Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Safe Harbor Statement

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.

Non-GAAP Financial Measures

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 example, non-GAAP measures may exclude the impact of certain items such as acquisitions or divestitures, amortization of intangibles, restructuring costs, discrete taxes, changes 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 differ from the calculation of similarly titled financial measures presented by other companies and therefore may not be comparable among companies.

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: net sales).

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: pretax earnings or pretax profit margin, segment earnings or segment margin).

Earnings, earnings per share, return on common stockholders’ equity and return on total capital 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, earnings per share, return on common stockholders' equity and return on total capital excluding these items is more representative of the Company’s operational performance and may be more useful for investors (U.S. GAAP measures: earnings, earnings per share, return on common stockholders’ equity, return on total capital).

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, dividends as a percent of free cash flow is an indicator of the Company's ability to support its dividend, and free cash flow conversion of adjusted net earnings (free cash flow divided by net earnings adjusted for intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments) is an indicator of the quality of the Company's earnings, 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. Management 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: operating cash flow, operating cash flow as a percent of net sales, dividends as a percent of operating cash flow).

FINANCIAL REVIEW

Report of Management

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, 2023 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.

Management's Report on Internal Control Over Financial Reporting

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 framework and the criteria established in Internal Control - Integrated Framework (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, 2023.

The Company's auditor, KPMG LLP, an independent registered public accounting firm, has issued an audit report on the effectiveness of the Company's internal control over financial reporting.

/s/ S. L. Karsanbhai						/s/ Michael J. Baughman
S. L. Karsanbhai						Michael J. Baughman
President						Executive Vice President
and Chief Executive Officer						and Chief Financial Officer

Results of Operations

Years ended September 30

(Dollars in Item 7 are in millions, except per share amounts or where noted)

			2021						2022						2023						22 vs. 21						23 vs. 22
Net sales			$	12,932					13,804						15,165						7		%				10		%
Gross profit			$	5,730					6,306						7,427						10		%				18		%
Percent of sales			44.3		%				45.7		%				49.0		%				1.4 pts						3.3 pts
SG&A			$	3,494					3,614						4,186
Percent of sales			27.0		%				26.2		%				27.6		%				(0.8) pts						1.4 pts
Gain on subordinated interest			$	—					(453)						(161)
Other deductions, net			$	319					519						683
Amortization of intangibles			$	277					336						482
Restructuring costs			$	132					75						72
Interest expense, net			$	155					194						34
Interest income from related party			$	—					—						(41)
Earnings from continuing operations before income taxes			$	1,762					2,432						2,726						38		%				12		%
Percent of sales			13.6		%				17.6		%				18.0		%				4.0 pts						0.4 pts
Earnings from continuing operations common stockholders			$	1,414					1,886						2,152						33		%				14		%
Percent of sales			10.9		%				13.7		%				14.2		%				2.8 pts						0.5 pts
Net earnings common stockholders			$	2,303					3,231						13,219						40		%				309		%
Percent of sales			17.8		%				23.4		%				87.2		%				5.6 pts						63.8 pts
Diluted EPS – Earnings from continuing operations			$	2.35					3.16						3.72						34		%				18		%
Diluted EPS – Net earnings			$	3.82					5.41						22.88						42		%				323		%
Adjusted Diluted EPS – Earnings from continuing operations			$	3.01					3.64						4.44						21		%				22		%
Return on common stockholders' equity			25.2		%				31.9		%				85.1		%				6.7 pts						53.2 pts
Return on total capital			18.1		%				20.4		%				66.5		%				2.3 pts						46.1 pts

OVERVIEW

Overall, sales for 2023 were $15.2 billion, up 10 percent compared with the prior year, reflecting strong growth across the majority of the Company's business segments and all geographies.

Net earnings from continuing operations attributable to common stockholders were $2,152 in 2023, up 14 percent compared with prior year earnings of $1,886, and diluted earnings per share from continuing operations were $3.72, up 18 percent versus $3.16 in 2022. Adjusted diluted earnings per share from continuing operations were $4.44 compared with $3.64 in the prior year, reflecting strong sales growth and operating performance.

The Company generated operating cash flow from continuing operations of $2.7 billion in 2023, an increase of $678, or 33 percent, reflecting higher earnings (excluding the impacts in both years from the Vertiv subordinated interest gains and higher Heritage AspenTech intangibles amortization in the current year).

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.

