Item 1. Financial Statements

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Item 1. Financial Statements

Consolidated Statements of Earnings

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three and six months ended March 31, 2024 and 2025

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

Three Months Ended March 31,Six Months Ended March 31,
2024202520242025
Net sales$4,3764,432$8,4938,608
Cost of sales2,0922,0614,2934,002
Selling, general and administrative expenses1,2961,2832,5732,506
Gain on subordinated interest(79)—(79)—
Other deductions, net330418781646
Interest expense (net of interest income of $33, $45, $73 and $89, respectively)574110150
Interest income from related party(31)—(62)—
Earnings from continuing operations before income taxes7116298861,404
Income taxes162199178382
Earnings from continuing operations5494307081,022
Discontinued operations, net of tax of $13, $—, $22 and $—, respectively(46)—(73)—
Net earnings5034306351,022
Less: Noncontrolling interests in subsidiaries2(55)(8)(48)
Net earnings common stockholders$501485$6431,070
Earnings common stockholders:
Earnings from continuing operations$547485$7161,070
Discontinued operations(46)—(73)—
Net earnings common stockholders$501485$6431,070
Basic earnings per share common stockholders:
Earnings from continuing operations$0.960.86$1.251.89
Discontinued operations(0.08)—(0.13)—
Basic earnings per common share$0.880.86$1.121.89
Diluted earnings per share common stockholders:
Earnings from continuing operations$0.950.86$1.241.88
Discontinued operations(0.08)—(0.12)—
Diluted earnings per common share$0.870.86$1.121.88
Weighted average outstanding shares:
Basic571.4563.0571.1565.7
Diluted574.1565.4573.7568.2

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three and six months ended March 31, 2024 and 2025

(Dollars in millions; unaudited)

Three Months Ended March 31,Six Months Ended March 31,
2024202520242025
Net earnings$503430$6351,022
Other comprehensive income (loss), net of tax:
Foreign currency translation6189180(303)
Pension and postretirement(12)3(24)6
Cash flow hedges(1)—210
Total other comprehensive income (loss)(7)192158(287)
Comprehensive income496622793735
Less: Noncontrolling interests in subsidiaries2(54)(6)(53)
Comprehensive income common stockholders$494676$799788

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, 2024Mar 31, 2025
ASSETS
Current assets
Cash and equivalents$3,5881,887
Receivables, less allowances of $121 and $124, respectively2,9272,901
Inventories2,1802,216
Other current assets1,4971,623
Total current assets10,1928,627
Property, plant and equipment, net2,8072,757
Other assets
Goodwill18,06717,999
Other intangible assets10,4369,823
Other2,7442,772
Total other assets31,24730,594
Total assets$44,24641,978
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current maturities of long-term debt$5326,187
Accounts payable1,3351,340
Accrued expenses3,8753,319
Total current liabilities5,74210,846
Long-term debt7,1558,176
Other liabilities3,8403,690
Equity
Common stock, $0.50 par value; authorized, 1,200.0 shares; issued, 953.4 shares; outstanding, 570.2 shares and 562.5 shares, respectively477477
Additional paid-in-capital169—
Retained earnings40,83039,977
Accumulated other comprehensive income (loss)(868)(1,150)
Cost of common stock in treasury, 383.2 shares and 390.9 shares, respectively(18,972)(20,055)
Common stockholders’ equity21,63619,249
Noncontrolling interests in subsidiaries5,87317
Total equity27,50919,266
Total liabilities and equity$44,24641,978

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Equity

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three and six months ended March 31, 2024 and 2025

(Dollars in millions; unaudited)

Three Months Ended March 31,Six Months Ended March 31,
2024202520242025
Common stock$477477$477477
Additional paid-in-capital
Beginning balance14011362169
Stock plans5142170(14)
AspenTech purchases of common stock(33)—(74)—
Purchase of noncontrolling interest—(1,400)—(1,400)
Settlement of AspenTech share awards—(76)—(76)
Reclass negative APIC to retained earnings—1,321—1,321
Ending balance158—158—
Retained earnings
Beginning balance39,91041,11240,07040,830
Net earnings common stockholders5014856431,070
Dividends paid (per share: $0.525, $0.5275, $1.050 and $1.055, respectively)(303)(299)(605)(602)
Reclass negative APIC to retained earnings—(1,321)—(1,321)
Ending balance40,10839,97740,10839,977
Accumulated other comprehensive income (loss)
Beginning balance(1,090)(1,340)(1,253)(868)
Foreign currency translation6187178(298)
Pension and postretirement(12)3(24)6
Cash flow hedges(1)—210
Ending balance(1,097)(1,150)(1,097)(1,150)
Treasury stock
Beginning balance(18,763)(19,872)(18,667)(18,972)
Purchases—(189)(175)(1,135)
Issued under stock plans1769652
Ending balance(18,746)(20,055)(18,746)(20,055)
Common stockholders' equity20,90019,24920,90019,249
Noncontrolling interests in subsidiaries
Beginning balance5,8815,8895,9095,873
Net earnings (loss)2(55)(8)(48)
Stock plans22143330
AspenTech purchases of common stock(24)—(55)—
Dividends paid—(1)—(1)
Purchase of noncontrolling interest—(5,832)—(5,832)
Other comprehensive income—22(5)
Ending balance5,881175,88117
Total equity$26,78119,266$26,78119,266

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Cash Flows

EMERSON ELECTRIC CO. & SUBSIDIARIES

Six Months Ended March 31, 2024 and 2025

(Dollars in millions; unaudited)

Six Months Ended
March 31,
20242025
Operating activities
Net earnings$6351,022
Earnings from discontinued operations, net of tax73—
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization846767
Stock compensation147127
Amortization of acquisition-related inventory step-up231—
Gain on subordinated interest(79)—
Changes in operating working capital(347)(203)
Other, net(329)(110)
Cash from continuing operations1,1771,603
Cash from discontinued operations(19)(585)
Cash provided by operating activities1,1581,018
Investing activities
Capital expenditures(159)(170)
Purchases of businesses, net of cash and equivalents acquired(8,342)(36)
Proceeds from subordinated interest79—
Other, net(68)(58)
Cash from continuing operations(8,490)(264)
Cash from discontinued operations1—
Cash used in investing activities(8,489)(264)
Financing activities
Net increase in short-term borrowings2,4642,628
Proceeds from short-term borrowings greater than three months992,496
Proceeds from long-term debt—1,544
Dividends paid(600)(598)
Purchases of common stock(175)(1,122)
AspenTech purchases of common stock(129)—
Purchase of noncontrolling interest—(7,171)
Settlement of AspenTech share awards—(76)
Other, net(46)(83)
Cash provided by (used in) financing activities1,613(2,382)
Effect of exchange rate changes on cash and equivalents(15)(73)
Decrease in cash and equivalents(5,733)(1,701)
Beginning cash and equivalents8,0513,588
Ending cash and equivalents$2,3181,887
Changes in operating working capital
Receivables$(35)(25)
Inventories(46)(67)
Other current assets(69)(92)
Accounts payable(46)(35)
Accrued expenses(151)16
Total changes in operating working capital$(347)(203)

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). Results are computed independently each period; as a result, the quarterly amounts may not sum to the calculated year-to-date figures. 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, 2024.

