EMERSON ELECTRIC CO (EMR)

CIK: 0000032604. SIC: 3600 Electronic & Other Electrical Equipment (No Computer Equip). Latest 10-K as of: 2025-11-10.

SIC breadcrumb: Manufacturing > Electronic And Other Electrical Equipment And Components, Except Computer Equipment > SIC 3600 Electronic & Other Electrical Equipment (No Computer Equip)

SEC company page: https://www.sec.gov/edgar/browse/?CIK=32604. Latest filing source: 0000032604-25-000087.

Selected Fundamentals

Metric	Value	Unit	FY	Filed
Revenue	18,016,000,000	USD	2025	2025-11-10
Net income	2,293,000,000	USD	2025	2025-11-10
Assets	41,964,000,000	USD	2025	2025-11-10

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2025-11-10. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000032604.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Metric	2016	2017	2018	2019	2020	2021	2022	2023	2024	2025
Revenue		15,264,000,000	17,408,000,000	18,372,000,000	16,785,000,000	12,932,000,000	13,804,000,000	15,165,000,000	17,492,000,000	18,016,000,000
Net income	1,635,000,000	1,518,000,000	2,203,000,000	2,306,000,000	1,965,000,000	2,303,000,000	3,231,000,000	13,219,000,000	1,968,000,000	2,293,000,000
Gross profit	6,262,000,000	6,404,000,000	7,432,000,000	7,815,000,000	7,009,000,000	7,563,000,000	6,306,000,000	7,427,000,000	8,885,000,000	9,519,000,000
Diluted EPS	2.52	2.35	3.46	3.71	3.24	3.82	5.41	22.88	3.43	4.04
Assets	21,732,000,000	19,589,000,000	20,390,000,000	20,497,000,000	22,882,000,000	24,715,000,000	35,672,000,000	42,746,000,000	44,246,000,000	41,964,000,000
Stockholders' equity	7,568,000,000	8,718,000,000	8,947,000,000	8,233,000,000	8,405,000,000	9,883,000,000	10,364,000,000	20,689,000,000	21,636,000,000	20,282,000,000
Net margin		9.94%	12.66%	12.55%	11.71%	17.81%	23.41%	87.17%	11.25%	12.73%

Financial Charts

Macro Cross-References

CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
UNRATE - Unemployment Rate
FEDFUNDS - Federal Funds Effective Rate
CES0500000003 - Average Hourly Earnings of All Employees, Total Private
DFEDTARU - Federal Funds Target Range - Upper Limit
DFEDTARL - Federal Funds Target Range - Lower Limit
DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
PCEPI - Personal Consumption Expenditures: Chain-type Price Index
PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
PPIACO - Producer Price Index by Commodity: All Commodities
T10YIE - 10-Year Breakeven Inflation Rate
U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
PAYEMS - All Employees, Total Nonfarm
CIVPART - Labor Force Participation Rate
EMRATIO - Employment-Population Ratio
UNEMPLOY - Unemployed
CE16OV - Employment Level
ICSA - Initial Claims
JTSJOL - Job Openings: Total Nonfarm
JTSQUR - Quits: Total Nonfarm
GDPC1 - Real Gross Domestic Product
A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
INDPRO - Industrial Production: Total Index
TCU - Capacity Utilization: Total Index
HOUST - New Privately-Owned Housing Units Started: Total Units
PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
RSAFS - Advance Retail Sales: Retail Trade
PCE - Personal Consumption Expenditures
DSPIC96 - Real Disposable Personal Income
PSAVERT - Personal Saving Rate
M2SL - M2
BOPGSTB - U.S. International Trade in Goods and Services: Balance

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2025-11-10. Report date: 2025-09-30.

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Safe Harbor Statement

This Annual Report on Form 10-K contains various forward-looking statements and includes assumptions concerning Emerson's operations, future results and prospects. These forward-looking statements are based on current expectations and are subject to risks and uncertainties. Emerson undertakes no obligation to update any such statements to reflect later developments. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, Emerson provides the cautionary statements set forth under Item 1A - “Risk Factors,” which are hereby incorporated by reference and identify important economic, political and technological factors, among others, changes in which could cause the actual results or events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions.