						2021						2022						2023
Diluted earnings from continuing operations per share						$	2.35					3.16						3.72
Amortization of intangibles						0.38						0.45						0.62
Restructuring and related costs						0.21						0.14						0.14
Acquisition/divestiture costs and pre-acquisition interest on AspenTech debt						—						0.15						0.13
Gain on subordinated interest						—						(0.60)						(0.21)
National Instruments investment gain						—						—						(0.07)
Other investment-related gains						—						(0.02)						—
AspenTech Micromine purchase price hedge						—						0.04						(0.02)
Interest income on undeployed proceeds from Copeland transaction						—						—						(0.19)
Loss on Copeland equity method investment						—						—						0.24
Russia business exit charge						—						0.32						0.08
OSI first year acquisition accounting charges and fees						0.07						—						—
Adjusted diluted earnings from continuing operations per share						$	3.01					3.64						4.44

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.

						2022						2023
Adjusted diluted earnings from continuing operations per share - prior year						$	3.01					3.64
Operations, including impact of AspenTech acquisition						0.58						0.77
Corporate and other						—						0.07
Stock compensation						0.12						(0.16)
Foreign currency						(0.02)						(0.12)
Pensions						0.03						0.07
Gains on sales of capital assets in 2022						0.02						(0.02)
Gains on sales of investments in 2021						(0.03)						—
Effective tax rate						(0.09)						0.01
Interest income on Copeland note receivable						—						0.05
Other						(0.01)						(0.01)
Share repurchases						0.03						0.14
Adjusted diluted earnings from continuing operations per share - current year						$	3.64					4.44

NET SALES

Net sales for 2023 were $15.2 billion, an increase of $1.4 billion, or 10 percent compared with 2022. 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 were up 10 percent on 6 percent higher volume and 4 percent higher price. Foreign currency translation subtracted 2 percent, the Heritage AspenTech acquisition added 3 percent and the divestiture of Metran, Emerson's Russia-based manufacturing subsidiary, deducted 1 percent. Underlying sales were up 11 percent in the U.S. and up 9 percent internationally.

Net sales for 2022 were $13.8 billion, an increase of $0.9 billion, or 7 percent compared with 2021. Intelligent Devices sales increased 5 percent, while Software and Control sales increased 16 percent. Underlying sales increased 7 percent on 4 percent higher volume and 3 percent higher price. The Heritage AspenTech acquisition

added 3 percent and foreign currency translation deducted 3 percent. Underlying sales were up 12 percent in the U.S. and up 5 percent internationally.

INTERNATIONAL SALES

Emerson is a global business with international sales representing 58 percent of total sales in 2023, including U.S. exports. The Company generally expects faster economic growth in emerging markets in Asia, Latin America, Eastern Europe and Middle East/Africa.

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. exports of $1.0 billion were up 6 percent compared with 2022. 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, Emerson's Russia-based manufacturing subsidiary, deducted 1 percent. Underlying sales increased 10 percent in Europe, 9 percent in Asia, Middle East & Africa (China up 4 percent), 14 percent in Latin America and 1 percent in Canada. Origin sales by international subsidiaries, including shipments to the U.S., totaled $7.7 billion in 2023, up 5 percent compared with 2022.

International destination sales, including U.S. exports, increased 2 percent, to $8.2 billion in 2022, reflecting the impact of the Heritage AspenTech acquisition. U.S. exports of $1.0 billion were up 51 percent compared with 2021, including an increase of approximately $200 due to the Heritage AspenTech acquisition. Underlying international destination sales were up 5 percent, as foreign currency translation had a 5 percent unfavorable impact on the comparison and the Heritage AspenTech acquisition added 2 percent. Underlying sales increased 5 percent in Asia, Middle East & Africa (China up 11 percent), 18 percent in Latin America and 14 percent in Canada, while Europe was down slightly. Origin sales by international subsidiaries, including shipments to the U.S., totaled $7.4 billion in 2022, down 2 percent compared with 2021.

ACQUISITIONS AND DIVESTITURES

Portfolio management is an integral component of Emerson's growth and value creation strategy. Over the past two 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 higher growth and cohesive 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 October 11, 2023, subsequent to Emerson's fiscal year-end, 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.

In 2023, the Company acquired two businesses, Flexim, which will be reported in the Measurement & Analytical segment, and Afag, which will be reported in the Discrete Automation segment, for $705, net of cash acquired.

On March 31, 2023, Emerson completed the divestiture of Metran, its Russia-based manufacturing subsidiary. In 2023, the Company recognized a pretax loss of $47 in Other deductions ($47 after-tax, in total $0.08 per share) related to its exit of business operations in Russia. The 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 previously announced sale of a majority stake in its Climate Technologies business (which constitutes the former Climate Technologies segment, excluding Therm-O-Disc which was divested earlier in 2022) to private equity funds managed by Blackstone in a $14.0 billion transaction. The Company recognized a pretax gain of approximately $10.6 billion (approximately $8.4 billion after-tax including tax expense recognized in prior quarters related to subsidiary restructurings). The new standalone business is named Copeland.

