Item 1. Financial Statements

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Item 1. Financial Statements

Consolidated Statements of Earnings

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three and nine months ended June 30, 2024 and 2025

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

Three Months Ended June 30,Nine Months Ended June 30,
2024202520242025
Net sales$4,3804,55312,87313,161
Cost of sales2,0662,1606,3596,161
Selling, general and administrative expenses1,2541,2663,8273,773
Gain on subordinated interest——(79)—
Loss on Copeland note receivable279—279—
Other deductions, net2942981,075944
Interest expense (net of interest income of $32, $31, $105 and $120, respectively)5695157145
Interest income from related party(24)—(86)—
Earnings from continuing operations before income taxes4557341,3412,138
Income taxes88154266536
Earnings from continuing operations3675801,0751,602
Discontinued operations, net of tax of $5, $2, $27 and $2, respectively(15)6(88)7
Net earnings3525869871,609
Less: Noncontrolling interests in subsidiaries23—15(48)
Net earnings common stockholders$3295869721,657
Earnings common stockholders:
Earnings from continuing operations3445801,0601,650
Discontinued operations(15)6(88)7
Net earnings common stockholders$3295869721,657
Basic earnings per share common stockholders:
Earnings from continuing operations$0.601.031.852.92
Discontinued operations(0.02)0.01(0.15)0.01
Basic earnings per common share$0.581.041.702.93
Diluted earnings per share common stockholders:
Earnings from continuing operations$0.601.031.842.91
Discontinued operations(0.03)0.01(0.15)0.01
Diluted earnings per common share$0.571.041.692.92
Weighted average outstanding shares:
Basic571.9562.1571.4564.5
Diluted574.8564.7574.1567.1

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three and nine months ended June 30, 2024 and 2025

(Dollars in millions; unaudited)

Three Months Ended June 30,Nine Months Ended June 30,
2024202520242025
Net earnings$3525869871,609
Other comprehensive income (loss), net of tax:
Foreign currency translation(124)29856(5)
Pension and postretirement(12)4(36)10
Cash flow hedges(6)(1)(4)9
Total other comprehensive income (loss)(142)3011614
Comprehensive income2108871,0031,623
Less: Noncontrolling interests in subsidiaries21115(52)
Comprehensive income common stockholders$1898869881,675

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, 2024June 30, 2025
ASSETS
Current assets
Cash and equivalents$3,5882,219
Receivables, less allowances of $121 and $125, respectively2,9272,908
Inventories2,1802,288
Other current assets1,4971,657
Total current assets10,1929,072
Property, plant and equipment, net2,8072,791
Other assets
Goodwill18,06718,158
Other intangible assets10,4369,669
Other2,7442,827
Total other assets31,24730,654
Total assets$44,24642,517
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current maturities of long-term debt$5325,953
Accounts payable1,3351,272
Accrued expenses3,8753,507
Total current liabilities5,74210,732
Long-term debt7,1558,278
Other liabilities3,8403,621
Equity
Common stock, $0.50 par value; authorized, 1,200.0 shares; issued, 953.4 shares; outstanding, 570.2 shares and 562.8 shares, respectively477477
Additional paid-in-capital16928
Retained earnings40,83040,265
Accumulated other comprehensive income (loss)(868)(850)
Cost of common stock in treasury, 383.2 shares and 390.6 shares, respectively(18,972)(20,050)
Common stockholders’ equity21,63619,870
Noncontrolling interests in subsidiaries5,87316
Total equity27,50919,886
Total liabilities and equity$44,24642,517

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Equity

EMERSON ELECTRIC CO. & SUBSIDIARIES

Three and nine months ended June 30, 2024 and 2025

(Dollars in millions; unaudited)

Three Months Ended June 30,Nine Months Ended June 30,
2024202520242025
Common stock$477477477477
Additional paid-in-capital
Beginning balance158—62169
Stock plans162818614
AspenTech purchases of common stock(34)—(108)—
Purchase of noncontrolling interest———(1,400)
Settlement of AspenTech share awards———(76)
Reclass negative APIC to retained earnings———1,321
Ending balance1402814028
Retained earnings
Beginning balance40,10839,97740,07040,830
Net earnings common stockholders3295869721,657
Dividends paid (per share: $0.525, $0.5275, $1.575 and 1.5825, respectively)(302)(298)(907)(901)
Reclass negative APIC to retained earnings———(1,321)
Ending balance40,13540,26540,13540,265
Accumulated other comprehensive income (loss)
Beginning balance(1,097)(1,150)(1,253)(868)
Foreign currency translation(122)29756(1)
Pension and postretirement(12)4(36)10
Cash flow hedges(6)(1)(4)9
Ending balance(1,237)(850)(1,237)(850)
Treasury stock
Beginning balance(18,746)(20,055)(18,667)(18,972)
Purchases—(26)(175)(1,161)
Issued under stock plans303112683
Ending balance(18,716)(20,050)(18,716)(20,050)
Common stockholders' equity20,79919,87020,79919,870
Noncontrolling interests in subsidiaries
Beginning balance5,881175,9095,873
Net earnings (loss)23—15(48)
Stock plans15—4830
AspenTech purchases of common stock(25)—(80)—
Dividends paid(3)(2)(3)(3)
Purchase of noncontrolling interest———(5,832)
Other comprehensive income(2)1—(4)
Ending balance5,889165,88916
Total equity$26,68819,88626,68819,886

