Emerson Electric Co.

05/08/2024 | Press release | Distributed by Public on 05/08/2024 14:18

Quarterly Report for Quarter Ending March 31, 2024 (Form 10-Q)

emr-20240331


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-Q


☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ____________________ to __________________

Commission file number 1-278

EMERSON ELECTRIC CO.
(Exact name of registrant as specified in its charter)
Missouri 43-0259330
(State or other jurisdiction of
incorporation or organization) 		(I.R.S. Employer
Identification No.)
8000 W. Florissant Ave.

P.O. Box 4100
St. Louis, Missouri 63136
(Address of principal executive offices) (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading
Symbol(s) 		Name of each exchange on which registered
Common Stock of $0.50 par value per share EMR New York Stock Exchange
NYSE Chicago
0.375% Notes due 2024 EMR 24 New York Stock Exchange
1.250% Notes due 2025 EMR 25A New York Stock Exchange
2.000% Notes due 2029 EMR 29 New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐








Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock of $0.50 par value per share outstanding at March 31, 2024: 572.1million shares.







PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

Consolidated Statements of Earnings
EMERSON ELECTRIC CO. & SUBSIDIARIES
Three and six months ended March 31, 2023 and 2024
(Dollars in millions, except per share amounts; unaudited)
Three Months Ended
March 31, 		Six Months Ended
March 31,
2023 2024 2023 2024
Net sales $ 3,756 4,376 $ 7,129 8,493
Cost of sales 1,955 2,092 3,708 4,293
Selling, general and administrative expenses 1,000 1,296 2,030 2,573
Gain on subordinated interest - (79) - (79)
Other deductions, net 109 389 229 876
Interest expense (net of interest income of $18, $33, $38 and $73, respectively)
53 57 101 101
Interest income from related party - (31) - (62)
Earnings from continuing operations before income taxes 639 652 1,061 791
Income taxes 134 149 232 156
Earnings from continuing operations 505 503 829 635
Discontinued operations, net of tax of $39, $-, $1,005 and $-, respectively
265 - 2,267 -
Net earnings 770 503 3,096 635
Less: Noncontrolling interests in subsidiaries (22) 2 (27) (8)
Net earnings common stockholders $ 792 501 $ 3,123 643
Earnings common stockholders:
Earnings from continuing operations 530 501 $ 859 643
Discontinued operations 262 - 2,264 -
Net earnings common stockholders $ 792 501 $ 3,123 643
Basic earnings per share common stockholders:
Earnings from continuing operations $ 0.93 0.87 $ 1.49 1.12
Discontinued operations 0.46 - 3.92 -
Basic earnings per common share $ 1.39 0.87 $ 5.41 1.12
Diluted earnings per share common stockholders:
Earnings from continuing operations $ 0.92 0.87 $ 1.48 1.12
Discontinued operations 0.46 - 3.90 -
Diluted earnings per common share $ 1.38 0.87 $ 5.38 1.12
Weighted average outstanding shares:
Basic 570.9 571.4 577.2 571.1
Diluted 573.6 574.1 580.1 573.7
See accompanying Notes to Consolidated Financial Statements.





1



Consolidated Statements of Comprehensive Income
EMERSON ELECTRIC CO. & SUBSIDIARIES

Three and six months ended March 31, 2023 and 2024
(Dollars in millions; unaudited)
Three Months Ended March 31, Six Months Ended March 31,
2023 2024 2023 2024
Net earnings $ 770 503 $ 3,096 635
Other comprehensive income (loss), net of tax:
Foreign currency translation 110 6 351 180
Pension and postretirement (17) (12) (33) (24)
Cash flow hedges 13 (1) 23 2
Total other comprehensive income (loss) 106 (7) 341 158
Comprehensive income 876 496 3,437 793
Less: Noncontrolling interests in subsidiaries (23) 2 (23) (6)
Comprehensive income common stockholders $ 899 494 $ 3,460 799


































See accompanying Notes to Consolidated Financial Statements.





2



Consolidated Balance Sheets
EMERSON ELECTRIC CO. & SUBSIDIARIES

(Dollars and shares in millions, except per share amounts; unaudited)
Sept 30, 2023 Mar 31, 2024
ASSETS
Current assets
Cash and equivalents $ 8,051 2,318
Receivables, less allowances of $100 and $117, respectively
2,518 2,877
Inventories 2,006 2,357
Other current assets 1,244 1,457
Total current assets 13,819 9,009
Property, plant and equipment, net 2,363 2,689
Other assets
Goodwill 14,480 17,964
Other intangible assets 6,263 10,976
Copeland note receivable and equity investment 3,255 3,191
Other 2,566 2,611
Total other assets 26,564 34,742
Total assets $ 42,746 46,440
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current maturities of long-term debt $ 547 3,155
Accounts payable 1,275 1,271
Accrued expenses 3,210 3,238
Total current liabilities 5,032 7,664
Long-term debt 7,610 7,614
Other liabilities 3,506 4,381
Equity
Common stock, $0.50 par value; authorized, 1,200.0 shares; issued, 953.4 shares; outstanding, 572.0 shares and 572.1 shares, respectively
477 477
Additional paid-in-capital 62 158
Retained earnings 40,070 40,108
Accumulated other comprehensive income (loss) (1,253) (1,097)
Cost of common stock in treasury, 381.4 shares and 381.3 shares, respectively
(18,667) (18,746)
Common stockholders' equity 20,689 20,900
Noncontrolling interests in subsidiaries 5,909 5,881
Total equity 26,598 26,781
Total liabilities and equity $ 42,746 46,440
See accompanying Notes to Consolidated Financial Statements.





3



Consolidated Statements of Equity
EMERSON ELECTRIC CO. & SUBSIDIARIES

Three and six months ended March 31, 2023 and 2024
(Dollars in millions; unaudited)
Three Months Ended March 31, Six Months Ended March 31,
2023 2024 2023 2024
Common stock $ 477 477 477 477
Additional paid-in-capital
Beginning balance 112 140 57 62
Stock plans 26 51 81 170
AspenTech purchases of common stock - (33) - (74)
Ending balance 138 158 138 158
Retained earnings
Beginning balance 30,076 39,910 28,053 40,070
Net earnings common stockholders 792 501 3,123 643
Dividends paid (per share: $0.520, $0.525, $1.040 and $1.050, respectively)
(297) (303) (605) (605)
Ending balance 30,571 40,108 30,571 40,108
Accumulated other comprehensive income (loss)
Beginning balance (1,255) (1,090) (1,485) (1,253)
Foreign currency translation 111 6 347 178
Pension and postretirement (17) (12) (33) (24)
Cash flow hedges 13 (1) 23 2
Ending balance (1,148) (1,097) (1,148) (1,097)
Treasury stock
Beginning balance (18,683) (18,763) (16,738) (18,667)
Purchases - - (2,000) (175)
Issued under stock plans 5 17 60 96
Ending balance (18,678) (18,746) (18,678) (18,746)
Common stockholders' equity 11,360 20,900 11,360 20,900
Noncontrolling interests in subsidiaries
Beginning balance 5,987 5,881 5,952 5,909
Net earnings (loss) (22) 2 (27) (8)
Stock plans 23 22 58 33
AspenTech purchases of common stock - (24) - (55)
Other comprehensive income (1) - 4 2
Ending balance 5,987 5,881 5,987 5,881
Total equity $ 17,347 26,781 17,347 26,781

See accompanying Notes to Consolidated Financial Statements.