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, 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.

On October 1, 2020, the Company completed the acquisition of Open Systems International, Inc. (OSI), a leading operations technology software provider in the global power industry, for approximately $1.6 billion, net of cash acquired. This business had net sales of $191 in 2021 and is now reported in the AspenTech segment.

See Notes 4, 5, 8 and 23 and Item 1A - "Risk Factors" for further information on acquisitions and divestitures.

COST OF SALES

Cost of sales for 2023 were $7,738, an increase of $240 compared with $7,498 in 2022. Gross profit was $7,427 in 2023 compared to $6,306 in 2022, while gross margin increased 3.3 percentage points to 49.0 percent due to favorable price less net material inflation, the impact of the Heritage AspenTech acquisition which benefited margins by 0.6 percentage points, and favorable mix.

Cost of sales for 2022 were $7,498, an increase of $296 compared with $7,202 in 2021, primarily due to higher sales volume and higher materials costs. Gross profit was $6,306 in 2022 compared to $5,730 in 2021, while gross margin increased 1.4 percentage points to 45.7 percent. The Heritage AspenTech acquisition benefited gross margin 0.9 percentage points and favorable mix also contributed to the increase. Price less net material inflation was favorable but had a slightly dilutive impact on margins, while higher freight and other inflation also negatively impacted margins.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

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.

SG&A expenses of $3,614 in 2022 increased $120 compared with 2021, reflecting the impact of higher sales and higher wage and other inflation. SG&A as a percent of sales decreased 0.8 percentage points to 26.2 percent, reflecting lower stock compensation expense of $72 due to a lower share price in 2022 (0.6 percentage points) and leverage on higher sales.

GAIN ON SUBORDINATED INTEREST

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). Based on the terms of the agreement and the current calculation, the Company could receive additional distributions of approximately $40. The remaining distributions are contingent on the timing and price at which Vertiv shares are sold by the equity holders and therefore, there can be no assurance as to the amount or timing of the remaining distributions to the Company.

OTHER DEDUCTIONS, NET

Other deductions, net were $683 in 2023, an increase of $164 compared with 2022, reflecting a loss of $177 on the Company's equity method investment in Copeland, 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 the current year. The current year also included a mark-to-market gain of $56 on the Company's equity investment in NI, and a mark-to-market gain of $24 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 loss of $50 in the prior year. On June 21, 2023, AspenTech terminated all outstanding foreign currency forward contracts.

Other deductions, net were $519 in 2022, an increase of $200 compared with 2021, reflecting a charge of $145 related to the Company exiting its business in Russia ($10 of which is reported in restructuring costs), acquisition/divestiture costs of $91, higher intangibles amortization of $59, primarily related to the Heritage AspenTech acquisition, and a mark-to-market loss of $50 related to foreign currency forward contracts entered into by AspenTech to mitigate the impact of foreign currency exchange associated with the Micromine purchase price. These items were partially offset by lower restructuring costs of $57. See Notes 6 and 7.

INTEREST EXPENSE, NET

Interest expense, net was $34, $194 and $155 in 2023, 2022 and 2021, respectively. The decrease in 2023 reflects interest income on undeployed proceeds from the Copeland transaction of $141 ($108 after-tax, $0.19 per share). The increase in 2022 compared to 2021 reflects the issuance of $3 billion of long-term debt in December 2021 to support the AspenTech transaction, partially offset by $500 of notes that matured in the first quarter of 2022.

Interest income from related party was $41 in 2023 and reflects non-cash interest income on the Copeland note receivable, which is capitalized to the carrying value of the note.

EARNINGS BEFORE INCOME TAXES

Pretax earnings from continuing operations of $2,726 increased $294 in 2023, up 12 percent compared with 2022, reflecting strong operating results in the current year. Earnings increased $447 in Intelligent Devices and decreased $27 in Software and Control (reflecting the impact of higher intangibles amortization due to the Heritage AspenTech acquisition).

Pretax earnings from continuing operations of $2,432 increased $670 in 2022, up 38 percent compared with 2021, reflecting the impact of the Vertiv gain discussed above and strong earnings, which increased $340 in Intelligent Devices and increased $74 in Software and Control. See the Business Segments discussion that follows and Note 20.

INCOME TAXES

Income taxes were $599, $549 and $346 for 2023, 2022 and 2021, respectively, resulting in effective tax rates of 22 percent, 23 percent and 20 percent in 2023, 2022 and 2021, respectively. The rate in 2022 reflected the impact of the Russia business exit which was essentially offset by a benefit related to the completion of tax examinations. See Note 16.

