA $ 533 563 6 %
Adjusted EBITA Margin 21.1 % 22.2 % 1.1 pts

~~Intelligent Devices sales were $2.5 billion in the first three months of 2023, an increase of $17, or 1 percent. Underlying sales increased 5 percent~~ ~~on higher price, while volume was flat overall reflecting lagging performance in Safety & Productivity. Underlying sales increased 14 percent in the Americas, while Asia, Middle East & Africa was down 3 percent (China down 12 percent~~). ~~Europe decreased 5 percent, but was up moderately excluding the negative impact of the business exit from Russia. F~~inal Control sales increased $45, or 6 percent. Underlying sales were up 10 percent, reflecting strength in chemical, energy and power end markets, particularly in the Americas. Europe was up slightly excluding the impact from Russia and Asia was down slightly. Sales for Measurement & Analytical increased $12, or 2 percent. Underlying sales were up 6 percent, reflecting strength in North America and solid growth in Europe excluding the impact from Russia. Sales were down 16 percent in Asia reflecting the negative impact from continued supply chain constraints. Discrete Automation sales were flat while underlying sales increased 6 percent, reflecting broad-based demand across most end markets and all geographies despite continued supply chain constraints. Safety & Productivity sales decreased $41, or 12 percent, reflecting weakness across all end markets, particularly in the Americas. Earnings were $517, an increase of $40, or 9 percent, and margin increased 1.5 percentage points to 20.4 percent, reflecting favorable price less net material inflation and favorable mix, partially offset by ~~higher~~ wage and other ~~inflation and unfavorable foreign currency transactions which negatively impacted margins 0.6 percentage points.~~inflation. Adjusted EBITA margin was ~~22.2~~24.6 percent, an increase of ~~1.1~~2.8 percentage points.

SOFTWARE AND CONTROL


		2021			2022		Change		FX		Acq/Div		U/L			2022			2023		Change		FX		Acq/Div		U/L

Sales:	Sales:														Sales:
Control Systems & Software	Control Systems & Software	$	570		606		6	%	4	%	—	%	10	%	Control Systems & Software	$	573		623		9	%	3	%	1	%	13	%
AspenTech	AspenTech	82			243		197	%	—	%	(197)	%	—	%	AspenTech	84			230		172	%	—	%	172	%	—	%
Total	Total	$	652		849		30	%	4	%	(24)	%	10	%	Total	$	657		853		30	%	3	%	(20)	%	13	%

Earnings:	Earnings:														Earnings:
Control Systems & Software	Control Systems & Software	$	116		107		(8)	%							Control Systems & Software	$	101		127		25	%
AspenTech	AspenTech	(2)			(33)		(1668)	%							AspenTech	(4)			(54)		(1162)	%
Total	Total	$	114		74		(36)	%							Total	$	97		73		(25)	%
Margin	Margin	17.6		%	8.7	%	(8.9) pts								Margin	14.7		%	8.6	%	(6.1) pts

Amortization of intangibles:	Amortization of intangibles:														Amortization of intangibles:
Control Systems & Software	Control Systems & Software	$	5		6										Control Systems & Software	$	5		5
AspenTech	AspenTech	22			121										AspenTech	23			122
Total	Total	$	27		127										Total	$	28		127

Restructuring and related costs:	Restructuring and related costs:														Restructuring and related costs:
Control Systems & Software	Control Systems & Software	$	1		1										Control Systems & Software	$	—		5
AspenTech	AspenTech	—			—										AspenTech	—			—
Total	Total	$	1		1										Total	$	—		5

Adjusted EBITA	Adjusted EBITA	$	142		202		42	%							Adjusted EBITA	$	125		205		64	%
Adjusted EBITA Margin	Adjusted EBITA Margin	21.8		%	23.8	%	2.0 pts								Adjusted EBITA Margin	19.1		%	24.1	%	5.0 pts

