Item 1. Financial Statements

Consolidated Statements of Earnings

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three months ended December 31, 2022 and 2023

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

									Three Months Ended December 31,
															2022						2023
Net sales															$	3,373					4,117
Cost of sales															1,753						2,201
Selling, general and administrative expenses															1,030						1,277
Other deductions, net															120						487
Interest expense (net of interest income of $20 and $40, respectively)															48						44
Interest income from related party															—						(31)
Earnings from continuing operations before income taxes															422						139
Income taxes															98						7
Earnings from continuing operations															324						132
Discontinued operations, net of tax of $966 and $—, respectively															2,002						—
Net earnings															2,326						132
Less: Noncontrolling interests in subsidiaries															(5)						(10)
Net earnings common stockholders															$	2,331					142
Earnings common stockholders:
Earnings from continuing operations															$	329					142
Discontinued operations															2,002						—
Net earnings common stockholders															$	2,331					142
Basic earnings per share common stockholders:
Earnings from continuing operations															$	0.56					0.25
Discontinued operations															3.43						—
Basic earnings per common share															$	3.99					0.25
Diluted earnings per share common stockholders:
Earnings from continuing operations															$	0.56					0.25
Discontinued operations															3.41						—
Diluted earnings per common share															$	3.97					0.25
Weighted average outstanding shares:
Basic															583.6						570.8
Diluted															586.7						573.3

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three months ended December 31, 2022 and 2023

(Dollars in millions; unaudited)

			Three Months Ended December 31,
			2022									2023
Net earnings			$	2,326								132
Other comprehensive income (loss), net of tax:
Foreign currency translation			241									174
Pension and postretirement			(16)									(12)
Cash flow hedges			10									3
Total other comprehensive income (loss)			235									165
Comprehensive income			2,561									297
Less: Noncontrolling interests in subsidiaries			—									(8)
Comprehensive income common stockholders			$	2,561								305

See accompanying Notes to Consolidated Financial Statements.

Consolidated Balance Sheets

EMERSON ELECTRIC CO. & SUBSIDIARIES

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

			Sept 30, 2023						Dec 31, 2023
ASSETS
Current assets
Cash and equivalents			$	8,051					2,076
Receivables, less allowances of $100 and $112, respectively			2,518						2,759
Inventories			2,006						2,432
Other current assets			1,244						1,399
Total current assets			13,819						8,666
Property, plant and equipment, net			2,363						2,701
Other assets
Goodwill			14,480						17,983
Other intangible assets			6,263						11,270
Copeland note receivable and equity investment			3,255						3,253
Other			2,566						2,640
Total other assets			26,564						35,146
Total assets			$	42,746					46,513
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current maturities of long-term debt			$	547					3,227
Accounts payable			1,275						1,234
Accrued expenses			3,210						3,304
Total current liabilities			5,032						7,765
Long-term debt			7,610						7,632
Other liabilities			3,506						4,561
Equity
Common stock, $0.50 par value; authorized, 1,200.0 shares; issued, 953.4 shares; outstanding, 572.0 shares and 571.7 shares, respectively			477						477
Additional paid-in-capital			62						140
Retained earnings			40,070						39,910
Accumulated other comprehensive income (loss)			(1,253)						(1,090)
Cost of common stock in treasury, 381.4 shares and 381.7 shares, respectively			(18,667)						(18,763)
Common stockholders’ equity			20,689						20,674
Noncontrolling interests in subsidiaries			5,909						5,881
Total equity			26,598						26,555
Total liabilities and equity			$	42,746					46,513

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Equity

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three months ended December 31, 2022 and 2023

(Dollars in millions; unaudited)

			Three Months Ended December 31,
			2022						2023
Common stock			$	477					477
Additional paid-in-capital
Beginning balance			57						62
Stock plans			55						119
AspenTech purchases of common stock			—						(41)
Ending balance			112						140
Retained earnings
Beginning balance			28,053						40,070
Net earnings common stockholders			2,331						142
Dividends paid (per share: $0.52 and $0.525, respectively)			(308)						(302)
Ending balance			30,076						39,910
Accumulated other comprehensive income (loss)
Beginning balance			(1,485)						(1,253)
Foreign currency translation			236						172
Pension and postretirement			(16)						(12)
Cash flow hedges			10						3
Ending balance			(1,255)						(1,090)
Treasury stock
Beginning balance			(16,738)						(18,667)
Purchases			(2,000)						(175)
Issued under stock plans			55						79
Ending balance			(18,683)						(18,763)
Common stockholders' equity			10,727						20,674
Noncontrolling interests in subsidiaries
Beginning balance			5,952						5,909
Net earnings (loss)			(5)						(10)
Stock plans			35						11
AspenTech purchases of common stock			—						(31)
Other comprehensive income			5						2
Ending balance			5,987						5,881
Total equity			$	16,714					26,555