Certain prior year amounts have been reclassified to conform to the current year presentation. On March 12, 2025, Emerson completed its purchase of the remaining outstanding shares of common stock of Aspen Technology, Inc. ("AspenTech") not already owned by the Company. As a result of the transaction, AspenTech is now a wholly owned subsidiary of the Company. AspenTech was reorganized upon completion of the transaction and now reports to Control Systems & Software leadership. AspenTech's results, which were previously reported as a separate segment, are now consolidated into the Control Systems & Software segment for all periods presented. See Notes 4 and 15. Additionally, on June 6, 2024, the Company entered into definitive agreements to sell its 40 percent non-controlling common equity interest in Copeland to private equity funds managed by Blackstone for $1.50 billion and its note receivable to Copeland for $1.9 billion, and the transactions were subsequently completed in August 2024. As a result of these transactions, the equity method losses related to the Company's non-controlling common equity interest in Copeland, which were previously reported in Other deductions, net, have been reclassified and are now reported as discontinued operations for all periods presented, and cash flows related to U.S. tax distributions have been reclassified to operating cash flows from discontinued operations (see Notes 5 and 10).

(2) REVENUE RECOGNITION

Emerson is a global technology and software company that provides innovative solutions for customers in a wide range of end markets around the world. 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 15 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, 2024Mar 31, 2025
Unbilled receivables (contract assets)$1,5991,709
Customer advances (contract liabilities)(1,115)(1,197)
Net contract assets$484512

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. Revenue recognized for the three and six months ended March 31, 2025 included $224 and $646, respectively, that was included in the beginning contract liability balance. Other factors that impacted the change in net contract assets were immaterial. Revenue recognized for the three and six months ended March 31, 2025 for performance obligations that were satisfied in previous periods, including cumulative catchup adjustments on the Company's long-term contracts, was immaterial.

As of March 31, 2025, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately $8.8 billion. 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 March 31,Six Months Ended March 31,
2024202520242025
Basic shares outstanding571.4563.0571.1565.7
Dilutive shares2.72.42.62.5
Diluted shares outstanding574.1565.4573.7568.2

(4) ACQUISITIONS AND DIVESTITURES

AspenTech

On March 12, 2025, Emerson completed its purchase of the remaining outstanding shares of common stock of AspenTech not already owned by the Company for approximately $7.2 billion. Emerson also incurred fees of $76 ($65 after-tax; the majority of the fees were accrued as of March 31, 2025 and will be reported as Financing cash flows when paid) and paid $76 to settle certain AspenTech share-based awards that were outstanding prior to the transaction closing. The purchase of the remaining outstanding shares and related costs are reported as an adjustment to Equity. Separately, AspenTech incurred $127 ($113 after-tax) of deal-related fees which are reported as acquisition/divestiture costs in Other deductions, net. AspenTech is now reported as a part of the Control Systems & Software segment in the Software and Control business group, see Note 15.

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 15.

The following table summarizes the components of the purchase consideration for NI.

Cash paid to acquire remaining NI shares not already owned by Emerson$7,833
Payoff of NI debt at closing634
Total consideration paid in cash at closing8,467
Fair value of NI shares already owned by Emerson prior to acquisition137
Value of stock-based compensation awards attributable to pre-combination service49
Total purchase consideration$8,653

Pro Forma Financial Information

The following unaudited proforma consolidated condensed financial results of operations are presented as if the acquisition of NI occurred on October 1, 2022. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved had the acquisition occurred as of that time ($ in millions, except per share amounts).

Three Months Ended March 31,Six Months Ended March 31,
20242024
Net Sales$4,376$8,512
Net earnings from continuing operations common stockholders$575$1,022
Diluted earnings per share from continuing operations$1.00$1.78

The pro forma results for the three months ended March 31, 2024 exclude backlog amortization of $34 which was assumed to be incurred in the first quarter of fiscal 2023.

The pro forma results for the six months ended March 31, 2024 exclude transaction costs of $69 which were assumed to be incurred in the first quarter of fiscal 2023. The pro forma results for the six months ended March 31, 2024 also exclude backlog amortization of $68, inventory step-up amortization of $213, and retention bonuses of $47 which were all assumed to be incurred in the six months ended March 31, 2023.

Other Transactions

On November 15, 2024, AspenTech acquired Open Grid Systems Limited, a global provider of network model management technology and a pioneer in developing model-driven applications supporting open access to data through industry standards, for a total purchase price of $46, net of cash acquired. The Company recognized goodwill of $32 (none of which is expected to be tax deductible) and other identifiable intangible assets of $20, consisting of developed technology and customer relationships with a weighted-average useful life of approximately 5 years.

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

(5) DISCONTINUED OPERATIONS

On May 31, 2023, the Company completed the sale of a majority stake in its Climate Technologies business to private equity funds managed by Blackstone in a $14.0 billion transaction. As a part of this transaction, Emerson received a note receivable with a face value of $2.25 billion and retained a 40 percent non-controlling common equity interest in a new standalone joint venture between Emerson and Blackstone named Copeland. Subsequently, on June 6, 2024, the Company entered into a definitive agreement to sell its 40 percent non-controlling common equity interest in Copeland to private equity funds managed by Blackstone for $1.5 billion. The transaction closed on August 13, 2024 and the Company recognized a gain of $539 ($435 after-tax) in discontinued operations in fiscal 2024. In addition, the equity method losses related to the Company's non-controlling equity interest in Copeland, which were reported since May 2023 in Other deductions, net, have been reclassified and are now reported as discontinued operations for all periods presented and are included in Other deductions, net in the table below. See Note 10 for further details.

Results from discontinued operations for the three and six months ended March 31, 2024 were as follows:

Three Months Ended March 31,Six Months Ended March 31,
20242024
Net sales$—$—
Cost of sales——
SG&A——
Gain on sale of business——
Other deductions, net5995
Earnings (Loss) before income taxes(59)(95)
Income taxes(13)(22)
Earnings (Loss), net of tax$(46)$(73)

Results for the three months ended and six months ended March 31, 2024 included equity method losses of $59 ($46 after-tax) and $95 ($73 after-tax), respectively, related to the Company's non-controlling common equity interest in Copeland.

