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Excrept from filing document 2024-09-30

Emerson the Company is a global technology and software company that provides innovative solutions for customers in a wide range of end markets around the world Through its leading automation portfolio Emerson helps process hybrid and discrete manufacturers optimize operations protect personnel reduce emissions and achieve their sustainability goals Sales by geographic destination in 2024 were the Americas
Portfolio management is an integral component of Emerson s growth and value creation strategy Over the past three years 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 These actions were undertaken to create a cohesive higher growth and higher margin industrial technology portfolio as a global automation leader serving a diversified set of end markets The Company s recent portfolio actions include the following transactions note that all d
On October 11 2023 the Company completed the acquisition of National Instruments Corporation NI at an equity value of 8 2 billion 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 approximately 1 7 billion and pretax earnings of approximately
On May 31 2023 the Company completed the sale of a majority stake in its Climate Technologies business which constitutes the former Climate Technologies segment excluding Therm O Disc which was divested earlier in 2022 the new standalone business is named Copeland to private equity funds managed by Blackstone in a 14 0 billion transaction Emerson received upfront pre tax cash proceeds of approximately 9 7 billion and a note receivable with a face value of 2 25 billion while retaining a 40 percent non controlling common equity interest in a new standalone joint venture between Emerson and Blackstone Subsequently in August 2024 Emerson sold its 40 percent non controlling common equity interest in Copeland to private equity funds managed by Blackstone for 1 5 billion and sold the note receivable to Copeland for 1 9 billion
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 defined as AspenTech herein Upon closing of the transaction Emerson owned 55 percent of the outstanding shares of AspenTech common stock on a fully diluted basis AspenTech had 2023 net sales of 1 04 billion
On November 5 2024 the Company announced a proposal to acquire all outstanding shares of common stock of AspenTech not already owned by Emerson for 240 per share in cash which implies a fully diluted market capitalization for AspenTech of 15 3 billion and an enterprise value of 15 1 billion The Company currently owns approximately 57 percent of AspenTech s outstanding shares of common stock The proposal is not subject to any financing condition and would be financed from cash on hand committed lines of credit and or other available sources of financing Also on November 5 2024 the Company announced that it is exploring strategic alternatives including a cash sale for its Safety Productivity segment No assurance can be given whether the proposal or the review will lead to one or more transactions or as to any of the terms or conditions of such transactions See Item 1A Risk Factors for additional information
Certain prior year amounts have been reclassified to conform to the current year presentation This includes the equity method losses related to the Company s non controlling common equity interest in Copeland which were reported since May 2023 in Other deductions net and have now been reclassified and reported as discontinued operations for all periods presented see Note 5 Beginning in 2024 the Company reports NI which is now referred to as Test Measurement as a new segment in the Software and Control business group As a result of its portfolio transformation discussed above the Company now reports seven segments and two business groups which are highlighted in the table below see Note 20 for further details
The Company s comprehensive automation portfolio includes intelligent devices control systems and design and optimization software solutions to support a diverse set of industries and infrastructure including process industries such as chemical power renewables and energy hybrid industries life sciences metals mining food beverage pulp paper and others discrete industries including automotive medical packaging and semiconductor and more
Emerson was incorporated in Missouri in 1890 and has evolved through internal growth and strategic acquisitions Management has a well established set of operating mechanisms to manage its business performance and set strategy The Company also has processes undertaken by management with oversight from the Board of Directors to specifically focus on risks in areas such as cybersecurity compliance legal sustainability financial and reputational among others The Company periodically updates assesses and monitors its risk exposures provides timely updates to the Board and takes actions to mitigate these risks
All Note references in this document refer to Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10 K which notes are hereby incorporated by reference See also Item 1A Risk Factors and Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations
The Final Control segment is a leading global provider of control valves isolation valves shutoff valves pressure relief valves pressure safety valves actuators and regulators for process and hybrid industries These solutions respond to commands from a control system to continuously and precisely control and regulate the flow of liquids or gases to achieve safe operation along with reliability sustainability and optimized performance Products within our Final Control segment are marketed under a variety of brands including Anderson Greenwood Bettis Crosby Fisher Keystone KTM and Vanessa
The Measurement Analytical segment is a leading supplier of intelligent instrumentation measuring the physical properties of liquids or gases such as pressure temperature level flow acoustics corrosion pH conductivity water quality toxic gases and flame These devices transfer data and asset management information to control systems and automation software allowing process and hybrid industry operators to make educated decisions regarding production reliability sustainability and safety Products within our Measurement Analytical segment are marketed under a variety of brands including Flexim Micro Motion and Rosemount
The Discrete Automation segment includes solenoid valves pneumatic valves valve position indicators pneumatic cylinders and actuators air preparation equipment pressure and temperature switches electric linear motion
solutions programmable automation control systems and software electrical distribution equipment and materials joining solutions used primarily in discrete industries Products within our Discrete Automation segment are marketed under a variety of brands including Afag Appleton ASCO Aventics Branson Movicon PACSystems SolaHD TESCOM and TopWorx
Pipe working tools include pipe wrenches and cutters pipe threading and roll grooving equipment battery hydraulic tools for press connections drain cleaners and diagnostic systems including sewer inspection cameras and locating equipment Electrical tools include conduit benders and cable pulling equipment battery hydraulic tools for cutting and crimping electrical cable and hole making equipment Other professional tools include water jetters wet dry vacuums commercial vacuums and hand tools Products within our Safety Productivity segment are marketed under a variety of brands including Greenlee Klauke ProTeam and RIDGID
The Control Systems Software segment provides control systems and software that control plant processes by collecting and analyzing information from measurement devices in the plant These technologies determine optimal settings with software based on a customer s specific algorithms and use that information to adjust valves pumps motors drives and other control hardware for maximum product quality process efficiency sustainability and safety These solutions include distributed control systems safety instrumented systems SCADA systems application software digital twins asset performance management and cybersecurity Control Systems Software solutions are predominantly used by process and hybrid manufacturers Products within our Control Systems Software segment are marketed under a variety of brands including AMS DeltaV and Ovation
As discussed above Emerson completed the acquisition of NI on October 11 2023 This business is now referred to as Test Measurement and is reported as a new segment in the Software and Control business group in 2024 Test Measurement provides software connected automated test and measurement systems that enable enterprises to bring products to market faster and at a lower cost The Test Measurement business spans the full range of customer needs including modular instrumentation data acquisition and control solutions and general purpose development software
AspenTech is a global leader in asset optimization software that enables industrial manufacturers to design operate and maintain their operations for maximum performance AspenTech combines decades of modeling simulation and optimization capabilities with industrial operations expertise and applies advanced analytics to improve the profitability and sustainability of production assets The purpose built software drives value for customers by improving operational efficiency and maximizing productivity reducing unplanned downtime and safety risks and minimizing energy consumption and emissions
Investing in innovation to accelerate organic growth is a critical component of Emerson s value creation strategy The Company is focused on key growth initiatives across its software control and intelligent devices portfolio These initiatives include disruptive measurement technologies software defined automation systems self optimizing asset software and sustainability solutions Total spending for R D engineering expense and customer funded engineering and development was 8 1 percent of sales in 2024 compared to 6 9 percent in 2023 and 6 3 percent in 2022
nd brass and to a lesser extent plastics and petroleum based chemicals The Company seeks to have many sources of supply for each of its major requirements in order to avoid significant dependence on any one or a few suppliers However the supply of materials or other items could be disrupted by natural disasters or other events Despite market price volatility for certain requirements the raw materials and various purchased components needed for the Company s products have generally been available in sufficient quantities See Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations
The Company maintains an intellectual property portfolio it has developed or acquired over a number of years including patents trademarks and licenses The Company also continues to develop or acquire new intellectual propert
y New patent applications are continuously filed to protect the Company s ongoing research and development activities and the Company periodically reviews the continued utility of patent assets The Company s trademark registrations may be renewed and their duration is dependent upon national laws and trademark use While this proprietary intellectual property portfolio is important to the Company in the aggregate management does not regard any of its segments as being dependent on any single patent trademark registration or license
The Company s estimated consolidated order backlog was 8 4 billion and 7 8 billion at September 30 2024 and 2023 respectively of which approximately 1 3 billion and 1 2 billion related to AspenTech while approximately 400 was attributable to Test Measurement Approximately 75 percent of the Company s consolidated backlog is expected to be recognized as revenue over the next 12 months with the remainder substantially over the subsequent two years thereafter Backlog by business group at September 30 2024 and 2023 follows dollars in millions
The Company s businesses operate in highly competitive markets The Company competes based on product performance quality branding service and or price across the industries and markets served A significant element of the Company s competitive strategy is to deliver solutions to our customers by manufacturing high quality products at the best relevant global cost Although no single company competes directly with Emerson in all of the Company s product lines various companies compete in one or more product lines with the number of competitors varying by product line Some competitors have substantially greater sales assets and financial resources than Emerson and the Company also competes with many smaller companies Management believes Emerson has a market leadership position in many of its product lines
The Company s operations products and services are subject to various government regulations including environmental regulations Our manufacturing locations generate waste of which treatment storage transportation and disposal are subject to U S federal state foreign and or local laws and regulations relating to protection of the environment The Company continually works to minimize the environmental impact of its operations through safe
technologies facility design and operating procedures Compliance with government regulations including environmental regulations has not had and based on current information and the applicable laws and regulations currently in effect is not expected to have a material effect on the Company s capital expenditures including expenditures for environmental control facilities earnings or competitive position However laws and regulations may be changed accelerated or adopted that impose significant operational restrictions and compliance requirements upon the Company and which could negatively impact our operating results See Item 1A Risk Factors
the Company s first ever employee value proposition EVP inviting our global workforce and potential hires to join in making the world healthier safer smarter and more sustainable Building on this momentum Emerson in 2024 focused on activating its EVP among employees by further defining it across five key cultural areas Legacy of Innovation Challenging Purposeful Work Diverse People Working Together Limitless Growth and Global and Local Impact Collectively these five areas form Emerson s differentiated employee experience By substantiating progress and achievements in each of these areas the Company is strengthening its culture and enabling its EVP to be considered at every touchpoint of the employee lifecycle and experience from HR programs to the actions of leaders behavioral norms and physical work environment
The skills experience and industry knowledge of key employees significantly benefit Emerson s operations and performance The Company s Board of Directors and management oversee various employee initiatives Emerson supports and develops its employees through global training and development programs that build and strengthen employees leadership and professional skills Leadership development programs include intensive learning programs for new leaders as well as more established leaders The Company also partners with educational institutions and nonprofit organizations to help prepare current and future workers with the knowledge and skills they need to succeed
To assess and improve employee retention and engagement Emerson implemented a globally consistent digital continuous listening strategy in 2023 through which all employees across the Company are surveyed annually and their feedback is used to drive actions that address areas of employee interest and concern In 2024 89 percent of employees participated up from 85 percent in 2023 and Emerson s overall engagement score increased to 79 percent up from 78 percent In addition Emerson s inclusion index score increased by 3 5 percentage points to 79 percent
Employee health and safety in the workplace is also one of the Company s core values The Corporate Safety Council is led by our Chief Sustainability Officer and oversees our safety efforts supported by health and safety committees and leaders that operate at the local site level Hazards in the workplace are actively identified and management tracks incidents so remedial actions can be taken to improve workplace safety In 2024 the Company s total recordable rate of injuries was 0 30 and its lost or restricted workday case rate was 0 22 both measured as the number of incidents per 100 employees
We have identified other human capital priorities including among other things providing competitive wages and benefits and promoting an inclusive culture The Company is committed to efforts to build diverse teams and foster a work environment that supports our large global workforce and helps us innovate for our customers Overall women represent 33 percent of our global workforce and 24 percent of leadership positions are held by women In the U S minorities represent 36 percent of our workforce and 23 percent of our leadership positions Our global Employee Resource Groups support our diverse workforce and have grown to over 13 000 members We are proud to have been named to Fortune Magazine s America s Most Innovative Companies list for 2023 and as a Best Employer for Diversity by Forbes in 2022
ess and management believes it has sufficient human capital to operate its business successfully The Company and its subsidiaries had approximately 73 000 employees at September 30 2024 Management believes that the Company s employee relations are favorable
A small portion of the Company s U S employees are unionized while outside the U S we have employees in certain countries particularly in Europe that are represented by an employee representative organization such as a union works council or employee association
Emerson s global purpose is to drive innovation that makes the world healthier safer smarter and more sustainable Our environmental sustainability strategy is focused on driving progress within our facilities and helping our customers achieve their ESG objectives In 2021 we appointed Mike Train as Chief Sustainability Officer This role part of our Office of the Chief Executive reflects our focus on sustainability across our company Under his leadership Emerson has made significant strides and we are strengthening our leadership position as our customers and suppliers work to deliver their environmental targets
In 2022 we set an ambitious target to achieve net zero greenhouse gas GHG emissions across our value chain by 2045 compared to a 2021 baseline To set us on the right pathway we will target net zero operations and a 25 percent reduction of our value chain emissions by 2030 also compared to a 2021 baseline In 2023 we established a goal to achieve zero waste to landfill in our manufacturing facilities by 2032 from a 2022 fiscal year baseline wherever this is compatible with local conditions and regulations We also introduced a new Technology and Environmental Sustainability Board committee which is tasked with overseeing strategy related to technology and R D the Company s product cybersecurity practices and Emerson s environmental sustainability goals and programs
demonstrates our efforts to improve our internal environmental sustainability performance including reducing our GHG emissions and energy and water consumption as well as engaging suppliers and other value chain partners
reflects how we foster collaboration among stakeholders by participating in environmental sustainability industry forums partnering to develop innovative solutions and engaging with governments globally to support sustainability related policies and regulations
Emerson s environmental sustainability initiatives and strategy are discussed further in our 2023 Sustainability Report which can be found on our website at www Emerson com this report is not incorporated by reference and should not be considered part of this Form 10 K
Emerson s reports on Forms 10 K 10 Q 8 K and all amendments to those reports as well as proxy statements are available without charge through the Company s website on the internet as soon as reasonably practicable after they are electronically filed with or furnished to the U S Securities and Exchange Commission SEC They may be accessed as follows www Emerson com Investors SEC Filings Information on the Company s website does not constitute part of this Form 10 K
Investing in our securities involves risks You should carefully consider among other matters the factors set forth below and the other information in this report The Company s risk factors set forth below are not the only risks facing the Company Additional risks and uncertainties not currently known to management or that management currently deems immaterial also may materially adversely affect the Company s business financial condition or operating results We may amend or supplement the risk factors set forth below from time to time by other reports we file with the SEC
Our businesses operate in markets that are highly competitive and potentially volatile and we compete on the basis of product performance quality service and or price across the industries and markets served Our businesses are
largely dependent on the current and future business environment including capital and consumer spending A significant element of our competitive strategy is to deliver solutions to our customers by manufacturing high quality products at the best relevant global cost Various companies compete with us in one or more product lines and the number of competitors varies by product line Some of our competitors have substantially greater sales assets and financial resources than our Company and we also compete with many smaller companies Competitive pressures could adversely affect prices or customer demand for our products impacting our sales or profit margins and or resulting in a loss of market share In addition certain of our businesses rely in part on independent sales representatives and distributors Any disruption or adverse change in our relationships with these independent sales representatives could weaken our competitive position and adversely affect our results of operations cash flows and financial condition A disruption or adverse change could result from the sale or financial instability of an independent sales representative or distributor changes to our relationship including favoring competing products for any reason or other events