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Cash Flows

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three Months Ended December 31, 2022 and 2023

(Dollars in millions; unaudited)

						Three Months Ended
						December 31,
						2022						2023
Operating activities
Net earnings						$	2,326					132
Earnings from discontinued operations, net of tax						(2,002)						—
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization						260						422
Stock compensation						102						74
Amortization of acquisition-related inventory step-up						—						231
Changes in operating working capital						(289)						(247)
Other, net						(95)						(168)
Cash from continuing operations						302						444
Cash from discontinued operations						116						(29)
Cash provided by operating activities						418						415
Investing activities
Capital expenditures						(59)						(77)
Purchases of businesses, net of cash and equivalents acquired						—						(8,339)
Proceeds from subordinated interest						15						—
Other, net						(23)						(37)
Cash from continuing operations						(67)						(8,453)
Cash from discontinued operations						2,953						1
Cash provided by (used in) investing activities						2,886						(8,452)
Financing activities
Net increase (decrease) in short-term borrowings						(539)						2,647
Payments of long-term debt						(9)						—
Dividends paid						(306)						(300)
Purchases of common stock						(2,000)						(175)
AspenTech purchases of common stock						—						(72)
Other, net						(41)						(45)
Cash provided by (used in) financing activities						(2,895)						2,055
Effect of exchange rate changes on cash and equivalents						58						7
Increase (decrease) in cash and equivalents						467						(5,975)
Beginning cash and equivalents						1,804						8,051
Ending cash and equivalents						$	2,271					2,076
Changes in operating working capital
Receivables						$	78					94
Inventories						(193)						(97)
Other current assets						14						(3)
Accounts payable						(58)						(89)
Accrued expenses						(130)						(152)
Total changes in operating working capital						$	(289)					(247)

See accompanying Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

EMERSON ELECTRIC CO. & SUBSIDIARIES

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

(1) BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary for a fair presentation of operating results for the interim periods presented. Adjustments consist of normal and recurring accruals. The consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all disclosures required for annual financial statements presented in conformity with U.S. generally accepted accounting principles (GAAP). For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 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									Dec 31, 2023
Unbilled receivables (contract assets)						$	1,453								1,502
Customer advances (contract liabilities)						(897)									(1,225)
Net contract assets (liabilities)						$	556								277

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 $200, while customer billings slightly exceeded revenue recognized for performance completed during the period. Revenue recognized for the three months ended December 31, 2023 included $368 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 months ended December 31, 2023 for performance obligations that were satisfied in previous periods, including cumulative catchup adjustments on the Company's long-term contracts, was immaterial.

As of December 31, 2023, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately $8.8 billion (of which $1.2 billion was attributable to AspenTech and approximately $500 was attributable to the National Instruments acquisition). The Company expects to recognize approximately 75 percent of its remaining performance obligations as revenue over the next 12 months, with the remainder substantially over the following two years.

(3) COMMON SHARES

Reconciliations of weighted-average shares for basic and diluted earnings per common share follow. Earnings allocated to participating securities were inconsequential.

			Three Months Ended December 31,
			2022						2023
Basic shares outstanding			583.6						570.8
Dilutive shares			3.1						2.5
Diluted shares outstanding			586.7						573.3

(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						524
Other current assets						140
Property, plant and equipment						336
Goodwill ($130 expected to be tax-deductible)						3,418
Other intangible assets						5,275
Other assets						116
Total assets						10,254
Accounts payable						54
Accrued expenses						325
Deferred taxes and other liabilities						1,222
Total purchase consideration						$	8,653

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 months ended December 31, 2023 attributable to the NI acquisition include sales of $382 and a net loss of $326. The net loss included the impact of inventory step-up amortization, 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 December 31,
									2022									2023
Net Sales									$	3,821								4,136
Net earnings from continuing operations common stockholders									$	(141)								420
Diluted earnings per share from continuing operations									$	(0.24)								0.73

The pro forma results for the three months ended December 31, 2022 include total 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 three months ended December 31, 2022 also include $105 of ongoing intangibles amortization, as well as backlog amortization of $34, inventory step-up amortization of $213, and retention bonuses of $43 which were all assumed to be incurred in the first quarter of fiscal 2023.