4



Consolidated Statements of Cash Flows
EMERSON ELECTRIC CO. & SUBSIDIARIES
Six Months Ended March 31, 2023 and 2024
(Dollars in millions; unaudited)
Six Months Ended
March 31,
2023 2024
Operating activities
Net earnings $ 3,096 635
Earnings from discontinued operations, net of tax (2,267) -
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 523 846
Stock compensation 142 147
Amortization of acquisition-related inventory step-up - 231
Gain on subordinated interest - (79)
Changes in operating working capital (390) (373)
Other, net (227) (206)
Cash from continuing operations 877 1,201
Cash from discontinued operations (391) (43)
Cash provided by operating activities 486 1,158
Investing activities
Capital expenditures (121) (159)
Purchases of businesses, net of cash and equivalents acquired - (8,342)
Proceeds from subordinated interest 15 79
Other, net (76) (68)
Cash from continuing operations (182) (8,490)
Cash from discontinued operations 2,916 1
Cash provided by (used in) investing activities 2,734 (8,489)
Financing activities
Net increase (decrease) in short-term borrowings (31) 2,464
Proceeds from short-term borrowings greater than three months 395 99
Payments of long-term debt (742) (1)
Dividends paid (603) (600)
Purchases of common stock (2,000) (175)
AspenTech purchases of common stock - (129)
Other, net (55) (45)
Cash provided by (used in) financing activities (3,036) 1,613
Effect of exchange rate changes on cash and equivalents 58 (15)
Increase (decrease) in cash and equivalents 242 (5,733)
Beginning cash and equivalents 1,804 8,051
Ending cash and equivalents $ 2,046 2,318
Changes in operating working capital
Receivables $ (63) (35)
Inventories (219) (46)
Other current assets 22 (69)
Accounts payable (98) (46)
Accrued expenses (32) (177)
Total changes in operating working capital $ (390) (373)
See accompanying Notes to Consolidated Financial Statements.





5



Notes to Consolidated Financial Statements
EMERSON ELECTRIC CO. & SUBSIDIARIES

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

(1) BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary for a fair presentation of operating results for the interim periods presented. Adjustments consist of normal and recurring accruals. The consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all disclosures required for annual financial statements presented in conformity with U.S. generally accepted accounting principles (GAAP). For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2023.

(2) REVENUE RECOGNITION

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 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, while a smaller portion is recognized over time or relates to sales arrangements with multiple performance obligations. See Note 14 for additional information about the Company's revenues.

The following table summarizes the balances of the Company's unbilled receivables (contract assets), which are reported in Other assets (current and noncurrent), and its customer advances (contract liabilities), which are reported in Accrued expenses and Other liabilities.
Sept 30, 2023 Mar 31, 2024
Unbilled receivables (contract assets) $ 1,453 1,480
Customer advances (contract liabilities) (897) (1,187)
Net contract assets (liabilities) $ 556 293
The majority of the Company's contract balances relate to (1) arrangements where revenue is recognized over time and payments from customers are made according to a contractual billing schedule, and (2) revenue from term software license arrangements where the license revenue is recognized upfront upon delivery. The decrease in net contract assets was primarily due to the acquisition of National Instruments, which increased contract liabilities by approximately $190, while customer billings slightly exceeded revenue recognized for performance completed during the period. Revenue recognized for the three and six months ended March 31, 2024 included $154 and $522, respectively, that was included in the beginning contract liability balance. Other factors that impacted the change in net contract assets were immaterial. Revenue recognized for the three and six months ended March 31, 2024 for performance obligations that were satisfied in previous periods, including cumulative catchup adjustments on the Company's long-term contracts, was immaterial.

As of March 31, 2024, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately $8.8 billion (of which approximately $1.25 billion was attributable to AspenTech and approximately $500 was attributable to National Instruments). The Company expects to recognize approximately 75 percent of itsremaining performance obligations as revenue over the next 12 months, with the remainder substantially over the following two years.






6



(3) COMMON SHARES

Reconciliations of weighted-average shares for basic and diluted earnings per common share follow. Earnings allocated to participating securities were inconsequential.
Three Months Ended
March 31, 		Six Months Ended
March 31,
2023 2024 2023 2024
Basic shares outstanding 570.9 571.4 577.2 571.1
Dilutive shares 2.7 2.7 2.9 2.6
Diluted shares outstanding 573.6 574.1 580.1 573.7
(4) ACQUISITIONS AND DIVESTITURES

National Instruments

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 $1.7 billion and pretax earnings of approximately $170 for the 12 months ended September 30, 2023. NI is now referred to as Test & Measurement and reported as a new segment in the Software and Control business group, see Note 14.

The following table summarizes the components of the purchase consideration reflected in the acquisition accounting for NI.
Cash paid to acquire remaining NI shares not already owned by Emerson $ 7,833
Payoff of NI debt at closing 634
Total consideration paid in cash at closing 8,467
Fair value of NI shares already owned by Emerson prior to acquisition 137
Value of stock-based compensation awards attributable to pre-combination service 49
Total purchase consideration $ 8,653

The total purchase consideration for NI was allocated to assets and liabilities as follows. Valuations of acquired assets and liabilities are in-process and subject to refinement.

Cash and equivalents $ 135
Receivables 310
Inventory 514
Other current assets 139
Property, plant and equipment 328
Goodwill ($130 expected to be tax-deductible)
3,407
Other intangible assets 5,275
Other assets 120
Total assets 10,228
Accounts payable 52
Accrued expenses 326
Deferred taxes and other liabilities 1,197
Total purchase consideration $ 8,653









7



The estimated intangible assets attributable to the transaction are comprised of the following (in millions):

Amount Estimated Weighted Average Life (Years)
Developed technology $ 1,570 9
Customer relationships 3,360 15
Trade names 210 9
Backlog 135 1
Total $ 5,275

Results of operations for the three and six months ended March 31, 2024 attributable to the NI acquisition include sales of $367 and $749, respectively, and a net loss of $80 and $406, respectively. The net loss included the impact of inventory step-up amortization recorded in the first quarter, intangibles amortization, retention bonuses, stock compensation expense and restructuring.

Pro Forma Financial Information

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).
Three Months Ended March 31, Six Months Ended March 31,
2023 2024 2023 2024
Net Sales $ 4,193 4,376 $ 8,014 8,512
Net earnings from continuing operations common stockholders $ 447 530 $ 306 950
Diluted earnings per share from continuing operations $ 0.77 0.92 $ 0.53 1.65

Pro forma Net sales for the three and six months ended March 31, 2023 include $437 and $885, respectively, attributable to NI.

The pro forma results for the three months ended March 31, 2023 include ongoing intangibles amortization of $107 and backlog amortization of $34, and exclude the mark-to-market gain of $35 recognized in the prior year on the Company's equity investment in National Instruments Corporation (see Note 7).

The pro forma results for the six months ended March 31, 2023 include transaction costs of $198 which were assumed to be incurred in the first quarter of fiscal 2023. These transaction costs include $88 incurred by NI prior to the completion of the transaction and $110 incurred by Emerson in periods subsequent to the first quarter of fiscal 2023. The pro forma results for the six months ended March 31, 2023 also include $212 of ongoing intangibles amortization, backlog amortization of $68, inventory step-up amortization of $213, and retention bonuses of $47, and exclude the mark-to-market gain of $35 recognized in the prior year on the equity investment in National Instruments Corporation.

Other Transactions

In the second quarter of fiscal 2024, the Company received its final distribution of $79 related to its subordinated interest in Vertiv. In addition, the Company divested a small business in the Final Control segment and recognized a non-cash lossof $39.

In the fourth quarter of fiscal 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 $423 (none of which is expected to be tax deductible) and other





8



identifiable intangible assets of $323, primarily customer relationships and intellectual property with a weighted-average useful life of approximately 9 years.

On March 31, 2023, Emerson completed the divestiture of Metran, its Russia-based manufacturing subsidiary. In the first quarter of fiscal 2023, the Company recognized a pretax loss of $47 in Other deductions ($47 after-tax, in total $0.08per share) related to its exit of business operations in Russia.

(5) DISCONTINUED OPERATIONS

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 fiscal 2022) to private equity funds managed by Blackstone in a $14.0 billion transaction. Emerson received upfront, pre-tax cash proceeds of approximately $9.7 billion and a note receivable with a face value of $2.25 billion (which accrues 5 percent interest payable in kind by capitalizing interest), while retaining a 40 percent 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 fiscal 2022 net sales of approximately $5.0 billion and pretax earnings of $1.0 billion. The Company recognized a pretax gain of approximately $10.6 billion in the third quarter of fiscal 2023 (approximately $8.4 billion after-tax including tax expense recognized prior to the completion of the transaction related to subsidiary restructurings). The new standalone business is named Copeland. See Note 10 for further details.