Non-GAAP Financial Measures

To supplement the Company’s financial information presented in accordance with U.S. generally accepted accounting principles (U.S. GAAP), management periodically uses certain “non-GAAP financial measures,” as such term is defined in Regulation G under SEC rules, to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. For example, non-GAAP measures may exclude the impact of certain items such as acquisitions or divestitures, amortization of intangibles, restructuring costs, discrete taxes, gains, losses and impairments, or items outside of management’s control, such as foreign currency exchange rate fluctuations. Management believes that the following non-GAAP financial measures provide investors and analysts useful insight into the Company’s financial position and operating performance. Any non-GAAP measure provided should be viewed in addition to, and not as an alternative to, the most directly comparable measure determined in accordance with U.S. GAAP, as identified in italics below. Further, the calculation of these non-GAAP financial measures may differ from the calculation of similarly titled financial measures presented by other companies and therefore may not be comparable among companies.

Underlying sales, which exclude the impact of significant acquisitions, divestitures and fluctuations in foreign currency exchange rates during the periods presented, are provided to facilitate relevant period-to-period comparisons of sales growth by excluding those items that impact overall comparability (U.S. GAAP measure: net sales).

Operating profit (defined as net sales less cost of sales and selling, general and administrative expenses) and operating profit margin (defined as operating profit divided by net sales) are indicative of short-term operational performance and ongoing profitability. Management closely monitors operating profit and operating profit margin of each business to evaluate past performance and actions required to improve profitability. EBIT (defined as earnings before deductions for interest expense, net, related party interest income, and income taxes) and total segment EBIT, and EBIT margin (defined as EBIT divided by net sales) and total segment EBIT margin, are financial measures that exclude the impact of financing on the capital structure and income taxes. Adjusted EBITA and adjusted segment EBITA (defined as earnings excluding interest expense, net, related party interest income, income taxes, intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments) and adjusted EBITA margin and adjusted segment EBITA margin (defined as adjusted EBITA divided by net sales) are measures used by management to evaluate the Company's operational performance, as they exclude the impact of acquisition-related investments and non-operational items. EBITDA (defined as EBIT excluding depreciation and amortization) and EBITDA margin (defined as EBITDA divided by net sales) are also used as measures of the Company's current operating performance, as they exclude the impact of capital and acquisition-related investments. Adjusted EBITDA (defined as EBITDA excluding restructuring expense, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments) and adjusted EBITDA margin (defined as Adjusted EBITDA divided by net sales) are also used to exclude the impact of non-operational items. All of these are commonly used financial measures

utilized by management to evaluate performance (U.S. GAAP measures: pretax earnings or pretax profit margin, segment earnings or segment margin).

Adjusted earnings and earnings per share, which exclude certain gains and losses, impairments, restructuring costs, impacts of acquisitions or divestitures, amortization of intangibles, discrete taxes, or other items provide additional insight into the underlying, ongoing operating performance of the Company and facilitate period-to-period comparisons by excluding the earnings impact of these items. Management believes that presenting adjusted earnings and earnings per share excluding these items is more representative of the Company’s operational performance and may be more useful for investors (U.S. GAAP measures: earnings, earnings per share).

Free cash flow (operating cash flow less capital expenditures) and free cash flow as a percent of net sales are indicators of the Company’s cash generating capabilities, and dividends as a percent of free cash flow is an indicator of the Company's ability to support its dividend, after considering investments in capital assets which are necessary to maintain and enhance existing operations. The determination of operating cash flow adds back noncash depreciation expense to earnings and thereby does not reflect a charge for necessary capital expenditures. Management believes that free cash flow, free cash flow as a percent of net sales and dividends as a percent of free cash flow are useful to both management and investors as measures of the Company’s ability to generate cash and support its dividend (U.S. GAAP measures: operating cash flow, operating cash flow as a percent of net sales, dividends as a percent of operating cash flow).