Software and Control sales were ~~$849~~$853 in tht~~e first three months~~he second quarter of 2023, an increase of ~~$197,~~$196, or 30 percent compared to the prior year, reflecting the impact of the Heritage AspenTech ~~acquisition.~~acquisition and strong growth in Control Systems & Software. Underlying sales were up 1013 percent on 811 percent higher volume and 2 percent higher price. U~~Overall, underlying~~nderlying sales increased 1112 percent in the Americas, 615 percent in Europe and 1511 percent in Asia, Middle East & Africa (China ~~up 26~~down 2 percent). Control Systems & Software sales increased ~~$36,~~$50, or ~~6 percent. Underlying~~9 percent, while underlying sales increased 1013 percent, reflecting global strength in process end markets ~~in North America, Europe (excluding the impact of the business exit from Russia) and Asia, which benefited from improved electronic component availability,~~ while power end markets were ~~up modestly.~~strong in Asia, Middle East & Africa and the Americas. AspenTech sales increased ~~$161,~~$146, or ~~197~~172 percent, due to the acquisition of Heritage AspenTech. Earnings for Software and Control decreased ~~$40,~~$24, down 3625 percent, and margin decreased ~~8.9~~6.1 percentage points, reflecting the impact from $99 of incremental intangibles amortization ($35 of which was reported in Cost of Sales) related to the Heritage AspenTech acquisition. Adjusted EBITA margin increased ~~2.0~~5.0 percentage points, reflecting the impact of the Heritage AspenTech acquisition, favorable mix and leverage on higher sales, partially offset by ~~lower margins within Control Systems & Software due to higher~~ inflation and unfavorable foreign currency transactions.

2425

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31

Following is an analysis of the Company’s operating results for the six months ended March 31, 2022, compared with the six months ended March 31, 2023.


	2022			2023		Change


Net sales	$	6,447		7,129		11	%
Gross profit	$	2,891		3,421		18	%
Percent of sales	44.8		%	48.0	%	3.2 pts

SG&A	$	1,737		2,030		17	%
Percent of sales	26.9		%	28.5	%	1.6 pts


Gain on subordinated interest	$	(453)		—

Other deductions, net	$	66		229
Amortization of intangibles	$	114		237
Restructuring costs	$	15		29

Interest expense, net	$	90		101

Earnings from continuing operations before income taxes	$	1,451		1,061		(27)	%
Percent of sales	22.5		%	14.9	%	(7.6) pts
Earnings from continuing operations common stockholders	$	1,174		859		(27)	%
Percent of sales	18.2		%	12.0	%	(6.2) pts
Net earnings common stockholders	$	1,570		3,123		99	%

Diluted EPS - Earnings from continuing operations	$	1.96		1.48		(24)	%
Diluted earnings per share	$	2.63		5.38		105	%

Net sales for the first six months of 2023 were $7.1 billion, up 11 percent compared with 2022. Intelligent Devices sales were up 6 percent, while Software and Control sales were up 30 percent, which included the impact of the Heritage AspenTech acquisition. Underlying sales were up 11 percent on 6 percent higher volume and 5 percent higher price, and foreign currency translation subtracted 4 percent. The Heritage AspenTech acquisition added 5 percent and the divestiture of Metran deducted 1 percent. Underlying sales increased 14 percent in the U.S. and increased 8 percent internationally. The Americas was up 14 percent, Europe was up 9 percent and Asia, Middle East & Africa was up 6 percent (China was flat).

Cost of sales for 2023 were $3,708, an increase of $152 versus $3,556 in 2022. Gross margin of 48.0 percent increased 3.2 percentage points due to favorable price less net material inflation, the impact of the Heritage AspenTech acquisition which benefited margins by 1.1 percentage points, and favorable mix.

SG&A expenses of $2,030 increased $293 and SG&A as a percent of sales increased 1.6 percentage points to 28.5 percent, reflecting the Heritage AspenTech acquisition and higher stock compensation expense of $65, of which $20 related to Emerson stock plans due to an increasing stock price in the current year and $45 was attributable to AspenTech stock plans. These items were partially offset by strong operating leverage on higher sales.

Other deductions, net were $229 in 2023, an increase of $163 compared with the prior year, reflecting higher intangibles amortization of $123 primarily related to the Heritage AspenTech acquisition, a charge of $47 related to the Company exiting its business in Russia and an unfavorable impact from foreign currency transactions of $67 reflecting losses in the current year compared to gains in the prior year. These items were partially offset by a mark-to-market gain of $35 on the Company's equity investment in NI and a mark-to-market gain of $21 related to foreign currency forward contracts entered into by AspenTech to mitigate the impact of foreign currency exchange associated with the Micromine purchase price. See Note 7.