On October 31, 2022, the Company completed the divestiture of its InSinkErator business, which manufactures food waste disposers, to Whirlpool Corporation for $3.0 billion. This business had net sales of $630 and pretax earnings of $152 in fiscal 2022. The Company recognized a pretax gain of approximately $2.8 billion (approximately $2.1 billion after-tax) in the first quarter of fiscal 2023.

The financial results of Climate Technologies and InSinkErator ("ISE") are reported as discontinued operations for the three and six months ended March 31, 2023 and were as follows:






9



Three Months Ended March 31, 2023
Climate Technologies ISE Total
Net sales $ 1,245 - 1,245
Cost of sales 782 - 782
SG&A 127 - 127
Gain on sale of business - (3) (3)
Other deductions, net 35 - 35
Earnings before income taxes 301 3 304
Income taxes 39 - 39
Earnings, net of tax $ 262 3 265
Six Months Ended March 31, 2023
Climate Technologies ISE Total
Net sales $ 2,309 49 2,358
Cost of sales 1,484 29 1,513
SG&A 269 8 277
Gain on sale of business - (2,783) (2,783)
Other deductions, net 67 12 79
Earnings before income taxes 489 2,783 3,272
Income taxes 352 653 1,005
Earnings, net of tax $ 137 2,130 2,267

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

Net cash from operating and investing activities for Climate Technologies, InSinkErator and Therm-O-Disc for the six months ended March 31, 2024 and 2023 were as follows:

Climate Technologies ISE and TOD Total
Six Months Ended March 31, Six Months Ended March 31, Six Months Ended March 31,
2023 2024 2023 2024 2023 2024
Cash from operating activities $ 44 (43) (435) - (391) (43)
Cash from investing activities $ (139) 1 3,055 - 2,916 1

Cash from operating activities for the six months ended March 31, 2023 reflects approximately $575 of income taxes paid related to the gain on the InSinkErator divestiture and the Climate Technologies subsidiary restructurings, transaction fees and unfavorable working capital. Cash from investing activities for the six months ended March 31, 2023 reflects the proceeds of $3.0 billion related to the InSinkErator divestiture.






10



(6) PENSION & POSTRETIREMENT PLANS

Total periodic pension and postretirement (income) expense is summarized below:
Three Months Ended March 31, Six Months Ended March 31,
2023 2024 2023 2024
Service cost $ 12 9 $ 24 18
Interest cost 54 55 108 110
Expected return on plan assets
(71) (74) (142) (148)
Net amortization (20) (14) (40) (28)
Total $ (25) (24) $ (50) (48)

(7) OTHER DEDUCTIONS, NET

Other deductions, net are summarized below:
Three Months Ended
March 31, 		Six Months Ended
March 31,
2023 2024 2023 2024
Amortization of intangibles (intellectual property and customer relationships) $ 119 273 237 547
Restructuring costs 19 30 29 113
Acquisition/divestiture costs 10 5 10 85
Foreign currency transaction (gains) losses 26 17 19 51
Investment-related gains & gains from sales of capital assets
(35) - (39) -
Loss on Copeland equity method investment - 59 - 95
Loss on divestiture of business - 39 - 39
Russia business exit - - 47 -
Other (30) (34) (74) (54)
Total $ 109 389 229 876

Intangibles amortization for the three and six months ended March 31, 2024 included $141 and $280, respectively, related to the NI acquisition. Foreign currency transaction losses for the three and six months ended March 31, 2023 included a mark-to-marketloss of $14 and a gain of $21, respectively, related to foreign currency forward contracts that were terminated in June 2023. The Company recognized a mark-to-market gain of $35 for the three months ended March 31, 2023 related to its equity investment in National Instruments Corporation. Other is composed of several items, including a portion of pension expense, litigation costs, provision for bad debt and other items, none of which is individually significant.







11



(8) RESTRUCTURING COSTS

Restructuring expense reflects costs associated with the Company's ongoing efforts to improve operational efficiency and deploy assets globally in order to remain competitive on a worldwide basis. The Company expects fiscal 2024 restructuring expense and related costs to be approximately $230, including costs to complete actions initiated in the first six months of the year.

Restructuring expense by business segment follows:

Three Months Ended March 31, Six Months Ended
March 31,
2023 2024 2023 2024
Final Control $ 2 (7) 1 (4)
Measurement & Analytical - 1 1 4
Discrete Automation 7 7 8 17
Safety & Productivity 2 1 2 1
Intelligent Devices 11 2 12 18
Control Systems & Software 5 3 6 4
Test & Measurement - 14 - 54
AspenTech - - - -
Software and Control 5 17 6 58
Corporate 3 11 11 37
Total $ 19 30 29 113
Corporate restructuring of $11 and $37 for the three and six months ended March 31, 2024, respectively, is comprised almost entirely of integration-related stock compensation expense attributable to NI.
Details of the change in the liability for restructuring costs during the six months ended March 31, 2024 follow:
Sept 30, 2023 Expense Utilized/Paid Mar 31, 2024
Severance and benefits $ 85 95 100 80
Other 2 18 15 5
Total $ 87 113 115 85
The tables above do not include $7 and $3 of costs related to restructuring actions incurred for the three months ended March 31, 2023 and 2024, respectively, that are required to be reported in cost of sales and selling, general and administrative expenses; year-to-date amounts are $12 and $7, respectively.
(9) TAXES

Income taxes were $149in the second quarter of fiscal 2024 and $134 in 2023, resulting in effective tax rates of 23 percent and 21 percent, respectively. The current year rate was negatively impacted by approximately 2percentage points due to the loss on divestiture (see Note 4), which was nondeductible for tax purposes.

Income taxes were $156 in the first six of months of fiscal 2024and $232 in 2023, resulting in effective tax rates of 20 percent and 22 percent, respectively. The current year rate included a $57 ($0.10 per share) benefit related to discrete tax items, partially offset by unfavorable impacts from inventory step-up amortization and the loss on divestiture noted above. In total, the net impact of these items benefited the rate by approximately 1 percentage point.







12



(10) EQUITY METHOD INVESTMENT AND NOTE RECEIVABLE

As discussed in Note 5, the Company completed the divestiture of a majority stake in Copeland on May 31, 2023, and received upfront, pre-tax cash proceeds of approximately $9.7 billion and a note receivable with a face value of $2.25 billion, while retaining a 40 percent non-controlling common equity interest in Copeland.
The Company records its share of Copeland's income or loss using the equity method of accounting. For the three and six months ended March 31, 2024 the Company recorded a loss of $59 and $95, respectively, in Other deductions to reflect its share of Copeland's losses and a tax benefit of $13 and $22, respectively, in Income taxes related to Copeland's U.S. business, which is taxed as a partnership (in total, a loss of $0.08 and $0.12per share, respectively). The Company recognized non-cash interest income on the note receivable of $31 and $62 for the three and six months ended March 31, 2024, respectively, which is reported in Interest income from related party and capitalized to the carrying value of the note.
As of March 31, 2024, the carrying values of the retained equity investment and note receivable were $1,036 and $2,155, respectively.
Summarized financial information for Copeland for the three and six months ended March 31, 2024 is as follows.
Three Months Ended March 31, Six Months Ended March 31,
2024 2024
Net sales $ 1,175 $ 2,199
Gross profit $ 412 $ 757
Income (loss) from continuing operations $ (147) $ (240)
Net income (loss) $ (147) $ (240)
Net income (loss) attributable to shareholders $ (148) $ (238)
(11) OTHER FINANCIAL INFORMATION

Sept 30, 2023 Mar 31, 2024
Inventories
Finished products $ 446 593
Raw materials and work in process 1,560 1,764
Total $ 2,006 2,357
Property, plant and equipment, net
Property, plant and equipment, at cost $ 5,524 5,976
Less: Accumulated depreciation 3,161 3,287
Total $ 2,363 2,689
Goodwill by business segment
Final Control $ 2,660 2,682
Measurement & Analytical 1,545 1,560
Discrete Automation 892 908
Safety & Productivity 388 399
Intelligent Devices 5,485 5,549
Control Systems & Software 668 671
Test & Measurement - 3,415
AspenTech 8,327 8,329
Software and Control 8,995 12,415
Total $ 14,480 17,964