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Cash Flows

EMERSON ELECTRIC CO. & SUBSIDIARIES

Nine Months Ended June 30, 2024 and 2025

(Dollars in millions; unaudited)

Nine Months Ended
June 30,
20242025
Operating activities
Net earnings$9871,609
Earnings from discontinued operations, net of tax88(7)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization1,2631,139
Stock compensation203198
Amortization of acquisition-related inventory step-up231—
Gain on subordinated interest(79)—
Loss on Copeland note receivable279—
Changes in operating working capital(176)(80)
Other, net(552)(195)
Cash from continuing operations2,2442,664
Cash from discontinued operations4(576)
Cash provided by operating activities2,2482,088
Investing activities
Capital expenditures(251)(263)
Purchases of businesses, net of cash and equivalents acquired(8,342)(36)
Proceeds from subordinated interest79—
Other, net(86)(94)
Cash from continuing operations(8,600)(393)
Cash from discontinued operations36—
Cash used in investing activities(8,564)(393)
Financing activities
Net increase in short-term borrowings2,2291,419
Proceeds from short-term borrowings greater than three months3225,292
Payments of short-term borrowings greater than three months(100)(1,349)
Proceeds from long-term debt—1,544
Payments of long-term debt(547)(503)
Dividends paid(901)(895)
Purchases of common stock(175)(1,147)
AspenTech purchases of common stock(188)—
Purchase of noncontrolling interest—(7,244)
Settlement of AspenTech share awards—(76)
Other, net(57)(60)
Cash provided by (used in) financing activities583(3,019)
Effect of exchange rate changes on cash and equivalents(20)(45)
Decrease in cash and equivalents(5,753)(1,369)
Beginning cash and equivalents8,0513,588
Ending cash and equivalents$2,2982,219
Changes in operating working capital
Receivables$4419
Inventories(34)(91)
Other current assets(130)(113)
Accounts payable(61)(62)
Accrued expenses5167
Total changes in operating working capital$(176)(80)

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 of Emerson Electric Co. ("Emerson", "we", "us", "our" or the "Company") 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.

(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, 2024June 30, 2025
Unbilled receivables (contract assets)$1,5991,795
Customer advances (contract liabilities)(1,115)(1,205)
Net contract assets (liabilities)$484590

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 nine months ended June 30, 2025 included $65 and $711, 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 nine months ended June 30, 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 June 30, 2025, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately $8.9 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 June 30,Nine Months Ended June 30,
2024202520242025
Basic shares outstanding571.9562.1571.4564.5
Dilutive shares2.92.62.72.6
Diluted shares outstanding574.8564.7574.1567.1

(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) 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 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 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 June 30,Nine Months Ended June 30,
20242024
Net Sales$4,38012,892
Net earnings from continuing operations common stockholders$3741,396
Diluted earnings per share from continuing operations$0.652.43

The pro forma results for the three months ended June 30, 2024 exclude backlog amortization of $34 which was assumed to be incurred in the third quarter of fiscal 2023.

The pro forma results for the nine months ended June 30, 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 nine months ended June 30, 2024 also exclude backlog amortization of $102, inventory step-up amortization of $213, and retention bonuses of $51 which were all assumed to be incurred in the nine months ended June 30, 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. See Note 10 for further details.

Results from discontinued operations were as follows:

Three Months Ended June 30,Nine Months Ended June 30,
2024202520242025
Net sales$————
Cost of sales————
SG&A———1
Gain on sale of business————
Other deductions, net20(4)115(6)
Earnings before income taxes(20)4(115)5
Income taxes(5)(2)(27)(2)
Earnings, net of tax$(15)6(88)7

Results for the three months ended and nine months ended June 30, 2024 included equity method losses of $16 ($9 after-tax) and $111 ($82 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 nine months ended June 30, 2025 and 2024 were as follows:

Nine Months Ended June 30,
20242025
Cash from operating activities4(576)
Cash from investing activities36—

Cash from operating activities for the nine months ended June 30, 2025 primarily reflects 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 June 30,Nine Months Ended June 30,
2024202520242025
Service cost$9182754
Interest cost5548165144
Expected return on plan assets(74)(73)(222)(219)
Net amortization(14)4(42)12
Total$(24)(3)(72)(9)

(7) OTHER DEDUCTIONS, NET

Other deductions, net are summarized below:

Three Months Ended June 30,Nine Months Ended June 30,
2024202520242025
Amortization of intangibles (intellectual property and customer relationships)$264219811677
Restructuring costs573717070
Acquisition/divestiture costs72592181
Foreign currency transaction (gains) losses9316073
Loss on divestiture of business——39—
Other(43)(14)(97)(57)
Total$2942981,075944

For the three and nine months ended June 30, 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 nine months of the year.

Restructuring expense by business segment follows:

Three Months Ended June 30,Nine Months Ended June 30,
2024202520242025
Final Control$5316
Measurement & Analytical3275
Discrete Automation1663317
Safety & Productivity1(1)2—
Intelligent Devices25104328
Control Systems & Software37716
Test & Measurement24—783
Software and Control2778519
Corporate5204223
Total$573717070

Corporate restructuring for the three and nine months ended June 30, 2025 includes $20 and $21, respectively, of integration-related stock compensation expense attributable to the AspenTech transaction. Corporate restructuring of $5 and $42 for the three and nine months ended June 30, 2024, respectively, is comprised almost entirely of integration-related stock compensation expense attributable to NI.