Net cash from operating and investing activities from discontinued operations for the six months ended March 31, 2025 and 2024 were as follows:

Six Months Ended March 31
20242025
Cash from operating activities$(19)$(585)
Cash from investing activities$1$—

Cash from operating activities for the six months ended March 31, 2025 represents income taxes paid related to the sale of the Company's 40 percent non-controlling common equity interest in Copeland.

(6) PENSION & POSTRETIREMENT PLANS

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

Three Months Ended March 31,Six Months Ended March 31,
2024202520242025
Service cost$918$1836
Interest cost554811096
Expected return on plan assets(74)(73)(148)(146)
Net amortization(14)4(28)8
Total$(24)(3)$(48)(6)

(7) OTHER DEDUCTIONS, NET

Other deductions, net are summarized below:

Three Months Ended March 31,Six Months Ended March 31,
2024202520242025
Amortization of intangibles (intellectual property and customer relationships)$273229$547457
Restructuring costs302111332
Acquisition/divestiture fees and related costs514485157
Foreign currency transaction (gains) losses17415142
Loss on divestiture of business39—39—
Other(34)(17)(54)(42)
Total$330418$781646

For the three and six months ended March 31, 2025, the increase in acquisition/divestiture costs is primarily related to the AspenTech transaction. See Note 4. Other is composed of several items, including a portion of pension expense, litigation costs, provision for bad debt and other items, none of which is individually significant.

(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 2025 restructuring expense and related costs to be approximately $140, including costs to complete actions initiated in the first six months of the year.

Restructuring expense by business segment follows:

Three Months Ended March 31,Six Months Ended March 31,
2024202520242025
Final Control$(7)2$(4)4
Measurement & Analytical1243
Discrete Automation751711
Safety & Productivity1—1—
Intelligent Devices291818
Control Systems & Software3648
Test & Measurement144543
Software and Control17105811
Corporate112373
Total$3021$11332

Corporate restructuring for the three and six months ended March 31, 2025 includes $1 of integration-related stock compensation expense attributable to the AspenTech transaction. Corporate restructuring for the three and six months ended March 31, 2024 of $11 and $37 respectively, is comprised almost entirely of integration-related stock compensation expense attributable to NI.

Details of the change in the liability for restructuring costs during the six months ended March 31, 2025 follow:

Sept 30, 2024ExpenseUtilized/PaidMar 31, 2025
Severance and benefits$105264685
Other7685
Total$112325490

The tables above do not include $3 and $6 of costs related to restructuring actions incurred for the three months ended March 31, 2024 and 2025, respectively, that are required to be reported in cost of sales and selling, general and administrative expenses; year-to-date amounts are $7 and $8, respectively.

(9) TAXES

Income taxes were $199 in the second quarter of fiscal 2025 and $162 in 2024, resulting in effective tax rates of 32 percent and 23 percent, respectively. The current year rate was negatively impacted by $49 ($0.09 per share) of discrete tax items related to the AspenTech transaction. In addition, the fees incurred by AspenTech were not fully deductible. In total, the net impact of these items increased the rate by approximately 10 percentage points. The prior year rate was negatively impacted by approximately 2 percentage points due to the loss on divestiture, which was nondeductible for tax purposes. See Note 4.

Income taxes were $382 in the first six months of fiscal 2025 and $178 in 2024, resulting in effective tax rates of 27 percent and 20 percent, respectively. The items discussed above increased the current year rate by approximately 5 percentage points. The prior year rate included a $57 ($0.10 per share) benefit related to discrete tax items, partially offset by unfavorable impacts from inventory step-up amortization and the loss on divestiture noted above. In total, the net impact of these items benefited the rate by approximately 1 percentage point.

(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.

On June 6, 2024, the Company entered into definitive agreements to sell its 40 percent non-controlling common equity interest in Copeland to private equity funds managed by Blackstone for $1.5 billion and its note receivable to Copeland for $1.9 billion, and the transactions were subsequently completed in August 2024. As a result of these transactions, the gain on the sale of the Company's non-controlling common equity interest in Copeland and the historical equity method losses, which were recorded since May 2023 in Other deductions, net, have been reclassified and are now reported as discontinued operations for all periods presented (see Note 5).

For the three and six months ended March 31, 2024 the Company recognized non-cash interest income on the note receivable of $31 and $62, respectively which is reported in Interest income from related party within continuing operations.

Summarized financial information for Copeland for the three and six months ended March 31, 2024 is as follows.

Three Months Ended March 31,Six Months Ended March 31,
20242024
Net sales$1,175$2,199
Gross profit$412$757
Income (loss) from continuing operations$(147)$(240)
Net income (loss)$(147)$(240)
Net income (loss) attributable to shareholders$(148)$(238)

(11) OTHER FINANCIAL INFORMATION

Sept 30, 2024Mar 31, 2025
Inventories
Finished products$512527
Raw materials and work in process1,6681,689
Total$2,1802,216
Property, plant and equipment, net
Property, plant and equipment, at cost$6,1856,158
Less: Accumulated depreciation3,3783,401
Total$2,8072,757
Goodwill by business segment
Final Control$2,7022,671
Measurement & Analytical1,5761,556
Discrete Automation919905
Safety & Productivity404395
Intelligent Devices5,6015,527
Control Systems & Software9,0039,026
Test & Measurement3,4633,446
Software and Control12,46612,472
Total$18,06717,999
Sept 30, 2024Mar 31, 2025
Other intangible assets
Gross carrying amount$15,62815,575
Less: Accumulated amortization5,1925,752
Net carrying amount$10,4369,823

Other intangible assets include customer relationships, net, of $5,953 and $6,296 and intellectual property, net, of $3,618 and $3,901 as of March 31, 2025 and September 30, 2024, respectively.

Three Months Ended March 31,Six Months Ended March 31,
2024202520242025
Depreciation and amortization expense include the following:
Depreciation expense$7983$158166
Amortization of intangibles (includes $49, $49, $98 and $99 reported in Cost of Sales, respectively)322278645556
Amortization of capitalized software23234345
Total$424384$846767
Sept 30, 2024Mar 31, 2025
Other assets include the following:
Pension assets$1,1941,223
Operating lease right-of-use assets692639
Unbilled receivables (contract assets)519564
Deferred income taxes6455
Asbestos-related insurance receivables3736
Accrued expenses include the following:
Customer advances (contract liabilities)$1,0431,112
Employee compensation706561
Income taxes587150
Operating lease liabilities (current)158149
Product warranty8284

The decrease in income taxes was due to $585 of income taxes paid in the second quarter related to the sale of the Company's 40 percent non-controlling common equity interest in Copeland. See Note 5.