13



Sept 30, 2023 Mar 31, 2024
Other intangible assets
Gross carrying amount $ 10,111 15,484
Less: Accumulated amortization 3,848 4,508
Net carrying amount $ 6,263 10,976
Other intangible assets include customer relationships, net, of $3,353 and $6,501 and intellectual property, net, of $2,707 and $4,247 as of September 30, 2023 and March 31, 2024, respectively.
The increase in goodwill and intangibles was primarily due to the NI acquisition. See Note 4.
Three Months Ended March 31, Six Months Ended March 31,
2023 2024 2023 2024
Depreciation and amortization expense include the following:
Depreciation expense $ 72 79 146 158
Amortization of intangibles (includes $49, $49, $98 and $98 reported in Cost of Sales, respectively)
168 322 335 645
Amortization of capitalized software 23 23 42 43
Total $ 263 424 523 846
Amortization of intangibles included $141 and $280 related to the NI acquisition for the three and six months ended March 31, 2024.
Sept 30, 2023 Mar 31, 2024
Other assets include the following:
Pension assets $ 995 1,053
Operating lease right-of-use assets 550 686
Unbilled receivables (contract assets) 559 528
Deferred income taxes 100 63
Asbestos-related insurance receivables 53 48
Accrued expenses include the following:
Customer advances (contract liabilities) $ 861 1,100
Employee compensation 618 531
Income taxes 207 220
Operating lease liabilities (current) 144 155
Product warranty 84 74
Other liabilities include the following:
Deferred income taxes $ 1,959 2,654
Operating lease liabilities (noncurrent) 404 511
Pension and postretirement liabilities 435 447
Asbestos litigation 173 164
The increase in deferred income tax liabilities reflects the impact of the NI acquisition. See Note 4.






14



(12) FINANCIAL INSTRUMENTS
Hedging Activities- As of March 31, 2024, the notional amount of foreign currency hedge positions was approximately $3.2 billion. All derivatives receiving hedge accounting are cash flow hedges. The majority of hedging gains and losses deferred as of March 31, 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.
Net Investment Hedge - In fiscal 2019, the Company issued euro-denominated debt of €1.5 billion. The euro notes reduce foreign currency risk associated with the Company's international subsidiaries that use the euro as their functional currency and have been designated as a hedge of a portion of the investment in these operations. Foreign currency gains or losses associated with the euro-denominated debt are deferred in accumulated other comprehensive income (loss) and will remain until the hedged investment is sold or substantially liquidated.
The following gains and losses are included in earnings and other comprehensive income (OCI) for the three and six months ended March 31, 2023 and 2024:
Into Earnings Into OCI
2nd Quarter Six Months 2nd Quarter Six Months
Gains (Losses) Location 2023 2024 2023 2024 2023 2024 2023 2024
Commodity Cost of sales $ (2) - (10) - 8 - 19 -
Foreign currency
Sales
(1) - (2) - (1) (5) 3 2
Foreign currency
Cost of sales
10 3 18 6 17 6 14 7
Foreign currency
Other deductions, net
(22) (26) (17) (11)
Net Investment Hedges
Euro denominated debt - - (14) 3 (137) (52)
Total $ (15) (23) (11) (5) 10 4 (101) (43)

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.
Fair Value Measurement - Valuations for all derivatives, the Company's note receivable from Copeland, and the Company's long-term debt fall within Level 2 of the GAAP valuation hierarchy. The fair value of the note receivable as of March 31, 2024 was approximately $2.0 billion, which was lower than the carrying value by approximately $100. See Note 10 for further details. As of March 31, 2024, the fair value of long-term debt was approximately $7.2 billion, which was lower than the carrying value by $963. The fair value of foreign currency contracts, which are reported in Other current assets and Accrued expenses, did not materially change since September 30, 2023. Commodity contracts related to discontinued operations and were novated to Copeland upon the completion of the transaction.
Counterparties to derivatives arrangements are companies with investment-grade credit ratings. The Company has bilateral collateral arrangements with counterparties with credit rating-based posting thresholds that vary depending on the arrangement. If credit ratings on the Company's debt fall below pre-established levels, counterparties can require immediate full collateralization of all derivatives in net liability positions. The maximum amount that could potentially have been required was immaterial. The Company also can demand full collateralization of derivatives in net asset positions should any counterparty credit ratings fall below certain thresholds. No collateral was posted with counterparties and none was held by the Company as of March 31, 2024.






15



(13) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Activity in Accumulated other comprehensive income (loss) for the three and six months ended March 31, 2023 and 2024 is shown below, net of income taxes:
Three Months Ended March 31, Six Months Ended March 31,
2023 2024 2023 2024
Foreign currency translation
Beginning balance $ (1,029) (840) (1,265) (1,012)
Other comprehensive income (loss), net of tax of $4, $(1), $32 and $12, respectively
111 (17) 347 155
Reclassification to loss on divestiture of business - 23 - 23
Ending balance (918) (834) (918) (834)
Pension and postretirement
Beginning balance (238) (259) (222) (247)
Amortization of deferred actuarial losses into earnings, net of tax of $3, $2, $7 and $4, respectively
(17) (12) (33) (24)
Ending balance (255) (271) (255) (271)
Cash flow hedges
Beginning balance 12 9 2 6
Gains deferred during the period, net of taxes of $(6), $0, $(9) and $(2), respectively
18 1 27 7
Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $2, $1, $2 and $1, respectively
(5) (2) (4) (5)
Ending balance 25 8 25 8
Accumulated other comprehensive income (loss) $ (1,148) (1,097) (1,148) (1,097)






16



(14) BUSINESS SEGMENTS

As disclosed in Note 4, the Company completed the acquisition of NI on October 11, 2023. NI is now referred to as Test & Measurement and reported as a new segment in the Software and Control business group.

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

Three Months Ended March 31, Six Months Ended March 31,
Sales Earnings (Loss) Sales Earnings (Loss)
2023 2024 2023 2024 2023 2024 2023 2024
Final Control $ 992 1,051 215 259 1,854 1,991 373 453
Measurement & Analytical 888 1,013 229 274 1,637 1,960 404 509
Discrete Automation 683 632 133 116 1,301 1,245 254 213
Safety & Productivity 361 365 83 83 671 687 146 151
Intelligent Devices 2,924 3,061 660 732 5,463 5,883 1,177 1,326
Control Systems & Software 623 687 127 151 1,229 1,362 234 300
Test & Measurement - 367 - (79) - 749 - (157)
AspenTech 230 278 (54) (8) 473 535 (87) (43)
Software and Control 853 1,332 73 64 1,702 2,646 147 100
Stock compensation
(40) (73) (142) (147)
Unallocated pension and postretirement costs 46 38 91 69
Corporate and other (47) (103) (111) (502)
Loss on Copeland equity method investment - (59) - (95)
Gain on subordinated interest - 79 - 79
Eliminations/Interest (21) (17) (53) (57) (36) (36) (101) (101)
Interest income from related party - 31 - 62
Total $ 3,756 4,376 639 652 7,129 8,493 1,061 791
Stock compensation for the three months and six months ended March 31, 2024 included $14 and $44 of integration-related stock compensation expense attributable to NI (of which $10 and $36, respectively, was reported as restructuring costs). Corporate and other for the three and six months ended March 31, 2024 included acquisition/divestiture fees and related costs of $16 and $146, respectively, and a divestiture loss of $39, while year-to-date also includes acquisition-related inventory step-up amortization of $231. Corporate and other for the six months ended March 31, 2023 included a loss of $47 related to the Company's exit of business operations in Russia and a mark-to-market gain of $35 related to its equity investment in National Instruments Corporation.