Details of the change in the liability for restructuring costs during the nine months ended June 30, 2025 follow:

Sept 30, 2024ExpenseUtilized/PaidJune 30, 2025
Severance and benefits$105588776
Other712145
Total$1127010181

The tables above do not include $3 and $4 of costs related to restructuring actions incurred for the three months ended June 30, 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 $10 and $11, respectively.

(9) TAXES

Income taxes were $154 in the third quarter of fiscal 2025 and $88 in 2024, resulting in effective tax rates of 21 percent and 19 percent, respectively. The prior year rate reflected a 3 percentage point benefit from return-to-provision adjustments related to the filing of the prior year U.S. tax return, partially offset by other individually immaterial items.

Income taxes were $536 in the first nine of months of fiscal 2025 and $266 in 2024, resulting in effective tax rates of 25 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. In total, the net impact of these items increased the rate by approximately 3 percentage points. The prior year rate included a $57 ($0.10 per share) benefit related to discrete tax items and the benefit discussed above related to the prior year U.S. tax return, partially offset by unfavorable impacts from inventory step-up amortization and the loss on divestiture (see Note 4), which was nondeductible for tax purposes. In total, the net impact of these items benefited the rate by approximately 2 percentage points, which was partially offset by other individually immaterial items.

(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, pretax 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 the note receivable to Copeland for $1.9 billion, and the transactions were subsequently completed in August 2024.

For the three and nine months ended June 30, 2024 the Company recognized non-cash interest income on the note receivable (through the date of the agreement) of $24 and $86, respectively which is reported in Interest income from related party within continuing operations. Upon entering into the note agreement, the Company recorded a pretax loss of $279 ($217 after-tax, $0.38 per share) to adjust the carrying value of the note to $1.9 billion to reflect the transaction price.

Summarized financial information for Copeland for the three and nine months ended June 30, 2024 is as follows.

Three Months Ended June 30,Nine Months Ended June 30,
20242024
Net sales$1,259$3,458
Gross profit$441$1,198
Income (loss) from continuing operations$(40)$(280)
Net income (loss)$(40)$(280)
Net income (loss) attributable to shareholders$(40)$(278)

(11) OTHER FINANCIAL INFORMATION

Sept 30, 2024June 30, 2025
Inventories
Finished products$512553
Raw materials and work in process1,6681,735
Total$2,1802,288
Property, plant and equipment, net
Property, plant and equipment, at cost$6,1856,271
Less: Accumulated depreciation3,3783,480
Total$2,8072,791
Goodwill by business segment
Final Control$2,7022,713
Measurement & Analytical1,5761,593
Discrete Automation919935
Safety & Productivity404415
Intelligent Devices5,6015,656
Control Systems & Software9,0039,038
Test & Measurement3,4633,464
Software and Control12,46612,502
Total$18,06718,158
Sept 30, 2024June 30, 2025
Other intangible assets
Gross carrying amount$15,62815,767
Less: Accumulated amortization5,1926,098
Net carrying amount$10,4369,669

Other intangible assets include customer relationships, net, of $5,917 and $6,296 and intellectual property, net, of $3,500 and $3,901 as of June 30, 2025 and September 30, 2024, respectively.

Three Months Ended June 30,Nine Months Ended June 30,
2024202520242025
Depreciation and amortization expense include the following:
Depreciation expense$8081238246
Amortization of intangibles (includes $49, $50, $147 and $149 reported in Cost of Sales, respectively)313269958826
Amortization of capitalized software24226767
Total$4173721,2631,139
Sept 30, 2024June 30, 2025
Other assets include the following:
Pension assets$1,1941,257
Operating lease right-of-use assets692638
Unbilled receivables (contract assets)519579
Deferred income taxes6455
Accrued expenses include the following:
Customer advances (contract liabilities)$1,0431,125
Employee compensation706684
Income taxes587126
Operating lease liabilities (current)158150
Product warranty8288
Other liabilities include the following:
Deferred income taxes$2,1381,914
Operating lease liabilities (noncurrent)511488
Pension and postretirement liabilities466464

(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 $5.4 billion at June 30, 2025.

In June 2025, the Company repaid $500 of 3.15% notes that matured. 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 June 30, 2025, the notional amount of foreign currency hedge positions was approximately $3.2 billion. All derivatives receiving hedge accounting are cash flow hedges. The majority of hedging gains and losses deferred as of June 30, 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 nine months ended June 30, 2024 and 2025:

Into EarningsInto OCI
3rd QuarterNine Months3rd QuarterNine Months
Gains (Losses)Location20242025202420252024202520242025
Foreign currencySales—1—55(7)75
Foreign currencyCost of sales3—9(1)(10)7(3)11
Foreign currencyOther deductions, net(12)29(23)(4)
Net Investment Hedges
Euro denominated debt$————25(134)(27)(138)
Total$(9)30(14)—20(134)(23)(122)

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 June 30, 2025, the fair value of long-term debt was approximately $8.1 billion, which was lower than the carrying value by $766. 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 June 30, 2025.