Other Transactions

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 $712, net of cash acquired. The Company recognized goodwill of $428 (none of which is expected to be tax deductible) and other identifiable intangible assets of $323, primarily customer relationships and intellectual property with a weighted-average useful life of approximately 9 years.

On 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 $0.08 per 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 months ended December 31, 2022 and were as follows:

			Three Months Ended December 31, 2022
			Climate Technologies						ISE						Total
Net sales			$	1,064					49						1,113
Cost of sales			702						29						731
SG&A			142						8						150
Gain on sale of business			—						(2,780)						(2,780)
Other deductions, net			32						12						44
Earnings before income taxes			188						2,780						2,968
Income taxes			313						653						966
Earnings, net of tax			$	(125)					2,127						2,002

Climate Technologies' results for the three months ended December 31, 2022 included lower expense of $27 due to ceasing depreciation and amortization upon the held-for-sale classification. Other deductions, net for Climate Technologies included $27 of transaction-related costs for the three months ended December 31, 2022. Income taxes for the three months ended December 31, 2022 included approximately $275 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 three months ended December 31, 2023 and 2022 were as follows:

			Climate Technologies																		ISE and TOD																					Total
			Three Months Ended December 31,																		Three Months Ended December 31,																		Three Months Ended December 31,
						2022									2023									2022									2023									2022									2023
Cash from operating activities						$	205								(29)									(89)									—									116									(29)
Cash from investing activities						$	(43)								1									2,996									—									2,953									1

For the three months ended December 31, 2022, net cash from operating activities reflects the payment of ISE transaction fees and unfavorable working capital. Cash from investing activities reflects the proceeds of approximately $3.0 billion related to the InSinkErator divestiture.

(6) PENSION & POSTRETIREMENT PLANS

Total periodic pension and postretirement (income) expense is summarized below:

			Three Months Ended December 31,
						2022									2023
Service cost						$	12								9
Interest cost						54									55
Expected return on plan assets						(71)									(74)
Net amortization						(20)									(14)
Total						$	(25)								(24)

(7) OTHER DEDUCTIONS, NET

Other deductions, net are summarized below:

			Three Months Ended December 31,
			2022												2023
Amortization of intangibles (intellectual property and customer relationships)						$	118								274
Restructuring costs						10									83
Acquisition/divestiture costs						—									80
Foreign currency transaction (gains) losses						(7)									34
Investment-related gains & gains from sales of capital assets						(4)									—
Loss on Copeland equity method investment						—									36
Russia business exit						47									—
Other						(44)									(20)
Total						$	120								487

Intangibles amortization for the three months ended December 31, 2023 included $139 related to the NI acquisition. Foreign currency transaction gains for the three months ended December 31, 2022 included a mark-to-market gain of $35 related to foreign currency forward contracts that were terminated in June 2023. Other is composed of several items, including pension expense, litigation costs, provision for bad debt and other items, none of which is individually significant.

(8) RESTRUCTURING COSTS

Restructuring expense reflects costs associated with the Company’s ongoing efforts to improve operational efficiency and deploy assets globally in order to remain competitive on a worldwide basis. The Company expects fiscal 2024 restructuring expense and related costs to be approximately $250, including costs to complete actions initiated in the first three months of the year.

Restructuring expense by business segment follows:

			Three Months Ended December 31,
			2022									2023
Final Control						$	(1)								3
Measurement & Analytical						1									3
Discrete Automation						1									10
Safety & Productivity						—									—
Intelligent Devices						1									16
Control Systems & Software						1									1
Test & Measurement						—									40
AspenTech						—									—
Software and Control						1									41
Corporate						8									26
Total						$	10								83

Corporate restructuring of $26 for the three months ended December 31, 2023 is comprised entirely of integration-related stock compensation expense attributable to NI.

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

			Sept 30, 2023									Expense									Utilized/Paid									Dec 31, 2023
Severance and benefits						$	85								79									56									108
Other						2									4									3									3
Total						$	87								83									59									111

The tables above do not include $5 and $4 of costs related to restructuring actions incurred for the three months ended December 31, 2022 and 2023, respectively, that are required to be reported in cost of sales.

(9) TAXES

Income taxes were $7 in the first quarter of fiscal 2024 and $98 in 2023, resulting in effective tax rates of 5 percent and 23 percent, respectively. The current year rate included a $57 ($0.10 per share) benefit related to discrete tax items and the impact of inventory step-up amortization, which in total had a 16 percentage point impact on the rate. The prior year rate included a 2 percentage point unfavorable impact related to the Russia charge, which had no related tax benefit.