Other liabilities include the following:
Deferred income taxes$2,1382,012
Operating lease liabilities (noncurrent)511488
Pension and postretirement liabilities466453
Asbestos litigation151141

(12) DEBT

On February 11, 2025, the Company entered into a $3 billion 364-day revolving backup credit facility to support increased commercial paper borrowings in connection with the AspenTech transaction. This facility is in addition to the Company's existing $3.5 billion revolving backup credit facility. Both credit facilities are unsecured and may be accessed under various interest rate alternatives at the Company's option. The fees to maintain the facilities are immaterial and the Company has not incurred any borrowings under either facility or previous facilities. Overall, the Company's commercial paper borrowings increased to approximately $5.1 billion at March 31, 2025.

In March 2025, the Company issued €500 of 3.0% notes due March 2031, $500 of 5.0% notes due March 2035, and €500 of 3.5% notes due March 2037. The Company used the net proceeds from the sale of the notes and increased commercial paper borrowings, along with cash on hand, to fund the AspenTech transaction (see Note 4).

(13) FINANCIAL INSTRUMENTS

Hedging Activities – As of March 31, 2025, the notional amount of foreign currency hedge positions was approximately $3.8 billion. All derivatives receiving hedge accounting are cash flow hedges. The majority of hedging gains and losses deferred as of March 31, 2025 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, of which €500 was repaid in 2024. Additionally, in March 2025, the Company issued €500 of 3.0% notes due March 2031 and €500 of 3.5% notes due March 2037. The net proceeds from the sale of the March 2025 euro notes were used for general corporate purposes and to fund a portion of the purchase price of the AspenTech transaction (see Note 4). The euro notes reduce foreign currency risk associated with the Company's international subsidiaries that use the euro as their functional currency and have been designated as a hedge of a portion of the investment in these operations. Foreign currency gains or losses associated with the euro-denominated debt are deferred in accumulated other comprehensive income (loss) and will remain until the hedged investment is sold or substantially liquidated.

The following gains and losses are included in earnings and other comprehensive income (OCI) for the three and six months ended March 31, 2024 and 2025:

Into EarningsInto OCI
2nd QuarterSix Months2nd QuarterSix Months
Gains (Losses)Location20242025202420252024202520242025
Foreign currencySales—2—3(5)—211
Foreign currencyCost of sales3—6—6275
Foreign currencyOther deductions, net(26)18(11)(33)
Net Investment Hedges
Euro denominated debt————3(75)(52)(5)
Total$(23)20(5)(30)4(73)(43)11

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 and the Company's long-term debt fall within Level 2 of the GAAP valuation hierarchy. As of March 31, 2025, the fair value of long-term debt was approximately $8.4 billion, which was lower than the carrying value by $834. The fair value of foreign currency contracts, which are reported in Other current assets and Accrued expenses, did not materially change since September 30, 2024.

Counterparties to derivatives arrangements are companies with investment-grade credit ratings. The Company has bilateral collateral arrangements with counterparties with credit rating-based posting thresholds that vary depending on the arrangement. If credit ratings on the Company's debt fall below pre-established levels, counterparties can require immediate full collateralization of all derivatives in net liability positions. The maximum amount that could potentially have been required was immaterial. The Company also can demand full collateralization of derivatives in net asset positions should any counterparty credit ratings fall below certain thresholds. No collateral was posted with counterparties and none was held by the Company as of March 31, 2025.

(14) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Activity in Accumulated other comprehensive income (loss) for the three and six months ended March 31, 2025 and 2024 is shown below, net of income taxes:
Three Months Ended March 31,Six Months Ended March 31,
2024202520242025
Foreign currency translation
Beginning balance$(840)(1,101)$(1,012)(616)
Other comprehensive income (loss), net of tax of $(1), $17, $12 and $1, respectively(17)184155(301)
Purchase of noncontrolling interest—3—3
Reclassification to loss on divestiture of business23—23—
Ending balance(834)(914)(834)(914)
Pension and postretirement
Beginning balance(259)(242)(247)(245)
Amortization of deferred actuarial losses into earnings, net of tax of $2, $(1), $4 and $(2), respectively(12)3(24)6
Ending balance(271)(239)(271)(239)
Cash flow hedges
Beginning balance936(7)
Gains deferred during the period, net of taxes of $0, $(1), $(2) and $(4), respectively11712
Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $1, $1, $1 and $1, respectively(2)(1)(5)(2)
Ending balance8383
Accumulated other comprehensive income (loss)$(1,097)(1,150)$(1,097)(1,150)

(15) BUSINESS SEGMENTS

As disclosed in Note 4, on March 12, 2025, Emerson completed its purchase of the remaining outstanding shares of common stock of AspenTech not already owned by the Company. As a result of the transaction, AspenTech is now a wholly owned subsidiary of the Company. AspenTech was reorganized upon completion of the transaction and now reports to Control Systems & Software leadership. AspenTech's results, which were previously reported as a separate segment, are now consolidated into the Control Systems & Software segment for all periods presented. Prior year amounts have been reclassified to conform to the current year presentation. In 2024, the Company completed the acquisition of NI on October 11, 2023. NI is now referred to as Test & Measurement and reported as a segment in the Software and Control business group.

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

Three Months Ended March 31,Six Months Ended March 31,
SalesEarnings (Loss)SalesEarnings (Loss)
20242025202420252024202520242025
Final Control$1,0511,073259267$1,9912,049453503
Measurement & Analytical1,0131,0022742661,9601,977509551
Discrete Automation6326151161171,2451,195213215
Safety & Productivity3653398375687651151143
Intelligent Devices3,0613,0297327255,8835,8721,3261,412
Control Systems & Software9651,0621432391,8972,055257446
Test & Measurement367359(79)(24)749718(157)(37)
Software and Control1,3321,421642152,6462,773100409
Stock compensation(73)(59)(147)(127)
Unallocated pension and postretirement costs38276955
Corporate and other(103)(238)(502)(295)
Gain on subordinated interest79—79—
Eliminations/Interest(17)(18)(57)(41)(36)(37)(101)(50)
Interest income from related party31—62—
Total$4,3764,432711629$8,4938,6088861,404

Stock compensation for the three months and six months ended March 31, 2025 included $6 of integration-related stock compensation expense attributable to AspenTech (of which $1, was reported as restructuring costs). Additionally, the three months and six months ended March 31, 2025 included $3 and $5 of integration-related stock compensation expense attributable to NI. Stock compensation for the three months and six months ended March 31, 2024 included $14 and $44 of integration-related stock compensation expense attributable to NI (of which $10 and $36, respectively, was reported as restructuring costs). Corporate and other for the three and six months ended March 31, 2025 included acquisition/divestiture fees and related costs of $160 and $179, respectively. Corporate and other for the three and six months ended March 31, 2024 included acquisition/divestiture fees and related costs of $16 and $146, respectively, and a divestiture loss of $39, while year-to-date also included acquisition-related inventory step-up amortization of $231.