(14) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Activity in Accumulated other comprehensive income (loss) for the three and nine months ended June 30, 2025 and 2024 is shown below, net of income taxes:
Three Months Ended June 30,Nine Months Ended June 30,
2024202520242025
Foreign currency translation
Beginning balance$(834)(914)(1,012)(616)
Other comprehensive income (loss), net of tax of $(6), $31, $6 and $32, respectively(122)29733(4)
Purchase of noncontrolling interest———3
Reclassification to loss on divestiture of business——23—
Ending balance(956)(617)(956)(617)
Pension and postretirement
Beginning balance(271)(239)(247)(245)
Amortization of deferred actuarial losses into earnings, net of tax of $2, $0, $6 and $(2), respectively(12)4(36)10
Ending balance(283)(235)(283)(235)
Cash flow hedges
Beginning balance836(7)
Gains deferred during the period, net of taxes of $1, $0, $(1) and $(4), respectively(4)—312
Reclassification of realized (gains) losses to sales and cost of sales, net of tax of $1, $—, $2 and $1, respectively(2)(1)(7)(3)
Ending balance2222
Accumulated other comprehensive income (loss)$(1,237)(850)(1,237)(850)

(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 June 30,Nine Months Ended June 30,
SalesEarnings (Loss)SalesEarnings (Loss)
20242025202420252024202520242025
Final Control$1,0461,1162532673,0373,165706770
Measurement & Analytical9821,0142522462,9422,992761796
Discrete Automation6186491091181,8631,844322333
Safety & Productivity35134679731,038996230216
Intelligent Devices2,9973,1256937048,8808,9972,0192,115
Control Systems & Software1,0431,0832172672,9403,138474713
Test & Measurement355361(88)(26)1,1041,079(245)(63)
Software and Control1,3981,4441292414,0444,217229650
Stock compensation(56)(71)(203)(198)
Unallocated pension and postretirement costs382710782
Corporate and other(38)(72)(540)(366)
Loss on Copeland note receivable(279)—(279)—
Gain on subordinated interest——79—
Eliminations/Interest(15)(16)(56)(95)(51)(53)(157)(145)
Interest income from related party24—86—
Total$4,3804,55345573412,87313,1611,3412,138

Stock compensation for the three and nine months ended June 30, 2025 included $24 and $30, respectively, of integration-related stock compensation expense attributable to AspenTech (of which $20 and $21, respectively, was reported as restructuring costs). Additionally, the three and nine months ended June 30, 2025 included $2 and $7, respectively, of integration-related stock compensation expense attributable to NI. Stock compensation for the three and nine months ended June 30, 2024 included $9 and $53, respectively, of integration-related stock compensation expense attributable to NI (of which $5 and $41, respectively, was reported as restructuring costs). Corporate and other for the three and nine months ended June 30, 2025 included acquisition/divestiture fees and related costs of $38 and $216, respectively. Corporate and other for the three and nine months ended June 30, 2024 included acquisition/divestiture fees and related costs of $13 and $159, respectively, while year-to-date also included acquisition-related inventory step-up amortization of $231 and a divestiture loss of $39.

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

Three Months Ended June 30,Nine Months Ended June 30,
2024202520242025
Final Control$4139120120
Measurement & Analytical323210595
Discrete Automation22226564
Safety & Productivity14154345
Intelligent Devices109108333324
Control Systems & Software148134444427
Test & Measurement150119454356
Software and Control298253898783
Corporate and other10113232
Total$4173721,2631,139

Test & Measurement depreciation and amortization for the three and nine months ended June 30, 2024 included backlog amortization of $34 and $102, respectively.

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

Three Months Ended June 30,Three Months Ended June 30,
20242025
AmericasAMEAEuropeTotalAmericasAMEAEuropeTotal
Final Control$5093981391,0465614101451,116
Measurement & Analytical4883451499825103511531,014
Discrete Automation294154170618319161169649
Safety & Productivity26218713512651863346
Intelligent Devices1,5539155292,9971,6559405303,125
Control Systems & Software4932992511,0435373202261,083
Test & Measurement160989735516596100361
Software and Control6533973481,3987024163261,444
Total$2,2061,3128774,3952,3571,3568564,569
Nine Months Ended June 30,Nine Months Ended June 30,
20242025
AmericasAMEAEuropeTotalAmericasAMEAEuropeTotal
Final Control$1,4761,1723893,0371,5871,1913873,165
Measurement & Analytical1,4751,0044632,9421,4921,0444562,992
Discrete Automation8744775121,8638964594891,844
Safety & Productivity774532111,03876648182996
Intelligent Devices4,5992,7061,5758,8804,7412,7421,5148,997
Control Systems & Software1,4008586822,9401,5169306923,138
Test & Measurement4862953231,1044962902931,079
Software and Control1,8861,1531,0054,0442,0121,2209854,217
Total$6,4853,8592,58012,9246,7533,9622,49913,214

(16) SUBSEQUENT EVENTS

On July 4, 2025, the One Big Beautiful Bill Act (the "OBBBA") was signed into law. The OBBBA extends certain key elements of the 2017 Tax Cuts and Jobs Act including provisions related to bonus depreciation and domestic research and development, among others. The Company is currently assessing the impact of the OBBBA on its consolidated financial statements, but does not expect the OBBBA to have a material impact in the current fiscal year.

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 third quarter of fiscal 2025, Emerson consolidated net sales were $4.6 billion, up 4 percent compared with the prior year. Underlying sales, which exclude foreign currency translation, acquisitions and divestitures, were up 3 percent. Foreign currency translation had a 1 percent favorable impact.