(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 months ended December 31, 2023 the Company recorded a loss of $36 in Other deductions to reflect its share of Copeland's losses and a tax benefit of $9 in Income taxes related to Copeland's U.S. business, which is taxed as a partnership (in total, a loss of $0.04 per share). The Company recognized non-cash interest income on the note receivable of $31, which is reported in Interest income from related party and capitalized to the carrying value of the note.

As of December 31, 2023, the carrying values of the retained equity investment and note receivable were $1,129 and $2,124, respectively.

Summarized financial information for Copeland for the three months ended December 31, 2023 is as follows.

			Three Months Ended December 31,
			2023
Net sales			$	1,024
Gross profit			$	345
Income (loss) from continuing operations			$	(93)
Net income (loss)			$	(93)
Net income (loss) attributable to shareholders			$	(90)

(11) OTHER FINANCIAL INFORMATION

			Sept 30, 2023									Dec 31, 2023
Inventories
Finished products						$	446								624
Raw materials and work in process						1,560									1,808
Total						$	2,006								2,432

Property, plant and equipment, net
Property, plant and equipment, at cost						$	5,524								5,953
Less: Accumulated depreciation						3,161									3,252
Total						$	2,363								2,701

Goodwill by business segment
Final Control						$	2,660								2,687
Measurement & Analytical						1,545									1,568
Discrete Automation						892									910
Safety & Productivity						388									399
Intelligent Devices						5,485									5,564
Control Systems & Software						668									672
Test & Measurement						—									3,418
AspenTech						8,327									8,329
Software and Control						8,995									12,419
Total						$	14,480								17,983

			Sept 30, 2023									Dec 31, 2023
Other intangible assets
Gross carrying amount						$	10,111								15,481
Less: Accumulated amortization						3,848									4,211
Net carrying amount						$	6,263								11,270

Other intangible assets include customer relationships, net, of $3,353 and $6,612 and intellectual property, net, of $2,707 and $4,445 as of September 30, 2023 and December 31, 2023, respectively.

The increase in goodwill and intangibles was primarily due to the NI acquisition. See Note 4.

			Three Months Ended December 31,
			2022						2023
Depreciation and amortization expense include the following:
Depreciation expense			$	74					79
Amortization of intangibles (includes $49 and $49 reported in Cost of Sales, respectively)			167						323
Amortization of capitalized software			19						20
Total			$	260					422

Amortization of intangibles included $139 related to the NI acquisition for the three months ended December 31, 2023.

			Sept 30, 2023									Dec 31, 2023
Other assets include the following:
Pension assets						$	995								1,024
Operating lease right-of-use assets						550									635
Unbilled receivables (contract assets)						559									606
Deferred income taxes						100									98
Asbestos-related insurance receivables						53									50

As of December 31, 2023, the Company had one operating lease that had not yet commenced with a lease term of approximately 15 years and total undiscounted future minimum payments of approximately $80. This lease is expected to commence in the second quarter of fiscal 2024 and will be recorded as a right-of-use asset and lease liability.

Accrued expenses include the following:
Customer advances (contract liabilities)						$	861								1,133
Employee compensation						618									499
Income taxes						207									274
Operating lease liabilities (current)						144									157
Product warranty						84									73

Other liabilities include the following:
Deferred income taxes						$	1,959								2,827
Operating lease liabilities (noncurrent)						404									465
Pension and postretirement liabilities						435									449
Asbestos litigation						173									169

The increase in deferred income tax liabilities reflects the impact of the NI acquisition. See Note 4.

(12) FINANCIAL INSTRUMENTS

Hedging Activities – As of December 31, 2023, the notional amount of foreign currency hedge positions was approximately $2.8 billion. All derivatives receiving hedge accounting are cash flow hedges. The majority of hedging gains and losses deferred as of December 31, 2023 are expected to be recognized over the next 12 months as the underlying forecasted transactions occur. Gains and losses on foreign currency derivatives reported in Other deductions, net reflect hedges of balance sheet exposures that do not receive hedge accounting.

Net Investment Hedge – In fiscal 2019, the Company issued euro-denominated debt of €1.5 billion. The euro notes reduce foreign currency risk associated with the Company's international subsidiaries that use the euro as their functional currency and have been designated as a hedge of a portion of the investment in these operations. Foreign currency gains or losses associated with the euro-denominated debt are deferred in accumulated other comprehensive income (loss) and will remain until the hedged investment is sold or substantially liquidated.