17



Depreciation and amortization (includes intellectual property, customer relationships and capitalized software) by business segment are summarized below:
Three Months Ended March 31, Six Months Ended March 31,
2023 2024 2023 2024
Final Control $ 45 39 90 79
Measurement & Analytical 28 33 58 73
Discrete Automation 22 21 43 43
Safety & Productivity 15 15 29 29
Intelligent Devices 110 108 220 224
Control Systems & Software 24 28 45 49
Test & Measurement - 153 - 304
AspenTech 123 124 246 247
Software and Control 147 305 291 600
Corporate and other 6 11 12 22
Total $ 263 424 523 846





18



Test & Measurement depreciation and amortization for the three and six months ended March 31, 2024 included intangibles amortization of $141 and $280 due to the acquisition.
Sales by geographic destination, Americas, Asia, Middle East & Africa ("AMEA") and Europe, are summarized below:
Three Months Ended March 31, Three Months Ended March 31,
2023 2024
Americas AMEA Europe Total Americas AMEA Europe Total
Final Control $ 494 362 136 992 513 404 134 1,051
Measurement & Analytical 455 304 129 888 512 334 167 1,013
Discrete Automation 311 184 188 683 294 161 177 632
Safety & Productivity 272 16 73 361 269 19 77 365
Intelligent Devices 1,532 866 526 2,924 1,588 918 555 3,061
Control Systems & Software 314 186 123 623 321 217 149 687
Test & Measurement - - - - 162 98 107 367
AspenTech 114 61 55 230 121 73 84 278
Software and Control 428 247 178 853 604 388 340 1,332
Total $ 1,960 1,113 704 3,777 2,192 1,306 895 4,393
Six Months Ended March 31, Six Months Ended March 31,
2023 2024
Americas AMEA Europe Total Americas AMEA Europe Total
Final Control $ 940 670 244 1,854 967 774 250 1,991
Measurement & Analytical 851 550 236 1,637 987 659 314 1,960
Discrete Automation 602 359 340 1,301 580 323 342 1,245
Safety & Productivity 508 33 130 671 512 35 140 687
Intelligent Devices 2,901 1,612 950 5,463 3,046 1,791 1,046 5,883
Control Systems & Software 608 371 250 1,229 646 426 290 1,362
Test & Measurement - - - - 326 197 226 749
AspenTech 226 124 123 473 261 133 141 535
Software and Control 834 495 373 1,702 1,233 756 657 2,646
Corporate and other
Total $ 3,735 2,107 1,323 7,165 4,279 2,547 1,703 8,529





19



Items 2 and 3.

Management's Discussion and Analysis of Financial Condition and Results of Operations
(Dollars are in millions, except per share amounts or where noted)

OVERVIEW

On 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.

For the second quarter of fiscal 2024, net sales were $4.4 billion, up 17 percent compared with the prior year. Underlying sales, which exclude foreign currency translation, acquisitions and divestitures, were up 8 percent. Foreign currency translation had a 1 percent unfavorable impact and the Test & Measurement acquisition added 10 percent.
Earnings from continuing operations attributable to common stockholders were $501, down 6 percent, and diluted earnings per share from continuing operations were $0.87, down 5 percent compared with $0.92 in the prior year. Adjusted diluted earnings per share from continuing operations were $1.36, up 25 percent compared with $1.09 in the prior year, reflecting the strong sales growth and operating performance, as well as an $0.11 contribution from Test & Measurement.

The table below presents the Company's diluted earnings per share from continuing operations on an adjusted basis to facilitate period-to-period comparisons and provide additional insight into the underlying, ongoing operating performance of the Company. Adjusted diluted earnings per share from continuing operations excludes intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction-related costs, and certain gains, losses or impairments.
Three Months Ended March 31, 2023 2024
Diluted earnings from continuing operations per share $ 0.92 0.87
Amortization of intangibles 0.16 0.36
Restructuring and related costs 0.04 0.05
Acquisition/divestiture fees and related costs 0.01 0.03
Loss on divestiture of business - 0.07
Gain on subordinated interest - (0.10)
National Instruments investment gain (0.05) -
AspenTech Micromine purchase price hedge 0.01 -
Loss on Copeland equity method investment - 0.08
Adjusted diluted earnings from continuing operations per share $ 1.09 1.36





20



The table below summarizes the changes in adjusted diluted earnings per share from continuing operations. The items identified below are discussed throughout MD&A, see further discussion above and in the Business Segments and Financial Position sections below.
Three Months Ended
Adjusted diluted earnings from continuing operations per share - March 31, 2023
$ 1.09
Operations 0.27
Corporate and other 0.02
Stock compensation (0.04)
Foreign currency (0.02)
Pensions (0.01)
Effective tax rate 0.01
Interest income from related party 0.04
Adjusted diluted earnings from continuing operations per share - March 31, 2024
$ 1.36

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31

Following is an analysis of the Company's operating results for the second quarter ended March 31, 2023, compared with the second quarter ended March 31, 2024.
2023 2024 Change
(dollars in millions, except per share amounts)
Net sales $ 3,756 4,376 17 %
Gross profit $ 1,801 2,284 27 %
Percent of sales 47.9 % 52.2 % 4.3 pts
SG&A $ 1,000 1,296 30 %
Percent of sales 26.7 % 29.6 % 2.9 pts
Gain on subordinated interest $ - (79)
Other deductions, net $ 109 389
Amortization of intangibles $ 119 273
Restructuring costs $ 19 30
Interest expense, net $ 53 57
Interest income from related party $ - (31)
Earnings from continuing operations before income taxes $ 639 652 2 %
Percent of sales 17.0 % 14.9 % (2.1) pts
Earnings from continuing operations common stockholders $ 530 501 (6) %
Percent of sales 14.2 % 11.4 % (2.8) pts
Net earnings common stockholders $ 792 501 (37) %
Diluted EPS - Earnings from continuing operations $ 0.92 0.87 (5) %
Diluted EPS - Net earnings $ 1.38 0.87 (37) %
Adjusted Diluted EPS - Earnings from continuing operations $ 1.09 1.36 25 %

Net sales for the second quarter of fiscal 2024 were $4.4 billion, up 17 percent compared with 2023. Intelligent Devices sales were up 5 percent, while Software and Control sales were up 56 percent, which included the impact of the Test & Measurement acquisition. Underlying sales were up 8 percenton 5 percent higher volume and 3 percent higher price. Foreign currency translation had a 1 percent unfavorable impact and the Test & Measurement acquisition added 10 percent. Underlying sales were up 2 percent in the U.S. and up 12 percent internationally. The Americas





21



was up 4 percent, Europe was up 12 percent, and Asia, Middle East & Africa was up 11 percent (China down 3 percent).

Cost of sales for the second quarter of fiscal 2024 were $2,092, an increase of $137 compared with 2023, reflecting the impact of higher volume and the Test & Measurement acquisition. Gross margin of 52.2 percent increased 4.3 percentage points, reflecting the Test & Measurement acquisition, higher price and leverage on higher sales.
Selling, general and administrative (SG&A) expenses of $1,296 increased $296 and SG&A as a percent of sales increased 2.9 percentage points to 29.6 percent compared with the prior year, reflecting the impact of the Test & Measurement acquisition and higher stock compensation expense, partially offset by strong operating leverage on higher sales.
In the second quarter of fiscal 2024, the Company received its final distribution of $79 related to its subordinated interest in Vertiv.
Other deductions, net were $389 for the second quarter of fiscal 2024, an increase of $280 compared with the prior year. The current year included intangibles amortization related to the Test & Measurement acquisition of $141, restructuring costs of $30, a loss of $59 on the Company's equity method investment in Copeland and a divestiture loss of $39. The prior year included a mark-to-market gain of $35 related to its equity investment in National Instruments Corporation and a mark-to-market loss of $14 related to foreign currency forward contracts that were terminated in June 2023. See Note 7 and Note 10.

Pretax earnings from continuing operations of $652 increased $13, up 2 percent compared with the prior year. Earnings increased $72in Intelligent Devices and decreased $9 in Software and Control, see the Business Segments discussion that follows and Note 14.

Income taxes were $149in the second quarter of fiscal 2024 and $134 in 2023, resulting in effective tax rates of 23 percent and 21 percent, respectively. The current year rate was negatively impacted by approximately 2 percentage points due to the loss on divestiture (see Note 4), which was nondeductible for tax purposes.