The success of new and improved products and services depends on their initial and continued acceptance by our customers Our businesses are affected by varying degrees of technological change such as among others artificial intelligences and machine learning and corresponding shifts in customer demand which result in unpredictable product transitions shortened life cycles and increased importance of bein
g first to market with new products and services We may experience difficulties or delays in the research development production and or marketing of new products and services which may negatively impact our operating results and prevent us from recouping or realizing a return on the investments required to continue to bring new products and services to market
We must anticipate and respond to market and technological changes driven by broader trends such as decarbonization and electrification efforts in response to climate change Market growth from the use of cleaner energy sources as well as emissions management energy efficiency and decarbonization efforts are likely to depend in part on technologies not yet deployed or widely adopted today We may not adequately innovate or position our businesses for the adoption of technologies such as battery storage solutions hydrogen use cases in industry mobility and power generation enhanced electrical grid demand management carbon capture and sequestration or advanced nuclear power
These trends and the relative competitiveness of our product and service offerings will continue to be impacted by uncertain factors such as the pace of technological developments and related cost considerations the levels of economic growth in different markets around the world and the adoption of climate change related policies such as carbon taxes greenhouse gas emission reductions incentives or mandates for particular types of energy or policies that impact the availability of financing for certain types of projects
The Company s intellectual property rights are important to its business and include numerous patents trademarks copyrights trade secrets and other confidential information This intellectual property may be subject to challenge infringement invalidation or circumvention by third parties Despite extensive security measures our intellectual property may be subject to misappropriation through unauthorized access of our information technology systems employee theft or other acts of industrial espionage Should the Company be unable to adequately defend or protect its intellectual property it may suffer competitive harm
We Engage in Acquisitions and Divestitures Which Are Subject to Domestic and Foreign Regulatory Requirements and May Encounter Difficulties in Integrating and Separating These Businesses and Therefore We May Not Realize the Anticipated Benefits
We regularly seek growth through strategic acquisitions as well as evaluate our portfolio for potential divestitures These activities require favorable environments to execute these transactions and we may encounter difficulties in obtaining the necessary regulatory approvals in both domestic and foreign jurisdictions In 2024 and in past years we have made various acquisitions and divestitures including our acquisition of National Instruments our divestiture of the Climate Technologies business now renamed Copeland and our majority stake in Aspen
Technology Inc and entered into joint venture arrangements intended to complement or expand our business and may continue to do so in the future As a result of these transactions the Company has a narrower business which is focused on higher growth markets including software innovation and disruptive technologies and may encounter more volatility and be more vulnerable to changing market conditions The success of these transactions will depend on our ability to achieve higher rates of growth integrate assets and personnel acquired in these transactions and to cooperate with our strategic partners We may encounter difficulties in integrating acquisitions with our operations as well as separating divested businesses and in managing strategic investments Furthermore we may not realize the degree or timing of anticipated benefits including among others increasing rates of profitability and growth Any of the foregoing could adversely affect our business and results of operations
Our Portfolio Actions Including the Proposed Acquisition of the Remaining Interest in AspenTech Not Already Owned by the Company and the Process to Explore Strategic Alternatives for the Company s Safety Productivity Segment May Not Be Completed or Completed on the Terms and Conditions Contemplated or With the Expected Benefits
On November 5 2024 the Company announced a proposal to acquire all outstanding shares of common stock of AspenTech not already owned by Emerson for 240 per share in cash which implies a fully diluted market capitalization for AspenTech of 15 3 billion and an enterprise value of 15 1 billion and would be financed from cash on hand committed lines of credit and or other available sources of financing Also on November 5 2024 the Company announced that it is exploring strategic alternatives including a cash sale for its Safety Productivity segment No assurance can be given whether the proposal or the review will lead to one or more transactions We can make no assurance as to the completion terms timing costs or benefits anticipated from any such transactions Unforeseen developments including delays in obtaining various tax regulatory and other approvals could delay any such transactions or cause one or more of them to occur on terms and conditions that are less favorable or at a higher cost than expected
We Use a Variety of Raw Materials and Components in Our Businesses and Significant Shortages or Price Increases Could Increase Our Operating Costs and Adversely Impact the Competitive Positions of Our P
Our major requirements for raw materials include steel cast iron electronics rare earth metals aluminum brass and to a lesser extent plastics and petroleum based chemicals The Company seeks multiple sources of supply for each of its major requirements in order to avoid significant dependence on any one or a few suppliers However the supply of materials or other items could be disrupted by natural disasters a health epidemic or pandemic or other events Significant shortages or price increases could impact the prices our affected businesses charge their operating costs and the competitive position of their products and services which could adversely affect our results of operations While we monitor market prices of the commodities we require and attempt to mitigate price exposure through hedging activities this risk could adversely affect our operating results
Our Operations Depend on Production Facilities Throughout the World a Majority of Which Are Located Outside the United States and Subject to Increased Risks of Disrupted Production Causing Delays in Shipments and Loss of Customers and Revenue
We manage businesses with manufacturing facilities worldwide a majority of which are located outside the United States and also source certain materials globally Emerging market sales represent over one third of total sales and serving a global customer base requires that we p
lace more materials sourcing and production in emerging markets to capitalize on market opportunities and maintain a best cost position Our and our suppliers non U S production facilities and operations could be disrupted by weather and natural disaster including the potential effects of climate change labor strife war including the Russia Ukraine and other global conflicts political unrest terrorist activity or public health concerns such as an epidemic or pandemic particularly in emerging countries that are not well equip
Our manufacturing facilities abroad are dependent on the stability of governments and business conditions and may be more susceptible to changes in laws policies and regulations in host countries as well as economic and political upheaval than our domestic facilities These facilities face increased risks of nationalization as well as operational disruptions which could cause delays in shipments of products and the loss of sales and customers and insurance proceeds may not adequately compensate us
Access to Funding Through the Capital Markets is Essential to the Execution of Our Business Plan and if We Are Unable to Maintain Such Access We Could Experience a Material Adverse Effect on Our Business and Financial Results
Our ability to invest in our businesses make strategic acquisitions and refinance maturing debt obligations requires access to the capital markets and sufficient bank credit lines to support short term borrowings Volatility in the capital markets may increase costs associated with issuing commercial paper or other debt instruments or affect the Company s ability to access those markets If we are unable to continue to access the capital markets we could experience a material adverse effect on our business and financial results Additionally if our customers suppliers or financial institutions are unable to access the capital markets to meet their commitments to the Company our business could be adversely impacted
Our success depends in part on the efforts and abilities of our management and key employees Their skills experience and industry knowledge significantly benefit our operations and performance The failure to attract develop and retain highly qualified personnel could adversely affect our ability to succeed in our human capital goals and priorities as well as negatively impact our business and operating results
The Company relies on information technology networks and systems including the internet to process transmit and store electronic information and to manage or support a variety of business processes and activities These technology networks and systems may be susceptible to damage disruptions or shutdowns due to failures during the process of upgrading or replacing software databases or components power outages telecommunications or system failures terrorist attacks natural disasters employee error or malfeasance server or cloud provider breaches and computer viruses or cyberattacks Cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to information technology networks and systems to more sophisticated and targeted measures known as advanced persistent threats directed at the Company its products its customers and or its third party service providers Despite the implementation of cybersecurity measures including access controls data encryption vulnerability assessments continuous monitoring and maintenance of backup and protective systems the Company s information technology systems may still be vulnerable to cybersecurity threats and other electronic security breaches It is possible for such vulnerabilities to remain undetected for an extended
period In addition it is possible a security breach could result in theft of trade secrets or other intellectual property or disclosure of confidential customer supplier or employee information We anticipate that the risk of cybersecurity attacks will increase as artificial intelligence capabilities improve and are increasingly used to identify vulnerabilities and construct increasingly sophisticated cybersecurity attacks with the possibility of additional vulnerabilities being introduced through our own use of artificial intelligence and its use by our stakeholders including vendors and customers among others Should the Company be unable to prevent security breaches or other damage to our information technology systems disruptions could have an adverse effect on our operations as well as expose the Company to litigation liability or penalties under privacy laws increased cybersecurity protection costs reputational damage and product failure In addition we must comply with increasingly complex and rigorous regulatory standards enacted to protect business and personal data in the U S and elsewhere Compliance with privacy and localization laws and regulations increases operational complexity Failure to comply with these regulatory standards could subject us to fines and penalties as well as legal and reputational risks including proceedings against the Company by governmental entities or others
Our Products and Services are Highly Sophisticated and Specialized and a Major Product Failure or Similar Event Caused by Defects Cybersecurity Incidents or Other Failures Could Adversely Affect Our Business Reputation Financial Position and Results of Operations
We produce highly sophisticated products and provide specialized services that incorporate or use complex or leading edge technology including both hardware and software Many of our products and services including measurement and analytical instrumentation industrial valves and equipment and process control systems are integrated and used in complex process hybrid and discrete manufacturing environments As a result the impact of a catastrophic product failure or similar event could be significant While we have built operational processes to ensure that our product design manufacture performance and servicing meet rigorous quality standards there can be no assurance that we or our customers or other third parties will not experience operational process or product
failures and other problems including through manufacturing or design defects process or other failures of contractors or third party suppliers cybersecurity incidents or other intentional acts that could result in potential product safety regulatory or environmental risks Cybersecurity incidents aimed at the software embedded in our products could lead to third party claims resulting from damages caused by our product failures and this risk is enhanced by the increasingly connected nature of our products The potential consequences of a material cybersecurity incident include financial loss reputational damage litigation with third parties diminution in the value of our investment in research development and engineering and increased cybersecurity protection and remediation costs due to the increasing sophistication and proliferation of threats which in turn could adversely affect our competitiveness and results of operations
Our Substantial Sales Both in the U S and Abroad Subject Us to Economic Risk as Our Results of Operations May Be Adversely Affected by Changes in Government Regulations and Policies and Currency Fluctuations
We sell manufacture engineer and purchase products globally with significant sales in both mature and emerging markets We expect sales in non U S markets to continue to represent a significant portion of our total sales Our U S and international operations subject the Company to changes in government regulations and policies in a large number of jurisdictions around the world including those related to trade investments taxation exchange controls and repatriation of earnings Changes in laws or policies including their interpretations governing the terms of foreign trade trade restrictions or barriers tariffs or taxes trade protection measures and retaliatory countermeasures including on imports from countries where we manufacture products could adversely impact our business and financial results In addition changes in the relative values of currencies occur from time to time and have affected our operating results and could do so in the future While we monitor our exchange rate exposures and attempt to mitigate this exposure through hedging activities this risk could adversely affect our operating results
e past our operations have been exposed to significant volatility due to changes in general economic conditions or consumer preferences recessions or adverse conditions in the end markets we serve In the future similar changes could adversely impact overall sales operating results including potential impairment charges for goodwill or other long lived assets and cash flows Moreover during economic downturns we may undertake more extensive restructuring actions including workforce reductions global facility consolidations centralization of certain business support activities and other cost reduction initiatives and incur higher costs As these plans and actions can be complex the anticipated operational improvements efficiencies and other benefits might be delayed or not realized
r consolidated income tax provision and related liabilities The Company s effective tax rate cash flows and operating results could be affected by changes in the mix of earnings in countries with different statutory tax rates as well as by changes in the local tax laws and regulations or the interpretations thereof including multiple overlapping tax regimes enacted as part of the Organization for Economic Cooperation and Development proposals that implement a global minimum tax In addition the Company s tax returns are subject to regular review and audit by U S and non U S tax authorities While we believe our tax provisions are appropriate the final outcome of tax audits or disputes could result in adju
We are subject to regulation under a wide variety of U S federal and state and non U S laws regulations and policies including laws related to anti corruption anti bribery export and import compliance anti trust and money
laundering due to our global operations In particular the U S Foreign Corrupt Practices Act the U K Bribery Act and similar anti bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business and we operate in many parts of the world that have experienced government corruption to some degree We cannot provide assurance our internal controls will always protect us from the improper conduct of our employees agents and business partners Any such violation of law or improper actions could subject us to civil or criminal investigations in the U S and other jurisdictions could lead to substantial civil or criminal monetary and non monetary penalties and related shareholder lawsuits could lead to increased costs of compliance and could damage our reputation our business and results of operations
We are and may in the future be a party to a number of legal proceedings and claims including those involving intellectual property commercial transactions government contracts the integration of emerging technologies for example artificial intelligence and machine learning among others M A employment employee benefit plans antitrust anti corruption accounting import and export health and safety matters product liability including asbestos and environmental matters several of which claim or may in the future claim si
gnificant damages Given the inherent uncertainty of litigation we can offer no assurance that existing litigation or a future adverse development will not have a material adverse impact We also are subject to various laws and regulations relating to environmental protection and the discharge of materials into the environment and we could incur substantial costs as a result of the noncompliance with or liability for cleanup or other costs or damages under environmental laws In addition increased public awareness and concern regarding global climate change may result in more international federal and or state or other stakeholder requirements or expectations that could result in more restrictive or expansive standards such as stricter limits on greenhouse gas emissions or more prescriptive reporting of environmental social and governance metrics There continues to be a lack of consistent climate change legislation and standards which creates economic and regulatory uncertainty While the Company has adopted certain voluntary targets environmental laws regulations or standards may be changed accelerated or adopted and impose significant operational restrictions and compliance requirements upon the Company its products or customers which could negatively impact the Company s business capital expenditures results of operations financial condition and competitive position
In response to growing customer investor employee governmental and other stakeholder interest in our ESG practices we have increased reporting of our ESG programs and performance and have established and announced our aspirational purpose causes values and related commitments goals or targets including those regarding sustainability greenhouse gas emissions our net zero ambition and diversity equity and inclusion Our ability to achieve such goals and aspirations is subject to numerous risks and uncertainties many of which rely on the collective efforts of others or may be outside of our control Such risks include among others the availability and adoption of new or additional technologies that reduce carbon or eliminate energy sources on a commercially reasonable basis competing and evolving economic policy and regulatory factors the ability of suppliers and others to meet our sustainability diversity and other goals the availability of qualified candidates in our labor markets and our ability to recruit and retain diverse talent and customer engagement in our goals There may be times where actual outcomes vary from those aimed for or expected and sometimes challenges may delay or block progress As a result we cannot offer assurances that the results reflected or implied by any such statements will be realized or achieved Moreover standards and expectations for ESG matters continue to evolve and may be subject to varying interpretations which may result in significant revisions to our goals or progress In addition certain of our product offerings may become less attractive as standards evolve A failure or perceived failure to meet our aspirational purpose causes values and related commitments goals or targets within the timelines we announce or at all or a failure or perceived failure to meet evolving stakeholders expectations and standards could damage our reputation adversely affect employee retention or engagement or support from our various stakeholders and could subject us to government enforcement actions or penalties and private litigation Such outcomes could negatively impact the Company s business capital expenditures results of operations financial condition and competitive position