FINANCIAL REVIEW

Report of Management

The Company's management is responsible for the integrity and accuracy of the financial statements. Management believes that the financial statements for each of the years in the three-year period ended September 30, 2025 have been prepared in conformity with U.S. generally accepted accounting principles appropriate in the circumstances. In preparing the financial statements, management makes informed judgments and estimates where necessary to reflect the expected effects of events and transactions that have not been completed. The Company's disclosure controls and procedures ensure that material information required to be disclosed is recorded, processed, summarized and communicated to management and reported within the required time periods.

In meeting its responsibility for the reliability of the financial statements, management relies on a system of internal accounting controls. This system is designed to provide reasonable assurance that assets are safeguarded and transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with U.S. generally accepted accounting principles. Although the design of this system recognizes that errors or irregularities may occur, management believes that the Company's internal accounting controls provide reasonable assurance that errors or irregularities that could be material to the financial statements are prevented or would be detected within a timely period.

The Audit Committee of the Board of Directors, which is composed solely of independent directors, is responsible for overseeing the Company's financial reporting process. The Audit Committee meets with management and the Company's internal auditors periodically to review the work of each and to monitor the discharge by each of its responsibilities. The Audit Committee also meets periodically with the independent auditors, who have free access to the Audit Committee and the Board of Directors, to discuss the quality and acceptability of the Company's financial reporting and internal controls, as well as nonaudit-related services.

The independent auditors are engaged to express an opinion on the Company's consolidated financial statements and on the Company's internal control over financial reporting. Their opinions are based on procedures that they believe to be sufficient to provide reasonable assurance that the financial statements contain no material errors and that the Company's internal controls are effective.

Management's Report on Internal Control Over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. With the participation of the Chief Executive Officer and the Chief Financial Officer, management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework and the criteria established in Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that internal control over financial reporting was effective as of September 30, 2025.

The Company's auditor, KPMG LLP, an independent registered public accounting firm, has issued an audit report on the effectiveness of the Company's internal control over financial reporting.

/s/ S. L. Karsanbhai

/s/ Michael J. Baughman

S. L. Karsanbhai

Michael J. Baughman

President

Executive Vice President

and Chief Executive Officer

and Chief Financial Officer

Results of Operations

Years ended September 30

(Dollars in Item 7 are in millions, except per share amounts or where noted)

2023

2024

2025

24 vs. 23

25 vs. 24

Net sales

15,165

17,492

18,016

Gross profit

7,427

8,885

9,519

Percent of sales

49.0

50.8

52.8

1.8 pts

2.0 pts

SG&A

4,186

5,142

5,103

Percent of sales

27.6

29.4

28.3

1.8 pts

(1.1) pts

Loss on Copeland note receivable

—

279

—

Gain on subordinated interest

(161)

(79)

—

Other deductions, net

506

1,434

1,245

Amortization of intangibles

482

1,077

884

Restructuring costs

228

136

Interest expense, net

175

237

Interest income from related party

(41)

(86)

—

Earnings from continuing operations before income taxes

2,903

2,020

2,934

(30)

Percent of sales

19.1

11.5

16.3

(7.6) pts

4.8 pts

Earnings from continuing operations common stockholders

2,286

1,618

2,285

(29)

Percent of sales

15.1

9.2

12.7

(5.9) pts

3.5 pts

Net earnings common stockholders

13,219

1,968

2,293

(85)

Percent of sales

87.2

11.2

12.7

(76.0) pts

1.5 pts

Diluted EPS – Earnings from continuing operations

3.96

2.82

4.03

(29)

Diluted EPS – Net earnings

22.88

3.43

4.04

(85)

Adjusted Diluted EPS – Earnings from continuing operations

4.44

5.49

6.00

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 20.