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

												Into Earnings												Into OCI
												1st Quarter																		1st Quarter
Gains (Losses)						Location						2022						2023																		2022						2023
Commodity						Cost of sales						$	(8)					—																		11						—
Foreign currency						Sales						(1)						—																		4						7
Foreign currency						Cost of sales						8						3																		(3)						1
Foreign currency						Other deductions, net						5						15
Net Investment Hedges
Euro denominated debt																		—																		(123)						(55)
Total												$	4					18																		(111)						(47)

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 December 31, 2023 was approximately $2.0 billion, which was lower than the carrying value by approximately $100. See Note 10 for further details. As of December 31, 2023, the fair value of long-term debt was approximately $7.4 billion, which was lower than the carrying value by $847. 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 December 31, 2023.

(13) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Activity in Accumulated other comprehensive income (loss) for the three months ended December 31, 2022 and 2023 is shown below, net of income taxes:
			Three Months Ended December 31,
						2022									2023
Foreign currency translation
Beginning balance						$	(1,265)								(1,012)
Other comprehensive income (loss), net of tax of $28 and $13, respectively						236									172
Ending balance						(1,029)									(840)
Pension and postretirement
Beginning balance						(222)									(247)
Amortization of deferred actuarial losses into earnings, net of tax of $4 and $2, respectively						(16)									(12)
Ending balance						(238)									(259)
Cash flow hedges
Beginning balance						2									6
Gains deferred during the period, net of taxes of $(3) and $(2), respectively						9									6
Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $— and $—, respectively						1									(3)
Ending balance						12									9
Accumulated other comprehensive income (loss)						$	(1,255)								(1,090)

(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 December 31,
			Sales												Earnings (Loss)
			2022						2023						2022						2023
Final Control			$	862					940						158						194
Measurement & Analytical			749						947						175						235
Discrete Automation			618						613						121						97
Safety & Productivity			310						322						63						68
Intelligent Devices			2,539						2,822						517						594
Control Systems & Software			606						675						107						149
Test & Measurement			—						382						—						(78)
AspenTech			243						257						(33)						(35)
Software and Control			849						1,314						74						36
Stock compensation															(102)						(74)
Unallocated pension and postretirement costs															45						31
Corporate and other															(64)						(399)
Loss on Copeland equity method investment															—						(36)
Eliminations/Interest			(15)						(19)						(48)						(44)
Interest income from related party															—						31
Total			$	3,373					4,117						422						139

Stock compensation for the three months ended December 31, 2023 included $30 of integration-related stock compensation expense attributable to NI ($26 of which was reported as restructuring costs). Corporate and other for the three months ended December 31, 2023 included acquisition-related inventory step-up amortization of $231 and acquisition/divestiture fees and related costs of $130, while 2022 included a loss of $47 related to the Company's exit of business operations in Russia and a mark-to-market gain of $35 related to foreign currency forward contracts that were terminated in June 2023.

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

			Three Months Ended December 31,
						2022						2023
Final Control						$	45					40
Measurement & Analytical						30						40
Discrete Automation						21						22
Safety & Productivity						14						14
Intelligent Devices						110						116
Control Systems & Software						21						21
Test & Measurement						—						151
AspenTech						123						123
Software and Control						144						295
Corporate and other						6						11
Total						$	260					422

Test & Measurement depreciation and amortization for the three months ended December 31, 2023 included intangibles amortization of $139 due to the acquisition.

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

			Three Months Ended December 31,																											Three Months Ended December 31,
			2022																											2023
						Americas						AMEA						Europe						Total						Americas						AMEA						Europe						Total
Final Control						$	446					308						108						862						454						370						116						940
Measurement & Analytical						396						246						107						749						475						325						147						947
Discrete Automation						291						175						152						618						286						162						165						613
Safety & Productivity						236						17						57						310						243						16						63						322
Intelligent Devices						1,369						746						424						2,539						1,458						873						491						2,822
Control Systems & Software						294						185						127						606						325						209						141						675
Test & Measurement						—						—						—						—						164						99						119						382
AspenTech						112						63						68						243						140						60						57						257
Software and Control						406						248						195						849						629						368						317						1,314
Total						$	1,775					994						619						3,388						2,087						1,241						808						4,136

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 first quarter of fiscal 2024, net sales were $4.1 billion, up 22 percent compared with the prior year. Underlying sales, which exclude foreign currency translation, acquisitions and divestitures, were up 10 percent. Foreign currency translation had a 1 percent favorable impact, the Test & Measurement acquisition added 12 percent and the divestiture of Metran, Emerson's Russia-based manufacturing subsidiary, deducted 1 percent.