NET EARNINGS AND EARNINGS PER SHARE

Net earnings from continuing operations attributable to common stockholders in 2023 were $2,152, up 14 percent compared with 2022, and diluted earnings per share from continuing operations were $3.72, up 18 percent compared with $3.16 in 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. Earnings from discontinued operations attributable to common stockholders in 2023 were $11,067 ($19.16 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, compared to $1,345 ($2.25 per share) in 2022. See Note 5. Net earnings attributable to common stockholders were $13,219 ($22.88 per share) compared with $3,231 ($5.41 per share) in 2022.

Net earnings from continuing operations attributable to common stockholders in 2022 were $1,886, up 33 percent compared with 2021, and diluted earnings per share from continuing operations were $3.16, up 34 percent compared with $2.35 in 2021. Results reflected strong operating results and included a gain of $0.60 per share related to the Company's subordinated interest in Vertiv. Adjusted diluted earnings per share from continuing

operations were $3.64 compared with $3.01 in the prior year. See the analysis of adjusted earnings per share in the Overview section for further details. Earnings from discontinued operations attributable to common stockholders in 2022 were $1,345 ($2.25 per share) compared to $889 ($1.47 per share) in 2021, reflecting an after-tax gain of $429 ($0.72 per share) related to the Therm-O-Disc divestiture in 2022. See Note 5. Net earnings common stockholders were $3,231 ($5.41 per share) in 2022 compared with $2,303 ($3.82 per share) in 2021.

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.

Twelve Months Ended September 30			2021						2022						2023						22 vs. 21						23 vs. 22
Earnings from continuing operations before income taxes			$	1,762					2,432						2,726						38		%				12		%
Percent of sales			13.6		%				17.6		%				18.0		%				4.0 pts						0.4 pts
Interest expense, net			155						194						34
Interest income from related party			—						—						(41)
Amortization of intangibles			304						430						678
Restructuring and related costs			166						105						92
Acquisition/divestiture and related costs			—						91						84
Gain on subordinated interest			—						(453)						(161)
National Instruments investment gain			—						—						(56)
Other investment-related gains									(14)						—
AspenTech Micromine purchase price hedge			—						50						(24)
Loss on Copeland equity method investment			—						—						177
Russia business exit charge			—						181						47
OSI first year acquisition accounting charges			50						—						—
Adjusted EBITA from continuing operations			$	2,437					3,016						3,556						24		%				18		%
Percent of sales			18.8		%				21.8		%				23.4		%				3.0 pts						1.6 pts

RETURNS ON EQUITY AND TOTAL CAPITAL

Return on common stockholders' equity (net earnings attributable to common stockholders divided by average common stockholders' equity) was 85.1 percent in 2023 compared with 31.9 percent in 2022 and 25.2 percent in 2021. Return on total capital (computed as net earnings attributable to common stockholders excluding after-tax net interest expense, divided by average common stockholders' equity plus short- and long-term debt less cash and short-term investments) was 66.5 percent in 2023 compared with 20.4 percent in 2022 and 18.1 percent in 2021. The higher returns in 2023 included the impact of the after-tax gain from the Copeland transaction (approximately $8.4 billion), the after-tax gain on the InSinkErator divestiture (approximately $2.1 billion), the Vertiv subordinated interest after-tax gain of $122, the National Instruments investment after-tax gain of $43, the after-tax loss on the Copeland equity method investment of $134, after-tax acquisition/divestiture costs of $78, and the Russia business exit after-tax loss of $47. The higher returns in 2022 included the impact of the Vertiv subordinated interest after-tax gain of $358, the after-tax gain on the Therm-O-Disc divestiture of $429, after-tax acquisition/divestiture costs of $93 (including amounts reported in discontinued operations), and the Russia business exit after-tax loss of $190. Excluding these items in both years, return on common stockholders' equity was 17.9 percent and 26.9 percent in 2023 and 2022, respectively, and return on total capital was 14.0 percent and 17.4 percent, respectively. The decrease in 2023 reflects the increase to equity from the after-tax gains on the Copeland transaction and InSinkErator divestiture.

Business Segments

Following is an analysis of segment results for 2023 compared with 2022, and 2022 compared with 2021. The Company defines segment earnings as earnings before interest and income taxes.