Earnings from continuing operations attributable to common stockholders were $580, up 68 percent, and diluted earnings per share from continuing operations were $1.03, up 72 percent compared with $0.60 in the prior year. The prior year included a pretax loss of $279 ($217 after-tax, $0.38 per share) related to the Company's definitive agreement to sell its Copeland note receivable for $1.9 billion (see Note 10). Adjusted diluted earnings per share from continuing operations were $1.52, up 6 percent compared with $1.43 in the prior year, reflecting sales growth and strong operating performance.

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 June 30,20242025
Diluted earnings from continuing operations per share$0.601.03
Amortization of intangibles0.350.37
Restructuring and related costs0.080.06
Acquisition/divestiture fees and related costs0.020.06
Loss on Copeland note receivable0.38—
Adjusted diluted earnings from continuing operations per share$1.431.52

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 Condition sections below.

Three Months Ended
Adjusted diluted earnings from continuing operations per share - June 30, 2024$1.43
Operations0.09
Foreign currency(0.02)
Pension(0.02)
Share count0.03
Other0.01
Adjusted diluted earnings from continuing operations per share - June 30, 2025$1.52

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30

Following is an analysis of the Company’s operating results for the third quarter ended June 30, 2025, compared with the third quarter ended June 30, 2024.

20242025Change
(dollars in millions, except per share amounts)
Net sales$4,3804,5534%
Gross profit$2,3142,3933%
Percent of sales52.8%52.6%(0.2) pts
SG&A$1,2541,2661%
Percent of sales28.6%27.8%(0.8) pts
Loss on Copeland note receivable$279—
Other deductions, net$294298
Amortization of intangibles$264219
Restructuring costs$5737
Interest expense, net$5695
Interest income from related party$(24)—
Earnings from continuing operations before income taxes$45573461%
Percent of sales10.4%16.1%5.7 pts
Earnings from continuing operations common stockholders$34458068%
Percent of sales7.9%12.7%4.8 pts
Net earnings common stockholders$32958678%
Diluted EPS - Earnings from continuing operations$0.601.0372%
Diluted EPS - Net earnings$0.571.0482%
Adjusted Diluted EPS - Earnings from continuing operations$1.431.526%

Net sales for the third quarter of fiscal 2025 were $4.6 billion, up 4 percent compared with 2024. Intelligent Devices sales were up 4 percent, while Software and Control sales were up 3 percent. Underlying sales were up 3 percent on 2.5 percent higher price and 0.5 percent higher volume. Foreign currency translation had a 1 percent favorable impact. Underlying sales were up 10 percent in the U.S. and down 2 percent internationally. The Americas was up 7 percent, Europe was down 7 percent, and Asia, Middle East & Africa was up 2 percent (China was flat).

Cost of sales for the third quarter of fiscal 2025 were $2,160, an increase of $94 compared with 2024, while gross margin of 52.6 percent decreased 0.2 percentage points. Tariffs, net of targeted price actions, had an immaterial impact on gross profit, but diluted margins by approximately 0.6 percentage points, while favorable price less net material inflation was partially offset by unfavorable mix.

Selling, general and administrative (SG&A) expenses of $1,266 increased $12 and SG&A as a percent of sales decreased 0.8 percentage points to 27.8 percent compared with the prior year, reflecting savings from cost reduction actions (primarily at Test & Measurement and AspenTech).

Other deductions, net were $298 for the third quarter of fiscal 2025, an increase of $4 compared with the prior year. The increase was due to higher acquisition/divestiture costs related to the AspenTech transaction and higher foreign currency transaction losses, partially offset by backlog amortization of $34 in the prior year related to the Test & Measurement acquisition. See Note 7.

Pretax earnings from continuing operations of $734 increased $279, up 61 percent compared with the prior year, reflecting the pretax loss of $279 recognized in the prior year related to the Company's definitive agreement to sell its Copeland note receivable for $1.9 billion. Earnings increased $11 in Intelligent Devices and increased $112 in Software and Control. See the Business Segments discussion that follows and Note 15.

Income taxes were $154 in the third quarter of fiscal 2025 and $88 in 2024, resulting in effective tax rates of 21 percent and 19 percent, respectively. The prior year rate reflected a 3 percentage point benefit from return-to-provision adjustments related to the filing of the prior year U.S. tax return, partially offset by other individually immaterial items.

Earnings from continuing operations attributable to common stockholders were $580, up 68 percent, and diluted earnings per share from continuing operations were $1.03, up 72 percent compared with $0.60 in the prior year. Adjusted diluted earnings per share from continuing operations were $1.52 compared with $1.43 in the prior year, up 6 percent, reflecting strong operating results. See the analysis above of adjusted earnings per share for further details.

Earnings (Loss) from discontinued operations were $6 ($0.01 per share) for the third quarter of fiscal 2025 and $(15) ($(0.03) per share) in the prior year. See Note 5.