Earnings from continuing operations attributable to common stockholders were $142, down 57 percent, and diluted earnings per share from continuing operations were $0.25, down 55 percent compared with $0.56 in the prior year. Adjusted diluted earnings per share from continuing operations were $1.22, up 56 percent compared with $0.78 in the prior year, reflecting the strong sales growth and operating performance, as well as a $0.13 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 Dec 31												2022						2023
Diluted earnings from continuing operations per share												$	0.56					0.25
Amortization of intangibles												0.15						0.36
Restructuring and related costs												0.02						0.12
Acquisition/divestiture fees and related costs												—						0.17
Amortization of acquisition-related inventory step-up												—						0.38
Loss on Copeland equity method investment												—						0.04
Discrete tax benefits												—						(0.10)
Russia business exit												0.08						—
AspenTech Micromine purchase price hedge												(0.03)						—
Adjusted diluted earnings from continuing operations per share												$	0.78					1.22

The table below summarizes the changes in adjusted diluted earnings per share from continuing operations. The items identified below are discussed throughout MD&A, see further discussion above and in the Business Segments and Financial Position sections below.

						Three Months Ended
Adjusted diluted earnings from continuing operations per share - Dec 31, 2022						$	0.78
Operations						0.33
Stock compensation						0.08
Interest income from related party						0.04
Share count						0.02
Effective tax rate						(0.03)
Adjusted diluted earnings from continuing operations per share - Dec 31, 2023						$	1.22

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31

Following is an analysis of the Company’s operating results for the first quarter ended December 31, 2022, compared with the first quarter ended December 31, 2023.

			2022						2023						Change
(dollars in millions, except per share amounts)
Net sales			$	3,373					4,117						22		%
Gross profit			$	1,620					1,916						18		%
Percent of sales			48.0		%				46.5		%				(1.5) pts
SG&A			$	1,030					1,277						24		%
Percent of sales			30.5		%				31.0		%				0.5 pts
Other deductions, net			$	120					487
Amortization of intangibles			$	118					274
Restructuring costs			$	10					83
Interest expense, net			$	48					44
Interest income from related party			$	—					(31)
Earnings from continuing operations before income taxes			$	422					139						(67)		%
Percent of sales			12.5		%				3.4		%				(9.1) pts
Earnings from continuing operations common stockholders			$	329					142						(57)		%
Percent of sales			9.8		%				3.4		%				(6.4) pts
Net earnings common stockholders			$	2,331					142						(94)		%
Diluted EPS - Earnings from continuing operations			$	0.56					0.25						(55)		%
Diluted EPS - Net earnings			$	3.97					0.25						(94)		%
Adjusted Diluted EPS - Earnings from continuing operations			$	0.78					1.22						56		%

Net sales for the first quarter of fiscal 2024 were $4.1 billion, up 22 percent compared with 2023. Intelligent Devices sales were up 11 percent, while Software and Control sales were up 55 percent, which included the impact of the Test & Measurement acquisition. Underlying sales were up 10 percent on 8 percent higher volume and 2 percent higher price. Foreign currency translation had a 1 percent favorable impact, the Test & Measurement acquisition added 12 percent and the divestiture of Metran, Emerson's Russia-based manufacturing subsidiary, deducted 1 percent. Underlying sales were up 9 percent in the U.S. and up 11 percent internationally. The Americas was up 8 percent, Europe was up 10 percent, and Asia, Middle East & Africa was up 15 percent (China up 9 percent).

Cost of sales for the first quarter of fiscal 2024 were $2,201, an increase of $448 compared with 2023, reflecting the impact of higher volume and the Test & Measurement acquisition. Gross margin of 46.5% decreased 1.5 percentage points, reflecting the impact from acquisition-related inventory step-up amortization of $231, which negatively impacted margins by 5.6 percentage points. Excluding this impact, gross margin improved due to the Test & Measurement acquisition and higher price.

Selling, general and administrative (SG&A) expenses of $1,277 increased $247 and SG&A as a percent of sales increased 0.5 percentage points to 31.0 percent compared with the prior year, reflecting the impact of the Test & Measurement acquisition, partially offset by lower stock compensation expense and strong operating leverage on higher sales.

Other deductions, net were $487 for the first quarter of fiscal 2024, an increase of $367 compared with the prior year. The current year included intangibles amortization related to the Test & Measurement acquisition of $139, restructuring costs of $83, acquisition/divestiture costs of $80 and a loss of $36 on the Company's equity method investment in Copeland. The prior year included a charge of $47 related to the Company exiting its business in Russia and a mark-to-market gain of $35 related to foreign currency forward contracts that were terminated in June 2023. See Note 7 and Note 10.