Pretax earnings from continuing operations of $1,061 decreased $390, or 27 percent, largely due to the Vertiv gain discussed above. Earnings increased $177 in Intelligent Devices and decreased $64 in Software and Control (reflecting the impact of higher intangibles amortization due to the Heritage AspenTech acquisition), while costs reported at Corporate increased $39 largely due to higher stock compensation expense of $65 and the $47 Russia business exit loss, partially offset by the $35 gain on the Company's equity investment in NI and the $21 gain on the Micromine foreign currency forward contracts. See the Business Segments discussion that follows and Note 13.

Income taxes were $232 for the first six months of 2023 and $276 for 2022, resulting in effective tax rates of 22 percent and 19 percent, respectively. The prior year rate included a 3 percentage point benefit related to the completion of tax examinations.

Earnings from continuing operations attributable to common stockholders were $859, down 27 percent compared with the prior year, and diluted earnings per share from continuing operations were $1.48, down 24 percent compared with $1.96 in 2022. The prior year included a $0.60 gain related to the Company's subordinated interest in Vertiv. Adjusted diluted earnings per share from continuing operations were $1.86 compared with $1.65 in the prior year, reflecting strong operating results. See the analysis below of adjusted earnings per share for further details.

Earnings from discontinued operations were $2,264 ($3.90 per share) which included the $2.1 billion after-tax gain on the divestiture of InSinkErator, compared to $396 ($0.67 per share) in the prior year. Earnings from discontinued operations were negatively impacted by approximately $245 of income taxes within Climate Technologies related to subsidiary restructurings and $55 of transaction-related costs. See Note 5.

Net earnings common stockholders were $3,123 ($5.38 per share) compared with $1,570 ($2.63 per share) in the prior year.

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.


Six Months Ended Mar 31	2022		2023

Diluted earnings from continuing operations per share	$	1.96	1.48

Amortization of intangibles	0.18		0.30
Restructuring and related costs	0.04		0.06
Gain on subordinated interest	(0.60)		—

National Instruments investment gain	—		(0.05)
Acquisition/divestiture costs and pre-acquisition interest on AspenTech debt	0.07		0.01
Russia business exit charge	—		0.08
AspenTech Micromine purchase price hedge gain	—		(0.02)

Adjusted diluted earnings from continuing operations per share	$	1.65	1.86

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.


	Six Months Ended
Adjusted diluted earnings from continuing operations per share - Mar 31, 2022	$	1.65

Operations	0.40


Stock compensation	(0.08)


Foreign currency	(0.11)
Pensions	0.05
Effective tax rate	(0.06)

Interest expense, net	(0.04)
Share count/other	0.05

Adjusted diluted earnings from continuing operations per share - Mar 31, 2023	$	1.86

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.


Six Months Ended Mar 31	2022			2023		Change

Earnings from continuing operations before income taxes	$	1,451		1,061		(27)	%
Percent of sales	22.5		%	14.9	%	(7.6) pts
Interest expense, net	90			101
Amortization of intangibles	142			335
Restructuring and related costs	28			41
Gain on subordinated interest	(453)			—

National Instruments investment gain	—			(35)
Acquisition/divestiture costs	30			10
Russia business exit charge	—			47
AspenTech Micromine purchase price hedge gain	—			(21)
Adjusted EBITA from continuing operations	$	1,288		1,539		20	%
Percent of sales	20.0		%	21.6	%	1.6 pts

Business Segments

Following is an analysis of operating results for the Company’s business segments for the six months ended March 31, 2022, compared with the six months ended March 31, 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 13.

