EMERSON ELECTRIC CO

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

Consolidated Statements of Comprehensive Income

Consolidated Balance Sheets

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

Consolidated Statements of Equity

Consolidated Statements of Cash Flows

Six Months Ended March 31, 2023 and 2024

Notes to Consolidated Financial Statements

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

(1)BASIS OF PRESENTATION

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

(2)REVENUE RECOGNITION

Emerson is a global manufacturer that designs and manufactures products and delivers services that bring technology and engineering together to provide innovative solutions for its customers. The majority of the Company's revenues relate to a broad offering of manufactured products and software which are recognized at the point in time when control transfers, while a smaller portion is recognized over time or relates to sales arrangements with multiple performance obligations. See Note 14 for additional information about the Company's revenues.

The following table summarizes the balances of the Company's unbilled receivables (contract assets), which are reported in Other assets (current and noncurrent), and its customer advances (contract liabilities), which are reported in Accrued expenses and Other liabilities.

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

As of March 31, 2024, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately $8.8 billion (of which approximately $1.25 billion was attributable to AspenTech and approximately $500 was attributable to National Instruments). The Company expects to recognize appro ximately 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.

(4)ACQUISITIONS AND DIVESTITURES

National Instruments

On October 11, 2023, the Company completed the acquisition of National Instruments Corporation (“NI”). NI, which provides software-connected automated test and measurement systems that enable enterprises to bring products to market faster and at a lower cost, had revenues of approximately $1.7 billion and pretax earnings of approximately $170 for the 12 months ended September 30, 2023. NI is now referred to as Test & Measurement and reported as a new segment in the Software and Control business group, see Note 14.

The following table summarizes the components of the purchase consideration reflected in the acquisition accounting for NI.

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

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

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

Pro Forma Financial Information

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

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

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

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

Other Transactions

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

In the fourth quarter of fiscal 2023, the Company acquiredtwo businesses, Flexim, which is reported in the Measurement & Analytical segment, and Afag, which is reported in the Discrete Automation segment, for $715, net of cash acquired. The Company recognized goodwill of $423 (none of which is expected to be tax deductible) and other identifiable intangible assets of $323, primarily customer relationships and intellectual property with a weighted-average useful life of approximately 9 years.

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

(5)DISCONTINUED OPERATIONS

On May 31, 2023, the Company completed the sale of a majority stake in its Climate Technologies business (which constitutes the former Climate Technologies segment, excluding Therm-O-Disc which was divested earlier in fiscal 2022) to private equity funds managed by Blackstone in a $14.0 billion transaction. Emerson received upfront, pre-tax cash proceeds of approximately $9.7 billion and a note receivable with a face value of $2.25 billion (which accrues 5 percent interest payable in kind by capitalizing interest), while retaining a 40 percent non-controlling common equity interest in a new standalone joint venture between Emerson and Blackstone. The Climate Technologies business, which includes the Copeland compressor business and the entire portfolio of products and services across all residential and commercial HVAC and refrigeration end-markets, had fiscal 2022 net sales of approximately $5.0 billion and pretax earnings of $1.0 billion. The Company recognized a pretax gain of approximately $10.6 billion in the third quarter of fiscal 2023 (approximately $8.4 billion after-tax including tax expense recognized prior to the completion of the transaction related to subsidiary restructurings). The new standalone business is named Copeland. See Note 10 for further details.

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

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

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

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

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

(6)PENSION & POSTRETIREMENT PLANS

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

(7)OTHER DEDUCTIONS, NET

Other deductions, net are summarized below:

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

(8)RESTRUCTURING COSTS

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

Restructuring expense by business segment follows:

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

Details of the change in the liability for restructuring costs during the six months ended March 31, 2024 follow:

The tables above do not include $7 and $3 of costs related to restructuring actions incurred for the three months ended March 31, 2023 and 2024, respectively, that are required to be reported in cost of sales and selling, general and administrative expenses; year-to-date amounts are $12 and $7, respectively.