On October 11, 2023, the Company completed the acquisition of National Instruments Corporation ("NI"), which is now referred to as Test & Measurement and reported as a segment in the Software and Control business group. NI provides software-connected automated test and measurement systems that enable enterprises to bring products to market faster and at a lower cost, and had revenues of approximately $1.7 billion for the 12 months ended September 30, 2023. See Note 4.

Overall, in 2025 sales were $18.0 billion, up 3 percent compared with the prior year. Underlying sales, which exclude foreign currency translation, acquisitions and divestitures, were also up 3 percent.

Net earnings from continuing operations attributable to common stockholders were $2,285 in 2025, up 41 percent compared with prior year earnings of $1,618, and diluted earnings per share from continuing operations were $4.03, up 43 percent versus $2.82 in 2024. The prior year included purchase accounting related impacts from the NI acquisition and higher associated restructuring charges, and 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. Adjusted diluted earnings per share from continuing operations were $6.00 compared with $5.49 in the prior year, reflecting sales growth and strong operating performance.

The Company generated operating cash flow from continuing operations of $3.7 billion in 2025, an increase of $359, or 11 percent, reflecting higher earnings and favorable changes in working capital.

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, interest income on undeployed proceeds related to the Copeland transaction, and certain gains, losses or impairments.

2023

2024

2025

Diluted earnings from continuing operations per share

3.96

2.82

4.03

Amortization of intangibles

0.62

1.43

1.35

Restructuring and related costs

0.14

0.33

0.23

Acquisition/divestiture fees and related costs

0.13

0.26

0.33

Discrete taxes

—

(0.10)

0.06

Amortization of acquisition-related inventory step-up

—

0.38

—

Loss on Copeland note receivable

—

0.38

—

Loss on divestiture of businesses

—

0.09

—

Gain on subordinated interest

(0.21)

(0.10)

—

National Instruments investment gain

(0.07)

—

AspenTech Micromine purchase price hedge

(0.02)

—

Interest income on undeployed proceeds from Copeland transaction

(0.19)

—

Russia business exit charge

0.08

—

Adjusted diluted earnings from continuing operations per share

4.44

5.49

6.00

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

2024

2025

Adjusted diluted earnings from continuing operations per share - prior year

4.44

5.49

Operations

1.06

0.62

Noncontrolling interests

—

0.13

Corporate and other

(0.02)

—

Stock compensation

0.05

(0.02)

Foreign currency

(0.07)

(0.01)

Pensions

—

(0.09)

Effective tax rate

(0.06)

—

Interest expense, net

0.06

(0.20)

Share count

0.03

0.08

Adjusted diluted earnings from continuing operations per share - current year

5.49

6.00

NET SALES

Net sales for 2025 were $18.0 billion, an increase of $0.5 billion, or 3 percent compared with 2024. Intelligent Devices sales increased 2 percent, while Software and Control sales increased 5 percent. Underlying sales were up 3 percent on 2.5 percent higher price and 0.5 percent higher volume. Underlying sales were up 5 percent in the U.S. and up 1 percent internationally.

Net sales for 2024 were $17.5 billion, an increase of $2.3 billion, or 15 percent compared with 2023. Intelligent Devices sales increased 5 percent, while Software and Control sales increased 48 percent, which included the impact of the Test & Measurement acquisition. Underlying sales increased 6 percent on 4 percent higher volume and 2 percent higher price. The Test & Measurement acquisition added 9.5 percent and the divestiture of Metran deducted 0.5 percent. Underlying sales were up 2 percent in the U.S. and up 9 percent internationally.

INTERNATIONAL SALES

Emerson is a global business with international sales representing 59 percent of total sales in 2025, including U.S. exports.

International destination sales, including U.S. exports, increased 1 percent, to $10.6 billion in 2025, reflecting the Company's overall increase in sales. U.S. exports of $1.4 billion were up 5 percent compared with 2024. Underlying international destination sales were up 1 percent. Underlying sales increased 3 percent in Asia, Middle East & Africa (China down 4 percent) and 7 percent in Canada, while Europe decreased 2 percent and Latin America was flat. Origin sales by international subsidiaries, including shipments to the U.S., totaled $9.4 billion in 2025, up 1 percent compared with 2024.