Emerson has a cybersecurity risk management program that is designed to assess identify manage and govern material risks from cybersecurity threats Emerson maintains oversight of its cybersecurity risk management program through a governance structure that includes senior management the Audit Committee and the Board of Directors the Board Emerson s cybersecurity risk management program leverages multiple layers of security controls across the Company s systems designed to establish risk treatment plans and regularly monitor risks Emerson maintains cybersecurity policies and standards aligned with industry standard control frameworks and applicable regulations laws and standards and a global incident response plan
Emerson s Board directly or through its appropriate committees provides oversight of management s efforts to mitigate cybersecurity risk and response to cyber incidents The Board and or its appropriate committees receive regular updates on cybersecurity from management and engage in discussions throughout the year including with subject matter experts as appropriate on the function of the Company s overall cybersecurity program cybersecurity risks strategies for addressing these risks and the implementation thereof The Audit Committee has oversight responsibility for the Company s enterprise cybersecurity risks The Board also receives reports on cyber events as appropriate including response efforts legal obligations and outreach and notification to regulators and or customers when needed as well as provide guidance to management as appropriate
Emerson s Chief Information Security Officer who has over twenty five years experience in information technology within the engineering and technology industries with the last fourteen years dedicated to cybersecurity oversees the Company s enterprise cybersecurity risk management program The Chief Information Security Officer leads the global enterprise security team responsible for leading enterprise wide information security strategy architecture processes as well as assessing identifying and managing cybersecurity risks which is an integrated aspect of our overall enterprise risk management program The Chief Information Security Officer provides regular updates to senior management on key security performance indicators of our enterprise cybersecurity program The Chief Information Security Officer also provides quarterly briefings on cybersecurity to the Audit Committee
Emerson maintains a centralized 24x7x365 global incident response operation managed by the global enterprise security team supported by leading cybersecurity tools that detect and respond to threats as they occur Every detected cyber incident is reviewed and assessed by Emerson s Computer Incident Response Team in accordance with our incident response plan which contains documented escalation paths and is regularly tested
Emerson engages independent third party cybersecurity experts to evaluate our cybersecurity maturity and test effectiveness of overall cybersecurity controls To test and reinforce Emerson s internal cybersecurity processes the Company utilizes an accredited and independent third party to audit and certify key elements of our primary data centers cloud environments and our enterprise IT organization The audits are conducted according to International Organization for Standardization ISO 27001 Framework although this is not meant to imply that we meet all technical standards specifications or requirements under ISO 27001 In addition to performing periodic internal security reviews the Company also conducts cybersecurity tabletop exercises led by third party cybersecurity consulting firms from time to time with the last such engagement occurring in 2023
Emerson relies on third party service providers for certain critical or key infrastructure solutions and services across our operations Emerson has an internal vendor management team that assesses risks from vendors and suppliers that provide amongst other things key information and supply chain services to Emerson
Emerson maintains a Cybersecurity Awareness Team within the global enterprise security team responsible for driving a global information security culture through awareness and education programs It has created company wide information security policies and procedures reviews these regularly and makes them electronically available to our employees The team works closely with subject matter experts to create educational material and communicate best practices to the company through online training custom video content simulated phishing attacks and a variety of other targeted touchpoints
To date no risks from cybersecurity threats including as a result of any previous cybersecurity incidents have materially affected or are reasonably likely to materially affect our business our business strategy our results of operations or financial condition In the event an attack or other intrusion were to be successful we have a response team of internal and external resources engaged and prepared to respond See Item 1A Risk Factors for additional information
locations that support multiple segments The majority of the locations are owned with the remainder occupied under lease The Company considers its facilities suitable and adequate for the purposes for which they are used The Company also maintains a smaller number of administrative sales research and development and distribution facilities
The Company and its subsidiaries are party to various legal proceedings some of which claim substantial amounts of damages It is not possible to predict the outcome of these matters but historically the Company has been largely successful in both prosecuting and defending claims and lawsuits
Given the uncertainties of litigation a remote possibility exists that litigation could have a material adverse impact on the Company however the Company believes a material adverse impact of any pending litigation is unlikely
Lal Karsanbhai has been Chief Executive Officer since February 2021 and President since March 2021 Prior to his current position Mr Karsanbhai was Executive President Automation Solutions from October 2018 through January 2021 President Measurement Analytical from 2016 through September 2018 and President Emerson Network Power Europe Middle East Africa from 2014 through 2016
Ram R Krishnan was appointed Executive Vice President and Chief Operating Officer in February 2021 Prior to his current position Mr Krishnan was President Final Control from November 2017 to February 2021 Chief Operating Officer Final Control from January 2017 to November 2017 and President Flow Solutions from 2016 through January 2017
Chief Accounting Officer in February 2018 Prior to his current position Mr Baughman was named Vice President and Controller in October 2017 Prior to that Mr Baughman was Vice President Finance Global Operations Quality and
Michael H Train was appointed Senior Vice President and Chief Sustainability Officer in March 2021 Prior to his current position Mr Train was President from October 2018 to March 2021 and Executive President
Automation Solutions from October 2016 through October 2018 Executive Vice President Automation Solutions from May 2016 through October 2016 and President of Global Sales for Emerson Process Management from 2010 through May 2016
Lisa A Flavin was appointed Senior Vice President and Chief Compliance Officer in March 2021 and assumed the additional role of Chief Transformation Officer in 2023 Prior to her current position Ms Flavin was Vice President and Chief Compliance Officer from February 2019 through March 2021 and Vice President Audit and Chief Compliance Officer from February 2015 through February 2019
Peter Zornio was appointed Senior Vice President and Chief Technology Officer in December 2022 Prior to his current position Mr Zornio was the Chief Technology Officer for the Automation Solutions Group from June 2017 to December 2022 and Chief Strategy Officer for Automation Solutions Systems and Solutions from June 2006 to June 2017
Nick Piazza was appointed Senior Vice President and Chief People Officer in August 2023 Prior to his current position Mr Piazza was Vice President of Global Talent and Human Resource Operations from August 2021 through July 2023 and Vice President of Human Resources in Asia Pacific for the company s Automation Solutions business from July 2017 through July 2021
Michael Tang was appointed Senior Vice President Secretary and Chief Legal Officer in January 2024 Prior to his current position Mr Tang was Senior Vice President General Counsel and Secretary of Agilent Technologies Inc Mr Tang had been with Agilent Technologies since 2006 holding numerous roles of increasing responsibility
Information regarding the market for the Company s common stock and dividend payments is set forth in Note 22 and is hereby incorporated by reference There were approximately 14 500 stockholders of record at
The following graph compares the total return on a cumulative basis through September 30 2024 assuming reinvestment of dividends of 100 invested in Company common stock as of market close on September 30 2019 to the S P 500 Index and the S P 500 Capital Goods Index This graph is not deemed to be filed with the U S Securities and Exchange Commission or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934 the Exchange Act and should not be deemed to be incorporated by reference into any of our prior or subsequent filings under the Securities Act of 1933 or the Exchange Act
This Annual Report on Form 10 K contains various forward looking statements and includes assumptions concerning Emerson s operations future results and prospects These forward looking statements are based on current expectations and are subject to risks and uncertainties Emerson undertakes no obligation to update any such statements to reflect later developments In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 Emerson provides the cautionary statements set forth under Item 1A Risk Factors which are hereby incorporated by reference and identify important economic political and technological factors among others changes in which could cause the actual results or events to differ materially from those set forth in or implied by the forward looking statements and related assumptions
To supplement the Company s financial information presented in accordance with U S generally accepted accounting principles U S GAAP management periodically uses certain non GAAP financial measures as such term is defined in Regulation G under SEC rules to clarify and enhance understanding of past performance and prospects for the future Generally a non GAAP financial measure is a numerical measure of a company s operating performance financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with U S GAAP For exa
anges in reporting segments gains losses and impairments or items outside of management s control such as foreign currency exchange rate fluctuations Management believes that the following non GAAP financial measures provide investors and analysts useful insight into the Company s financial position and operating performance Any non GAAP measure provided should be viewed in addition to and not as an alternative to the most directly comparable measure determined in accordance with U S GAAP as identified in italics below Further the calculation of these non GAAP financial measures may
Underlying sales which exclude the impact of significant acquisitions divestitures and fluctuations in foreign currency exchange rates during the periods presented are provided to facilitate relevant period to period comparisons of sales growth by excluding those items that impact overall comparability U S GAAP measure
Operating profit defined as net sales less cost of sales and selling general and administrative expenses and operating profit margin defined as operating profit divided by net sales are indicative of short term operational performance and ongoing profitability Management closely monitors operating profit and operating profit margin of each business to evaluate past performance and actions required to improve profitability EBIT defined as earnings before deductions for interest expense net related party interest income and income taxes and total segment EBIT and EBIT margin defined as EBIT divided by net sales and total segment EBIT margin are financial measures that exclude the impact of financing on the capital structure and income taxes
Adjusted EBITA and adjusted segment EBITA defined as earnings excluding interest expense net related party interest income income taxes intangibles amortization expense restructuring expense first year purchase accounting related items and transaction fees and certain gains losses or impairments and adjusted EBITA margin and adjusted segment EBITA margin defined as adjusted EBITA divided by net sales are measures used by management to evaluate the Company s operational performance as they exclude the impact of acquisition related investments and non operational items EBITDA defined as EBIT excluding depreciation and amortization and EBITDA margin defined as EBITDA divided by net sales are also used as measures of the Company s current operating performance as they exclude the impact of capital and acquisition related investments Adjusted EBITDA defined as EBITDA excluding restructuring expense first year purchase accounting related items and transaction fees and certain gains losses or impairments and adjusted EBITDA margin defined as Adjusted EBITDA divided by net sales are also used to exclude the impact of non operational items All of these are commonly used financial measures utilized by management to evaluate performance U S GAAP measures
Earnings and earnings per share excluding certain gains and losses impairments restructuring costs impacts of acquisitions or divestitures amortization of intangibles discrete taxes or other items provide additional insight into the underlying ongoing operating performance of the Company and facilitate period to period comparisons by excluding the earnings impact of these items Management believes that presenting earnings and earnings per
Free cash flow operating cash flow less capital expenditures and free cash flow as a percent of net sales are indicators of the Company s cash generating capabilities and dividends as a percent of free cash flow is an indicator of the Company s ability to support its divid
end after considering investments in capital assets which are necessary to maintain and enhance existing operations The determination of operating cash flow adds back noncash depreciation expense to earnings and thereby does not reflect a charge for necessary capital expenditures Managemen
t believes that free cash flow free cash flow as a percent of net sales and dividends as a percent of free cash flow are useful to both management and investors as measures of the Company s ability to generate cash and support its dividend U S GAAP measures
The Company s management is responsible for the integrity and accuracy of the financial statements Management believes that the financial statements for each of the years in the three year period ended September 30 2024 have been prepared in conformity with U S generally accepted accounting principles appropriate in the circumstances In preparing the financial statements management makes informed judgments and estimates where necessary to reflect the expected effects of events and transactions that have not been completed The Company s disclosure controls and procedures ensure that material information required to be disclosed is recorded processed summarized and communicated to management and reported within the required time periods
In meeting its responsibility for the reliability of the financial statements management relies on a system of internal accounting controls This system is designed to provide reasonable assurance that assets are safeguarded and transactions are executed in accordance with management s authorization and recorded properly to permit the preparation of financial statements in accordance with U S generally accepted accounting principles Although the design of this system recognizes that errors or irregularities may occur management believes that the Company s internal accounting controls provide reasonable assurance that errors or irregularities that could be material to the financial statements are prevented or would be detected within a timely period
The Audit Committee of the Board of Directors which is composed solely of independent directors is responsible for overseeing the Company s financial reporting process The Audit Committee meets with management and the Company s internal auditors periodically to review the work of each and to monitor the discharge by each of its responsibilities The Audit Committee also meets periodically with the independent auditors who have free access to the Audit Committee and the Board of Directors to discuss the quality and acceptability of the Company s financial reporting and internal controls as well as nonaudit related services
The independent auditors are engaged to express an opinion on the Company s consolidated financial statements and on the Company s internal control over financial reporting Their opinions are based on procedures that they believe to be sufficient to provide reasonable assurance that the financial statements contain no material errors and that the Company s internal controls are effective
The Company s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company With the participation of the Chief Executive Officer and the Chief Financial Officer management conducted an evaluation of the effectiveness of internal control over financial reporting based on the frame
2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission Based on this evaluation management has concluded that internal control over financial reporting was effective as of September 30 2024
On October 11 2023 the Company completed the acquisition of National Instruments Corporation NI which is now referred to as Test Measurement and reported as a new segment in the Software and Control business group NI provides software connected automated test and measurement systems that enable enterprises to bring products to market faster and at a lower cost and had revenues of approximately 1 7 billion for the 12 months ended September 30 2023 See Note 4
On June 6 2024 the Company entered into definitive agreements to sell its 40 percent non controlling common equity interest in Copeland to private equity funds managed by Blackstone for 1 5 billion and its note receivable to Copeland for 1 9 billion and the transactions were subsequently completed in August 2024 Upon entering into the note agreement the Company recorded a pretax loss in continuing operations of 279 217 after tax 0 38 per share to adjust the carrying value of the note to 1 9 billion to reflect the transaction price while the Company recognized a gain of 539 435 after tax in discontinued operations upon the sale of the common equity interest In addition the equity method losses related to the Company s non controlling common equity interest in Copeland which were reported since May 2023 in Other deductions net have been reclassified and are now reported as discontinued operations for all periods presented See Notes 5 and 8 for further detail
Overall in 2024 sales were 17 5 billion up 15 percent compared with the prior year Underlying sales which exclude foreign currency translation acquisitions and divestitures were up 6 percent The Test Measurement acquisition added 9 5 percent and the divestiture of Metran Emerson s Russia based manufacturing subsidiary deducted 0 5 percent
were 2 82 down 29 percent versus 3 96 in 2023 The decrease was primarily due to purchase accounting related impacts from the NI acquisition and higher associated restructuring charges and the loss on the sale of the Copeland note receivable Adjusted diluted earnings per share from continuing operations were 5 49 compared with 4 44 in the prior year reflecting sales growth and strong operating performance as well as a 0 45 contribution from Test Measurement
The Company generated operating cash flow from continuing operations of 3 3 billion in 2024 an increase of 607 or 22 percent reflecting higher earnings excluding the impact of non cash items related to the NI acquisition and the loss on the Copeland note receivable
The table below presents the Company s diluted earnings per share from continuing operations on an adjusted basis to facilitate period to period comparisons and provide additional insight into the underlying ongoing operating performance of the Company Adjusted diluted earnings per share from continuing operations excludes intangibles amortization expense restructuring expense first year purchase accounting related items and transaction related costs interest income on undeployed proceeds related to the Copeland transaction gains or losses on the Copeland equity method investment and certain gains losses or impairments
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