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

Three Months Ended March 31,Six Months Ended March 31,
2024202520242025
Final Control$3941$7981
Measurement & Analytical33317362
Discrete Automation21224343
Safety & Productivity15142929
Intelligent Devices108108224215
Control Systems & Software152146296293
Test & Measurement153119304237
Software and Control305265600530
Corporate and other11112222
Total$424384$846767

Test & Measurement depreciation and amortization for the three and six months ended March 31, 2024 included backlog amortization of $34 and $68, respectively.

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

Three Months Ended March 31,Three Months Ended March 31,
20242025
AmericasAMEAEuropeTotalAmericasAMEAEuropeTotal
Final Control$5134041341,0515513911311,073
Measurement & Analytical5123341671,0134943551531,002
Discrete Automation294161177632297148170615
Safety & Productivity26919773652611662339
Intelligent Devices1,5889185553,0611,6039105163,029
Control Systems & Software4422902339654933202491,062
Test & Measurement16298107367156101102359
Software and Control6043883401,3326494213511,421
Total$2,1921,3068954,3932,2521,3318674,450
Six Months Ended March 31,Six Months Ended March 31,
20242025
AmericasAMEAEuropeTotalAmericasAMEAEuropeTotal
Final Control$9677742501,9911,0267802432,049
Measurement & Analytical9876593141,9609826933021,977
Discrete Automation5803233421,2455772983201,195
Safety & Productivity5123514068750131119651
Intelligent Devices3,0461,7911,0465,8833,0861,8029845,872
Control Systems & Software9075594311,8979796104662,055
Test & Measurement326197226749331194193718
Software and Control1,2337566572,6461,3108046592,773
Total$4,2792,5471,7038,5294,3962,6061,6438,645

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 March 12, 2025, Emerson completed its purchase of the remaining outstanding shares of common stock of AspenTech not already owned by the Company for approximately $7.2 billion. As a result of the transaction, AspenTech is now a wholly owned subsidiary of the Company. AspenTech was reorganized upon completion of the transaction and now reports to Control Systems & Software leadership. AspenTech's results, which were previously reported as a separate segment, are now consolidated into the Control Systems & Software segment for all periods presented. See Notes 4 and 15.

For the second quarter of fiscal 2025, net sales were $4.4 billion, up 1 percent compared with the prior year. Underlying sales, which exclude foreign currency translation, acquisitions and divestitures, were up 2 percent. Foreign currency translation had a 1 percent unfavorable impact.

Earnings from continuing operations attributable to common stockholders were $485, down 11 percent, and diluted earnings per share from continuing operations were $0.86, down 9 percent compared with $0.95 in the prior year, reflecting the impact of higher acquisition/divestiture fees and related costs primarily related to the AspenTech transaction. Adjusted diluted earnings per share from continuing operations were $1.48, up 9 percent compared with $1.36 in the prior year, reflecting strong operating results.

The table below presents the Company's diluted earnings per share from continuing operations on an adjusted basis to facilitate period-to-period comparisons and provide additional insight into the underlying, ongoing operating performance of the Company. Adjusted diluted earnings per share from continuing operations excludes intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction-related costs, and certain gains, losses or impairments.

Three Months Ended March 31,20242025
Diluted earnings from continuing operations per share$0.950.86
Amortization of intangibles0.360.32
Restructuring and related costs0.050.04
Acquisition/divestiture fees and related costs0.030.17
Loss on divestiture of business0.07—
Gain on subordinated interest(0.10)—
Discrete taxes related to AspenTech transaction—0.09
Adjusted diluted earnings from continuing operations per share$1.361.48

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

Three Months Ended
Adjusted diluted earnings from continuing operations per share - March 31, 2024$1.36
Operations0.14
Benefit from full ownership of AspenTech0.07
Foreign currency(0.05)
Pensions(0.02)
Interest expense, net(0.02)
Adjusted diluted earnings from continuing operations per share - March 31, 2025$1.48

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31

Following is an analysis of the Company’s operating results for the second quarter ended March 31, 2025, compared with the second quarter ended March 31, 2024.

20242025Change
(dollars in millions, except per share amounts)
Net sales$4,3764,4321%
Gross profit$2,2842,3714%
Percent of sales52.2%53.5%1.3 pts
SG&A$1,2961,283(1)%
Percent of sales29.6%28.9%(0.7) pts
Gain on subordinated interest$(79)—
Other deductions, net$330418
Amortization of intangibles$273229
Restructuring costs$3021
Interest expense, net$5741
Interest income from related party$(31)—
Earnings from continuing operations before income taxes$711629(12)%
Percent of sales16.3%14.2%(2.1) pts
Earnings from continuing operations common stockholders$547485(11)%
Percent of sales12.5%11.0%(1.5) pts
Net earnings common stockholders$501485(3)%
Diluted EPS - Earnings from continuing operations$0.950.86(9)%
Diluted EPS - Net earnings$0.870.86(1)%
Adjusted Diluted EPS - Earnings from continuing operations$1.361.489%

Net sales for the second quarter of fiscal 2025 were $4.4 billion, up 1 percent compared with 2024. Software and Control sales were up 7 percent, while Intelligent Devices sales were down 1 percent. Underlying sales were up 2 percent on 0.5 percent higher volume and 1.5 percent higher price. Foreign currency translation had a 1 percent unfavorable impact. Underlying sales were up 2 percent in the U.S. and up 2 percent internationally. The Americas was up 3 percent, Europe was down 1 percent, and Asia, Middle East & Africa was up 3 percent (China down 8 percent).

Cost of sales for the second quarter of fiscal 2025 were $2,061, a decrease of $31 compared with 2024. Gross margin of 53.5 percent increased 1.3 percentage points, reflecting favorable price less net material inflation.

Selling, general and administrative (SG&A) expenses of $1,283 decreased $13 and SG&A as a percent of sales decreased 0.7 percentage points to 28.9 percent compared with the prior year, reflecting savings from cost reduction actions.

In the second quarter of fiscal 2024, the Company received its final distribution of $79 related to its subordinated interest in Vertiv.

Other deductions, net were $418 for the second quarter of fiscal 2025, an increase of $88 compared with the prior year, primarily due to an increase in acquisition/divestiture fees and related costs, which included $127 of deal-related fees incurred by AspenTech. Higher foreign currency transaction losses also negatively impacted the current year, while the prior year included backlog amortization related to the Test & Measurement acquisition of $34 and a divestiture loss of $39. See Note 7.

Pretax earnings from continuing operations of $629 decreased $82, down 12 percent compared with the prior year, reflecting the impact of the AspenTech deal-related fees discussed above and the prior year subordinated interest gain. Earnings decreased $7 in Intelligent Devices and increased $151 in Software and Control, see the Business Segments discussion that follows and Note 15.