Pretax earnings from continuing operations of $139 decreased $283, down 67 percent compared with the prior year. Earnings increased $77 in Intelligent Devices and decreased $38 in Software and Control, see the Business Segments discussion that follows and Note 14.

Income taxes were $7 in the first quarter of fiscal 2024 and $98 in 2023, resulting in effective tax rates of 5 percent and 23 percent, respectively. The current year rate included a $57 ($0.10 per share) benefit related to discrete tax items and the impact of inventory step-up amortization, which in total had a 16 percentage point impact on the rate. The prior year rate included a 2 percentage point unfavorable impact related to the Russia charge, which had no related tax benefit.

Earnings from continuing operations attributable to common stockholders were $142, down 57 percent, and diluted earnings per share from continuing operations were $0.25, down 55 percent compared with $0.56 in the prior year. Adjusted diluted earnings per share from continuing operations were $1.22 compared with $0.78 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 $2,002 ($3.41 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 in the first quarter of fiscal 2024 were $142 compared with $2,331 in the prior year, and earnings per share were $0.25 compared with $3.97 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.

Three Months Ended Dec 31			2022						2023						Change
Earnings from continuing operations before income taxes			$	422					139						(67)		%
Percent of sales			12.5		%				3.4		%				(9.1) pts
Interest expense, net			48						44
Interest income from related party			—						(31)
Amortization of intangibles			167						323
Restructuring and related costs			15						87
Acquisition/divestiture fees and related costs			—						134
Amortization of acquisition-related inventory step-up			—						231
Loss on Copeland equity method investment			—						36
Russia business exit			47						—
AspenTech Micromine purchase price hedge gain			(35)						—
Adjusted EBITA from continuing operations			$	664					963						45		%
Percent of sales			19.7		%				23.4		%				3.7 pts

Business Segments

Following is an analysis of operating results for the Company’s business segments for the first quarter ended December 31, 2022, compared with the first quarter ended December 31, 2023. 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

			2022						2023						Change						FX						Acq/Div						U/L
Sales:
Final Control			$	862					940						9		%				(1)		%				1		%				9		%
Measurement & Analytical			749						947						26		%				—		%				2		%				28		%
Discrete Automation			618						613						(1)		%				(1)		%				—		%				(2)		%
Safety & Productivity			310						322						4		%				(1)		%				—		%				3		%
Total			$	2,539					2,822						11		%				(1)		%				1		%				11		%
Earnings:
Final Control			$	158					194						22		%
Measurement & Analytical			175						235						34		%
Discrete Automation			121						97						(20)		%
Safety & Productivity			63						68						8		%
Total			$	517					594						15		%
Margin			20.4		%				21.0		%				0.6 pts
Amortization of intangibles:
Final Control			$	22					22
Measurement & Analytical			5						20
Discrete Automation			7						9
Safety & Productivity			6						6
Total			$	40					57
Restructuring and related costs:
Final Control			$	4					7
Measurement & Analytical			1						3
Discrete Automation			1						10
Safety & Productivity			—						—
Total			$	6					20
Adjusted EBITA			$	563					671						19		%
Adjusted EBITA Margin			22.2		%				23.8		%				1.6 pts

Intelligent Devices sales were $2.8 billion in the first quarter of 2024, an increase of $283, or 11 percent. Underlying sales increased 11 percent on 9 percent higher volume and 2 percent higher price. Underlying sales increased 6 percent in the Americas, Europe increased 14 percent and Asia, Middle East & Africa was up 18 percent (China up 10 percent). Final Control sales increased $78, or 9 percent, reflecting strength in energy and power end markets. Sales for Measurement & Analytical increased $198, or 26 percent, reflecting robust growth in all geographies and strong backlog conversion. Discrete Automation sales decreased $5, or 1 percent, reflecting softness in the Americas and Asia, Middle East & Africa. Safety & Productivity sales increased $12, or 4 percent, reflecting solid demand in the Americas and Europe. Earnings for Intelligent Devices were $594, an increase of $77, or 15 percent, and margin increased 0.6 percentage points to 21.0 percent. Adjusted EBITA margin was 23.8 percent, an increase of 1.6 percentage points, reflecting leverage on higher sales and favorable price less net material inflation, partially offset by higher headcount and other costs.