Earnings from continuing operations attributable to common stockholders were $501, down 6 percent, and diluted earnings per share from continuing operations were $0.87, down 5 percent compared with $0.92 in the prior year. Adjusted diluted earnings per share from continuing operations were $1.36 compared with $1.09 in the prior year, reflecting strong operating results. See the analysis above of adjusted earnings per share for further details.

Earnings from discontinued operations were $262 ($0.46 per share) in the prior year.See Note 5.

Net earnings common stockholders in the second quarter of fiscal 2024 were $501 compared with $792 in the prior year, and earnings per share were $0.87 compared with $1.38 in the prior year.

The table below, which shows results from continuing operations on an adjusted EBITA basis, is intended to supplement the Company's discussion of its results of operations herein. The Company defines adjusted EBITA as earnings from continuing operations excluding interest expense, net, income taxes, intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction-related costs, gains or losses on the Copeland equity method investment, and certain gains, losses or impairments. Adjusted EBITA and adjusted EBITA margin are measures used by management and may be useful for investors to evaluate the Company's operational performance.






22



Three Months Ended March 31, 2023 2024 Change
Earnings from continuing operations before income taxes $ 639 652 2 %
Percent of sales 17.0 % 14.9 % (2.1) pts
Interest expense, net 53 57
Interest income from related party - (31)
Amortization of intangibles 168 322
Restructuring and related costs 26 33
Acquisition/divestiture fees and related costs 10 20
Loss on divestiture of business - 39
Gain on subordinated interest - (79)
National Instruments investment gain (35) -
AspenTech Micromine purchase price hedge 14 -
Loss on Copeland equity method investment - 59
Adjusted EBITA from continuing operations $ 875 1,072 23 %
Percent of sales 23.3 % 24.5 % 1.2 pts







23



Business Segments
Following is an analysis of operating results for the Company's business segments for the second quarter ended March 31, 2023, compared with the second quarter ended March 31, 2024. The Company defines segment earnings as earnings before interest and taxes. See Note 14 for a discussion of the Company's business segments.

INTELLIGENT DEVICES
2023 2024 Change FX Acq/Div U/L
Sales:
Final Control $ 992 1,051 6 % 1 % - % 7 %
Measurement & Analytical 888 1,013 14 % 1 % 1 % 16 %
Discrete Automation 683 632 (8) % 1 % - % (7) %
Safety & Productivity 361 365 1 % - % - % 1 %
Total $ 2,924 3,061 5 % 1 % - % 6 %
Earnings:
Final Control $ 215 259 21 %
Measurement & Analytical 229 274 19 %
Discrete Automation 133 116 (13) %
Safety & Productivity 83 83 - %
Total $ 660 732 11 %
Margin 22.6 % 23.9 % 1.3 pts
Amortization of intangibles:
Final Control $ 22 22
Measurement & Analytical 5 12
Discrete Automation 7 8
Safety & Productivity 7 7
Total $ 41 49
Restructuring and related costs:
Final Control $ 9 (7)
Measurement & Analytical - 1
Discrete Automation 7 7
Safety & Productivity 2 1
Total $ 18 2
Adjusted EBITA $ 719 783 9 %
Adjusted EBITA Margin 24.6 % 25.6 % 1.0 pts
Intelligent Devices sales were $3.1 billion inthe second quarter of 2024, an increase of $137, or 5 percent. Underlying sales increased 6 percenton 3percent higher volume and 3 percent higher price.Underlying sales increased 4 percent in the Americas, Europe increased 6 percent and Asia, Middle East & Africa was up 9 percent (China down 5 percent). Final Control sales increased $59, or 6 percent, reflecting strength in energy and power end markets, particularly in Asia, Middle East & Africa. Sales for Measurement & Analytical increased $125, or 14 percent, reflecting robust growth in all geographies and strong backlog conversion. Discrete Automation sales decreased $51, or 8 percent, reflecting softness in all geographies driven in part by lower factory automation demand. Safety & Productivity sales increased $4, or 1 percent, as modest growth in Europe and strength in Asia, Middle Ease & Africa was largely offset by softness in the Americas. Earnings for Intelligent Devices were $732, an increase of $72, or 11 percent, and margin increased 1.3 percentage points to 23.9 percent. Adjusted EBITA margin was 25.6 percent, an increase of 1.0 percentage points, reflecting leverage on higher sales, favorable mix and favorable price less net material inflation, partially offset by increases in other costs.






24



SOFTWARE AND CONTROL
2023 2024 Change FX Acq/Div U/L
Sales:
Control Systems & Software $ 623 687 11 % 1 % - % 12 %
Test & Measurement - 367 - %
AspenTech 230 278 21 % - % - % 21 %
Total $ 853 1,332 56 % 1 % (43) % 14 %
Earnings:
Control Systems & Software $ 127 151 19 %
Test & Measurement - (79) - %
AspenTech (54) (8) 84 %
Total $ 73 64 (14) %
Margin 8.6 % 4.7 % (3.9) pts
Amortization of intangibles:
Control Systems & Software $ 5 11
Test & Measurement - 141
AspenTech 122 121
Total $ 127 273
Restructuring and related costs:
Control Systems & Software $ 5 3
Test & Measurement - 16
AspenTech - -
Total $ 5 19
Adjusted EBITA $ 205 356 73 %
Adjusted EBITA Margin 24.1 % 26.7 % 2.6 pts

Software and Control sales were $1,332 in the second quarter of 2024, an increase of $479, or 56 percent compared to the prior year, reflecting the impact of the Test & Measurement acquisition and strong growth in Control Systems & Software. Underlying sales were up 14 percent on 11 percent higher volume and 3 percent higher price. Underlying sales increased 4 percent in the Americas, 31 percent in Europe and 20 percent in Asia, Middle East & Africa (China up 9 percent). Control Systems & Software sales increased $64, or 11 percent, reflecting strong international demand in process end markets and strong demand in power end markets in the Americas. Test & Measurement sales were $367 in the second quarter, reflecting the acquisition. AspenTech sales increased $48, or 21 percent, primarily due to higher license and maintenance revenue. Earnings for Software and Control decreased $9, down 14 percent, and margin decreased 3.9 percentage points due to the Test & Measurement loss which reflected significant intangibles amortization and restructuring. Adjusted EBITA margin increased 2.6 percentage points, reflecting leverage on higher sales and higher price.






25




RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31

Following is an analysis of the Company's operating results for the six months ended March 31, 2023, compared with the six months ended March 31, 2024.
2023 2024 Change
(dollars in millions, except per share amounts)
Net sales $ 7,129 8,493 19 %
Gross profit $ 3,421 4,200 23 %
Percent of sales 48.0 % 49.5 % 1.5 pts
SG&A $ 2,030 2,573 27 %
Percent of sales 28.5 % 30.3 % 1.8 pts
Gain on subordinated interest $ - (79)
Other deductions, net $ 229 876
Amortization of intangibles $ 237 547
Restructuring costs $ 29 113
Interest expense, net $ 101 101
Interest income from related party $ - (62)
Earnings from continuing operations before income taxes $ 1,061 791 (25) %
Percent of sales 14.9 % 9.3 % (5.6) pts
Earnings from continuing operations common stockholders $ 859 643 (25) %
Percent of sales 12.0 % 7.6 % (4.4) pts
Net earnings common stockholders $ 3,123 643 (79) %
Diluted EPS - Earnings from continuing operations $ 1.48 1.12 (24) %
Diluted EPS - Net earnings $ 5.38 1.12 (79) %
Adjusted Diluted EPS - Earnings from continuing operations $ 1.86 2.58 39 %

Net sales for the first sixmonths of 2024 were $8.5 billion, up 19 percent compared with 2023. Intelligent Devices sales were up 8 percent, while Software and Control sales were up 56 percent, which included the impact of the Test & Measurement acquisition. Underlying sales were up 9 percent on 6.5 percent higher volume and 2.5 percent higher price. Foreign currency translation had a negligible impact, the Test & Measurement acquisition added 11 percent and the divestiture of Metran deducted 1 percent. Underlying sales increased 6 percent in the U.S. and increased 12 percent internationally. The Americas was up 6 percent, Europe was up 11 percent and Asia, Middle East & Africa was up 13 percent (China was up 3 percent).