which included the impact of the Test Measurement acquisition Underlying sales were up 6 percent on 4 percent higher volume and 2 percent higher price The Test Measurement acquisition added 9 5 percent and the divestiture of Metran deducted 0 5 percent Underlying sales were up 2 percent in the U S and up 9 percent internationally
Intelligent Devices sales increased 7 percent while Software and Control sales increased 20 percent which included the impact of the Heritage AspenTech acquisition Underlying sales increased 10 percent
International destination sales including U S exports increased 9 percent to 8 9 billion in 2023 reflecting the Company s overall increase in sales and the impact of the Heritage AspenTech acquisition U S
Underlying international destination sales were up 9 percent as foreign currency translation had a 3 percent unfavorable impact on the comparison the Heritage AspenTech acquisition added 3 percent and the divestiture of Metran deducted 1 percent Underlying sales
Portfolio management is an integral component of Emerson s growth and value creation strategy Over the past three years 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 These actions were undertaken to create a cohesive higher growth and higher margin industrial technology portfolio as a global automation leader serving a diversified set of end markets The Company s recent portfolio actions include the following transactions
On November 5 2024 the Company announced a proposal to acquire all outstanding shares of common stock of AspenTech not already owned by Emerson for 240 per share in cash which implies a fully diluted market capitalization for AspenTech of 15 3 billion and an enterprise value of 15 1 billion The Company currently owns approximately 57 percent of AspenTech s outstanding shares of common stock The proposal is not subject to any financing condition and would be financed from cash on hand committed lines of credit and or other available sources of financing Also on November 5 2024 the Company announced that it is exploring strategic alternatives including a cash sale for its Safety Productivity segment No assurance can be given whether the proposal or the review will lead to one or more transactions or as to any of the terms or conditions of such transactions See Item 1A Risk Factors for additional information
On October 11 2023 the Company completed the acquisition of National Instruments Corporation NI at an equity value of 8 2 billion 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 approximately 1 7 billion and pretax earnings of approximately 170 for the 12 months ended September 30 2023
per share related to its exit of business operations in Russia The Company had previously announced its intention to exit business operations in 2022 and recognized a pretax loss of 181 190 after tax in total 0 32 per share This charge included a loss of 36 in operations and 145 reported in Other deductions 10 of which is reported in restructuring costs and was primarily non cash Emerson s historical net sales in Russia represented approximately 2 0 percent of consolidated annual sales
On May 31 2023 the Company completed the sale of a majority stake in its Climate Technologies business which constitutes the former Climate Technologies segment excluding Therm O Disc which was divested earlier in 2022 to private equity funds managed by Blackstone in a 14 0 billion transaction The Company recognized a pretax gain of approximately 10 6 billion approximately 8 4 billion after tax including tax expense recognized in prior quarters related to subsidiary restructurings The standalone business is named Copeland
Subsequently on June 6 2024 the Company entered into definitive agreements to sell its 40 percent non controlling common equity interest in Copeland to private equity funds managed by Blackstone for 1 5 billion and its note receivable to Copeland for 1 9 billion and the transactions were completed in August 2024 See Notes 5 and 8 and the discussion below for further details
On October 31 2022 the Company completed the divestiture of its InSinkErator business which manufactures food waste disposers to Whirlpool Corporation for 3 0 billion and the Company recognized a pretax gain of approximately 2 8 billion approximately 2 1 billion after tax in 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 2022
Climate Technologies including equity method losses related to the Company s non controlling common equity interest in Copeland Therm O Disc and InSinkErator are reported within discontinued operations for all periods presented
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 defined as AspenTech herein Upon closing of the transaction Emerson owned 55 percent of the outstanding shares of AspenTech common stock on a fully diluted basis 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 Due to the timing of the acquisition the results for the first half of fiscal 2022 do not include the results of Heritage AspenTech
Cost of sales for 2024 were 8 607 an increase of 869 compared with 7 738 in 2023 reflecting the impact of higher volume and the Test Measurement acquisition Gross profit was 8 885 in 2024 compared to 7 427 in 2023 while gross margin increased
nts to 50 8 percent reflecting the Test Measurement acquisition and higher price partially offset by the impact from acquisition related inventory step up amortization of 231 which negatively impacted margins by approximately 1 3 percentage points
SG A expenses of 5 142 in 2024 increased 956 compared with 2023 and SG A as a percent of sales increased 1 8 percentage points to 29 4 percent reflecting the impact of the Test Measurement acquisition partially offset by strong operating leverage on higher sales
SG A expenses of 4 186 in 2023 increased 572 compared with 2022 and SG A as a percent of sales increased 1 4 percentage points to 27 6 percent reflecting the Heritage AspenTech acquisition and higher stock compensation expense of 125 of which 75 related to Emerson stock plans due to a higher share price and 50 was attributable to AspenTech stock plans These items were partially offset by strong operating leverage on higher sales
On June 6 2024 the Company entered into definitive agreements to sell its 40 percent non controlling common equity interest in Copeland to private equity funds managed by Blackstone for 1 5 billion and its note receivable to Copeland for 1 9 billion and the transactions were subsequently completed in August 2024 Upon entering into the note agreement the Company recorded a pretax loss in continuing operations of 279 217 after tax 0 38 per share to adjust the carrying value of the note to 1 9 billion to reflect the transaction price while the Company recognized a gain of 539 435 after tax in discontinued operations upon the sale of the common equity interest In addition the equity method losses related to the Company s non controlling common equity interest in Copeland which were reported since May 2023 in Other deductions net have been reclassified and are now reported as discontinued operations for all periods presented
In the first quarter of 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 of 2022 358 after tax 0 60 per share and received the remaining 15 related to the pretax gain in the first quarter of 2023 In 2023 the Company received additional distributions totaling 161 122 after tax 0 21 per share and in 2024 received its final distribution of 79 60 after tax 0 10 per share
Other deductions net were 1 434 in 2024 an increase of 928 compared with 2023 The current year included intangibles amortization related to the Test Measurement acquisition of 560 while restructuring costs increased by 156 and acquisition divestiture costs increased by 27 The Company also incurred divestiture losses of 48 50 after tax 0 09 per share
and included higher intangibles amortization of 146 primarily related to the Heritage AspenTech acquisition and an unfavorable impact from foreign currency transactions of 112 reflecting losses in the current year compared to gains in the prior year The prior year included a charge of 145 related to the Company exiting its business in Russia compared to a charge of 47 in
nuing operations of 2 020 decreased 883 in 2024 down 30 percent compared with 2023 which included the impact of acquisition related inventory step up amortization higher amortization due to the Test Measurement acquisition and the loss on the Copeland note receivable discussed above Earnings increased
come taxes were 415 642 and 549 for 2024 2023 and 2022 respectively resulting in effective tax rates of 21 percent 22 percent and 23 percent in 2024 2023 and 2022 respectively The current year rate included a 57 0 10 per share benefit related to discrete tax items and a benefit related to the filing of the prior year U S tax return partially offset by unfavorable impacts from inventory step up amortization and the divestiture losses see Note 4 which were non deductible for tax purposes In total the net impact of these items benefited the rate by approximately 1 percentage point See Note 16
Net earnings from continuing operations attributable to common stockholders in 2024 were 1 618 down 29 percent compared with 2023 and diluted earnings per share from continuing operations were 2 82 down 29 percent compared with 3 96 in 2023 reflecting the impact of acquisition related inventory step up amortization higher amortization due to the Test Measurement acquisition and the loss on the Copeland note receivable discussed above Adjusted diluted earnings per share from continuing operations were 5 49 compared with 4 44 in the prior year See the
ls Earnings from discontinued operations attributable to common stockholders in 2024 were 350 0 61 per share and included the gain on the sale of the Company s 40 percent non controlling common equity interest in Copeland of 539 435 after tax Earnings from discontinued operations in 2023 were 10 933 18 92 per share which included the 8 4 billion after tax gain on the Copeland transaction and the 2 1 billion after tax gain on the divestiture of InSinkErator See Note 5 Net earni
2022 reflecting strong operating results Adjusted diluted earnings per share from continuing operations were 4 44 compared with 3 64 in the prior year See the analysis of adjusted earnings per share in the Overview section for further details Earnin
Intelligent Devices sales were 12 2 billion in 2024 an increase of 573 or 5 percent Underlying sales increased 5 percent on 3 percent higher volume and 2 percent higher price Underlying sales increased 3 percent in the Americas U S up 1 percent increased 5 percent in Europe and increased 9 percent in Asia Middle East Africa China down 2 percent Sales for Final Control increased 234 or 6 percent reflecting strength in energy and power end markets Sa
Intelligent Devices sales were 11 6 billion in 2023 an increase of 752 or 7 percent Underlying sales increased 10 percent on 5 percent higher volume and 5 percent higher price Underlying sales increased 11 percent in the Americas U S up 12 percent increased 9 percent in Europe and increased 8 percent in Asia Middle East Africa China up 2 percent Sales for Final Control increased 363 or 10 percent Underlying sales increased 13 percent reflecting strength in chemical and energy end markets and across all geographies particularly in the U S Sales for Measurement Analytical increased 380 or 12 percent Underlying sales increased 16 percent reflecting robust growth in the Americas and Europe due to strong demand while Asia Middle East Africa was up moderately due to softness in China Discrete Automation sales increased 23 or 1 percent while underlying sales increased 3 percent reflecting softening demand in the second half of the year with all geographies up low to mid single digits for the full year Safety Productivity sales decreased 14 or 1 percent and underlying sales decreased 1 percent reflecting softness in the Americas and Europe while Asia Middle East Africa was up slightly Earnings for Intelligent Devices were 2 616 an increase of 447 or 21 percent and margin increased 2 6 percentage points to 22 6 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 24 6 percent an increase of 2 2 percentage points
Software and Control sales were 5 4 billion in 2024 an increase of 1 751 or 48 percent compared to the prior year reflecting the impact of the Test Measurement acquisition Underlying sales increased 8 percent on 5 percent higher volume and 3 percent higher price Underlying sales increased 8 percent in the Americas U S up 7 percent increased 9 percent in Europe and increased 8 percent in Asia Middle East Africa China down 5 percent Sales for
increased 236 or 9 percent reflecting strong international demand in process and hybrid end markets while power end markets were strong globally Test Measurement sales were 1 464 Sales for AspenTech increased 51 or 5 percent reflecting higher maintenance and services revenue Earnings for Software and Control were 282 a decrease of 140 or 33 percent and margin decreased
percentage points to 5 2 percent reflecting the impact from 560 of incremental intangibles amortization related to the Test Measurement acquisition Adjusted EBITA margin was 27 0 percent an increase of
Software and Control sales were 3 6 billion in 2023 an increase of 594 or 20 percent compared to 2022 reflecting the impact of the Heritage AspenTech acquisition and strong growth in Control Systems Software Underlying sales increased 10 percent on 8 percent higher volume and 2 percent higher price Underlying sales increased 7 percent in the Americas U S up 6 percent increased 11 percent in Europe and increased 13 percent in Asia Middle East Africa China up 16 percent Sales for Control Systems Software increased 208 or 9 percent and underlying sales increased 11 percent reflecting global strength in process end markets while power end markets were up modestly Sales for AspenTech increased 386 or 59 percent due to the acquisition of Heritage AspenTech Earnings for Software and Control were 422 a decrease of 27 or 6 percent and margin decreased 3 1 percentage points to 11 6 percent reflecting the impact from 249 of incremental intangibles amortization related to the Heritage AspenTech acquisition Adjusted EBITA margin was 25 8 percent an increase of 2 3 percentage points reflecting leverage on higher sales higher price and favorable mix partially offset by inflation and unfavorable foreign currency transactions
Emerson maintains a conservative financial structure to provide the strength and flexibility necessary to achieve our strategic objectives and efficiently deploy 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 44 billion and stockholders equity of 22 billion and has the resources available for reinvestment in existing businesses strategic acquisitions and managing its capital structure on a short and long term basis
The Company continues to generate substantial operating cash flow including over 3 3 billion from continuing operations in 2024 Cash flows have been and are expected to be sufficient for at least the next 12 months to meet
Company has been able to readily meet all its funding requirements and currently believes that sufficient funds will be available to meet its needs for the foreseeable future through operating cash flow existing resources short and long term debt capacity or its 3 5 billion revolving backup credit facility under which it has not incurred any borrowings
Operating cash flow from continuing operations for 2024 was 3 3 billion an increase of 607 or 22 percent compared with 2023 reflecting higher earnings excluding the impact of non cash items related to the NI acquisition and the loss on the Copeland note receivable Acquisition related costs and integration activities negatively impacted operating cash flow in the current year by approximately 235 AspenTech generated operating cash flow of approximately 320 compared to approximately 310 in the prior year Operating cash flow from continuing operations for 2023 was 2 7 billion an increase of 32 percent compared to 2 0 billion in 2022 reflecting higher earnings excluding the impacts in both years from the Vertiv subordinated interest gains and higher Heritage AspenTech intangibles amortization in 2023
At September 30 2024 operating working capital as a percent of sales was 8 0 percent compared with 8 5 percent in 2023 and 7 2 percent in 2022 Total operating working capital increased in 2024 due to the NI acquisition but improved as a percent of sales compared to 2023 due improvements in inventory levels Operating working capital was elevated in 2023 due to higher inventory levels to support sales growth and higher receivables
Free cash flow from continuing operations operating cash flow less capital expenditures was 2 898 in 2024 up 23 percent reflecting the increase in operating cash flow Free cash flow from continuing operations was 2 347 in 2023 compared with 1 749 in 2022 Net cash paid in connection with acquisitions was 8 342 705 and 5 702 in 2024 2023 and 2022 respectively
Total cash provided by operating activities including the impact of discontinued operations was 3 332 637 and 2 922 in 2024 2023 and 2022 respectively The decrease in 2023 was due to approximately 2 3 billion of income taxes paid related to the gains on the Copeland transaction and InSinkErator divestiture and subsidiary restructurings related to the Copeland transaction Investing cash flow from discontinued operations was 3 4 billion in 2024 reflecting
the proceeds of approximately 1 5 billion related to the sale of the Company s 40 percent non controlling common equity interest in Copeland and 1 9 billion related to the sale of the note receivable while 2023 was 12 5 billion reflecting
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 included 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
Dividends were 1 201 2 10 per share in 2024 compared with 1 198 2 08 per share in 2023 and 1 223 2 06 per share in 2022 In November 2024 the Board of Directors voted to increase the quarterly cash dividend to an annualized rate of 2 11 per share
Purchases of Emerson common stock totaled 435 2 000 and 500 in 2024 2023 and 2022 respectively at average per share prices of 99 04 94 09 and 87 64 AspenTech repurchases were 208 in 2024 and 214 in 2023 and the Company s current common ownership percentage is approximately 57 percent In November 2015 the Board of Directors authorized the purchase of up to 70 million shares and during 2022 the remaining shares available under this authorization were purchased In March 2020 the Board of Directors authorized the purchase of an additional 60 million shares and a total of approximately 28 9 million shares remain available The Company purchased 4 4 million shares in 2024 21 3 million shares in 2023 and 5 7 million shares in 2022 under the authorizations
Total debt which includes long term debt current maturities of long term debt commercial paper and other short term borrowings was 7 687 8 157 and 10 374 as of September 30 2024 2023 and 2022 respectively The decrease in 2024 reflected the repayment of
including 264 related to AspenTech s repayment of the outstanding balance on its existing term loan facility plus accrued interest Activity in 2022 included the issuance of 3 billion of long term debt and increased commercial paper borrowings of approximately 1 3 billion The Company used the net proceeds from the sale of the notes and the increased commercial paper borrowings to fund the majority of its contribution of approximately 6 0 billion to existing stockholders of Heritage AspenTech as part of the transaction Long term debt was issued in December 2021 as follows 1 billion of 2 0 notes due December 2028 1 billion of 2 2 notes due December 2031 and 1 billion of 2 8 notes due December 2051 Additionally the Company repaid 500 of 2 625 notes that matured in 2022 See Note 4 and Note 13
The total debt to total capital ratio decreased slightly in 2024 reflecting repayments of long term debt while the net debt to net capital ratio increased reflecting the use of cash held on the balance sheet at September 30 2023 that was used to complete the NI acquisition These ratios decreased in 2023 compared to 2022 due to the proceeds and after tax gains which increased common stockholder s equity on the Copeland transaction and InSinkErator divestiture The interest coverage ratio is computed as earnings before income taxes plus interest expense divided by interest expense The decrease in 2024 reflects lower GAAP pretax earnings largely due to the NI acquisition Excluding the impact from acquisition related inventory step up amortization of 231 higher intangibles amortization of 595 acquisition divestiture fees and related costs of 220 higher restructuring and related costs of 152 the loss of 279 on the Copeland note receivable and the gain on the subordinated interest of 79 the interest coverage ratio was 11 6X The Company s earnings increased in 2023 which offset higher interest expense due to the increased long term debt and commercial paper borrowings to fund the Heritage AspenTech acquisition
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
ofile and selectively uses derivative financial instruments including forwards swaps and purchased options to manage these risks The Company does not hold derivatives for trading or speculative purposes The value of derivatives and other financial instruments is subject to change as a result of market movements in rates and prices Sensitivity analysis is one technique used to fo
recast the impact of these movements Based on a hypothetical 10 percent increase in interest rates or a 10 percent weakening in the U S dollar across all currencies the potential losses in future earnings fair value or cash flows are not material Sensitivity analysis has limitations for example a weaker U S dollar would benefit future earnings through favorable translation of non U S operating results See Notes 1 and 11 through 13