Net earnings common stockholders in the third quarter of fiscal 2025 were $586 compared with $329 in the prior year, and earnings per share were $1.04 compared with $0.57 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 June 30,20242025Change
Earnings from continuing operations before income taxes$45573461%
Percent of sales10.4%16.1%5.7 pts
Interest expense, net5695
Interest income from related party(24)—
Amortization of intangibles313269
Restructuring and related costs6041
Acquisition/divestiture fees and related costs1744
Loss on Copeland note receivable279—
Adjusted EBITA from continuing operations$1,1561,1832%
Percent of sales26.4%26.0%(0.4) pts

Business Segments

Following is an analysis of operating results for the Company’s business segments for the third quarter ended June 30, 2025 compared with the third quarter ended June 30, 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$1,0461,1167%(2)%—%5%
Measurement & Analytical9821,0143%(1)%—%2%
Discrete Automation6186495%(2)%—%3%
Safety & Productivity351346(1)%(1)%—%(2)%
Total$2,9973,1254%(1)%—%3%
Earnings:
Final Control$2532675%
Measurement & Analytical252246(2)%
Discrete Automation1091189%
Safety & Productivity7973(7)%
Total$6937042%
Margin23.1%22.5%(0.6) pts
Amortization of intangibles:
Final Control$2122
Measurement & Analytical1111
Discrete Automation98
Safety & Productivity67
Total$4748
Restructuring and related costs:
Final Control$53
Measurement & Analytical32
Discrete Automation166
Safety & Productivity1—
Total$2511
Adjusted EBITA$765763—%
Adjusted EBITA Margin25.5%24.4%(1.1) pts

Intelligent Devices sales were $3.1 billion in the third quarter of 2025, an increase of $128, or 4 percent. Underlying sales increased 3 percent on 2.5 percent higher price and 0.5 percent higher volume. Underlying sales increased 7 percent in the Americas, Europe decreased 5 percent and Asia, Middle East & Africa was up 2 percent (China down 1 percent). Final Control sales increased $70, or 7 percent, reflecting strength in power end markets, particularly in the Americas. Sales for Measurement & Analytical increased $32, or 3 percent, reflecting mixed geographic results. Discrete Automation sales increased $31, or 5 percent, reflecting strength in the Americas and modest growth in Asia, Middle East & Africa, partially offset by continued softness in Europe. Safety & Productivity sales decreased $5, or 1 percent, due to softness in Europe, partially offset by modest growth in the Americas. Earnings for Intelligent Devices were $704, an increase of $11, or 2 percent, and margin decreased 0.6 percentage points to 22.5 percent, reflecting unfavorable foreign currency transactions and the impact of tariffs, partially offset by favorable price less net material inflation. Adjusted EBITA margin was 24.4 percent, decreasing 1.1 percentage points compared with the prior year, reflecting lower restructuring and related costs in the current year.

SOFTWARE AND CONTROL

20242025ChangeFXAcq/DivU/L
Sales:
Control Systems & Software$1,0431,0834%(1)%—%3%
Test & Measurement3553612%(3)%—%(1)%
Total$1,3981,4443%(1)%—%2%
Earnings:
Control Systems & Software$21726723%
Test & Measurement(88)(26)70%
Total$12924187%
Margin9.2%16.7%7.5 pts
Amortization of intangibles:
Control Systems & Software$127114
Test & Measurement139107
Total$266221
Restructuring and related costs:
Control Systems & Software$47
Test & Measurement25—
Total$297
Adjusted EBITA$42446911%
Adjusted EBITA Margin30.3%32.6%2.3 pts

Software and Control sales were $1.4 billion in the third quarter of 2025, an increase of $46, or 3 percent compared to the prior year. Underlying sales were up 2 percent on higher price. Underlying sales increased 8 percent in the Americas and 4 percent in Asia, Middle East & Africa (China up 1 percent), while Europe decreased 11 percent. Control Systems & Software sales increased $40, or 4 percent, reflecting growth in power end markets globally and process end markets in the Americas. Test & Measurement sales increased $6, or 2 percent, reflecting early signs of recovery in discrete end markets and mixed geographic results. Earnings for Software and Control increased $112, up 87 percent, and margin increased 7.5 percentage points, reflecting higher price, savings from cost reduction actions (primarily at Test & Measurement and AspenTech), and lower intangibles amortization and restructuring costs compared to the prior year. Adjusted EBITA margin increased 2.3 percentage points.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30

Following is an analysis of the Company’s operating results for the nine months ended June 30, 2025, compared with the nine months ended June 30, 2024.

20242025Change
(dollars in millions, except per share amounts)
Net sales$12,87313,1612%
Gross profit$6,5147,0007%
Percent of sales50.6%53.2%2.6 pts
SG&A$3,8273,773(1)%
Percent of sales29.7%28.7%(1.0) pts
Loss on Copeland note receivable$279—
Gain on subordinated interest$(79)—
Other deductions, net$1,075944
Amortization of intangibles$811677
Restructuring costs$17070
Interest expense, net$157145
Interest income from related party$(86)—
Earnings from continuing operations before income taxes$1,3412,13859%
Percent of sales10.4%16.2%5.8 pts
Earnings from continuing operations common stockholders$1,0601,65056%
Percent of sales8.2%12.5%4.3 pts
Net earnings common stockholders$9721,65770%
Diluted EPS - Earnings from continuing operations$1.842.9158%
Diluted EPS - Net earnings$1.692.9273%
Adjusted Diluted EPS - Earnings from continuing operations$4.014.389%

Net sales for the first nine months of 2025 were $13.2 billion, up 2 percent compared with 2024. Intelligent Devices sales were up 1 percent, while Software and Control sales were up 4 percent. Underlying sales were up 2 percent on 1.5 percent higher price and 0.5 percent higher volume. Foreign currency translation had no impact. Underlying sales increased 4 percent in the U.S. and increased 1 percent internationally. The Americas was up 5 percent, Europe was down 4 percent and Asia, Middle East & Africa was up 3 percent (China was down 4 percent).