INTELLIGENT DEVICES


	2022			2023		Change		FX		Acq/Div		U/L


Sales:
Final Control	$	1,701		1,854		9	%	4	%	1	%	14	%
Measurement & Analytical	1,506			1,637		9	%	4	%	2	%	15	%
Discrete Automation	1,261			1,301		3	%	5	%	—	%	8	%
Safety & Productivity	706			671		(5)	%	2	%	—	%	(3)	%
Total	$	5,174		5,463		6	%	4	%	—	%	10	%

Earnings:
Final Control	$	274		373		36	%
Measurement & Analytical	346			404		17	%
Discrete Automation	250			254		2	%
Safety & Productivity	130			146		13	%
Total	$	1,000		1,177		18	%
Margin	19.3		%	21.5	%	2.2 pts

Amortization of intangibles:
Final Control	$	48		44
Measurement & Analytical	11			10
Discrete Automation	15			14
Safety & Productivity	13			13
Total	$	87		81

Restructuring and related costs:
Final Control	$	15		13
Measurement & Analytical	5			1
Discrete Automation	3			8
Safety & Productivity	1			2
Total	$	24		24


Adjusted EBITA	$	1,111		1,282		15	%
Adjusted EBITA Margin	21.5		%	23.5	%	2.0 pts

Intelligent Devices sales were $5.5 billion in the first six months of 2023, an increase of $289, or 6 percent. Underlying sales increased 10 percent on 5 percent higher volume and 5 percent higher price. Underlying sales increased 15 percent in the Americas, Europe increased 8 percent, and Asia, Middle East & Africa was up 4 percent (China down 2 percent). Final Control sales increased $153, or 9 percent. Underlying sales were up 14 percent, reflecting strength in energy and chemical end markets, particularly in the Americas, while Europe and Asia, Middle East & Africa were up moderately. Sales for Measurement & Analytical increased $131, or 9 percent. Underlying sales were up 15 percent, reflecting robust growth in the Americas and Europe due to strong demand and backlog conversion, while Asia, Middle East & Africa was down slightly due to weakness in China. Discrete Automation sales increased $40, or 3 percent, while underlying sales increased 8 percent, reflecting broad-based demand across most end markets and all geographies despite continued supply chain constraints. Safety & Productivity sales decreased $35, or 5 percent, and underlying sales decreased 3 percent, reflecting weakness in the Americas and Europe. Earnings for Intelligent Devices were $1,177, an increase of $177, or 18 percent, and margin increased 2.2 percentage points to 21.5 percent, reflecting favorable price less net material inflation, leverage on higher sales and favorable mix, partially offset by wage and other inflation. Adjusted EBITA margin was 23.5 percent, an increase of 2.0 percentage points.

SOFTWARE AND CONTROL


	2022			2023		Change		FX		Acq/Div		U/L


Sales:
Control Systems & Software	$	1,143		1,229		8	%	4	%	1	%	13	%
AspenTech	166			473		184	%	—	%	(184)	%	—	%
Total	$	1,309		1,702		30	%	4	%	(21)	%	13	%

Earnings:
Control Systems & Software	$	217		234		7	%
AspenTech	(6)			(87)		(1316)	%
Total	$	211		147		(31)	%
Margin	16.1		%	8.6	%	(7.5) pts

Amortization of intangibles:
Control Systems & Software	$	10		11
AspenTech	45			243
Total	$	55		254

Restructuring and related costs:
Control Systems & Software	$	1		6
AspenTech	—			—
Total	$	1		6

Adjusted EBITA	$	267		407		52	%
Adjusted EBITA Margin	20.4		%	23.9	%	3.5 pts

Software and Control sales were $1,702 in the first six months of 2023, an increase of $393, or 30 percent compared to the prior year, reflecting the impact of the Heritage AspenTech acquisition and strong growth in Control Systems & Software. Underlying sales were up 13 percent on 11 percent higher volume and 2 percent higher price. Underlying sales increased 11 percent in the Americas, 14 percent in Europe and 13 percent in Asia, Middle East & Africa (China up 12 percent). Control Systems & Software sales increased $86, or 8 percent. Underlying sales increased 13 percent, reflecting global strength in process end markets while power end markets were strong in Europe and up moderately in the Americas and Asia, Middle East & Africa. AspenTech sales increased $307, or 184 percent, due to the acquisition of Heritage AspenTech. Earnings for Software and Control decreased $64, down 31 percent, and margin decreased 7.5 percentage points, reflecting the impact from $198 of incremental intangibles amortization ($70 of which was reported in Cost of Sales) related to the Heritage AspenTech acquisition. Adjusted EBITA margin increased 3.5 percentage points, reflecting the impact of the Heritage AspenTech acquisition, leverage on higher sales and favorable mix, partially offset by inflation and unfavorable foreign currency transactions.