INTELLIGENT DEVICES
			2022						2023						Change						FX						Acq/Div						U/L
Sales:
Final Control			$	3,607					3,970						10		%				2		%				1		%				13		%
Measurement & Analytical			3,215						3,595						12		%				2		%				2		%				16		%
Discrete Automation			2,612						2,635						1		%				2		%				—		%				3		%
Safety & Productivity			1,402						1,388						(1)		%				—		%				—		%				(1)		%
Total			$	10,836					11,588						7		%				2		%				1		%				10		%
Earnings:
Final Control			$	592					865						46		%
Measurement & Analytical			785						936						19		%
Discrete Automation			542						509						(6)		%
Safety & Productivity			250						306						22		%
Total			$	2,169					2,616						21		%
Margin			20.0		%				22.6		%				2.6 pts
Amortization of intangibles:
Final Control			$	94					88
Measurement & Analytical			21						27
Discrete Automation			30						29
Safety & Productivity			26						26
Total			$	171					170
Restructuring and related costs:
Final Control			$	75					28
Measurement & Analytical			3						13
Discrete Automation			—						27
Safety & Productivity			10						—
Total			$	88					68
Adjusted EBITA			$	2,428					2,854						18		%
Adjusted EBITA Margin			22.4		%				24.6		%				2.2 pts

2023 vs. 2022 - 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.

INTELLIGENT DEVICES
			2021						2022						Change						FX						Acq/Div						U/L
Sales:
Final Control			$	3,488					3,607						4		%				3		%				—		%				7		%
Measurement & Analytical			3,078						3,215						4		%				3		%				—		%				7		%
Discrete Automation			2,474						2,612						6		%				4		%				—		%				10		%
Safety & Productivity			1,340						1,402						5		%				2		%				—		%				7		%
Total			$	10,380					10,836						5		%				3		%				—		%				8		%
Earnings:
Final Control			$	432					592						37		%
Measurement & Analytical			684						785						15		%
Discrete Automation			457						542						18		%
Safety & Productivity			256						250						(2)		%
Total			$	1,829					2,169						19		%
Margin			17.6		%				20.0		%				2.4 pts
Amortization of intangibles:
Final Control			$	107					94
Measurement & Analytical			25						21
Discrete Automation			34						30
Safety & Productivity			28						26
Total			$	194					171
Restructuring and related costs:
Final Control			$	66					75
Measurement & Analytical			58						3
Discrete Automation			11						—
Safety & Productivity			4						10
Total			$	139					88
Adjusted EBITA			$	2,162					2,428						12		%
Adjusted EBITA Margin			20.8		%				22.4		%				1.6 pts

2022 vs. 2021 - Intelligent Devices sales were $10.8 billion in 2022, an increase of $456, or 5 percent. Underlying sales increased 8 percent on 5 percent higher volume and 3 percent higher price. Foreign currency translation had a 3 percent unfavorable impact. Underlying sales increased 12 percent in the Americas (U.S. up 12 percent), increased 1 percent in Europe and increased 5 percent in Asia, Middle East & Africa (China up 11 percent). Sales for Final Control increased $119, or 4 percent, and underlying sales increased 7 percent, reflecting strong demand in the Americas and China, partially offset by softness in the rest of Asia, Middle East & Africa. Sales for Measurement & Analytical increased $137, or 4 percent, and underlying sales increased 7 percent. Sales were strong in China and North America, while sales were down moderately in Europe due to supply chain constraints. Discrete Automation sales increased $138, or 6 percent, and underlying sales increased 10 percent, reflecting strong demand across all geographies. Safety & Productivity sales increased $62, or 5 percent, and underlying sales increased 7 percent. Sales of professional tools were strong, while wet/dry vacuums decreased moderately due to difficult comparisons. Earnings for Intelligent Devices were $2,169, an increase of $340, or 19 percent, and margin increased 2.4 percentage points to 20.0 percent, reflecting leverage on higher volume, favorable mix, lower restructuring expenses which benefited margins 0.5 percentage points, savings from cost reduction actions and favorable price less net material inflation, partially offset by higher freight and other inflation. Adjusted EBITA margin was 22.4 percent, an increase of 1.6 percentage points.

SOFTWARE AND CONTROL
			2022						2023						Change						FX						Acq/Div						U/L
Sales:
Control Systems & Software			$	2,398					2,606						9		%				1		%				1		%				11		%
AspenTech			656						1,042						59		%				—		%				(60)		%				(1)		%
Total			$	3,054					3,648						20		%				1		%				(11)		%				10		%
Earnings:
Control Systems & Software			$	437					529						21		%
AspenTech			12						(107)						(967)		%
Total			$	449					422						(6)		%
Margin			14.7		%				11.6		%				(3.1) pts
Amortization of intangibles:
Control Systems & Software			$	22					22
AspenTech			237						486
Total			$	259					508
Restructuring and related costs:
Control Systems & Software			$	11					9
AspenTech			—						1
Total			$	11					10
Adjusted EBITA			$	719					940						31		%
Adjusted EBITA Margin			23.5		%				25.8		%				2.3 pts

2023 vs. 2022 - Software and Control sales were $3.6 billion in 2023, an increase of $594, or 20 percent compared to the prior year, 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.