International destination sales, including U.S. exports, increased 18 percent, to $10.5 billion in 2024, reflecting the Company's overall increase in sales and the impact of the Test & Measurement acquisition. U.S. exports of $1.3 billion were up 26 percent compared with 2023. Underlying international destination sales were up 9 percent and the Test & Measurement acquisition added 9 percent. Underlying sales increased 7 percent in Europe, 8 percent in Asia, Middle East & Africa (China down 3 percent), 21 percent in Latin America and 5 percent in Canada. Origin sales by international subsidiaries, including shipments to the U.S., totaled $9.3 billion in 2024, up 20 percent compared with 2023.

ACQUISITIONS AND DIVESTITURES

Portfolio management is an integral component of Emerson's growth and value creation strategy. Over the past three years, the Company has taken significant actions to accelerate the transformation of its portfolio through the completion of strategic acquisitions and divestitures of non-core businesses. These actions were undertaken to create a cohesive, higher growth and higher margin industrial technology portfolio as a global automation leader serving a diversified set of end markets. The Company’s recent portfolio actions include the following transactions:

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 20.

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.

On October 11, 2023, the Company completed the acquisition of National Instruments Corporation ("NI") at an equity value of $8.2 billion. 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.

In 2023, the Company acquired two businesses, Flexim, which is reported in the Measurement & Analytical segment, and Afag, which is reported in the Discrete Automation segment, for $715, net of cash acquired.

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 2022) to private equity funds managed by Blackstone in a $14.0 billion transaction. The Company recognized a pretax gain of approximately $10.6 billion (approximately $8.4 billion after-tax including tax expense recognized in prior quarters related to subsidiary restructurings). The standalone business is named Copeland.

Subsequently, 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 completed in August 2024.

On March 31, 2023, Emerson completed the divestiture of Metran, its Russia-based manufacturing subsidiary and in 2023, 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. Emerson's historical net sales in Russia represented approximately 2.0 percent of consolidated annual sales.

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, and the Company recognized a pretax gain of approximately $2.8 billion (approximately $2.1 billion after-tax) in 2023.

See Notes 4, 5 and 8 and Item 1A - "Risk Factors" for further information on acquisitions and divestitures.

COST OF SALES

Cost of sales for 2025 were $8,497, a decrease of $110 compared with $8,607 in 2024. Gross profit was $9,519 in 2025 compared to $8,885 in 2024, while gross margin increased 2.0 percentage points to 52.8 percent. The prior year reflected the impact from acquisition-related inventory step-up amortization of $231, which negatively impacted margins by approximately 1.3 percentage points. Favorable price less net material inflation also contributed to the increase in gross margin.

Cost of sales for 2024 were $8,607, an increase of $869 compared with $7,738 in 2023, reflecting the impact of higher volume and the Test & Measurement acquisition. Gross profit was $8,885 in 2024 compared to $7,427 in 2023, while gross margin increased 1.8 percentage points to 50.8 percent, reflecting the Test & Measurement acquisition and higher price partially offset by the impact from acquisition-related inventory step-up amortization of $231, which negatively impacted margins by approximately 1.3 percentage points.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses of $5,103 in 2025 decreased $39 compared with 2024 and SG&A as a percent of sales decreased 1.1 percentage points to 28.3 percent, reflecting savings from cost reduction actions (primarily at Test & Measurement and AspenTech).

SG&A expenses of $5,142 in 2024 increased $956 compared with 2023 and SG&A as a percent of sales increased 1.8 percentage points to 29.4 percent, reflecting the impact of the Test & Measurement acquisition, partially offset by strong operating leverage on higher sales.

SALE OF COPELAND NOTE RECEIVABLE AND EQUITY INTEREST

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. Upon entering into the note agreement, the Company recorded a pretax loss in continuing operations 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, while the Company recognized a gain of $539 ($435 after-tax) in discontinued operations upon the sale of the common equity interest.