FINANCIAL CONDITION

Key elements of the Company's financial condition for the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 as compared to the year ended September 30, 2022 and the ~~three~~six months ended ~~December~~March 31, ~~2021~~2022 follow.


		Dec 31, 2021			Sept 30, 2022			Dec 31, 2022				Mar 31, 2022			Sept 30, 2022			Mar 31, 2023
Operating working capital	Operating working capital	$	780		$	990		$	351		Operating working capital	$	1,044		$	990		$	1,140
Current ratio	Current ratio	2.4			1.1			1.1			Current ratio	1.7			1.1			1.2
Total debt-to-total capital	Total debt-to-total capital	46.1		%	50.0		%	48.1		%	Total debt-to-total capital	50.9		%	50.0		%	47.1		%
Net debt-to-net capital	Net debt-to-net capital	28.2		%	45.3		%	41.7		%	Net debt-to-net capital	27.6		%	45.3		%	41.6		%
Interest coverage ratio	Interest coverage ratio	23.9		X	11.7		X	7.3		X	Interest coverage ratio	16.0		X	11.7		X	8.6		X

The Company's operating working capital as of ~~December~~March 31, ~~2022~~2023 includes remaining income taxes payable of approximately ~~$660~~$330 related to the gain on the InSinkErator divestiture ~~which is expected to be paid over the next three quarters,~~ and ~~approximately $275 related to~~ subsidiary restructurings at Climate Technologies, ~~approximately $230 of~~ which ~~was paid in January 2023 with the remainder~~are expected to be paid by the end of fiscal 2023. Excluding these income taxes payable related to discontinued operations, operating working capital ~~increased compared to the same quarter last year and compared to September 30, 2022~~remained elevated due to higher inventory levels to support sales growth and reflecting ongoing supply chain and logistics constraints. As of ~~December~~March 31, ~~2022,~~2023, Emerson's cash and equivalents totaled ~~$2,271,~~$2,046, which included ~~approximately $450~~$287 attributable to AspenTech. ~~Subsequent to the end of the quarter, in January 2023~~ ~~AspenTech paid off the outstanding balance of its existing term loan facility of $264, plus accrued interest.~~ The cash held by AspenTech 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 current ratio ~~was unchanged~~increased slightly compared to September 30, 2022. The interest coverage ratio (earnings before income taxes plus interest expense, divided by interest expense) of ~~7.3X~~8.6X for the first ~~three~~six months of fiscal 2023 compares to ~~23.9X~~16.0X for the ~~three~~six months ended ~~December~~March 31, ~~2021,~~2022, reflecting lower pretax earnings and higher interest expense. Pretax earnings in the prior year included the Vertiv subordinated interest gain of $453. Excluding the gain, the interest coverage ratio was ~~12.9X in~~11.3X for the ~~prior year.~~six months ended March 31, 2022.

Operating cash flow from continuing operations for the first ~~three~~six months of fiscal 2023 was ~~$302, a decrease~~$877, an increase of ~~$75~~$121 compared with ~~$377~~$756 in the prior year, reflecting higher earnings (excluding the prior year impact of the Vertiv subordinated interest gain and the current year impact from Heritage AspenTech intangibles amortization), partially offset by higher working capital due to ongoing supply chain constraints. Operating cash flow included approximately ~~$50~~$180 generated by AspenTech. Free cash flow from continuing operations of ~~$243~~$756 in the first ~~three~~six months of fiscal 2023 (operating cash flow of ~~$302~~$877 less capital expenditures of ~~$59) decreased $61~~$121) increased $140 compared to free cash flow of ~~$304~~$616 in 2022 (operating cash flow of ~~$377~~$756 less capital expenditures of ~~$73)~~$140), reflecting the ~~decrease~~increase in operating cash ~~flow.~~flow and lower capital spending. Cash used in investing activities from continuing operations was ~~$67.~~$182. Cash used in financing activities from continuing operations was ~~$2,895,~~$3,036, reflecting share repurchases of $2.0 billion, ~~net~~ repayments of ~~short-term borrowings~~long-term debt of ~~$539,~~$742, which included $264 related to AspenTech's repayment of the outstanding balance on its existing term loan facility plus accrued interest, and dividend payments.