Cost of sales for 2025 were $6,161, a decrease of $198 versus $6,359 in 2024, and gross margin of 53.2 percent increased 2.6 percentage points, as the prior year reflected the impact from acquisition-related inventory step-up of $231, which negatively impacted margins in the prior year by 1.8 percentage points. Favorable price less net material inflation also contributed to the increase in gross margin.

SG&A expenses of $3,773 decreased $54 and SG&A as a percent of sales decreased 1.0 percentage points to 28.7 percent, reflecting savings from cost reduction actions.

In the third quarter of fiscal 2024, the Company recognized a pretax loss of $279 ($217 after-tax, $0.38 per share) related to the Company's definitive agreement to sell its Copeland note receivable for $1.9 billion.

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 $944 in 2025, a decrease of $131 compared with the prior year, reflecting lower intangibles amortization expense of $134 (including $102 of backlog amortization related to the Test & Measurement acquisition) and lower restructuring expense of $100, partially offset by higher acquisition/divestiture fees and related costs. The prior year included a divestiture loss of $39.

Pretax earnings from continuing operations of $2,138 increased $797 compared with prior year. Earnings increased $96 in Intelligent Devices and increased $421 in Software and Control. See the Business Segments discussion that follows and Note 15.

Income taxes were $536 in the first nine of months of fiscal 2025 and $266 in 2024, resulting in effective tax rates of 25 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. In total, the net impact of these items increased the rate by approximately 3 percentage points. The prior year rate included a $57 ($0.10 per share) benefit related to discrete tax items and a benefit from return-to-provision adjustments related to the filing of the prior year U.S. tax return, partially offset by unfavorable impacts from inventory step-up amortization and the loss on divestiture (see Note 4), which was nondeductible for tax purposes. In total, the net impact of these items benefited the rate by approximately 2 percentage points, which was partially offset by other individually immaterial items.

Earnings from continuing operations attributable to common stockholders were $1,650, up 56 percent compared with the prior year, and diluted earnings per share from continuing operations were $2.91, up 58 percent compared with $1.84 in 2024. Adjusted diluted earnings per share from continuing operations were $4.38 compared with $4.01 in the prior year, up 9 percent. See the analysis below of adjusted earnings per share for further details.

Earnings (Loss) from discontinued operations were $7 ($0.01 per share) compared to $(88) ($(0.15) per share) in the prior year. See Note 5.

Net earnings common stockholders were $1,657 ($2.92 per share) compared with $972 ($1.69 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.

Nine Months Ended June 30,20242025
Diluted earnings from continuing operations per share$1.842.91
Amortization of intangibles1.071.00
Restructuring and related costs0.250.12
Discrete taxes(0.10)0.09
Amortization of acquisition-related inventory step-up0.38—
Acquisition/divestiture fees and related costs0.220.26
Loss on divestiture of business0.07—
Gain on subordinated interest(0.10)—
Loss on Copeland note receivable0.38—
Adjusted diluted earnings from continuing operations per share$4.014.38

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 Condition sections below.

Nine Months Ended
Adjusted diluted earnings from continuing operations per share - June 30, 2024$4.01
Operations0.45
Foreign currency(0.03)
Pensions(0.06)
Other0.01
Adjusted diluted earnings from continuing operations per share - June 30, 2025$4.38

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.

Nine Months Ended June 30,20242025Change
Earnings from continuing operations before income taxes$1,3412,13859%
Percent of sales10.4%16.2%5.8 pts
Interest expense, net157145
Interest income from related party(86)—
Amortization of intangibles958826
Restructuring and related costs18081
Acquisition/divestiture fees and related costs171232
Loss on divestiture of business39—
Amortization of acquisition-related inventory step-up231—
Gain on subordinated interest(79)—
Loss on Copeland note receivable279—
Adjusted EBITA from continuing operations$3,1913,4227%
Percent of sales24.8%26.0%1.2 pts

Business Segments

Following is an analysis of operating results for the Company’s business segments for the nine months ended June 30, 2025, compared with the nine months ended June 30, 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$3,0373,1654%—%—%4%
Measurement & Analytical2,9422,9922%—%—%2%
Discrete Automation1,8631,844(1)%—%—%(1)%
Safety & Productivity1,038996(4)%—%—%(4)%
Total$8,8808,9971%—%—%1%
Earnings:
Final Control$7067709%
Measurement & Analytical7617965%
Discrete Automation3223333%
Safety & Productivity230216(6)%
Total$2,0192,1155%
Margin22.7%23.5%0.8 pts
Amortization of intangibles:
Final Control$6564
Measurement & Analytical4333
Discrete Automation2624
Safety & Productivity1920
Total$153141
Restructuring and related costs:
Final Control$56
Measurement & Analytical75
Discrete Automation3317
Safety & Productivity21
Total$4729
Adjusted EBITA$2,2192,2853%
Adjusted EBITA Margin25.0%25.4%0.4 pts