Income taxes were $199 in the second quarter of fiscal 2025 and $162 in 2024, resulting in effective tax rates of 32 percent and 23 percent, respectively. The current year rate was negatively impacted by $49 ($0.09 per share) of discrete tax items related to the AspenTech transaction. In addition, the fees incurred by AspenTech were not fully deductible. In total, the net impact of these items increased the rate by 10 percentage points. The prior year rate was negatively impacted by approximately 2 percentage points due to the loss on divestiture, which was nondeductible for tax purposes.

Earnings from continuing operations attributable to common stockholders were $485, down 11 percent, and diluted earnings per share from continuing operations were $0.86, down 9 percent compared with $0.95 in the prior year. Adjusted diluted earnings per share from continuing operations were $1.48 compared with $1.36 in the prior year, reflecting strong operating results. See the analysis above of adjusted earnings per share for further details.

Loss from discontinued operations was $46 ($(0.08) per share) in the prior year. See Note 5.

Net earnings common stockholders in the second quarter of fiscal 2025 were $485 compared with $501 in the prior year, and earnings per share were $0.86 compared with $0.87 in the prior year.

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

Three Months Ended March 31,20242025Change
Earnings from continuing operations before income taxes$711629(12)%
Percent of sales16.3%14.2%(2.1) pts
Interest expense, net5741
Interest income from related party(31)—
Amortization of intangibles322278
Restructuring and related costs3327
Acquisition/divestiture fees and related costs20168
Loss on divestiture of business39—
Gain on subordinated interest(79)—
Adjusted EBITA from continuing operations$1,0721,1437%
Percent of sales24.5%25.8%1.3 pts

Business Segments

Following is an analysis of operating results for the Company’s business segments for the second quarter ended March 31, 2025, compared with the second quarter ended March 31, 2024. The Company defines segment earnings as earnings before interest and taxes. See Note 15 for a discussion of the Company's business segments.

INTELLIGENT DEVICES

20242025ChangeFXAcq/DivU/L
Sales:
Final Control$1,0511,0732%1%—%3%
Measurement & Analytical1,0131,002(1)%1%—%—%
Discrete Automation632615(3)%2%—%(1)%
Safety & Productivity365339(7)%1%—%(6)%
Total$3,0613,029(1)%1%—%—%
Earnings:
Final Control$2592673%
Measurement & Analytical274266(3)%
Discrete Automation116117—%
Safety & Productivity8375(9)%
Total$732725(1)%
Margin23.9%23.9%— pts
Amortization of intangibles:
Final Control$2221
Measurement & Analytical1211
Discrete Automation88
Safety & Productivity76
Total$4946
Restructuring and related costs:
Final Control$(7)2
Measurement & Analytical12
Discrete Automation75
Safety & Productivity11
Total$210
Adjusted EBITA$783781—%
Adjusted EBITA Margin25.6%25.8%0.2 pts

Intelligent Devices sales were $3.0 billion in the second quarter of 2025, a decrease of $32, or 1 percent. Underlying sales were flat as slightly lower volume was offset by higher price. Underlying sales increased 2 percent in the Americas, Europe decreased 5 percent and Asia, Middle East & Africa was flat (China down 8 percent). Final Control sales increased $22, or 2 percent, reflecting strength in power end markets, particularly in Middle East & Africa. Sales for Measurement & Analytical decreased $11, or 1 percent, reflecting difficult comparisons and mixed geographic results. Discrete Automation sales improved sequentially, but decreased compared to the prior year by $17, or 3 percent, reflecting softness in Europe and Asia, Middle East & Africa, partially offset by modest growth in the Americas. Safety & Productivity sales decreased $26, or 7 percent, reflecting softness in all geographies. Earnings for Intelligent Devices were $725, a decrease of $7, or 1 percent, while margin remained at 23.9 percent, reflecting favorable price less net material inflation, offset by unfavorable foreign currency transactions of $13. Adjusted EBITA margin was 25.8 percent, an increase of 0.2 percentage points.

SOFTWARE AND CONTROL

20242025ChangeFXAcq/DivU/L
Sales:
Control Systems & Software$9651,06210%1%—%11%
Test & Measurement367359(2)%1%—%(1)%
Total$1,3321,4217%—%—%7%
Earnings:
Control Systems & Software$14323967%
Test & Measurement(79)(24)69%
Total$64215240%
Margin4.7%15.1%10.4 pts
Amortization of intangibles:
Control Systems & Software$132127
Test & Measurement141105
Total$273232
Restructuring and related costs:
Control Systems & Software$36
Test & Measurement166
Total$1912
Adjusted EBITA$35645929%
Adjusted EBITA Margin26.7%32.3%5.6 pts

Software and Control sales were $1,421 in the second quarter of 2025, an increase of $89, or 7 percent compared to the prior year, reflecting strong growth in Control Systems & Software. Underlying sales increased 7 percent on 5 percent higher volume and 2 percent higher price. Underlying sales increased 8 percent in the Americas, 4 percent in Europe and 10 percent in Asia, Middle East & Africa (China down 7 percent). Control Systems & Software sales increased $97, or 10 percent, reflecting robust growth at AspenTech and moderate demand in process end markets in Europe and Asia, Middle East & Africa. Test & Measurement sales decreased $8 or 2 percent, reflecting softness in the Americas and Europe, partially offset by strong growth in Asia, Middle East & Africa. Earnings for Software and Control increased $151, up 240 percent, and margin increased 10.4 percentage points, reflecting strong leverage on higher Control Systems & Software sales, higher price, savings from cost reduction actions (primarily at Test & Measurement), and lower intangibles amortization compared to the prior year. Adjusted EBITA margin increased 5.6 percentage points.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31

Following is an analysis of the Company’s operating results for the six months ended March 31, 2025, compared with the six months ended March 31, 2024.

20242025Change
(dollars in millions, except per share amounts)
Net sales$8,4938,6081%
Gross profit$4,2004,60610%
Percent of sales49.5%53.5%4.0 pts
SG&A$2,5732,506(3)%
Percent of sales30.3%29.1%(1.2) pts
Gain on subordinated interest$(79)—
Other deductions, net$781646
Amortization of intangibles$547457
Restructuring costs$11332
Interest expense, net$10150
Interest income from related party$(62)—
Earnings from continuing operations before income taxes$8861,40458%
Percent of sales10.4%16.3%5.9 pts
Earnings from continuing operations common stockholders$7161,07050%
Percent of sales8.4%12.4%4.0 pts
Net earnings common stockholders$6431,07067%
Diluted EPS - Earnings from continuing operations$1.241.8852%
Diluted EPS - Net earnings$1.121.8868%
Adjusted Diluted EPS - Earnings from continuing operations$2.582.8611%

Net sales for the first six months of 2025 were $8.6 billion, up 1 percent compared with 2024. Intelligent Devices sales were flat, while Software and Control sales were up 5 percent. Underlying sales were up 2 percent on 0.5 percent higher volume and 1.5 percent higher price. Foreign currency translation had a 1 percent unfavorable impact. Underlying sales increased 1 percent in the U.S. and increased 3 percent internationally. The Americas was up 3 percent, Europe was down 2 percent and Asia, Middle East & Africa was up 3 percent (China was down 6 percent).