GAIN ON SUBORDINATED INTEREST

In 2023, the Company received distributions related to its subordinated interest in Vertiv totaling $161 ($122 after-tax, $0.21 per share) and received $15 related to gains recognized in 2022. In 2024, the Company received its final distribution of $79 ($60 after-tax, $0.10 per share).

OTHER DEDUCTIONS, NET

Other deductions, net were $1,245 in 2025, a decrease of $189 compared with 2024, reflecting lower intangibles amortization of $193 (including $136 of backlog amortization in the prior year related to the Test & Measurement

acquisition) and lower restructuring expense of $92, partially offset by higher acquisition/divestiture fees and related costs which increased by $118. The prior year also included divestiture losses of $48.

Other deductions, net were $1,434 in 2024, an increase of $928 compared with 2023. 2024 included intangibles amortization related to the Test & Measurement acquisition of $560, while restructuring costs increased by $156 and acquisition/divestiture costs increased by $27. The Company also incurred divestiture losses of $48 ($50 after-tax, $0.09 per share).

INTEREST EXPENSE, NET

Interest expense, net was $237, $175 and $34 in 2025, 2024 and 2023, respectively. The increase in 2025 reflects higher levels of debt to support the AspenTech transaction. Results in 2023 included interest income on undeployed proceeds from the Copeland transaction of $141 ($108 after-tax, $0.19 per share).

Interest income from related party was $86 and $41 in 2024 and 2023, respectively and reflects non-cash interest income on the Copeland note receivable, which was capitalized to the carrying value of the note through the date of the sale agreement.

EARNINGS BEFORE INCOME TAXES

Pretax earnings from continuing operations of $2,934 increased $914 in 2025, up 45 percent compared with 2024. Earnings increased $146 in Intelligent Devices and increased $545 in Software and Control.

Pretax earnings from continuing operations of $2,020 decreased $883 in 2024, down 30 percent compared with 2023, which included the impact of acquisition-related inventory step-up amortization, higher amortization due to the Test & Measurement acquisition, and the loss on the Copeland note receivable. Earnings increased $191 in Intelligent Devices and decreased $140 in Software and Control.

INCOME TAXES

Income taxes were $696, $415 and $642 for 2025, 2024 and 2023, respectively, resulting in effective tax rates of 24 percent, 21 percent and 22 percent in 2025, 2024 and 2023, respectively. The current year rate was negatively impacted by discrete tax items totaling $36 ($0.06 per share) and fees incurred by AspenTech which were not fully deductible (see Note 4). In total, the net impact of these items increased the rate by approximately 2 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 divestiture losses (see Note 4), which were non-deductible for tax purposes. In total, the net impact of these items benefited the rate by approximately 1 percentage point. See Note 16.

NET EARNINGS AND EARNINGS PER SHARE

Net earnings from continuing operations attributable to common stockholders in 2025 were $2,285, up 41 percent compared with 2024, and diluted earnings per share from continuing operations were $4.03, up 43 percent compared with $2.82 in 2024. Adjusted diluted earnings per share from continuing operations were $6.00 compared with $5.49 in the prior year. See the analysis of adjusted earnings per share in the Overview section for further details. Earnings from discontinued operations attributable to common stockholders in 2025 were $8 ($0.01 per share), compared to $350 ($0.61 per share) in 2024. Net earnings attributable to common stockholders were $2,293 ($4.04 per share) compared with $1,968 ($3.43 per share) in 2024.