SOFTWARE AND CONTROL

			2022						2023						Change						FX						Acq/Div						U/L
Sales:
Control Systems & Software			$	606					675						11		%				(1)		%				1		%				11		%
Test & Measurement			—						382						—		%
AspenTech			243						257						6		%				—		%				—		%				6		%
Total			$	849					1,314						55		%				(1)		%				(45)		%				9		%
Earnings:
Control Systems & Software			$	107					149						40		%
Test & Measurement			—						(78)						#DIV/0!
AspenTech			(33)						(35)						(7)		%
Total			$	74					36						(51)		%
Margin			8.7		%				2.8		%				(5.9) pts
Amortization of intangibles:
Control Systems & Software			$	6					5
Test & Measurement			—						139
AspenTech			121						122
Total			$	127					266
Restructuring and related costs:
Control Systems & Software			$	1					1
Test & Measurement			—						40
AspenTech			—						—
Total			$	1					41
Adjusted EBITA			$	202					343						70		%
Adjusted EBITA Margin			23.8		%				26.1		%				2.3 pts

Software and Control sales were $1,314 in the first quarter of 2024, an increase of $465, or 55 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 9 percent on 7 percent higher volume and 2 percent higher price. Underlying sales increased 14 percent in the Americas, 2 percent in Europe and 9 percent in Asia, Middle East & Africa (China up 4 percent). Control Systems & Software sales increased $69, or 11 percent, reflecting robust global demand in process end markets and strong demand in power end markets in the Americas and Asia, Middle East & Africa. Test & Measurement sales were $382 in the first quarter, reflecting the impact of the acquisition. AspenTech sales increased $14, or 6 percent, primarily due to higher maintenance and services revenue. Earnings for Software and Control decreased $38, down 51 percent, and margin decreased 5.9 percentage points due to the Test & Measurement loss which reflected significant intangibles amortization and restructuring. Adjusted EBITA margin increased 2.3 percentage points, reflecting leverage on higher sales, higher price and favorable mix.

FINANCIAL CONDITION

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

			Dec 31, 2022						Sept 30, 2023						Dec 31, 2023
Operating working capital			$	351					$	1,283					$	2,052
Current ratio			1.1						2.7						1.1
Total debt-to-total capital			48.1		%				28.3		%				34.4		%
Net debt-to-net capital			41.7		%				0.5		%				29.8		%
Interest coverage ratio			7.3		X				11.5		X				2.6		X

Operating working capital increased due to the acquisition of NI, changes in accrued expenses and higher inventory levels to support sales growth. As of December 31, 2023, Emerson's cash and equivalents totaled $2,076, 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 2.6X for the first three months of fiscal 2024 compares to 7.3X for the three months ended December 31, 2022, 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 $156, acquisition/divestiture fees and related costs of $134, higher restructuring and related costs of $72, and the loss of $36 on the Copeland equity method investment, the interest coverage ratio was 10.1X.

Operating cash flow from continuing operations for the first three months of fiscal 2024 was $444, an increase of $142 compared with $302 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 $100. AspenTech generated approximately $30 compared to $50 in the prior year. Free cash flow from continuing operations of $367 in the first three months of fiscal 2024 (operating cash flow of $444 less capital expenditures of $77) increased $124 compared to free cash flow of $243 in 2023 (operating cash flow of $302 less capital expenditures of $59), reflecting the increase in operating cash flow. Cash used in investing activities from continuing operations was $8,453, reflecting the acquisition of NI. Cash provided by financing activities from continuing operations was $2,055, reflecting an increase in short-term borrowings of $2,647, partially offset by share repurchases and dividends.

Total cash provided by operating activities was $415 including the impact of discontinued operations, and decreased $3 compared with $418 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 $47 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.

FISCAL 2024 OUTLOOK

For the full year, consolidated net sales from continuing operations are expected to be up 14.5 percent to 17 percent, with underlying sales up 4.5 percent to 6.5 percent excluding a 10 to 10.5 percent impact from the NI acquisition. Earnings per share from continuing operations are expected to be $2.80 to $2.95, while adjusted earnings per share from continuing operations are expected to be $5.30 to $5.45 (see the following reconciliation).

Outlook for Fiscal 2024 Earnings Per Share						2024
Diluted earnings from continuing operations per share						$2.80 - $2.95
Amortization of intangibles						~ 1.42
Restructuring and related costs						~ 0.34
Loss on Copeland equity method investment						~ 0.20
Amortization of acquisition-related inventory step-up						~ 0.38
Acquisition/divestiture fees and related costs						~ 0.26
Discrete tax benefits						~ (0.10)
Adjusted diluted earnings from continuing operations per share						$5.30- $5.45

Operating cash flow from continuing operations is expected to be $3.0 to $3.1 billion and free cash flow from continuing operations, 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.

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, 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.