Preparation of the Company s financial statements requires management to make judgments assumptions and estimates regarding uncertainties that could affect reported revenue expenses assets liabilities and equity Note 1 describes the significant accounting policies used in preparation of the consolidated financial statements The most significant areas where management judgments and estimates impact the primary financial statements are described below Actual results in these areas could differ materially from management s estimates under different assumptions or conditions
The Company evaluates its contracts with customers to identify the promised goods or services and recognizes revenue for the identified performance obligations at the amount the Company expects to be entitled to in exchange for those goods or services A performance obligation is a promise in a contract to transfer a distinct good or service to a customer Revenue is recognized when or as performance obligations are satisfied and control has transferred to the customer typically when products are shipped or delivered title and risk of loss pass to the customer and the Company has a present right to payment The majority of the Company s revenues relate to a broad offering of manufactured products and software which are recognized at the point in time when control transfers generally in accordance with shipping terms or the first day of the contractual term for software A portion of the Company s revenues relate to the sale of post contract customer support parts and labor for repairs and engineering services
In some circumstances contracts include multiple performance obligations where revenue is recognized separately for each good or service as well as contracts where revenue is recognized over time as control transfers to the customer Tangible products represent a large majority of the delivered items in contracts with multiple performance obligations or where revenue is recognized over time while a smaller portion is attributable to installation service and maintenance In sales arrangements that involve multiple performance obligations revenue is allocated based on the relative standalone selling price for each performance obligation Observable selling prices from actual transactions are used whenever possible In other instances the Company determines the standalone selling price based on thi
rd party pricing or management s best estimate For projects where revenue is recognized over time the Company typically uses an input method to determine progress and recognize revenue based on costs incurred The Company believes costs incurred closely correspond with its performance under the contract and the transfer of control to the customer The Company also has software maintenance contracts where revenue is recognized ratably over the maintenance term
Assets and liabilities acquired in business combinations including intangible assets are accounted for using the acquisition method and recorded at their respective fair values In 2024 the Company completed the acquisition of National Instruments Corporation and in 2022 completed the acquisition of Aspen Technology Inc and engaged independent third party valuation specialists to assist in the determination of the fair value of intangible assets This included the use of certain assumptions and estimates including projected revenue for customer relationship and developed technology intangible assets the attrition rate for customer relationship intangible assets and the obsolescence rate for developed technology intangible assets Although we believe the assumptions and estimates to be reasonable and appropriate they require judgement and are based on experience and historical information obtained from National Instruments Corporation and Aspen Technology Inc
Long lived assets which include property plant and equipment goodwill and identifiable intangible assets are reviewed for impairment whenever events or changes in business circumstances indicate impairment may exist If
the Company determines that the carrying value of a long lived asset may not be recoverable a permanent impairment charge is recorded for the amount by which the carrying value of the long lived asset exceeds its estimated fair value Reporting units are also reviewed for possible goodwill impairment at least annually in the fourth quarter If an initial assessment indicates it is more likely than not an impairment may exist it is evaluated by comparing the reporting unit s estimated fair value to its carrying value Fair value is generally estimated using an income approach that discounts estimated future cash flows using discount rates judged by management to be commensurate with the applicable risk Estimates of future sales operating results cash flows and discount rates are subject to changes in the economic environment including such factors as the general level of market interest rates expected equity market returns and the volatility of markets served particularly when recessionary economic circumstances continue for an extended period of time
The Company maintains a prudent long term investment strategy consistent with the duration of pension obligations The determination of defined benefit plan expense and liabilities is dependent on various assumptions including the expected annual rate of return on plan assets the discount rate and the rate of annual compensation increases In accordance with U S generally accepted accounting principles actual results that differ from the Compa
ny s assumptions are accumulated as deferred actuarial gains or losses and amortized to expense in future periods The Company s principal U S defined benefit plan is closed to employees hired after January 1 2016 while shorter tenured employees ceased accruing benefits effective October 1 2016 Effective January 1 2025 the Company is implementing a new profit sharing retirement program for all U S non union employees Eligible employees will receive a base contribution to a cash balance account administered within the principal U S defined benefit plan to be funded by surplus pension assets as well as a potential profit sharing contribution to their defined contribution account After December 31 2024 future service for employees that had continued to accrue benefits in the principal U S defined benefit plan will be frozen
As of September 30 2024 the U S pension plans were overfunded by 800 in total approximately 22 percent in excess of the projected benefit obligation including unfunded plans totaling 161 The non U S plans were underfunded by 38 including unfunded plans totaling 230 The Company contributed a total of 38 to defined benefit plans in 2024 and expects to contribute approximately 40 in 2025 At year end 2024 the discount rate for U S plans was 4 97 percent and was 6 03 percent in 2023 The assumed investment return on plan assets was 6 50 percent in 2024 6 00 percent in 2023 and 6 00 percent in 2022 and will be 6 50 percent for 2025 While management believes its assumptions used are appropriate actual experience may differ A 0 25 percentage point decrease in the U S and non U S discount rates would have increased the total projected benefit obligation at September 30 2024 by 100 and increased 2025 pension expense by 15 A 0 25 percentage point decrease in the expected return on plan assets would increase 2025 pension expense by 15 See Note 1
and other matters several of which claim substantial amounts of damages The Company accrues for such liabilities when it is probable that future costs including legal fees and expenses will be incurred and such costs can be reasonably estimated Accruals are based on developments to date management s estimates of the outcomes of these matters and the Company s experience in contesting litigating and settling similar matters T
he Company engages an outside expert to develop an actuarial estimate of its expected costs to resolve all pending and future asbestos claims including defense costs as well as its related insurance receivables The reserve for asbestos litigation which is recorded on an undiscounted basis is based on projected claims through 2065
Although it is not possible to predict the ultimate outcome of these matters the Company historically has been largely successful in defending itself against claims and suits that have been brought against it and will continue to defend itself vigorously in all such matters While the Company believes a material adverse impact is unlikely given the inherent uncertainty of litigation a remote possibility exists that a future development could have a material adverse impact on the Company See Note 15
Income tax expense and tax assets and liabilities reflect management s assessment of taxes paid or expected to be paid received on items included in the financial statements Deferred tax assets and liabilities arise from temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and consideration of operating loss and tax credit carryforwards Deferred income taxes are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be
recovered or settled The impact on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date Valuation allowances are provided to reduce deferred tax assets to the amount that will more likely than not be realized This requires management to make judgments and estimates regarding the amount and timing of the reversal of taxable temporary differences expected future taxable income and the impact of tax planning strategies
Uncertainty exists regarding tax positions taken in previously filed tax returns which remain subject to examination along with positions expected to be taken in future returns The Company provides for unrecognized tax benefits based on the technical merits when it is more likely than not that an uncertain tax position will not be sustained upon examination Adjustments are made to the uncertain tax positions when facts and circumstances change such as the closing of a tax audit changes in applicable tax laws including tax case rulings and legislative guidance or expiration of the applicable statute of limitations
Cash repatriated to the U S is generally not subject to U S federal income taxes No provision is made for withholding taxes and any applicable U S income taxes on the undistributed earnings of non U S subsidiaries where these earnings are considered indefinitely invested or otherwise retained for continuing international operations Determination of the amount of taxes that might be paid on these undistributed earnings if eventually remitted is not practicable See Notes 1 and 16
At September 30 2024 there were no known contingent liabilities including guarantees pending litigation taxes and other claims that management believes will be material in relation to the Company s financial statements nor were there any material commit
which requires disclosures about the use of supplier finance programs This standard has no impact on the accounting for supplier finance programs and did not materially impact the Company s disclosures
which requires annual disclosures about certain types of government assistance received This standard has no impact on the accounting for government assistance and did not materially impact the Company s disclosures
which clarify the accounting for contract assets and liabilities assumed in a business combination In general this will result in contract liabilities being recognized at their historical amounts under ASC 606 rather than at fair value in accordance with the general requirements of ASC 805
which require the recognition of a franchise tax that is partially based on income as an income based tax with any incremental amount as a non income based tax These updates also make certain changes to intra period tax allocation principles and interim tax calculations
For fiscal year 2025 consolidated net sales from continuing operations are expected to be up 3 5 to 5 5 percent with underlying sales up 3 to 5 percent excluding a 0 5 percent favorable impact from foreign currency translation Earnings per share are expected to be 4 42 to 4 62 while adjusted earnings per share are expected to be 5 85 to 6 05 see the following reconciliation
Operating cash flow is expected to be 3 6 to 3 7 billion and free cash flow which excludes projected capital spending of approximately 0 4 billion is expected to be 3 2 to 3 3 billion The fiscal 2025 outlook assumes approximately 2 0 billion returned to shareholders through share repurchases including approximately 1 0 billion expected to be completed in the first fiscal quarter and approximately 1 2 billion of dividend payments
tatements in conformity with U S generally accepted accounting principles U S GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures Actual results could differ from these estimates Certain prior year amounts have been reclassified to conform to the current year presentation On June 6 2024 the Company entered into definitive agreements to sell its 40 percent non controlling common equity interest in Copeland to private equity funds managed by Blackstone for 1 5 billion and its note receivable to Copeland for 1 9 billion and the transactions were subsequently completed in August 2024 As a result of these transactions the equity interest and note receivable are reported as held for sale in the prior year the equity method losses related to the Company s non controlling common equity interest in Copeland which were reported since May 2023 in Other deductions net have been reclassified and are now reported as discontinued operations for all periods presented and cash flows related to U S tax distributions have been reclassified to operating cash flows from discontinued operations see Notes 5 and 8
which requires disclosures about the use of supplier finance programs This standard has no impact on the accounting for supplier finance programs and did not materially impact the Company s disclosures
which requires annual disclosures about certain types of government assistance received This standard has no impact on the accounting for government assistance and did not materially impact the Company s disclosures
which clarify the accounting for contract assets and liabilities assumed in a business combination In general this will result in contract liabilities being recognized at their historical amounts under ASC 606 rather than at fair value in accordance with the general requirements of ASC 805
which require the recognition of a franchise tax that is partially based on income as an income based tax with any incremental amount as a non income based tax These updates also make certain changes to intra period tax allocation principles and interim tax calculations
The consolidated financial statements include the accounts of the Company and its controlled affiliates Intercompany transactions profits and balances are eliminated in consolidation Investments of 20 percent to 50 percent of the voting shares of other entities are accounted for by the equity method Investments in publicly traded companies of less than 20 percent are carried at fair value with changes in fair value reflected in earnings Investments in nonpublicly traded companies of less than 20 percent are carried at cost minus impairment and adjusted for observable price changes in orderly transactions
The functional currency for most of the Company s non U S subsidiaries is the local currency Adjustments resulting from translating local currency financial statements into U S dollars are reflected in accumulated other comprehensive income
Inventories are stated at the lower of cost and net realizable value The majority of inventory is valued based on standard costs which are revised at the beginning of each year and approximate average costs while the remainder is principally valued on a first in first out basis Following are the components of inventory as of September 30
establishes a formal hierarchy and framework for measuring certain financial statement items at fair value and requires disclosures about fair value measurements and the reliability of valuation inputs Under ASC 820 measurement assumes the transaction to sell an asset or transfer a liability occurs in the principal or at least the most advantageous market for that asset or liability Within the hierarchy Level 1 instruments use observable market prices for an identical item in active markets and have the most reliable valuations Level 2 instruments are valued through broker dealer quotation or other approaches using market observable inputs for similar items in active markets including forward and spot prices interest rates and volatilities Level 3 instruments are valued using inputs not observable in an active market such as company developed future cash flow estimates and are considered the least reliable Valuations for all of the Company s financial instruments fall within Level 2 The fair value of the Company s long term debt is Level 2 estimated using current interest rates and pricing from financial institutions and other market sources for debt with similar maturities and characteristics
The Company records investments in land buildings and machinery and equipment at cost Depreciation is computed principally using the straight line method over estimated service lives which for principal assets are 30 to 40 years for buildings and 8 to 12 years for machinery and equipment Long lived tangible assets are reviewed for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable Impairment losses are recognized based on estimated fair values if the sum of estimated future undiscounted cash flows of the related assets is less than the carrying values
Assets and liabilities acquired in business combinations are accounted for using the acquisition method and recorded at their respective fair values Substantially all goodwill is assigned to the reporting unit that acquires a business A reporting unit is an operating segment as defined in ASC 280
or a business one level below an operating segment if discrete financial information for that business unit is prepared and regularly reviewed by the segment manager The Company conducts annual impairment tests of goodwill in the fourth quarter If an initial assessment indicates it is more likely than not goodwill might be impaired it is evaluated by comparing the reporting unit s estimated fair value to its carrying value An impairment charge would be recorded for the amount by which the carrying value of the reporting unit exceeds the estimated fair value Goodwill is also tested for impairment between annual tests if events or circumstances indicate the fair value of a unit may be less than its carrying value Estimated fair values of reporting units are Level 3 measures and are developed generally
under an income approach that discounts estimated future cash flows using risk adjusted interest rates as well as earnings multiples or other techniques as warranted Fair values are subject to changes in underlying economic conditions
ifiable intangibles consist of intellectual property such as technology patents and trademarks customer relationships and capitalized software Identifiable intangibles are also subject to evaluation for potential impairment if events or circumstances indicate the carrying amount may not be recoverable See Note 10
The Company leases offices manufacturing facilities and equipment and transportation information technology and office equipment under operating lease arrangements Finance lease arrangements are immaterial The Company determines whether an arrangement is or contains a lease at contract inception An arrangement contains a lease if the Company has the right to direct the use of and obtain substantially all of the economic benefits of an identified asset Right of use assets and lease liabilities are recognized at lease commencement based on the present value of lease payments over the lease term Leases with an initial term of 12 months or less are not recognized on the balance sheet and are recorded as short term lease expense The discount rate used to calculate present value is the Company s incremental borrowing rate based on the lease term and the economic environment of the applicable country or region
Certain leases contain renewal options or options to terminate prior to lease expiration which are included in the measurement of right of use assets and lease liabilities when it is reasonably certain they will be exercised The Company has elected to account for lease and non lease components as a single lease component for its offices and manufacturing facilities Some lease arrangements include payments that are adjusted periodically based on actual charges incurred for common area maintenance utilities taxes and insurance or changes in an index or rate referenced in the lease The fixed portion of these payments is included in the measurement of right of use assets and lease liabilities at lease commencement while the variable portion is recorded as variable lease expense The Company s leases typically do not contain material residual value guarantees or restrictive covenants
Warranties vary by product line and are competitive for the markets in which the Company operates Warranties are largely offered to provide assurance that the product will function as intended and generally extend for a period of one to two years from the date of sale or installation Provisions for warranty expense are estimated at the time of sale based on historical experience and adjusted quarterly for any known issues that may arise Product warranty expense is less than one half of one percent of sales