SOFTWARE AND CONTROL
			2021						2022						Change						FX						Acq/Div						U/L
Sales:
Control Systems & Software			$	2,321					2,398						3		%				4		%				—		%				7		%
AspenTech			319						656						106		%				—		%				(106)		%				—		%
Total			$	2,640					3,054						16		%				4		%				(13)		%				7		%
Earnings:
Control Systems & Software			$	382					437						14		%
AspenTech			(7)						12						269		%
Total			$	375					449						20		%
Margin			14.2		%				14.7		%				0.5 pts
Amortization of intangibles:
Control Systems & Software			$	20					22
AspenTech			89						237
Total			$	109					259
Restructuring and related costs:
Control Systems & Software			$	11					11
AspenTech			2						—
Total			$	13					11
Adjusted EBITA			$	497					719						45		%
Adjusted EBITA Margin			18.8		%				23.5		%				4.7 pts

2022 vs. 2021 - Software and Control sales were $3.1 billion in 2022, an increase of $414, or 16 percent compared to 2021, reflecting the impact of the Heritage AspenTech acquisition and growth in Control Systems & Software. Underlying sales increased 7 percent on higher volume. Underlying sales increased 13 percent in the Americas (U.S. up 12 percent), decreased 4 percent in Europe and increased 6 percent in Asia, Middle East & Africa (China up 11 percent). Sales for Control Systems & Software increased $77, or 3 percent, and underlying sales increased 7 percent, reflecting strength in process end markets in North America and China, partially offset by weakness in Europe, while power end markets were strong in North America and Europe. Sales for AspenTech increased $337, or 106 percent, due to the acquisition of Heritage AspenTech. Earnings for Software and Control were $449, an increase of $74, or 20 percent, and margin increased 0.5 percentage points to 14.7 percent. Results for 2022 included intangibles amortization of $148 related to the Heritage AspenTech acquisition. Adjusted EBITA margin was 23.5 percent, an increase of 4.7 percentage points, reflecting the impact of the Heritage AspenTech acquisition and leverage on higher volume in Control Systems & Software.

Financial Position, Liquidity and Capital Resources

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 $43 billion and 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.

The Company continues to generate substantial operating cash flow, including over $2.7 billion from continuing operations in 2023. Cash flows have been and are expected to be sufficient for at least the next 12 months to meet the Company’s operating requirements, including those related to salaries and wages, working capital, capital expenditures, and other liquidity requirements associated with operations. The Company also has certain contractual obligations, primarily long-term debt and operating leases (see Notes 9, 12 and 13). The 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.

CASH FLOW
			2021						2022						2023
Operating Cash Flow			$	2,458					2,048						2,726
Percent of sales			19.0		%				14.8		%				18.0		%
Capital Expenditures			$	404					299						363
Percent of sales			3.1		%				2.2		%				2.4		%
Free Cash Flow (Operating Cash Flow less Capital Expenditures)			$	2,054					1,749						2,363
Percent of sales			15.9		%				12.7		%				15.6		%
Operating Working Capital			$	457					990						1,283
Percent of sales			3.5		%				7.2		%				8.5		%

Operating cash flow from continuing operations for 2023 was $2.7 billion, an increase of $678, or 33 percent compared with 2022, reflecting higher earnings (excluding the impacts in both years from the Vertiv subordinated interest gains and higher Heritage AspenTech intangibles amortization in the current year). Operating cash flow included approximately $310 generated by AspenTech. Operating cash flow from continuing operations of $2.0 billion in 2022 decreased 17 percent compared to $2.5 billion in 2021, reflecting higher working capital due to increased sales and ongoing supply chain constraints.

At September 30, 2023, operating working capital as a percent of sales was 8.5 percent compared with 7.2 percent in 2022 and 3.5 percent in 2021. Operating working capital remained elevated in 2023 due to higher inventory levels to support sales growth and higher receivables. The increase for 2022 compared to 2021 was due to higher inventory levels to support sales growth and reflecting supply chain constraints. In addition, the Heritage AspenTech acquisition increased operating working capital by approximately $250 in 2022. As of September 30, 2023, Emerson's cash and equivalents totaled $8.1 billion, reflecting the after-tax proceeds related to the Copeland transaction, which were used along with other available liquidity to fund the National Instruments transaction subsequent to year-end (see the Leverage/Capitalization section for further discussion of Emerson's post-close financial position). Going forward, Copeland is not expected to issue dividends to the Company but will distribute cash for the Company to pay its share of U.S. taxes. The Company's cash also includes approximately $120 attributable to AspenTech which is intended to be used for its own purposes and is not available to return to Emerson shareholders.