Cost of sales for 2025 were $4,002, a decrease of $291 compared with 2024, and gross margin of 53.5 percent increased 4.0 percentage points, as the prior year reflected the impact from acquisition-related inventory step-up amortization of $231, which negatively impacted margins in the prior year by 2.7 percent. Favorable price less net material inflation also contributed to the increase in gross margin.

SG&A expenses of $2,506 decreased $67 and SG&A as a percent of sales decreased 1.2 percentage points to 29.1 percent, reflecting savings from cost reduction actions and the impact of Test & Measurement acquisition-related costs incurred in the prior year which are reported in Corporate and other (see Note 15).

In the second quarter of fiscal 2024, the Company received its final distribution of $79 related to its subordinated interest in Vertiv.

Other deductions, net were $646 in 2025, a decrease of $135 compared with the prior year, reflecting lower restructuring expense of $81 and lower intangibles amortization expense of $90 (including $68 of backlog amortization related to the Test & Measurement acquisition in the prior year), partially offset by higher acquisition/divestiture fees and related costs. The prior year also included a divestiture loss of $39. See Note 7.

Pretax earnings from continuing operations of $1,404 increased $518 compared with prior year. Earnings increased $86 in Intelligent Devices and $309 in Software and Control, see the Business Segments discussion that follows and Note 15.

Income taxes were $382 in the first six months of fiscal 2025 and $178 in 2024, resulting in effective tax rates of 27 percent and 20 percent, respectively. The current year rate was negatively impacted by $49 ($0.09 per share) of discrete tax items related to the AspenTech transaction. In addition, the fees incurred by AspenTech were not fully deductible. Overall, these items increased the current year rate by approximately 5 percentage points. The prior year rate included a $57 ($0.10 per share) benefit related to discrete tax items, partially offset by unfavorable impacts from inventory step-up amortization and the loss on divestiture noted above. In total, the net impact of these items benefited the rate by approximately 1 percentage point.

Earnings from continuing operations attributable to common stockholders were $1,070, up 50 percent compared with the prior year, and diluted earnings per share from continuing operations were $1.88, up 52 percent compared with $1.24 in 2024. Adjusted diluted earnings per share from continuing operations were $2.86 compared with $2.58 in the prior year, reflecting strong operating results. See the analysis below of adjusted earnings per share for further details.

Loss from discontinued operations was $73 ($0.12 per share) in the prior year. See Note 5.

Net earnings common stockholders were $1,070 ($1.88 per share) compared with $643 ($1.12 per share) in the prior year.

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

Six Months Ended March 31,20242025
Diluted earnings from continuing operations per share$1.241.88
Amortization of intangibles0.730.63
Restructuring and related costs0.170.06
Discrete taxes(0.10)0.09
Amortization of acquisition-related inventory step-up0.38—
Acquisition/divestiture fees and related costs0.190.20
Loss on divestiture of business0.07—
Gain on subordinated interest(0.10)—
Adjusted diluted earnings from continuing operations per share$2.582.86

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

Six Months Ended
Adjusted diluted earnings from continuing operations per share - March 31, 2024$2.58
Operations0.30
Benefit from full ownership of AspenTech0.07
Stock compensation(0.02)
Foreign currency(0.01)
Pensions(0.03)
Interest expense, net(0.02)
Other(0.01)
Adjusted diluted earnings from continuing operations per share - March 31, 2025$2.86

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

Six Months Ended March 31,20242025Change
Earnings from continuing operations before income taxes$8861,40458%
Percent of sales10.4%16.3%5.9 pts
Interest expense, net10150
Interest income from related party(62)—
Amortization of intangibles645556
Restructuring and related costs12040
Acquisition/divestiture fees and related costs154189
Loss on divestiture of business39—
Amortization of acquisition-related inventory step-up231—
Gain on subordinated interest(79)—
Adjusted EBITA from continuing operations$2,0352,23910%
Percent of sales24.0%26.0%2.0 pts

Business Segments

Following is an analysis of operating results for the Company’s business segments for the six months ended March 31, 2025, compared with the six months ended March 31, 2024. The Company defines segment earnings as earnings before interest and taxes. As a result of the Company's portfolio transformation, the Company has realigned its business segments and now reports five segments and two business groups. See Note 15.

INTELLIGENT DEVICES

20242025ChangeFXAcq/DivU/L
Sales:
Final Control$1,9912,0493%1%—%4%
Measurement & Analytical1,9601,9771%1%—%2%
Discrete Automation1,2451,195(4)%1%—%(3)%
Safety & Productivity687651(5)%—%—%(5)%
Total$5,8835,872—%1%—%1%
Earnings:
Final Control$45350311%
Measurement & Analytical5095518%
Discrete Automation2132151%
Safety & Productivity151143(5)%
Total$1,3261,4126%
Margin22.5%24.0%1.5 pts
Amortization of intangibles:
Final Control$4442
Measurement & Analytical3221
Discrete Automation1716
Safety & Productivity1313
Total$10692
Restructuring and related costs:
Final Control$—4
Measurement & Analytical43
Discrete Automation1711
Safety & Productivity11
Total$2219
Adjusted EBITA$1,4541,5235%
Adjusted EBITA Margin24.7%25.9%1.2 pts

Intelligent Devices sales were $5.9 billion in the first six months of 2025, flat compared to the prior year. Underlying sales increased 1 percent as higher price was partially offset by slightly lower volume. Underlying sales increased 2 percent in the Americas, Europe decreased 4 percent, and Asia, Middle East & Africa was up 1 percent (China down 5 percent). Final Control sales increased $58, or 3 percent, reflecting strength in power end markets. Sales for Measurement & Analytical increased $17, or 1 percent, reflecting growth in Asia, Middle East & Africa partially offset by softness in Europe. Discrete Automation sales decreased $50, or 4 percent, reflecting softness in Asia, Middle East & Africa and Europe, partially offset by slight growth in the Americas. Safety & Productivity sales decreased $36, or 5 percent, reflecting softness in all geographies. Earnings for Intelligent Devices were $1,412, an increase of $86, or 6 percent, and margin increased 1.5 percentage points to 24.0 percent, reflecting favorable price less net material inflation and favorable foreign currency transactions of $19. Adjusted EBITA margin was 25.9 percent, an increase of 1.2 percentage points.