Emerson is a global manufacturer that designs and manufactures products and delivers services that bring technology and engineering together to provide innovative solutions for its customers The Company evaluates its contracts with customers to identify the promised goods or services and recognizes revenue for the identified performance obligations at the amount the Company expects to be entitled to in exchange for those goods or services A performance obligation is a promise in a contract to transfer a distinct good or service to a customer Revenue is recognized when or as performance obligations are satisfied and control has transferred to the customer typically when products are shipped or delivered title and risk of loss pass to the customer and the Company has a present right to payment The majority of the Company s revenues relate to a broad offering of manufactured products and software which are recognized at the point in time when control transfers generally in accordance with shipping terms or the first day of the contractual term for software A portion of the Company s revenues relate to the sale of post contract customer support parts and labor for repairs and engineering services In some circumstances contracts include multiple performance obligations where revenue is recognized separately for each good or service as
of the Company s revenues These revenues primarily relate to projects in the Control Systems Software segment where revenue is recognized using the percentage of completion method to reflect the transfer of control over time and software maintenance contracts in the Software and Control business group where revenue is typically recognized on a straight line basis Approximately
For projects where revenue is recognized over time the Company typically uses an input method to determine progress and recognize revenue based on costs incurred The Company believes costs incurred closely correspond with its performance under the contract and the transfer of control to the customer For software maintenance contracts revenue is recognized ratably over the maintenance term
In sales arrangements that involve multiple performance obligations revenue is allocated based on the relative standalone selling price for each performance obligation Observable selling prices from actual transactions are used whenever possible In other instances the Company determines the standalone selling price based on third party pricing or management s best estimate Generally contract duration is short term and cancellation termination or refund provisions apply only in the event of contract breach and are rarely invoked
Payment terms vary but are generally short term in nature The Company s long term contracts where revenue is generally recognized over time are typically billed as work progresses in accordance with the contract terms and conditions either at periodic intervals or upon achievement of certain milestones The timing of revenue recognition and billings under these contracts results in either unbilled receivables contract assets when revenue recognized exceeds billings or customer advances contract liabilities when billings exceed revenue recognized Unbilled receivables are reclassified to accounts receivable when an unconditional right to consideration exists typically when a milestone in the contract is achieved The Company does not evaluate whether the transaction price includes a significant financing component for contracts where the time between cash collection and performance is less than one year
Certain arrangements with customers include variable consideration typically in the form of rebates cash discounts or penalties In limited circumstances the Company sells products with a general right of return In most instances returns are limited to product quality issues The Company records a reduction to revenue at the time of sale to reflect the ultimate amount of consideration it expects to receive The Company s estimates are updated quarterly based on historical experience trend analysis and expected market conditions Variable consideration is typically not constrained at the time revenue is recognized See Notes 2 and 20 for additional information about the Company s revenues
ofile The Company s foreign currency exposures relate to transactions denominated in currencies that differ from the functional currencies of its business units primarily in euros Mexican pesos and Chinese yuan As part of the Company s risk management strategy derivative instruments are selectively used in an effort to minimize the impact of these exposures Foreign exchange forwards and options are utilized to hedge foreign currency exposures impacting sales or cost of sales transactions firm commitments and the fair value of assets and liabilities Non U S dollar obligations are utilized to reduce foreign currency risk associated with the Company s net investments in foreign operations All derivatives are associated with specific underlying exposures and the Company does not hold derivatives for trading or speculative purposes The duration of hedge positions is generally two years or less except for the Company s net investment hedges
and recognized at fair value For derivatives hedging variability in future cash flows any gain or loss is deferred in stockholders equity and recognized when the underlying hedged transaction impacts earnings The majority of the Company s derivatives that are designated as hedges and qualify for hedge accounting are cash flow hedges For derivatives hedging the fair value of existing assets or liabilities both the gain or loss on the derivative and the offsetting loss or gain on the hedged item are recognized in earnings each period Currency fluctuations on non U S dollar obligations that have been designated as hedges of net investments in foreign operations are recognized in accumulated other comprehensive income loss and reclassified to income in the same period when a foreign operation is sold or substantially liquidated and the gain or loss related to the sale is included in income To the extent that any hedge is not fully effective at offsetting changes in the underlying hedged item there could be a net earnings impact
dge economic exposures that do not receive hedge accounting under ASC 815 The underlying exposures for these hedges relate primarily to the revaluation of certain foreign currency denominated assets and liabilities In addition in 2022 AspenTech entered into foreign currency forward contracts to
the Micromine purchase price On June 21 2023 AspenTech terminated all outstanding foreign currency forward contracts and on August 1 2023 announced the termination of the agreement to purchase Micromine Gains or losses on derivative instruments not designated as hedges are recognized in the income statement immediately
Counterparties to derivative 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 on 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 at year end Risk from credit loss when derivatives are in asset positions is not considered material The Company has master netting arrangements in place with its counterparties that allow the offsetting of certain derivative related amounts receivable and payable when settlement occurs in the same period Accordingly counterparty balances are netted in the consolidated balance sheet and are reported in other current assets or accrued expenses as appropriate depending on positions with counterparties as of the balance sheet date See Note 11
The provision for income taxes is based on pretax income reported in the consolidated statements of earnings and tax rates currently enacted in each jurisdiction Certain income and expense items are recognized in different time periods for financial reporting and income tax filing purposes and deferred income taxes are provided for the effect of temporary differences The Tax Cuts and Jobs Act subjects the Company to U S tax on global intangible low taxed income earned by certain of its non U S subsidiaries The Company has elected to recognize this tax as a period expense when it is incurred The Company also provides for withholding taxes and any applicable U S income taxes on earnings intended to be repatriated from non U S locations No provision has been made for these taxes on approxim
f undistributed earnings of non U S subsidiaries as of September 30 2024 as these earnings are considered indefinitely invested or otherwise retained for continuing international operations Recognition of withholding taxes and any applicable U S income taxes on undistributed non U S earnings would be triggered by a management decision to repatriate those earnings Determination of the amount of taxes that might be paid on these undistributed earnings if eventually remitted is not practicable See Note 16
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
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 lice
Revenue recognized for 2024 for performance obligations that were satisfied in previous periods including cumulative catchup adjustments on the Company s long term contracts was not material Capitalized amounts related to incremental costs to obtain customer contracts and costs to fulfill contracts are immaterial
As of September 30 2024 the Company s backlog relating to unsatisfied or partially unsatisfied performance obligations in contracts with its customers was approximately 8 4 billion of which approximately 1 3 billion
Basic earnings per common share consider only the weighted average of common shares outstanding while diluted earnings per common share which are calculated using the two class method also consider the dilutive effects of stock options and incentive shares An inconsequential number of shares of common stock were excluded from the computation of dilutive earnings per share in 2024 2023 and 2022 as the effect would have been antidilutive Earnings allocated to participating securities were inconsequential for all years presented
On October 11 2023 the Company completed the acquisition of National Instruments Corporation NI 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 approximately
The following unaudited proforma consolidated condensed financial results of operations are presented as if the acquisition of NI occurred on October 1 2022 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
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 a diversified high performance industrial software leader with greater scale capabilities and technologies defined as AspenTech herein Upon closing of the transaction Emerson beneficially owned 55 percent
of the outstanding shares of 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 the Emerson Industrial Software Business continues at its historical basis The Company recorded a noncontrolling interest of
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
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
ober 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
The pro forma results for 2022 exclude 91 of transaction costs which were included in the Company s reported results for 2022 but were assumed to be incurred in the first quarter of 2021 The pro forma results for 2022 include additional interest expense of 56 related to the issuance of
In 2023 the Company acquired two businesses Flexim which is reported in the Measurement Analytical segment and Afag which is reported in the Discrete Automation segment for 715 net of cash acquired The Company recognized goodwill of 424 none of which is expected to be tax deductible and other identifiable intangible assets of 323 primarily customer relationships and intellectual property with a weighted average useful life of approximately 9 years
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 On August 1 2023 AspenTech announced the termination of the agreement to purchase Micromine AspenTech along with the sellers of Micromine had been waiting to secure a final Russian regulatory approval as a condition to the closing of the transaction As this process continued the timing and requirements necessary to get this approval became increasingly unclear This lack of clarity on the potential for and timing of a successful review led AspenTech and the sellers of Micromine to this mutual course of action AspenTech did not pay any termination fee as part of this arrangement
related to its exit of business operations in Russia The Company had previously announced its intention to exit business operations in 2022 and recognized a pretax loss of 181 190 after tax in total 0 32 per share This charge included a loss of 36 in operations and 145 reported in Other deductions 10 of which is reported in restructuring costs and was primarily non cash Emerson s historical net sales in Russia represented approximately 2 0 percent of consolidated annual sales
In 2022 the Company acquired three other businesses two in the Control Systems Software segment and one in the AspenTech segment for 130 net of cash acquired The three businesses had combined annual sales of approximately 40
In the first quarter of 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 of 2022 358 after tax 0 60 per share and received the remaining 15 related to the pretax gain in the first quarter of 2023 In 2023 the Company received additional distributions totaling 161 122 after tax 0 21 per share and in 2024 received its final distribution of 79 60 after tax 0 10 per share
On May 31 2023 the Company completed the sale of a majority stake in its Climate Technologies business which constitutes the former Climate Technologies segment excluding Therm O Disc which was divested earlier in 2022 to private equity funds managed by Blackstone in a 14 0 billion transaction Emerson received upfront pre tax cash proceeds of approximately 9 7 billion and a note receivable with a face value of 2 25 billion which accrues
non controlling common equity 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 2022 net sales of approximately 5 0 billion and pretax earnings of 1 0 billion The Company recognized a pretax gain of approximately 10 6 billion approximately 8 4 billion after tax including tax expense recognized in prior quarters related to subsidiary restructurings The new standalone business is named Copeland
On June 6 2024 the Company entered into a definitive agreement to sell its 40 percent non controlling common equity interest in Copeland to private equity funds managed by Blackstone for 1 5 billion The transaction closed on August 13 2024 and the Company recognized a gain of 539 435 after tax in discontinued operations In addition the equity method losses related to the Company s non controlling common equity interest in Copeland which were reported since May 2023 in Other deductions net have been reclassified and are now reported as discontinued operations for all periods presented and are included within Climate Technologies in Other deductions net in the table below See Note 8 for further details
On October 31 2022 the Company completed the divestiture of its InSinkErator business which manufactures food waste disposers to Whirlpool Corporation for 3 0 billion This business had net sales of 630 and pretax earnings of 152 in 2022 The Company recognized a pretax gain of approximately 2 8 billion approximately 2 1 billion after tax in the first quarter of 2023
pleted 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 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 all years presented and were as follows
Climate Technologies results for 2024 included a gain on the sale of the Company s 40 percent non controlling common equity interest in Copeland of 539 435 after tax while 2023 include lower expense of 96 due to ceasing depreciation and amortization upon the held for sale classification and 57 of transaction related costs reported in Other deductions net Equity method losses related to the Company s 40 percent non controlling common equity interest in Copeland were 125 and 177 for 2024 and 2023 respectively Income taxes for 2023 included approximately 2 2 billion for the gain on the Copeland transaction and subsidiary restructurings and approximately 660 related to the gain on the InSinkErator divestiture
approximately 2 3 billion of income taxes paid related to the gains on the Copeland transaction and InSinkErator divestiture and subsidiary restructurings related to the Copeland transaction Cash from investing activities for 2024 reflects the proceeds of approximately 1 5 billion related to the sale of the Company s 40 percent non controlling common equity interest in Copeland and 1 9 billion related to the sale of the note receivable while 2023 reflects the proceeds of approximately 9 7 billion related to the Copeland transaction and approximately 3 0 billion related to the InSinkErator divestiture
Intangibles amortization for 2024 included 560 related to the NI acquisition while 2023 included 258 related to the Heritage AspenTech acquisition compared to 97 in 2022 Foreign currency transaction losses included a mark to market gain of 24 in 2023 related to foreign currency forward contracts entered into by AspenTech to mitigate the impact of foreign currency exchange associated with the Micromine purchase price compared to a mark to market loss of 50 in 2022 On June 21 2023 AspenTech terminated all outstanding foreign currency forward contracts The Company recognized a mark to market gain of 56 in 2023 related to its equity investment in National Instruments Corporation see Note 11 for further information In 2024 Other includes a loss of 48 related to the divestiture of two small businesses see Note 4 Other is also composed of several other items including pension expense litigation costs provision for bad debt and other items none of which is individually significant
Each year the Company incurs costs to size its businesses to levels appropriate for current economic conditions and to continually improve its cost structure and operational efficiency deploy assets globally and remain competitive on a worldwide basis Costs result from numerous individual actions implemented across the Company s various operating units on an ongoing basis and can include costs for moving facilities to best cost locations restarting plants after relocation or geographic expansion to better serve local markets reducing headcount or the number of facilities exiting certain product lines and other costs resulting from asset deployment decisions such as contract termination costs asset write downs and vacant facility costs
luded workforce reductions of approximately 2 250 700 and 2 150 positions and the exit of twenty two ten and seven production facilities and sales offices worldwide respectively Corporate restructuring for 2024 includes 43 of integration related stock compensation expense attributable to NI
The tables above do not include 16 20 and 40 of costs related to restructuring actions incurred in 2024 2023 and 2022 respectively that are required to be reported in cost of sales and selling general and administrative expenses
As discussed in Note 5 the Company completed the divestiture of a majority stake in Copeland on May 31 2023 and received upfront pre tax cash proceeds of approximately 9 7 billion and a note receivable with a face value of 2 25 billion while retaining a 40 percent non controlling common equity intere
st in Copeland As a result of the transaction the Company deconsolidated Copeland from its financial statements as it no longer had a controlling interest and initially recognized its common equity investment and note receivable at fair values of 1 359 and 2 052 respectively
On June 6 2024 the Company entered into definitive agreements to sell its 40 percent non controlling common equity interest in Copeland to private equity funds managed by Blackstone for 1 5 billion and its note receivable to Copeland for 1 9 billion and the transactions were subsequently completed in August 2024 As a result of these transactions the equity interest and note receivable are reported as held for sale in the prior year and the gain on the sale of the Company s non controlling common equity interest in Copeland and the historical equity method losses which were reported since May 2023 in Other deductions net have been reclassified and are now reported as discontinued operations for all periods presented see Note 5
The Company recognized non cash interest income on the note receivable through the date of the agreement of 86 and 41 in 2024 and 2023 respectively which is reported in Interest income from related party within continuing operations and capitalized to the carrying value of the note Upon entering into the note agreement the Company recorded a pretax loss of 279 217 after tax 0 38 per share to adjust the carrying value of the note to 1 9 billion to reflect the transaction price
Summarized financial information for Copeland for 2024 and 2023 is presented below Copeland s results only reflect activity subsequent to the Company s divestiture of its majority stake and through the completion of the sale of the 40 percent non controlling common equity interest
Short term lease expense and sublease income were immaterial for the years ended September 30 2024 2023 and 2022 Cash paid for operating leases is classified within operating cash flows from continuing operations and was 202 170 and 163 for the years ended September 30 2024 2023 and 2022 respectively Operating lease right of use asset additions were 250 247 and 94 for the years ended September 30 2024 2023 and 2022 respectively
The following table summarizes the balances of the Company s operating lease right of use assets and operating lease liabilities as of September 30 2023 and 2024 the vast majority of which relates to offices and manufacturing facilities
The weighted average remaining lease term for operating leases was 7 7 years and 6 2 years and the weighted average discount rate was 4 4 percent and 4 2 percent as of September 30 2024 and September 30 2023 respectively
As of September 30 2024 the notional amount of foreign currency hedge positions was approximately 3 3 billion All derivatives receiving hedge accounting are cash flow hedges The majority of hedging gains and losses deferred as of September 30 2024 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 Cash flows related to foreign currency hedges are classified within operating cash flows