Free cash flow from continuing operations (operating cash flow less capital expenditures) was $2,363 in 2023, up 35 percent, reflecting the increase in operating cash flow. Free cash flow from continuing operations was $1,749 in 2022, compared with $2,054 in 2021. Net cash paid in connection with acquisitions was $705, $5,702 and $1,592 in 2023, 2022 and 2021, respectively.

Total cash provided by operating activities including the impact of discontinued operations was $637, $2,922 and $3,575 in 2023, 2022 and 2021, 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 of $12.5 billion in 2023 reflects the proceeds from the Copeland transaction and InSinkErator divestiture.

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 $1,198 ($2.08 per share) in 2023, compared with $1,223 ($2.06 per share) in 2022 and $1,210 ($2.02 per share) in 2021. In November 2023, the Board of Directors voted to increase the quarterly cash dividend 1 percent, to an annualized rate of $2.10 per share.

Purchases of Emerson common stock totaled $2,000, $500 and $500 in 2023, 2022 and 2021, respectively, at average per share prices of $94.09, $87.64 and $94.65. AspenTech repurchases were $214 in 2023, which increased the Company's common ownership percentage to 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 33.3 million shares remain available. The Company purchased 21.3 million shares in 2023, 5.7 million shares in 2022 and 5.3 million shares in 2021 under the authorizations.

LEVERAGE/CAPITALIZATION
			2021						2022						2023
Total Assets			$	24,715					35,672						42,746
Long-term Debt			$	5,793					8,259						7,610
Common Stockholders' Equity			$	9,883					10,364						20,689
Total Debt-to-Total Capital Ratio			40.3		%				50.0		%				28.3		%
Net Debt-to-Net Capital Ratio			30.4		%				45.3		%				0.5		%
Operating Cash Flow-to-Debt Ratio			36.9		%				19.7		%				33.4		%
Interest Coverage Ratio			11.6X						11.7X						11.5X

Total debt, which includes long-term debt, current maturities of long-term debt, commercial paper and other short-term borrowings, was $8,157, $10,374 and $6,665 as of September 30, 2023, 2022 and 2021, respectively. The decrease in 2023 included a net reduction in short-term borrowings of approximately $1.6 billion and repayments of long-term debt of $741 (including $264 related to AspenTech's repayment of the outstanding balance on its existing term loan facility plus accrued interest). The increase in 2022 was due to the issuance of $3 billion of long-term debt and increased commercial paper borrowings of approximately $1.3 billion compared to September 30, 2021. The Company used the net proceeds from the sale of the notes and the increased commercial paper borrowings to fund the majority of its contribution of approximately $6.0 billion to existing stockholders of 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, and in 2021 repaid $300 of 4.25% notes that matured. See Note 4 and Note 13.

The total debt-to-total capital ratio and net debt-to-net capital ratio (less cash and short-term investments) decreased in 2023 due to the proceeds and after-tax gains (which increased common stockholder's equity) on the Copeland transaction and InSinkErator divestiture. Considering the cash paid to complete the National Instruments transaction in October 2023, the Company's net debt-to-net capital ratio was approximately 29.0 percent, reflecting moderate levels of debt consistent with prior years. These ratios increased in 2022 due to the increased borrowings to support the AspenTech transaction discussed above. The interest coverage ratio is computed as earnings before income taxes plus interest expense, divided by interest expense. The Company's earnings increased in 2023 and 2022 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. The Company also maintains a universal shelf registration statement on file with the SEC under which it can issue debt securities, preferred stock, common stock, warrants, share purchase contracts or share purchase units without a predetermined limit. Securities can be sold in one or more separate offerings with the size, price and terms to be determined at the time of sale.

FINANCIAL INSTRUMENTS

In the normal course of business, the Company is exposed to changes in interest rates and foreign currency exchange rates due to its worldwide presence and diverse business profile 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 forecast 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.

Critical Accounting Policies

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.

REVENUE RECOGNITION

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 third-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.

VALUATION OF ASSETS AND LIABILITIES

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 2022, the Company completed the acquisition of Aspen Technology, Inc. and engaged an independent third-party valuation specialist to assist in the determination of the fair value of intangible assets. This included the use of certain assumptions and estimates, including the projected revenue for the customer relationship and developed technology intangible asset and the obsolescence rate for the developed technology intangible asset. 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 Aspen Technology, Inc.