SOFTWARE AND CONTROL

20242025ChangeFXAcq/DivU/L
Sales:
Control Systems & Software$1,8972,0558%1%—%9%
Test & Measurement749718(4)%1%—(3)%
Total$2,6462,7735%1%—%6%
Earnings:
Control Systems & Software$25744674%
Test & Measurement(157)(37)76%
Total$100409311%
Margin3.8%14.7%10.9 pts
Amortization of intangibles:
Control Systems & Software$259253
Test & Measurement280211
Total$539464
Restructuring and related costs:
Control Systems & Software$48
Test & Measurement565
Total$6013
Adjusted EBITA$69988627%
Adjusted EBITA Margin26.4%32.0%5.6 pts

Software and Control sales were $2,773 in the first six months of 2025, an increase of $127, or 5 percent compared to the prior year. Underlying sales were up 6 percent on 4 percent higher volume and 2 percent higher price. Underlying sales increased 7 percent in the Americas, 2 percent in Europe and 7 percent in Asia, Middle East & Africa (China down 9 percent). Control Systems & Software sales increased $158, or 8 percent, reflecting robust growth at AspenTech, favorable demand in process end markets across all geographies, and strong demand in power end markets in Asia, Middle East & Africa. Test & Measurement sales decreased $31 or 4 percent, reflecting softness in Europe partially offset by modest growth in the Americas. Earnings for Software and Control increased $309, up 311 percent, and margin increased 10.9 percentage points, reflecting strong leverage on higher Control Systems & Software sales, higher price, savings from cost reduction actions (primarily at Test & Measurement), and lower intangibles amortization and lower restructuring and related costs compared to the prior year. Adjusted EBITA margin increased 5.6 percentage points.

FINANCIAL CONDITION

Key elements of the Company's financial condition as of and for the six months ended March 31, 2025 as compared to the year ended September 30, 2024 and the six months ended March 31, 2024 follow.

Mar 31, 2024Sept 30, 2024Mar 31, 2025
Operating working capital$2,182$1,394$2,081
Current ratio1.21.80.8
Total debt-to-total capital34.0%26.2%42.7%
Net debt-to-net capital28.8%15.9%39.3%
Interest coverage ratio10.2X7.2X9.8X

The change in operating working capital compared to September 30,2024 was due to the payment of income taxes of approximately $585 related to the sale of the Company's 40 percent non-controlling common equity interest in Copeland. The current ratio decreased compared to September 30, 2024, reflecting the decrease in cash and increase in short-term borrowing to support the AspenTech transaction.

The interest coverage ratio (earnings before income taxes plus interest expense, divided by interest expense) of 9.8X for the 12 months ended March 31, 2025 compares to 10.2X for the 12 months ended March 31, 2024.

The increase in the debt-to-capital ratios reflects increased short-term borrowings and long-term debt to fund the AspenTech transaction. On February 11, 2025, the Company entered into a $3 billion 364-day revolving backup credit facility to support increased commercial paper borrowings in connection with the AspenTech transaction. This facility is in addition to the Company's existing $3.5 billion revolving backup credit facility. Both credit facilities are unsecured and may be accessed under various interest rate alternatives at the Company's option. The fees to maintain the facilities are immaterial and the Company has not incurred any borrowings under either facility or previous facilities. Overall, the Company's commercial paper borrowings increased to approximately $5.1 billion at March 31, 2025. In March 2025, the Company issued €500 of 3.0% notes due March 2031, $500 of 5.0% notes due March 2035, and €500 of 3.5% notes due March 2037. Although the Company's financial leverage and debt ratios are currently elevated, Emerson expects to retain its investment-grade long-term debt ratings. Further, the Company expects its leverage and debt ratios to improve through its strong operating cash flows and disciplined capital allocation, including a targeted reduction in net debt of approximately $1 billion over the next 6-12 months.

Operating cash flow from continuing operations for the first six months of fiscal 2025 was $1,603, an increase of $426 compared with $1,177 in the prior year, reflecting higher earnings. Free cash flow from continuing operations of $1,433 in the first six months of fiscal 2025 (operating cash flow of $1,603 less capital expenditures of $170) increased $415 compared to free cash flow of $1,018 in 2024 (operating cash flow of $1,177 less capital expenditures of $159), reflecting the increase in operating cash flow. Cash used in investing activities from continuing operations was $264. Cash used in financing activities from continuing operations was $2,382, reflecting the purchase of the remaining outstanding shares of common stock of AspenTech not already owned by the Company for approximately $7.2 billion, share purchases of $1.1 billion and dividends, partially offset by the increase in short and long-term debt discussed above.

Total cash provided by operating activities was $1,018 including the impact of discontinued operations, and decreased $140 compared with $1,158 in the prior year. The decrease reflected higher operating cash flow from continuing operations, offset by $585 of income taxes paid in the second quarter related to the sale of the Company's 40 percent non-controlling common equity interest in Copeland.

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 $42 billion and common stockholders' equity of $19 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 2025 OUTLOOK

This past quarter marked the conclusion of Emerson's portfolio transformation with the completion of the purchase of the remaining outstanding shares of common stock of AspenTech not already owned by the Company on March 12, 2025. In addition, following a review of strategic alternatives for the Safety & Productivity segment, the Company has concluded that the best value for its shareholders is to retain the business. The outlook discussed below reflects full ownership of AspenTech subsequent to completion of the transaction and includes the Safety & Productivity segment.

For fiscal year 2025, consolidated net sales from continuing operations are expected to be up approximately 4 percent, with underlying sales also up approximately 4 percent. Earnings per share are expected to be $4.05 to $4.20, while adjusted earnings per share are expected to be $5.90 to $6.05 (see the following reconciliation).

Outlook for Fiscal 2025 Earnings Per Share2025
Diluted earnings from continuing operations per share$4.05 - $4.20
Amortization of intangibles~ 1.34
Restructuring and related costs~ 0.20
Acquisition/divestiture fees and related costs~ 0.22
Discrete taxes~ 0.09
Adjusted diluted earnings from continuing operations per share$5.90- $6.05

Operating cash flow is expected to be $3.5 to $3.6 billion and free cash flow, which excludes projected capital spending of approximately $0.4 billion, is expected to be $3.1 to $3.2 billion. The fiscal 2025 outlook assumes returning approximately $2.3 billion to shareholders through approximately $1.1 billion of 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 changes or increases in tariffs and the potential retaliatory measures against the United States, the scope, duration and ultimate impacts of the Russia-Ukraine and other global conflicts, as well as economic and currency conditions, market demand, pricing, protection of intellectual property, cybersecurity, tariffs, competitive and technological factors, and inflation, among others, which are set forth in the “Risk Factors” of Part I, Item 1A, and the "Safe Harbor Statement" of Part II, Item 7, to the Company's Annual Report on Form 10-K for the year ended September 30, 2024, "Risk Factors" of Part II - Other Information, Item 1A of the Company's Quarterly Report on Form 10-Q for the three-month period ended March 31, 2025 and in subsequent reports filed with the SEC, which are hereby incorporated by reference.

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