In 2019 the Company issued euro denominated debt of 1 5 billion of which 500 was repaid in 2024 The outstanding 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 Cash flows related to the euro denominated debt are classified within financing cash flows
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
The Company had an equity investment in National Instruments Corporation NI valued at 136 as of September 30 2023 reported in Other noncurrent assets and recognized a mark to market gain of 56 in 2023 On April 12 2023 Emerson announced an agreement to acquire NI for 60 per share in cash for the remaining shares not already owned by Emerson and the transaction closed on October 11 2023 See Note 4
tively as of September 30 2024 and 2023 which was lower than the carrying value by 705 and 1 275 respectively The fair values of foreign currency contracts were reported in Other current assets and Accrued expenses as summarized below
The fair value of the Company s equity investment in National Instruments falls within Level 1 and was based on the most recent quoted closing market price from its principal exchange for the period ended September 30 2023
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
Long term debt maturing during each of the four years after 2025 is 562 760 497 and 998 respectively Total interest paid on long term debt was approximately 193 200 and 199 in 2024 2023 and 2022 respectively
During the year the Company repaid 529 of 0 375 euro notes that matured in May 2024 In 2023 the Company repaid 500 of 2 625 notes that matured in February 2023 and AspenTech repaid 264 to pay off the outstanding balance on its existing term loan facility plus accrued interest
Total net periodic pension income increased in 2024 primarily due to higher return on plan assets partially offset by higher interest costs Net periodic pension expense income includes 7 and 16 and defined contribution expense includes 14 and 32 for 2023 and 2022 respectively related to discontinued operations For defined contribution plans the Company makes cash contributions based on plan requirements which are expensed as incurred
enefits effective October 1 2016 Effective January 1 2025 the Company is implementing a new profit sharing retirement program for all U S non union employees Eligible employees will receive a base contribution to a cash balance account administered within the principal U S defined benefit plan to be funded by surplus pension assets as well as a potential profit sharing contribution to their defined contribution account After December 31 2024 future service for employees that had continued to accrue benefits in the principal U S defined benefit plan will be frozen
Actuarial losses in 2024 were largely due to a decrease in the discount rates used to estimate the benefit obligations for the U S and non U S plans which were 4 97 and 4 7 at September 30 2024 compared to 6 03 and 5 2 at September 30 2023 respectively A
lans which were 6 03 and 5 2 at September 30 2023 compared to 5 64 and 4 9 at September 30 2022 respectively As of September 30 2024 U S pension plans were overfunded by 800 in total including unfunded plans totaling 161 The non U S plans were underfunded by 38 including unfunded plans totaling 230
As of the September 30 2024 and 2023 measurement dates the plans total accumulated benefit obligation was 3 942 and 3 719 respectively The total projected benefit obligation accumulated benefit obligation and fair value of plan assets for individual plans with projected benefit obligations in excess of plan assets were 558 470 and 125 respectively for 2024 and 519 435 and 118 respectively for 2023 The total projected benefit obligation accumulated benefit obligation and fair value of plan assets for individual plans with accumulated benefit obligations in excess of plan assets were 515 452 and 92 respectively for 2024 and 469 413 and 77 respectively for 2023
Future benefit payments by U S plans are estimated to be 272 in 2025 262 in 2026 260 in 2027 255 in 2028 250 in 2029 and 1 165 in total over the five years 2030 through 2034 Based on foreign currency exchange rates as of September 30 2024 future benefit payments by non U S plans are estimated to be 63 in 2025 61 in 2026 64 in 2027 68 in 2028 73 in 2029 and 374 in total over the five years 2030 through 2034 The Company expects to contribute
The discount rate for the U S retirement plans was 4 97 percent as of September 30 2024 An actuarially developed company specific yield curve is used to determine the discount rate To determine the service and interest cost components of pension expense for its U S retirement plans the
Company applies the specific spot rates along the yield curve rather than the single weighted average rate to the projected cash flows to provide more precise measurement of these costs The expected return on plan assets assumption is determined by reviewing the investment returns of the plans for the past 10 years plus longer term historical returns of an asset mix approximating the Company s asset allocation targets and periodically comparing these returns to expectations of investment advisors and actuaries to determine whether long term future returns are expected to differ significantly from the past
The primary objective for the investment of pension assets is to secure participant retirement benefits by earning a reasonable rate of return Plan assets are invested consistent with the provisions of the prudence and diversification rules of ERISA and with a long term investment horizon The Company continuously monitors the value of assets by class and routinely rebalances to remain within target allocations The equity strategy is to minimize concentrations of risk by investing primarily in a mix of companies that are diversified across geographies market capitalization style sectors and industries worldwide The approach for bonds emphasizes investment grade corporate and government debt with maturities matching the duration of pension liabilities The bonds strategy also includes a high yield element which is generally shorter in duration For diversification a small portion of U S plan assets is allocated to private equity partnerships and real asset fund investments providing opportunities for above market returns Leveraging techniques are not used and the use of derivatives in any fund is limited and inconsequential
U S equities reflect companies domiciled in the U S including multinational companies International equities are comprised of companies domiciled in developed nations outside the U S Emerging market equities are comprised of companies domiciled in portions of Asia Eastern Europe and Latin America Corporate bonds represent investment grade debt of issuers primarily from the U S Government bonds include investment grade instruments issued by federal state and local governments primarily in the U S Other includes cash interests in mixed asset funds investing in commodities natural resources agriculture real estate and infrastructure funds life insurance contracts U S and shares in certain general investment funds of financial institutions or insurance arrangements non U S that typically ensure no market losses or provide for a small minimum return guarantee
Valuations of Level 1 assets for all classes are based on quoted closing market prices from the principal exchanges where the individual securities are traded Cash is valued at cost which approximates fair value Debt securities categorized as Level 2 assets are generally valued based on independent broker dealer bids or by comparison to other debt securities having similar durations yields and credit ratings Valuation techniques and inputs for these assets include discounted cash flow analysis earnings multiple approaches recent transactions transfer restrictions prevailing discount rates volatilities credit ratings and other factors In the Other class interests in mixed asset funds are Level 2 and U S life insurance contracts and non U S general fund investments and insurance arrangements are
Level 3 Investments measured at NAV are primarily nonexchange traded commingled or collective funds where the underlying securities have observable prices available from active markets and typically provide liquidity daily or within a few days The NAV category also includes fund investments in private equities real estate and infrastructure where the fair value of the underlying assets is determined by the investment manager Total unfunded commitments for the private equity funds were approximately 90 at September 30 2024 These investments cannot be redeemed but instead the funds will make distributions through liquidation of the underlying assets which is expected to occur over approximately the next 10 years The real estate and infrastructure funds typically offer quarterly redemption
The Company also sponsors unfunded postretirement benefit plans primarily health care for certain U S retirees and their dependents The Company s principal U S postretirement plan has been frozen to new employees since 1993 The postretirement benefit liability
for all plans was 71 and 72 as of September 30 2024 and 2023 respectively and included deferred actuarial gains in accumulated other comprehensive income of 68 and 95 respectively Service and interest costs are negligible and more than offset by the amortization of deferred actuarial gains which resulted in net postretirement income of 18 for 2024 19 for 2023 and 12 for 2022 Benefits paid
were 10 and 9 for 2024 and 2023 respectively and the Company estimates that future health care benefit payments will be approximately 7 per year for 2025 through 2029 and 27 in total over the five years 2030 through 2034
The Company is a party to a number of pending legal proceedings and claims including those involving general and product liability including asbestos and other matters several of which claim substantial amounts of damages The Company accrues for such liabilities when it is probable that future costs including legal fees and expenses will be incurred and such costs can be reasonably estimated Accruals are based on developments to date management s estimates of the outcomes of these matters and the Company s experience in contesting litigating and settling similar matters The Company engages an outside expert to develop an actuarial estimate of its expected costs to resolve all pending and future asbestos claims including defense costs as well as its related insurance receivables The reserve for asbestos litigation which is recorded on an undiscounted basis is based on projected claims through 2065 See Note 21 for additional information about the Company s asbestos liabilities and related insurance receivables
Although it is not possible to predict the ultimate outcome of these matters the Company historically has been largely successful in defending itself against claims and suits that have been brought against it and will continue to defend itself vigorously in all such matters While the Company believes a material adverse impact is unlikely given the inherent uncertainty of litigation a remote possibility exists that a future development could have a material adverse impact on the Company The Company enters into certain indemnification agreements in the ordinary course of business in which the indemnified party is held harmless and is reimbursed for losses incurred from claims by third parties usually up to a prespecified limit In connection with divestitures of certain assets or businesses the Company often provides indemnities to the buyer with respect to certain matters including for example environmental or unidentified tax liabilities related to periods prior to the disposition Because of the uncertain nature of the indemnities the maximum liability cannot be quantified As such contingent liabilities are recorded when they are both probable and reasonably estimable Historically payments under indemnity arrangements have been inconsequential
ontingent liabilities including guarantees pending litigation taxes and other claims that management believes will be material in relation to the Company s financial statements nor were there any material commitments outside the normal course of business
Test Measurement purchase accounting reflects a lower tax benefit on inventory step up amortization The increase in Other in 2024 includes the losses on two small divestitures which were non deductible for tax purposes See Note 4 for further details The increase in Other in 2023 compared to 2022 was driven by a 2 percentage point impact due to an increase in unrecognized tax benefits
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 included 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
Following are changes in unrecognized tax benefits before considering recoverability of any cross jurisdictional tax credits U S federal state and non U S and temporary differences The amount of unrecognized tax benefits is not expected to change significantly in the next 12 months
If none of the unrecognized tax benefits shown is ultimately paid the tax provision and the calculation of the effective tax rate would be favorably impacted by 246 which is net of cross jurisdictional tax credits and temporary differences The Company accrues interest and penalties related to income taxes in income tax expense Total expense income recognized was 6 1 and 7 in 2024 2023 and 2022 respectively As of September 30 2024 and 2023 total accrued interest and penalties were 27 and 22 respectively
The U S is the major jurisdiction for which the Company files income tax returns Examinations for U S federal are complete through 2017 except for 2014 The status of state and non U S tax examinations varies due to the numerous legal entities and jurisdictions in which the Company operates
ximately 950 3 310 and 720 in 2024 2023 and 2022 respectively Taxes paid in 2023 included approximately 2 3 billion related to the gains on the sale of the majority stake in Copeland and the InSinkErator divestiture and subsidiary restructurings related to the Copeland transaction Taxes related to the Company s sale of its non controlling common equity interest in Copeland will be paid in 2025 Approximately
The Company s stock based compensation plans include performance shares restricted stock restricted stock units and stock options Although the Company has discretion shares distributed under these plans are issued from treasury stock
In fiscal 2022 the Company changed the terms of its annual performance share awards that were issued in the first quarter The terms meet the criteria for equity classification in accordance with ASC 718
As a result of the Company s acquisition of NI outstanding NI restricted stock units and performance stock units were assumed by Emerson and converted at the time of the acquisition into Emerson time based restricted stock units but otherwise subject to the same terms and conditions including vesting and payment schedule as the awards originally issued by NI
As of September 30 2024 total unrecognized compensation expense related to unvested shares awarded under Emerson plans was 190 which is expected to be recognized over a weighted average period of 1 1 years while the total future unrecognized compensation cost related to AspenTech stock options RSUs and performance stock un
The Company s incentive shares plans include performance shares awards which distribute the value of common stock to key management employees at the conclusion of a three year period subject to certain operating performance conditions and other terms and restrictions Dividend equivalents are only paid on earned awards after the performance period has concluded Compensation expense for performance shares is recognized over the service period based on the number of shares ultimately expected to be earned
Additionally the rights to receive approximately 518 000 and 928 000 shares awarded in 2024 and 2023 respectively are outstanding and contingent upon the Company achieving its performance objectives through 2026 and 2025 respectively
Incentive shares plans also include restricted stock awards and restricted stock units Restricted stock awards involve distribution of common stock to key management employees subject to cliff vesting at the end of service periods ranging from three to ten years while restricted stock units granted to employees vest over a three year period The fair value of restricted stock awards and restricted stock units is determined based on the average of the high and low market prices of the Company s common stock on the date of grant with compensation expense recognized ratably over the applicable vesting period In 2024 approximately 55 000 shares of restricted stock and approximately 1 462 000 restricted stock units vested as a result of participants fulfilling the applicable service requirements Consequently approximately 38 000 shares and 1 404 000 units were issued while 17 000 shares and 58 000 units were withheld for income taxes in accordance with minimum withholding requirements As of September 30 2024 there were approximately 2 269 000 shares of unvested restricted stock and restricted stock units outstanding
In addition to the employee stock option and incentive share plans in 2024 the Company awarded approximately 19 000 restricted stock units under the restricted stock plan for non management directors As of September 30 2024 approximately 38 000 shares were available for issuance under this plan
There were no stock option grants in 2024 2023 and 2022 The Company s stock option plans expired in 2021 Previously awarded stock options allow key officers and employees to purchase common stock at specified prices which are equal to 100 percent of the closing market price of the Company s stock on the date of grant Options generally vest one third in each of the three years subsequent to grant and expire 10 years from the date of grant
As discussed in Note 4 Emerson completed the acquisition of Heritage AspenTech in the third quarter of 2022 AspenTech as defined in Note 4 operates as a separate publicly traded company and has various stock based compensation plans including stock options restricted stock units and performance stock units which are settled in their own common stock and are accounted for as equity awards Restricted stock units and performance stock units generally vest over three years In fiscal 2023 and 2024 the Company granted performance stock units with both a performance and service condition The performance condition relates to the attainment of predefined goals based on annual contract value and free cash flows On a quarterly basis management evaluates the probability that the threshold performance goals will be achieved if at all and the anticipated level of attainment to determine the amount of compensation expense to record in the condensed consolidated financial statements Option awards have been granted with an exercise price equal to the market closing price of AspenTech s stock on the trading day prior to the grant date These options generally vest over four years and expire within seven years or ten years of grant AspenTech s policy is to issue new shares upon the exercise of vested stock awards
Pursuant to the terms of the transaction agreement between Emerson and Heritage AspenTech each outstanding option to purchase shares of Heritage AspenTech common stock whether vested or unvested that was unexercised as of immediately prior to the closing date was converted into an option to acquire shares of AspenTech Each converted option is subject to the same terms and conditions as applied to the original option In addition each outstanding award of restricted stock units with respect to shares of Heritage AspenTech common stock that were unvested as of immediately prior to the closing date was converted into an award of restricted stock units with respect to shares of AspenTech Each converted restricted stock unit is also subject to the same terms and conditions as applied to the original restricted stock unit
ASC 805 required the Company to determine the fair value of the AspenTech share based payment awards related to the replacement of the Heritage AspenTech share based payment awards and allocate the total fair value based on the services that are attributable to the pre and post combination service periods respectively The portion that is attributable to the pre combination service period was considered part of the consideration transferred for Heritage AspenTech and included as part of the purchase price The portion that is attributable to the post combination service period is recognized as stock based compensation expense in the post combination consolidated financial statements over the remaining requisite service period
AspenTech utilizes the Black Scholes option valuation model for estimating the fair value of options granted The Black Scholes option valuation model incorporates assumptions regarding expected stock price volatility the expected life of the option the risk free interest rate dividend yield and the market value of AspenTech s common stock The expected stock price volatility is determined based on AspenTech s stock s historic prices over a period commensurate with the expected life of the award The expected life of an option represents the period for which options are expected to be outstanding as determined by historic option exercises and cancellations The risk free
condition The 2024 performance stock units vest on a cliff basis in three years based upon the achievement of predefined performance goals with no ability for the awards to vest on an accelerated basis The performance goal relates to i growth in annual contract value over the performance period and ii cumulative free cash flow over the performance period Up to 150 percent of the performance stock units could vest upon achievement of the performance goals Conversely if a minimum performance goal is not met none of the performance stock units will vest