Total cash provided by operating activities was ~~$418~~$486 including the impact of discontinued operations, and decreased ~~$105~~$479 compared with ~~$523~~$965 in the prior ~~year.~~year due to approximately $575 of incomes taxes paid related to the gain on the InSinkErator divestiture and subsidiary restructurings at Climate Technologies. Investing cash flow from discontinued operations was ~~$3.0~~$2.9 billion, reflecting proceeds from the InSinkErator divestiture.

The Company expects to receive after-tax proceeds of approximately $7.8 billion from the Climate Technologies transaction, which is expected to close in the third quarter of fiscal 2023, and expects to use these proceeds along with available cash and liquidity to fund its proposed National Instruments transaction.

In February 2023, the Company entered into a $3.5 billion five-year revolving backup credit facility with various banks, which replaced the May 2018 $3.5 billion facility. 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 credit 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 maintain the facility are immaterial.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic, and ~~among~~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 and the remainder 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 $36 billion and common stockholders' equity of $11 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 2023 OUTLOOK

For the full year, consolidated net sales from continuing operations are expected to be up 89 to 1010.5 percent, with underlying sales up ~~6.5~~8.5 to ~~8.5~~10 percent excluding a 21.5 percent unfavorable impact from foreign currency translation, ~~and an approximately 3.5~~a 2.5 percent ~~favorable~~ impact from acquisitions ~~net of~~and a 0.5 percent impact from divestitures.

Earnings per share from continuing operations are expected to be ~~$3.55~~$3.58 to ~~$3.70~~$3.68 (which excludes any potential impact from the 45 percent common equity ownership in Climate Technologies' income or loss post-close), while adjusted earnings per share from continuing operations are expected to be ~~$4.00~~$4.15 to ~~$4.15,~~$4.25, excluding a ~~$0.60~~$0.61 per share impact from amortization of intangibles, $0.12 per share from restructuring actions, $0.08 per share from the Russia business exit, a ~~$0.03~~$0.02 per share benefit from the AspenTech Micromine purchase price hedge, ~~$0.09~~$0.06 per share for acquisition/divestiture costs, a $0.05 gain on the National Instruments equity investment, $0.06 per share from interest income on the Climate Technologies note receivable, and ~~$0.23~~$0.17 per share of interest income on undeployed proceeds from the Climate Technologies and InSinkErator divestitures. Earnings from discontinued operations are expected to be ~~$10.5 billion to $11.5 billion, or~~ $18 to $20 per share, including the net gains on 2023 divestitures. Operating cash flow from continuing operations is expected to be approximately $2.5 billion and free cash flow from continuing operations, which excludes projected capital spending of $300 million, is expected to be approximately $2.2 billion. The fiscal 2023 outlook includes $2 billion returned to shareholders through share repurchases completed in the first quarter and approximately $1.2 billion of dividend payments.

The Company's fiscal 2023 results from continuing operations after the Climate Technologies divestiture (assumed to close March 31, 2023 for the purposes of guidance) will reflect a 45 percent common equity ownership in the income, or loss, of Climate Technologies. Emerson will not control Climate Technologies post-closing and is therefore unable to estimate the amount of its 45 percent share of Climate Technologies' post-close results. The effect of Emerson's 45 percent share of Climate Technologies is expected to be immaterial to post-closing cash flows.

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 Climate Technologies transaction and the ~~potential~~proposed 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, 2022 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.

2632

PART II. OTHER INFORMATION

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

~~(c) Issuer Purchases~~Neither 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
October 2022 — $— — 54,540
November 2022 11,957 $92.85 11,957 42,583
December 2022 9,299 $95.69 9,299 33,284
Total 21,256 $94.09 21,256 33,284

Company common stock during the three-month period ended March 31, 2023. In March 2020, the Board of Directors authorized the purchase of ~~an additional~~ 60 million shares and a total of approximately 33.3 shares remain available for purchase under the authorization.

Item 6. Exhibits

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


















2(a)**10.1		~~Transaction~~Credit Agreement dated ~~as of October 30, 2022, among Emerson Electric Co., BCP Emerald Aggregator L.P., Emerald Debt Merger Sub L.L.C and Emerald JV Holdings L.P,~~February 17, 2023, incorporated by reference to the Company’s Form 8-K filed on ~~October 31, 2022,~~February 21, 2023, File No. 1-278, Exhibit ~~2.1.~~10.1.