Cost of sales for 2024 were $4,293, an increase of $585 versus $3,708 in 2023, reflecting the impact of higher volume and the Test & Measurement acquisition. Gross margin of 49.5 percent increased 1.5 percentage points, reflecting the Test & Measurement acquisition, higher price and leverage on higher sales, partially offset by the impact from acquisition-related inventory step-up amortization of $231, which negatively impacted margins by approximately 2.7 percentage points.

SG&A expenses of $2,573 increased $543 and SG&A as a percent of sales increased 1.8 percentage points to 30.3 percent, reflecting the impact of the Test & Measurement acquisition, partially offset by strong operating leverage on higher sales.
In the second quarter of fiscal 2024, the Company received its final distribution of $79 related to its subordinated interest in Vertiv.





26



Other deductions, net were $876 in 2024, an increase of $647 compared with the prior year. The current year included intangibles amortization related to the Test & Measurement acquisition of $280, restructuring costs of $113, acquisition/divestiture costs of $85, a loss of $95on the Company's equity method investment in Copeland and a divestiture loss of $39. The prior year included a charge of $47related to the Company exiting its business in Russia, a mark-to-market gain of $35 related to its equity investment in National Instruments Corporation and a mark-to-marketgain of $21 related to foreign currency forward contracts that were terminated in June 2023. See Note 7 and Note 10.
Pretax earnings from continuing operations of $791 decreased $270 compared with prior year. Earnings increased $149 in Intelligent Devices and decreased $47 in Software and Control, see the Business Segments discussion that follows and Note 14.

Income taxes were $156 in the first six of months of fiscal 2024and $232 in 2023, resulting in effective tax rates of 20 percent and 22 percent, respectively. The current year rate included a $57 ($0.10 per share) benefit related to discrete tax items, partially offset by unfavorable impacts from inventory step-up amortization and the loss on divestiture noted above. In total, the net impact of these items benefited the rate by approximately 1 percentage point.

Earnings from continuing operations attributable to common stockholders were $643, down25 percent compared with the prior year, and diluted earnings per share from continuing operations were $1.12, down24 percent compared with $1.48 in 2023. See the analysis above of adjusted earnings per share for further details.

Earnings from discontinued operations were $2,264 ($3.90 per share) in the prior year, reflecting the $2.1 billion after-tax gain on the InSinkErator divestiture.See Note 5.

Net earnings common stockholders were $643 ($1.12 per share) compared with $3,123 ($5.38 per share) in the prior year.

The table below presents the Company's diluted earnings per share on an adjusted basis to facilitate period-to-period comparisons and provide additional insight into the underlying, ongoing operating performance of the Company.

Six Months Ended March 31, 2023 2024
Diluted earnings from continuing operations per share $ 1.48 1.12
Amortization of intangibles 0.30 0.73
Restructuring and related costs 0.06 0.17
Discrete taxes - (0.10)
Amortization of acquisition-related inventory step-up - 0.38
Acquisition/divestiture fees and related costs 0.01 0.19
Loss on divestiture of business - 0.07
Gain on subordinated interest - (0.10)
National Instruments investment gain (0.05) -
AspenTech Micromine purchase price hedge (0.02) -
Loss on Copeland equity method investment - 0.12
Russia business exit charge 0.08 -
Adjusted diluted earnings from continuing operations per share $ 1.86 2.58





27



The table below summarizes the changes in adjusted diluted earnings per share. The items identified below are discussed throughout MD&A, see further discussion above and in the Business Segments and Financial Position sections below.
Six Months Ended
Adjusted diluted earnings from continuing operations per share - March 31, 2023
$ 1.86
Operations 0.59
Corporate and other 0.03
Stock compensation 0.05
Foreign currency (0.02)
Pensions (0.02)
Effective tax rate (0.01)
Interest income from related party 0.08
Share count 0.02
Adjusted diluted earnings from continuing operations per share - March 31, 2024
$ 2.58

The table below, which shows results on an adjusted EBITA basis, is intended to supplement the Company's discussion of its results of operations herein.

Six Months Ended March 31, 2023 2024 Change
Earnings from continuing operations before income taxes $ 1,061 791 (25) %
Percent of sales 14.9 % 9.3 % (5.6) pts
Interest expense, net 101 101
Interest income from related party - (62)
Amortization of intangibles 335 645
Restructuring and related costs 41 120
Acquisition/divestiture fees and related costs 10 154
Loss on divestiture of business - 39
Amortization of acquisition-related inventory step-up - 231
Gain on subordinated interest - (79)
National Instruments investment gain (35) -
AspenTech Micromine purchase price hedge (21) -
Loss on Copeland equity method investment - 95
Russia business exit charge 47 -
Adjusted EBITA from continuing operations $ 1,539 2,035 32 %
Percent of sales 21.6 % 24.0 % 2.4 pts

Business Segments
Following is an analysis of operating results for the Company's business segments for the six months ended March 31, 2023, compared with the six months ended March 31, 2024. The Company defines segment earnings as earnings before interest and taxes. As a result of the Company's portfolio transformation, the Company has realigned its business segments and now reports six segments and two business groups. See Note 14.





28



INTELLIGENT DEVICES
2023 2024 Change FX Acq/Div U/L
Sales:
Final Control $ 1,854 1,991 7 % - % 1 % 8 %
Measurement & Analytical 1,637 1,960 20 % - % 2 % 22 %
Discrete Automation 1,301 1,245 (4) % (1) % - % (5) %
Safety & Productivity 671 687 2 % - % - % 2 %
Total $ 5,463 5,883 8 % - % - % 8 %
Earnings:
Final Control $ 373 453 22 %
Measurement & Analytical 404 509 26 %
Discrete Automation 254 213 (16) %
Safety & Productivity 146 151 3 %
Total $ 1,177 1,326 13 %
Margin 21.5 % 22.5 % 1.0 pts
Amortization of intangibles:
Final Control $ 44 44
Measurement & Analytical 10 32
Discrete Automation 14 17
Safety & Productivity 13 13
Total $ 81 106
Restructuring and related costs:
Final Control $ 13 -
Measurement & Analytical 1 4
Discrete Automation 8 17
Safety & Productivity 2 1
Total $ 24 22
Adjusted EBITA $ 1,282 1,454 13 %
Adjusted EBITA Margin 23.5 % 24.7 % 1.2 pts

Intelligent Devices sales were $5.9 billion in the first six months of 2024, an increase of $420, or 8 percent. Underlying sales increased 8 percent on 6 percent higher volume and 2 percent higher price. Underlying sales increased 5 percent in the Americas, Europe increased 10 percent, and Asia, Middle East & Africa was up 13 percent (China up 2 percent). Final Control sales increased $137, or 7 percent, reflecting strength in energy and power end markets. Sales for Measurement & Analytical increased $323, or 20 percent, reflecting robust growth in all geographies and strong backlog conversion. Discrete Automation sales decreased $56, or 4 percent, reflecting softness in all geographies. Safety & Productivity sales increased $16, or 2 percent, reflecting slight growth in the Americas, moderate growth in Europe and strength in Asia, Middle East & Africa. Earnings for Intelligent Devices were $1,326, an increase of $149, or 13 percent, and margin increased 1.0 percentage points to 22.5 percent. Adjusted EBITA margin was 24.7 percent, an increase of 1.2 percentage points, reflecting leverage on higher sales, favorable mix and favorable price less net material inflation, partially offset by increases in other costs.