On a quarterly basis management evaluates the probability that the threshold performance goals will be achieved if at all and the anticipated level of attainment to determine the amount of compensation expense to record in the condensed consolidated financial statements
In 2023 AspenTech granted performance stock units with a performance condition and service condition These performance stock units vest on a cliff basis in three years based upon the achievement of predefined performance goals with the ability for 25 percent of granted awards to vest on an accelerated basis in each of the first two years The performance goal relates to the sum of i annual contract value growth and ii free cash flow margin over the
performance period Up to 175 percent of the performance stock units could vest upon achievement of the performance goals Conversely if a minimum performance goal is not met none of the performance stock units will vest
At September 30 2024 23 3 million shares of common stock were reserved for issuance under the Company s stock based compensation plans During 2024 4 4 million common shares were purchased and 2 6 million treasury shares were reissued In 2023 21 3 million common shares were purchased and 1 8 million treasury shares were reissued
segment is a leading global provider of control valves isolation valves shutoff valves pressure relief valves pressure safety valves actuators and regulators for process and hybrid industries These solutions respond to commands from a control system to continuously and precisely control and regulate the flow of liquids or gases to achieve safe operation along with reliability sustainability and optimized performance
segment is a leading supplier of intelligent instrumentation measuring the physical properties of liquids or gases such as pressure temperature level flow acoustics corrosion pH conductivity water quality toxic gases and flame These devices transfer data and asset management information to control systems and automation software allowing process and hybrid industry operators to make educated decisions regarding production reliability sustainability and safety
segment includes solenoid valves pneumatic valves valve position indicators pneumatic cylinders and actuators air preparation equipment pressure and temperature switches electric linear motion solutions programmable automation control systems and software electrical distribution equipment and materials joining solutions used primarily in discrete industries
Pipe working tools include pipe wrenches and cutters pipe threading and roll grooving equipment battery hydraulic tools for press connections drain cleaners and diagnostic systems including sewer inspection cameras and locating equipment Electrical tools include conduit benders and cable pulling equipment battery hydraulic tools for cutting and crimping electrical cable and hole making equipment Other professional tools include water jetters wet dry vacuums commercial vacuums and hand tools
segment provides control systems and software that control plant processes by collecting and analyzing information from measurement devices in the plant These technologies determine optimal settings with software based on a customer s specific algorithms and use that information to adjust valves pumps motors drives and other control hardware for maximum product quality process efficiency sustainability and safety These solutions include distributed control systems safety instrumented systems SCADA systems application software digital twins asset performance management and cybersecurity Control Systems Software solutions are predominantly used by process and hybrid manufacturers
segment provides software connected automated test and measurement systems that enable enterprises to bring products to market faster and at a lower cost The Test Measurement business spans the full range of customer needs including modular instrumentation data acquisition and control solutions and general purpose development software
is a global leader in asset optimization software that enables industrial manufacturers to design operate and maintain their operations for maximum performance AspenTech combines decades of modeling simulation and optimization capabilities with industrial operations expertise and applies advanced analytics to improve the profitability and sustainability of production assets The purpose built software drives value for customers by improving operational efficiency and maximizing productivity reducing unplanned downtime and safety risks and minimizing energy consumption and emissions
The principal distribution method for each segment is direct sales forces although the Company also uses independent sales representatives and distributors Due to its global presence certain of the Company s international operations are subject to risks including the stability of governments and business conditions in foreign countries which could result in adverse changes in exchange rates changes in regulations or disruption of operations
The primary income measure used for assessing segment performance and making operating decisions is earnings before interest and income taxes Certain expenses are reported at Corporate including stock compensation expense and a portion of pension and postretirement benefit costs Corporate and other includes unallocated corporate expenses acquisition divestiture costs first year acquisition accounting charges which include fair value adjustments related to inventory backlog and deferred revenue and other items Corporate assets are primarily comprised of cash and cash equivalents investments certain fixed assets and assets held for sale Summarized below is information about the Company s operations by business segment and by geography
elated to the Company s exit of business operations in Russia compared to a loss of 181 in 2022 Corporate and other in 2023 also included a mark to market gain of 24 related to foreign currency forward contracts entered into by AspenTech and a mark to market gain of 56 related to the Company s equity investment in National Instruments Corporation see Note 6
On November 5 2024 the Company announced a proposal to acquire all outstanding shares of common stock of AspenTech not already owned by Emerson for 240 per share in cash The Company currently owns approximately 57 percent of AspenTech s outstanding shares of common stock Also on November 5 2024 the Company announced that it is exploring strategic alternatives including a cash sale for its Safety Productivity segment
We have audited the accompanying consolidated balance sheets of Emerson Electric Co and subsidiaries the Company as of September 30 2024 and 2023 the related consolidated statements of earnings comprehensive income equity and cash flows for each of the years in the three year period ended September 30 2024 and the related notes collectively the consolidated financial statements We also have audited the Company s internal control over financial reporting as of September 30 2024 based on criteria established in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission
In our opinion the consolidated financial statements referred to above present fairly in all material respects the financial position of the Company as of September 30 2024 and 2023 and the results of its operations and its cash flows for each of the years in the three year period ended September 30 2024 in conformity with U S generally accepted accounting principles Also in our opinion the Company maintained in all material respects effective internal control over financial reporting as of September 30 2024 based on criteria established in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission
responsible for these consolidated financial statements for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Report on Internal Control Over Financial Reporting Our responsibility is to express an opinion on the Company s consolidated financial statements and an opinion on the Company s internal control over financial reporting based on our audits We are a public accounting firm registered with the Public Company Accounting Oversight Board United States PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement whether due to error or fraud and whether effective internal control over financial reporting was maintained in all material respects
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the consolidated financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the consolidated financial statements Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk Our audits also included performing such other procedures as we
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate beca
ed or required to be communicated to the audit committee and that 1 relate to accounts or disclosures that are material to the consolidated financial statements and 2 involved our especially challenging subjective or complex judgments The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matters below providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate
We identified the evaluation of the sufficiency of audit evidence over net sales as a critical audit matter Net sales are recognized primarily from the sale of tangible products from hundreds of Company locations around the world Evaluating the sufficiency of audit evidence obtained required especially subjective auditor judgment because of the geographical dispersion of the Company s net sales generating activities This included determining the Company locations at which procedures were performed and the supervision and review of procedures performed at those locations
The following are the primary procedures we performed to address this critical audit matter We applied auditor judgment to determine the nature and extent of procedures to be performed over net sales including the determination of the Company locations at which those procedures were to be performed At each Company location where procedures were performed we
Assessed the recorded net sales by selecting a sample of transactions and compared the amounts recognized for consistency with underlying documentation including contracts with customers and shipping documentation
As discussed in Notes 4 and 8 to the consolidated financial statements on October 11 2023 the Company completed the acquisition of National Instruments Corporation for a total purchase consideration of 8 7 billion The estimated intangible assets attributable to the transactions included customer relationships and developed technology intangible assets with acquisition date fair values of 3 36 billion and 1 57 billion respectively
We identified the evaluation of the acquisition date fair value of the customer relationships and developed technology intangible assets as a critical audit matter A high degree of subjective and complex auditor judgment was required to evaluate key assumptions used to value these acquired intangible assets Specifically key assumptions included projected revenue and customer attrition for the customer relationships intangible asset and projected revenue and obsolescence rates for the developed technology intangible asset Changes to these assumptions could have had a significant impact on the fair value of such assets In addition
The following are the primary procedures we performed to address this critical audit matter We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company s business combination process including controls related to the development of the projected revenue customer attrition and obsolescence rate assumptions used in the Company s valuations of intangible assets We evaluated the projected revenue used by the Company by 1 comparing to historical results of the acquired entity and publicly available information for peer companies and 2 inquiring of individuals outside of the accounting function about projected revenue and the process used to develop it In addition we compared the Company s projected revenue for the acquired entity to their actual revenue subsequent to the acquisition to evaluate the C
The Company maintains a system of disclosure controls and procedures which is designed to ensure that information required to be disclosed by the Company in the reports filed or submitted under the Securities Exchange Act of 1934 is recorded processed summarized and reported within the time periods specified in the SEC s rules and forms and is accumulated and communicated to management including the Company s certifying officers as appropriate to allow timely decisions regarding required disclosure Based on an evaluation performed the Company s certifying officers have concluded that the disclosure controls and procedures were effective as of September 30 2024 to provide reasonable assurance of achieving these objectives
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 rep
Management s report on internal control over financial reporting and the related report of the Company s auditor KPMG LLP an independent registered public accounting firm set forth in Item 7 and Item 8 respectively of this Annual Report on Form 10 K are hereby incorporated by reference
Information regarding nominees and directors appearing under Proxy Item No 1 Election of Directors in the Emerson Electric Co Notice of Annual Meeting of Shareholders and Proxy Statement for the February 2025 annual shareholders meeting the 2025 Proxy Statement is hereby incorporated by reference Information regarding executive officers is set forth in Part I of this report Information regarding the Audit Committee and Audit Committee Financial Expert appearing under Board and Committee Operations Board and Corporate Governance Committees of Our Board of Directors Board and Committee Operations Corporate Governance and Nominating Committee Nomination Process and Proxy Access in the 2025 Proxy Statement is hereby incorporated by reference
The Company has adopted a Code of Ethics that applies to the Company s Chief Executive Officer Chief Financial Officer and Chief Accounting Officer has posted such Code of Ethics on its website and intends to satisfy the disclosure requirement under Item 5 05 of Form 8 K by posting such information on its website The Company has adopted Charters for its Audit Committee Compensation Committee and Corporate Governance and Nominating Committee and a Code of Business Ethics for directors officers and employees which are available on its website and in print to any stockholder who requests them The Company has also adopted Corporate Governance Principles and Practices which are available on its website and in print to any stockholder who requests them The Corporate Governance section of the Company s website may be accessed as follows www Emerson com Investors Corporate Governance Information appearing under Delinquent Section 16 a Reports and Executive Compensation Compensation Discussion and Analysis Policies Supporting Our Fundamental Principles in the 2025 Proxy Statement is hereby incorporated by reference
Information appearing under Executive Compensation including the information set forth under Compensation Discussion and Analysis Compensation Tables other than Pay vs Performance Board and Committee Operations Corporate Governance and Nominating Committee Director Compensation Board and Committee Operations Compensation Committee including but not limited to the information set forth under Role of Executive Officers and the Compensation Consultant Compensation Committee Report and Compensation Committee Interlocks and Insider Participation in the 2025 Proxy Statement is hereby incorporated by reference
The information contained in the Compensation Committee Report shall not be deemed to be filed with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934 the Exchange Act except to the extent that the Company specifically incorporates such information into future filings under the Securities Act of 1933 or the Exchange Act
The information regarding beneficial ownership of shares by nominees and continuing directors named executive officers five percent beneficial owners and by all directors and executive officers as a group appearing under Ownership of Emerson Equity Securities in the 2025 Proxy Statement is hereby incorporated by reference
Includes the Stock Option and Incentive Shares Plans previously approved by the Company s security holders Shares included in column a assume the maximum payouts where applicable and are as follows i 288 000 shares reserved for outstanding stock option awards ii 1 037 000 shares reserved for performance share awards granted in 2024 iii 1 345 000 shares reserved for performance share awards granted in 2023 iv 1 332 000 shares reserved for performance share awards granted in 2022 and v 1 780 000 shares reserved for outstanding restricted stock unit awards As provided by the Company s Incentive Shares Plans performance shares awards represent a commitment to issue such shares without cash payment by the employee contingent upon achievement of the performance objectives and continued service by the employee
The table above includes awards of 793 000 shares outstanding as of September 30 2024 relating to restricted stock units and performance stock units which were originally issued by National Instruments Corporation and assumed by Emerson and converted into Emerson time based restricted stock units in connection with the acquisition of National Instruments Corporation in early fiscal 2024
The price in column b represents the weighted average exercise price for outstanding options Included in column c are shares remaining available for award under previously approved plans as follows i 16 000 000 under the 2024 Incentive Shares Plan ii 963 000 under the 2015 Incentive Shares Plan iii 503 000 under the 2006 Incentive Shares Plan and iv 38 000 under the Restricted Stock Plan for Non Management Directors
Information appearing under Board and Committee Operations Board and Corporate Governance Review Approval or Ratification of Transactions with Related Persons Certain Business Relationships and Related Party Transactions and Director Independence in the 2025 Proxy Statement is hereby incorporated by reference
2 Financial Statement Schedules All schedules are omitted because they are not required not applicable or the required information is provided in the financial statements or notes thereto contained in this Annual Report on Form 10 K
among Emerson Electric Co Aspen Technology Inc EMR Worldwide Inc Emersub CX Inc and Emersub CXI Inc incorporated by reference to the Company s Form 8 K filed on October 12 2021 File No 1 278 Exhibit 2 1
dated as of March 23 2022 among Emerson Electric Co Aspen Technology Inc EMR Worldwide Inc Emersub CX Inc and Emersub CXI Inc incorporated by reference to Emerson Electric Co Form 10 Q for the quarter ended March 31 2022 filed on May 4 2022 File No 1 278 Exhibit 2 b
dated as of May 3 2022 among Emerson Electric Co Aspen Technology Inc EMR Worldwide Inc Emersub CX Inc and Emersub CXI Inc incorporated by reference to Emerson Electric Co Form 10 Q for the quarter ended March 31 2022 filed on May 4 2022 File No 1 278 Exhibit 2 c
among Emerson Electric Co BCP Emerald Aggregator L P Emerald Debt Merger Sub L L C and Emerald JV Holdings L P incorporated by reference to Emerson Electric Co Form 8 K filed on October 31 2022 File No 1 278 Exhibit 2 1
Unit Purchase Agreement dated as of June 6 2024 among Emersub 21 LLC Emersub 22 LLC Humboldt Hermetic Motor Corp Emersub XLVI Inc BCP Emerald Aggregator L P Emerald JV Holdings L P and Emerald JV Holdings G P LLC
Indenture dated as of December 10 1998 between Emerson Electric Co and Computershare Trust Company N A as successor to Wells Fargo Bank National Association as successor trustee to The Bank of New York Mellon Trust Company N A successor to The Bank of New York Mellon formerly known as the Bank of New York as trustee
Agreement of Resignation Appointment and Acceptance dated as of April 26 2019 by and among Emerson Electric Co Computershare Trust Company N A as successor to Wells Fargo Bank National Association as successor trustee and The Bank of New York Mellon Trust Company N A as resigning trustee
No other long term debt instruments are filed since the total amount of securities authorized under any such instrument does not exceed 10 percent of the total assets of Emerson Electric Co and its subsidiaries on a consolidated basis Emerson Electric Co agrees to furnish a copy of such instruments to the SEC upon request
Amended and Restated Emerson Electric Co Savings Investment Restoration Plan and Forms of Participation Agreement Annual Election Form and Payment Election Form applicable only with respect to benefits after January 1 2005
Forms of Performance Shares Award Certificate and Acceptance of Award used on or prior to November 5 2018 Performance Shares Program Award Summary used on or prior to November 5 2018 and Form of Restricted Shares Award Agreement used on or prior to November 5 2018
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 years ended September 30 2022 2023 and 2024 ii Consolidated Statements of Comprehensive Income for the years ended September 30 2022 2023 and 2024 iii Consolidated Balance Sheets at September 30 2023 and 2024 iv Consolidated Statements of Equity for the years ended September 30 2022 2023 and 2024 v Consolidated Statements of Cash Flows for the years ended September 30 2022 2023 and 2024 and vi Notes to Consolidated Financial Statements for the year ended September 30 2024
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
Pursuant to the requirements of Section 13 or 15 d 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
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below on November 12 2024 by the following persons on behalf of the registrant and in the capacities indicated

Company Name	EMERSON ELECTRIC CO Vist SEC web-site
Category	ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP)
Trading Symbol	EMR