In 2023, the consideration received from the divestiture of a majority stake in Copeland included a note receivable with a face value of $2.25 billion and the Company also retained a 40 percent non-controlling common equity interest in Copeland. The note receivable and common equity interest were required to be initially valued at fair value as part of the overall consideration received for the transaction. The fair value of the common equity investment was determined using a discounted cash flow model, which included estimating financial projections for Copeland and applying an appropriate discount rate, and an option pricing model based on various assumptions. Fair value for the note receivable was determined using a market approach primarily based on interest rates for companies with similar credit quality and the expected duration of the note.

LONG-LIVED ASSETS

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.

RETIREMENT PLANS

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 Company'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.

As of September 30, 2023, the U.S. pension plans were overfunded by $656 in total (approximately 22 percent in excess of the projected benefit obligation), including unfunded plans totaling $159. The non-U.S. plans were underfunded by $62, including unfunded plans totaling $213. The Company contributed a total of $46 to defined benefit plans in 2023 and expects to contribute approximately $45 in 2024. At year-end 2023, the discount rate for U.S. plans was 6.03 percent, and was 5.64 percent in 2022. The assumed investment return on plan assets was 6.00 percent in 2023, 6.00 percent in 2022 and 6.50 percent in 2021, and will be 6.50 percent for 2024. 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, 2023 by $100 and increased 2024 pension expense by $15. A 0.25 percentage point decrease in the expected return on plan assets would increase 2024 pension expense by $15. See Note 14.

CONTINGENT LIABILITIES

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.

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 TAXES

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.

Other Items

LEGAL MATTERS

At September 30, 2023, 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 commitments outside the normal course of business.

NEW ACCOUNTING PRONOUNCEMENTS

In 2023, the Company adopted ASU No. 2021-10 (Topic 832), Government Assistance, 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.

In 2022, the Company adopted three accounting standard updates, and in 2021 adopted two accounting standard updates and one new accounting standard, each of which had an immaterial or no impact on the Company's financial statements. These included:

• Updates to Accounting Standards Codification ("ASC") 805, Business Combinations, 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.

• Updates to ASC 740, Income Taxes, which require the recognition of a franchise tax that is partially based on income as an income-based tax with any incremental amount as a non-income based tax. These updates also make certain changes to intra-period tax allocation principles and interim tax calculations.

• Updates to ASC 321, Equity Securities, ASC 323 Investments - Equity Method and Joint Ventures, and ASC 815, Derivatives and Hedging, which clarify how to account for the transition into and out of the equity method of accounting when evaluating observable transactions.

• Updates to ASC 350, Intangibles - Goodwill and Other, which eliminate the requirement to measure impairment based on the implied fair value of goodwill compared to the carrying amount of a reporting unit’s goodwill. Instead, goodwill impairment will be measured as the excess of a reporting unit’s carrying amount over its estimated fair value.

• Updates to ASC 350, Intangibles - Goodwill and Other, which align the requirements for capitalizing implementation costs incurred in a software hosting arrangement with the requirements for costs incurred to develop or obtain internal-use software.

• Adoption of ASC 326, Financial Instruments - Credit Losses, which amends the impairment model by requiring entities to use a forward-looking approach to estimate lifetime expected credit losses on certain types of financial instruments, including trade receivables.

FISCAL 2024 OUTLOOK

For fiscal year 2024, consolidated net sales from continuing operations are expected to be up 13 to 15.5 percent, with underlying sales up 4 to 6 percent excluding a 1 percent unfavorable impact from foreign currency translation and a 10 to 10.5 percent impact from the NI acquisition. Earnings per share, which incorporate the NI acquisition other than as set forth below, are expected to be $3.82 to $4.02, while adjusted earnings per share are expected to be $5.15 to $5.35 (see the following reconciliation).

Outlook for Fiscal 2024 Earnings Per Share						2024
Diluted earnings per share						$3.82 - $4.02
Amortization of intangibles						~ 0.67
Restructuring and related costs						~ 0.22
Acquisition/divestiture fees and related costs						~ 0.22
Copeland equity loss						~ 0.22
Adjusted diluted earnings per share						$5.15 - $5.35

Operating cash flow is expected to be $3.0 to $3.1 billion and free cash flow, which excludes projected capital spending of approximately $0.4 billion, is expected to be $2.6 to $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.

GAAP earnings per share guidance for fiscal 2024 does not include the impact of intangibles amortization and other purchase accounting-related costs related to the NI transaction. The initial accounting for this transaction is not yet complete and therefore Emerson is unable to estimate these amounts. Although these items may have a significant impact on GAAP earnings per share, they will be excluded from adjusted earnings per share and will have no impact on cash flows.