~~10(a)~~10.2	~~Amended and Restated Deferred Compensation Plan for Non-Employee Directors and Forms of Payment Election Forms~~

~~10(b)~~		~~Amended and Restated Restricted Stock Plan for Non-Management Directors and Form of Restricted Stock Unit Award Letter under the Emerson Electric Co. Restricted Stock Plan for Non-Management Directors~~

~~10(c)~~		Emerson Electric Co. Annual Cash Incentive Plan and Form of Acceptance of Award,

~~10(d)~~		~~Letter Agreement dated November 16, 2022 between Emerson Electric Co. and Mark J. Bulanda, signed November 22, 2022,~~ incorporated by reference to the Company’s Form ~~8-K,~~10-Q, filed on ~~November 28, 2022,~~February 8, 2023, File No. 1-278, Exhibit ~~10.1.~~10(c).

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

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

101		Attached as Exhibit 101 to this report are the following documents formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Statements of Earnings for the three and six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021,~~2022, (ii) Consolidated Statements of Comprehensive Income for the three and six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021,~~2022, (iii) Consolidated Balance Sheets as of September 30, 2022 and ~~December~~March 31, ~~2022,~~2023, (iv) Consolidated Statements of Equity for the three and six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021,~~2022, (v) Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021,~~2022, and (vi) Notes to Consolidated Financial Statements for the three and six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021.~~2022.

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

**		Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Emerson agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request. Portions of these exhibits have been redacted in compliance with Regulation S-K Item 601(b)(10).

2733

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EMERSON ELECTRIC CO.

/s/ F. J. Dellaquila

Frank J. Dellaquila

Senior Executive Vice President and Chief Financial Officer

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

~~February 8,~~May 3, 2023

2834


	Three Months Ended
	December 31,
	2021		2022
Operating activities
Net earnings	$	895	2,326
Earnings from discontinued operations, net of tax	(149)		(2,002)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	178		260
Stock compensation	34		102


Changes in operating working capital	(125)		(289)
Gain on subordinated interest	(453)		—


Other, net	(3)		(95)
Cash from continuing operations	377		302
Cash from discontinued operations	146		116
Cash provided by operating activities	523		418

Investing activities
Capital expenditures	(73)		(59)
Purchases of businesses, net of cash and equivalents acquired	(39)		—

Proceeds from subordinated interest	438		15
Other, net	3		(23)
Cash from continuing operations	329		(67)
Cash from discontinued operations	(44)		2,953
Cash provided by investing activities	285		2,886

Financing activities
Net increase in short-term borrowings	(335)		(539)


Proceeds from long-term debt	2,975		—
Payments of long-term debt	(501)		(9)
Dividends paid	(307)		(306)
Purchases of common stock	(253)		(2,000)
Other, net	22		(41)
Cash provided by (used in) financing activities	1,601		(2,895)

Effect of exchange rate changes on cash and equivalents	(37)		58
Increase in cash and equivalents	2,372		467
Beginning cash and equivalents	2,354		1,804
Ending cash and equivalents	$	4,726	2,271

Changes in operating working capital
Receivables	$	172	78
Inventories	(177)		(193)
Other current assets	7		14
Accounts payable	(15)		(58)
Accrued expenses	(112)		(130)

Total changes in operating working capital	$	(125)	(289)



Accrued expenses include the following:
Income taxes	$	125	1,080
Customer advances (contract liabilities)	751		901
Employee compensation	523		372
Operating lease liabilities (current)	128		131
Product warranty	84		89


Three Months Ended Dec 31	2021		2022

Diluted earnings from continuing operations per share	$	1.25	0.56

Amortization of intangibles	0.09		0.15
Restructuring and related costs	0.02		0.02
Gain on subordinated interest	(0.60)		—

Acquisition/divestiture costs	0.03		—
Russia business exit	—		0.08
AspenTech Micromine purchase price hedge	—		(0.03)


Adjusted diluted earnings from continuing operations per share	$	0.79	0.78


Period	Total Number of Shares Purchased		Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 2022		—	$—		—	54,540
November 2022		11,957	$92.85		11,957	42,583
December 2022		9,299	$95.69		9,299	33,284
Total		21,256	$94.09		21,256	33,284