(9)TAXES

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

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

(10)EQUITY METHOD INVESTMENT AND NOTE RECEIVABLE

As discussed in Note 5, the Company completed the divestiture of a majority stake in Copeland on May 31, 2023, and received upfront, pre-tax cash proceeds of approximately $9.7 billion and a note receivable with a face value of $2.25 billion, while retaining a 40 percent non-controlling common equity interest in Copeland.

The Company records its share of Copeland's income or loss using the equity method of accounting. For the three and six months ended March 31, 2024 the Company recorded a loss of $59 and$95, respectively, in Other deductions to reflect its share of Copeland's losses and a tax benefit of $13 and$22, respectively, in Income taxes related to Copeland's U.S. business, which is taxed as a partnership (in total, a loss of $0.08 and$0.12 per share, respectively). The Company recognized non-cash interest income on the note receivable of $31 and $62 for the three and six months ended March 31, 2024, respectively, which is reported in Interest income from related party and capitalized to the carrying value of the note.

As of March 31, 2024, the carrying values of the retained equity investment and note receivable were $1,036 and $2,155, respectively.

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

(11)OTHER FINANCIAL INFORMATION

Other intangible assets include customer relationships, net, of $3,353 and $6,501 and intellectual property, net, of $2,707 and $4,247 as of September 30, 2023 and March 31, 2024, respectively.

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

Amortization of intangibles included $141 and $280 related to the NI acquisition for the three and six months ended March 31, 2024.

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

(12)FINANCIAL INSTRUMENTS

Hedging Activities – As of March 31, 2024, the notional amount of foreign currency hedge positions was approximately $3.2 billion. All derivatives receiving hedge accounting are cash flow hedges. The majority of hedging gains and losses deferred as of March 31, 2024 are expected to be recognized over the next 12 months as the underlying forecasted transactions occur. Gains and losses on foreign currency derivatives reported in Other deductions, net reflect hedges of balance sheet exposures that do not receive hedge accounting.

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

The following gains and losses are included in earnings and other comprehensive income (OCI) for the three and six months ended March 31, 2023 and 2024:

Regardless of whether derivatives and non-derivative financial instruments receive hedge accounting, the Company expects hedging gains or losses to be offset by losses or gains on the related underlying exposures. The amounts ultimately recognized will differ from those presented above for open positions, which remain subject to ongoing market price fluctuations until settlement. Derivatives receiving hedge accounting are highly effective and no amounts were excluded from the assessment of hedge effectiveness.

Fair Value Measurement – Valuations for all derivatives, the Company's note receivable from Copeland, and the Company's long-term debt fall within Level 2 of the GAAP valuation hierarchy. The fair value of the note receivable as of March 31, 2024 was approximately $2.0 billion, which was lower than the carrying value by approximately $100. See Note 10 for further details. As of March 31, 2024, the fair value of long-term debt was approximately $7.2 billion, which was lower than the carrying value by $963. The fair value of foreign currency contracts, which are reported in Other current assets and Accrued expenses, did not materially change since September 30, 2023. Commodity contracts related to discontinued operations and were novated to Copeland upon the completion of the transaction.

Counterparties to derivatives arran gements 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 andnone was held by the Company as of March 31, 2024.

(13)ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

(14)BUSINESS SEGMENTS

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

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

Stock compensation for the three months and six months ended March 31, 2024 included $14 and $44 of integration-related stock compensation expense attributable to NI (of which $10 and $36, respectively, was reported as restructuring costs). Corporate and other for the three and six months ended March 31, 2024 included acquisition/divestiture fees and related costs of $16 and $146, respectively, anda divestiture loss of $39, while year-to-date also includes acquisition-related inventory step-up amortization of $231. Corporate and other for the six months ended March 31, 2023 included a loss of $47 related to the Company's exit of business operations in Russia and a mark-to-market gain of $35 related to its equity investment in National Instruments Corporation.

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

Test & Measurement depreciation and amortization for the three and six months ended March 31, 2024 included intangibles amortization of $141 and $280 due to the acquisition.

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

Items 2 and 3.