29



SOFTWARE AND CONTROL
2023 2024 Change FX Acq/Div U/L
Sales:
Control Systems & Software $ 1,229 1,362 11 % - % - % 11 %
Test & Measurement - 749 - %
AspenTech 473 535 13 % - % - % 13 %
Total $ 1,702 2,646 56 % - % (44) % 12 %
Earnings:
Control Systems & Software $ 234 300 29 %
Test & Measurement - (157) - %
AspenTech (87) (43) 50 %
Total $ 147 100 (32) %
Margin 8.6 % 3.8 % (4.8) pts
Amortization of intangibles:
Control Systems & Software $ 11 16
Test & Measurement - 280
AspenTech 243 243
Total $ 254 539
Restructuring and related costs:
Control Systems & Software $ 6 4
Test & Measurement - 56
AspenTech - -
Total $ 6 60
Adjusted EBITA $ 407 699 72 %
Adjusted EBITA Margin 23.9 % 26.4 % 2.5 pts

Software and Control sales were $2,646 in the first six months of 2024, an increase of $944, or 56 percent compared to the prior year, reflecting the impact of the Test & Measurement acquisition. Underlying sales were up 12 percent on 9 percent higher volume and 3 percent higher price. Underlying sales increased 9 percent in the Americas, 16 percent in Europe and 14 percent in Asia, Middle East & Africa (China up 7 percent). Control Systems & Software sales increased $133, or 11 percent, reflecting global strength in process end markets while power end markets were up strong in the Americas and Europe. Test & Measurement sales were $749 in the first six months of 2024, reflecting the acquisition. AspenTech sales increased $62, or 13 percent, reflecting higher license, maintenance and services revenue. Earnings for Software and Control decreased $47, down 32 percent, and margin decreased 4.8 percentage points, reflecting the impact from $280 of incremental intangibles amortization related to the Test & Measurement acquisition. Adjusted EBITA margin increased 2.5 percentage points, reflecting leverage on higher sales and higher price.






30



FINANCIAL CONDITION
Key elements of the Company's financial condition as of and for the six months ended March 31, 2024 as compared to the year ended September 30, 2023 and the six months ended March 31, 2023 follow.
Mar 31, 2023 Sept 30, 2023 Mar 31, 2024
Operating working capital $ 1,140 $ 1,283 $ 2,182
Current ratio 1.2 2.7 1.2
Total debt-to-total capital 47.1 % 28.3 % 34.0 %
Net debt-to-net capital 41.6 % 0.5 % 28.8 %
Interest coverage ratio 8.6 X 11.5 X 5.5 X
Operating working capital increased due to the acquisition of NI and changes in accrued expenses. As of March 31, 2024, Emerson's cash and equivalents totaled $2,318, which included approximately $180 attributable to AspenTech. The cash held by AspenTech is intended to be used for its own purposes and is not available to return to Emerson shareholders.
The current ratio decreased compared to September 30, 2023, reflecting the decrease in cash and increase in short-term borrowings used to support the NI acquisition. The interest coverage ratio (earnings before income taxes plus interest expense, divided by interest expense) of 5.5X for the first six months of fiscal 2024 compares to 8.6X for the six months ended March 31, 2023, reflecting 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 $310, acquisition/divestiture fees and related costs of $154, higher restructuring and related costs of $79, the loss of $95 on the Copeland equity method investment and the gain on subordinated interest of $79, the interest coverage ratio was 10.1X.
Operating cash flow from continuing operations for the first six months of fiscal 2024 was $1,201, an increase of $324 compared with $877 in the prior year, reflecting higher earnings (excluding the impact of items related to the NI acquisition). Acquisition-related costs and integration activities negatively impacted operating cash flow in the current year by approximately $170. AspenTech generated operating cash flow of approximately $170 compared to approximately $180 in the prior year. Free cash flow from continuing operations of $1,042 in the first six months of fiscal 2024 (operating cash flow of $1,201 less capital expenditures of $159) increased $286 comparedto free cash flow of $756 in 2023 (operating cash flow of $877 less capital expenditures of $121), reflecting the increase in operating cash flow, partially offset by higher capital expenditures. Cash used in investing activities from continuing operations was $8,490, reflecting the acquisition of NI. Cash provided by financing activities from continuing operations was $1,613, reflecting an increase in short-term borrowings of $2,464, partially offset by share repurchases and dividends.
Total cash provided by operating activities was $1,158 including the impact of discontinued operations, and increased $672 compared with $486 in the prior year.
Emerson maintains a conservative financial structure to provide the strength and flexibility necessary to achieve our strategic objectives and has been successful in efficiently deploying cash where needed worldwide to fund operations, complete acquisitions and sustain long-term growth. Emerson is in a strong financial position, with total assets of $46 billion and common stockholders' equity of $21 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.





31



FISCAL 2024 OUTLOOK
For the full year, consolidated net sales from continuing operations are expected to be up 15 percent to 16 percent, with underlying sales up 5.5 percent to 6.5 percent excluding a 10 percent impact from the NI acquisition and a 0.5 percent unfavorable impact from foreign currency. Earnings per share from continuing operations are expected to be $2.98 to $3.08, while adjusted earnings per share from continuing operations are expected to be $5.40 to $5.50 (see the following reconciliation).
Outlook for Fiscal 2024 Earnings Per Share 2024
Diluted earnings from continuing operations per share $2.98 - $3.08
Amortization of intangibles ~ 1.43
Restructuring and related costs ~ 0.32
Loss on Copeland equity method investment ~ 0.19
Amortization of acquisition-related inventory step-up 0.38
Acquisition/divestiture fees and related costs ~ 0.23
Divestiture loss / (gain), net (0.03)
Discrete tax benefits (0.10)
Adjusted diluted earnings from continuing operations per share $5.40- $5.50
Operating cash flow from continuing operations is expected to be approximately $3.1 billion and free cash flow from continuing operations, which excludes projected capital spending of approximately $0.4 billion, is expected to be approximately $2.7 billion. The fiscal 2024 outlook assumes approximately $500 million returned to shareholders through share repurchases and approximately $1.2 billion of dividend payments.
Statements in this report that are not strictly historical may be "forward-looking" statements, which involve risks and uncertainties, and Emerson undertakes no obligation to update any such statements to reflect later developments. These risks and uncertainties include the scope, duration and ultimate impacts of the Russia-Ukraine and other global conflicts, as well as economic and currency conditions, market demand, pricing, protection of intellectual property, cybersecurity, tariffs, competitive and technological factors, and inflation, among others, which are set forth in the "Risk Factors" of Part I, Item 1A, and the "Safe Harbor Statement" of Part II, Item 7, to the Company's Annual Report on Form 10-K for the year ended September 30, 2023 and in subsequent reports filed with the SEC, which are hereby incorporated by reference.
Item 4. Controls and Procedures
The Company maintains a system of disclosure controls and procedures designed to ensure that information required to be disclosed in its reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported in a timely manner. This system also is designed to ensure information is accumulated and communicated to management, including the Company's certifying officers, to allow timely decisions regarding required disclosure. Based on an evaluation performed, the certifying officers have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.
Notwithstanding the foregoing, there can be no assurance that the Company's disclosure controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiaries to report material information otherwise required to be set forth in the Company's reports.
There was no change in the Company's internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.






32



PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Neither the Company nor any "affiliated purchaser" repurchased any shares of Company common stock during the three-month period ended March 31, 2024. In March 2020, the Board of Directors authorized the purchase of 60 million shares and a total of approximately 31.4 shares remain available for purchase under the authorization.


Item 5. Other Information
During the three-month period ended March 31, 2024, none of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement.

Item 6. Exhibits

(a) Exhibits (Listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K).
10.1
31
Certifications pursuant to Exchange Act Rule 13a-14(a).
32
Certifications pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350.
101
Attached as Exhibit 101 to this report are the following documents formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Statements of Earnings for the three and six months ended March 31, 2024 and 2023, (ii) Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2024 and 2023, (iii) Consolidated Balance Sheets as of September 30, 2023 and March 31, 2024, (iv) Consolidated Statements of Equity for the three and six months ended March 31, 2024 and 2023, (v) Consolidated Statements of Cash Flows for the six months ended March 31, 2024 and 2023, and (vi) Notes to Consolidated Financial Statements for the three and six months ended March 31, 2024 and 2023.


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






33




SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
EMERSON ELECTRIC CO.
By /s/ M. J. Baughman
M. J. Baughman
Executive Vice President, Chief Financial Officer
and Chief Accounting Officer
(on behalf of the registrant and as Chief Financial Officer)
May 8, 2024






34