Intelligent Devices sales were $9.0 billion in the first nine months of 2025, an increase of $117, or 1 percent. Underlying sales increased 1 percent on higher price. Underlying sales increased 4 percent in the Americas, Europe decreased 4 percent, and Asia, Middle East & Africa was up 2 percent (China down 4 percent). Final Control sales increased $128, or 4 percent, reflecting strength in power end markets. Sales for Measurement & Analytical increased $50, or 2 percent, reflecting mixed geographic results and difficult comparisons. Discrete Automation sales decreased $19, or 1 percent, reflecting softness in Europe and Asia, Middle East & Africa, partially offset by moderate growth in the Americas. Safety & Productivity sales decreased $42, or 4 percent, reflecting softness in all geographies. Earnings for Intelligent Devices were $2,115, an increase of $96, or 5 percent, and margin increased 0.8 percentage points to 23.5 percent, reflecting favorable price less net material inflation. Adjusted EBITA margin was 25.4 percent, an increase of 0.4 percentage points.

SOFTWARE AND CONTROL

20242025ChangeFXAcq/DivU/L
Sales:
Control Systems & Software$2,9403,1387%—%—%7%
Test & Measurement1,1041,079(2)%—%—%(2)%
Total$4,0444,2174%—%—%4%
Earnings:
Control Systems & Software$47471350%
Test & Measurement(245)(63)74%
Total$229650184%
Margin5.7%15.4%9.7 pts
Amortization of intangibles:
Control Systems & Software$386367
Test & Measurement419318
Total$805685
Restructuring and related costs:
Control Systems & Software$816
Test & Measurement815
Total$8921
Adjusted EBITA$1,1231,35621%
Adjusted EBITA Margin27.8%32.2%4.4 pts

Software and Control sales were $4,217 in the first nine months of 2025, an increase of $173, or 4 percent compared to the prior year. Underlying sales were up 4 percent on 2 percent higher volume and 2 percent higher price. Underlying sales increased 7 percent in the Americas and 6 percent in Asia, Middle East & Africa (China down 6 percent), while Europe decreased 3 percent. Control Systems & Software sales increased $198, or 7 percent, reflecting robust growth at AspenTech and favorable demand in process and power end markets across all geographies. Test & Measurement sales decreased $25, or 2 percent, reflecting softness in Europe partially offset by modest growth in the Americas. Earnings for Software and Control increased $421, up 184 percent, and margin increased 9.7 percentage points, reflecting leverage on higher Control Systems & Software sales, higher price, savings from cost reduction actions (primarily at Test & Measurement), lower intangibles amortization, and lower restructuring and related costs compared to the prior year. Adjusted EBITA margin increased 4.4 percentage points.

FINANCIAL CONDITION

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

June 30, 2024Sept 30, 2024June 30, 2025
Operating working capital$1,921$1,394$2,074
Current ratio1.21.80.8
Total debt-to-total capital32.7%26.2%41.7%
Net debt-to-net capital27.3%15.9%37.7%
Interest coverage ratio8.5X7.2X9.6X

The change in operating working capital compared to September 30, 2024 was due to the payment of income taxes of approximately $585 in the second quarter of fiscal 2025 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 9.6X for the 12 months ended June 30, 2025 compares to 8.5X for the 12 months ended June 30, 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 $5.4 billion at June 30, 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 compared to its historical levels, 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 nine months of fiscal 2025 was $2,664, an increase of $420 compared with $2,244 in the prior year, reflecting higher earnings and favorable changes in working capital. Free cash flow from continuing operations of $2,401 in the first nine months of fiscal 2025 (operating cash flow of $2,664 less capital expenditures of $263) increased $408 compared to free cash flow of $1,993 in 2024 (operating cash flow of $2,244 less capital expenditures of $251), reflecting the increase in operating cash flow. Cash used in investing activities from continuing operations was $393. Cash used by financing activities from continuing operations was $3,019, 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, and the repayment of $500 of 3.15% notes that matured, partially offset by the increase in short and long-term debt discussed above.

Total cash provided by operating activities was $2,088 including the impact of discontinued operations, and decreased $160 compared with $2,248 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 designed 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 $43 billion and common stockholders' equity of $20 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

For fiscal year 2025, consolidated net sales from continuing operations are expected to be up approximately 3.5 percent, with underlying sales also up approximately 3.5 percent. Earnings per share are expected to be approximately $4.08, while adjusted earnings per share are expected to be approximately $6.00 (see the following reconciliation).

Outlook for Fiscal 2025 Earnings Per Share2025
Diluted earnings from continuing operations per share$4.08
Amortization of intangibles~ 1.34
Restructuring and related costs~ 0.22
Acquisition/divestiture fees and related costs~ 0.27
Discrete taxes~ 0.09
Adjusted diluted earnings from continuing operations per share$6.00

Operating cash flow is expected to be approximately $3.6 billion and free cash flow, which excludes projected capital spending of approximately $0.4 billion, is expected to be approximately $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 represent management’s expectations, based on currently available information. Actual results, performance or achievements could differ materially from those expressed in any forward-looking statement. Any forward-looking statements in this report speak only as of the date of this report. Emerson undertakes no obligation to update any such statements to reflect new information or later developments. Examples of risks and uncertainties that may cause or actual results or performance to be materially different from those expressed or implied by forward looking statements 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, 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 June 30, 2025 and in subsequent reports filed with the SEC, which are hereby incorporated by reference. The outlook contained herein represents the Company's expectation for its consolidated results, other than as noted herein.

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