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

Three Months Ended December 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, 2024.

Certain prior year amounts have been reclassified to conform to the current year presentation. 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 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 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. Revenue recognized for the three months ended December 31, 2024 included $422 that was included in the beginning contract liability balance. Other factors that impacted the change in net contract assets were immaterial. Revenue recognized for the three months ended December 31, 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 December 31, 2024, the Company's backlog relating to unsatisfied (or partially unsatisfied) performance obligations in contracts with its customers was approximately $8.5 billion (of which $1.25 billion was attributable to AspenTech). 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 followingtwo years.

(3)COMMON SHARES

Reconciliations of weighted-average shares for basic and diluted earnings per common share follow. Diluted earnings per share are calculated using the two-class method. 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 segment in the Software and Control business group, see Note 14.

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

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).

The proforma results for the three months ended December 31, 2023 exclude transaction costs of $69 which were assumed to be incurred in the first quarter of fiscal 2023. The proforma results for the three months ended December 31, 2023 also exclude backlog amortization of $34, inventory step-up amortization of $213, and retention bonuses of $43 which were all assumed to be incurred in the first quarter of fiscal 2023.

Other Transactions

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.

(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 months ended December 31, 2023 were as follows:

Results for the three months ended December 31, 2023 included equity method losses of $36 ($27 after-tax) related to the Company's non-controlling common equity interest in Copeland.

Net cash from operating and investing activities from discontinued operations for the three months ended December 31, 2023 were as follows:

(6)PENSION & POSTRETIREMENT PLANS

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

(7)OTHER DEDUCTIONS, NET

Other deductions, net are summarized below:

In the first quarter of fiscal 2025, the decrease in intangibles amortization was largely due to backlog amortization of$34 in the prior year related to the NI acquisition. Other is composed of several items, including pension expense, litigation costs, provision for bad debt and other items, none of which is individually significant.

(8)RESTRUCTURING COSTS

Restructuring expense reflects costs associated with the Company’s ongoing efforts to improve operational efficiency and deploy assets globally in order to remain competitive on a worldwide basis. The Company expects fiscal 2025 restructuring expense and related costs to be approximately$110, including costs to complete actions initiated in the first three months of the year.

Restructuring expense by business segment follows:

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

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

The tables above do not include $2 and $4 of costs related to restructuring actions incurred for the three months ended December 31, 2024 and 2023, respectively, that are required to be reported in selling, general and administrative expenses.

(9)TAXES

Income taxes were $182 in the first quarter of fiscal 2025 and $16 in 2024, resulting in effective tax rates of 24 percent and 9 percent, respectively. The prior year rate included a $57 ($0.10 per share) benefit related to discrete tax items and the impact of inventory step-up amortization, which in total had a 12 percentage point impact on the rate.

(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 months ended December 31, 2023 the Company recognized non-cash interest income on the note receivable of $31, which is reported in Interest income from related party within continuing operations.

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

(11)OTHER FINANCIAL INFORMATION

Other intangible assets include customer relationships, net, of $6,029 and $6,296 and intellectual property, net, of $3,751 and $3,901 as of December 31, 2024 and September 30, 2024, respectively.

(12)FINANCIAL INSTRUMENTS

Hedging Activities – As of December 31, 2024, the notional amount of foreign currency hedge positions was approximately $3.4 billion. All derivatives receiving hedge accounting are cash flow hedges. The majority of hedging gains and losses deferred as of December 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, of which €500 was repaid in 2024. 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. Cash flows related to the euro-denominated debt are classified within financing cash flows.

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

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 December 31, 2024, the fair value of long-term debt was approximately $6.7 billion, which was lower than the carrying value by $932. 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 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 December 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 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 ended December 31, 2023 included $30 of integration-related stock compensation expense attributable to NI ($26 of which was reported as restructuring costs). Corporate and other for the three months ended December 31, 2024 included acquisition/divestiture fees and related costs of $22 compared to $130 in 2023, while 2023 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:

The decrease in Test & Measurement depreciation and amortization for the three months ended December 31, 2024 compared to the three months ended December 31, 2023 was due to backlog amortization of $34 in the prior year.

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

(15)SUBSEQUENT EVENTS

On January 27, 2025, the Company announced that it reached an agreement with AspenTech under which Emerson will acquire all outstanding shares of common stock of AspenTech not already owned by Emerson for $265 per share pursuant to an all-cash tender offer. The Company currently owns approximately 57 percent of AspenTech's outstanding shares of common stock. The transaction values the minority stake being acquired at $7.2 billion, and the Company expects to finance the transaction from cash on hand and debt financing. The transaction is expected to close in the first half of calendar year 2025, and upon closing, AspenTech will become a wholly owned subsidiary of Emerson.

Items 2 and 3.