Net earnings from continuing operations attributable to common stockholders in 2024 were $1,618, down 29 percent compared with 2023, and diluted earnings per share from continuing operations were $2.82, down 29 percent compared with $3.96 in 2023, reflecting the impact of acquisition-related inventory step-up amortization, higher amortization due to the Test & Measurement acquisition, and the loss on the Copeland note receivable. Adjusted diluted earnings per share from continuing operations were $5.49 compared with $4.44 in the prior year. See the analysis of adjusted earnings per share in the Overview section for further details. Earnings from discontinued operations attributable to common stockholders in 2024 were $350 ($0.61 per share) and included the gain on the sale of the Company's 40 percent non-controlling common equity interest in Copeland of $539 ($435 after-tax). Earnings from discontinued operations in 2023 were $10,933 ($18.92 per share), which included the $8.4 billion after-tax gain on the Copeland transaction and the $2.1 billion after-tax gain on the divestiture of InSinkErator. See Note 5. Net earnings common stockholders were $1,968 ($3.43 per share) in 2024 compared with $13,219 ($22.88 per share) in 2023.

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.

2023

2024

2025

24 vs. 23

25 vs. 24

Earnings from continuing operations before income taxes

2,903

2,020

2,934

(30)

Percent of sales

19.1

11.5

16.3

(7.6) pts

4.8 pts

Interest expense, net

175

237

Interest income from related party

(41)

(86)

—

Amortization of intangibles

678

1,274

1,083

Restructuring and related costs

244

162

Acquisition/divestiture fees and related costs

220

277

Amortization of acquisition-related inventory step-up

—

231

—

Loss on Copeland note receivable

—

279

—

Loss on divestitures of businesses

—

Gain on subordinated interest

(161)

(79)

—

National Instruments investment gain

(56)

—

AspenTech Micromine purchase price hedge

(24)

—

Russia business exit charge

—

Adjusted EBITA from continuing operations

3,556

4,326

4,693

Percent of sales

23.4

24.7

26.0

1.3 pts

Business Segments

Following is an analysis of segment results for 2025 compared with 2024, and 2024 compared with 2023. The Company defines segment earnings as earnings before interest and income taxes.

INTELLIGENT DEVICES

2024

2025

Change

Acq/Div

U/L

Sales:

Final Control

4,204

4,380

—

Measurement & Analytical

4,061

4,143

—

Discrete Automation

2,506

2,521

—

Safety & Productivity

1,390

1,356

(2)

(1)

—

(3)

Total

12,161

12,400

—

Earnings:

Final Control

977

1,081

Measurement & Analytical

1,056

1,112

Discrete Automation

466

469

Safety & Productivity

308

291

(5)

Total

2,807

2,953

Margin

23.1

23.8

0.7 pts

Amortization of intangibles:

Final Control

Measurement & Analytical

Discrete Automation

Safety & Productivity

Total

202

190

Restructuring and related costs:

Final Control

Measurement & Analytical

Discrete Automation

Safety & Productivity

Total

Adjusted EBITA

3,094

3,212

Adjusted EBITA Margin

25.4

25.9

0.5 pts

2025 vs. 2024 - Intelligent Devices sales were $12.4 billion in 2025, an increase of $239, or 2 percent. Underlying sales increased 2 percent on higher price, while volume was favorable at Final Control and Measurement & Analytical, offset by decreased volume at Discrete Automation and Safety & Productivity. Underlying sales increased 3 percent in the Americas (U.S. up 4 percent), decreased 3 percent in Europe and increased 2 percent in Asia, Middle East & Africa (China down 3 percent). Sales for Final Control increased $176, or 4 percent, reflecting strength in power end markets. Sales for Measurement & Analytical increased $82, or 2 percent, reflecting mixed geographic results and difficult comparisons. Discrete Automation sales increased $15, or 1 percent, reflecting solid growth in the Americas, mostly offset by softness in Europe and Asia, Middle East & Africa. Safety & Productivity sales decreased $34, or 2 percent, reflecting softness in all geographies. Earnings for Intelligent Devices were $2,953, an increase of $146, or 5 percent, and margin increased 0.7 percentage points to 23.8 percent, reflecting favorable price less net material inflation. Adjusted EBITA margin was 25.9 percent, an increase of 0.5 percentage points.

INTELLIGENT DEVICES

2023

2024

Change

Acq/Div

U/L

Sales:

Final Control

3,970

4,204

—

Measurement & Analytical

3,595

4,061

—

Discrete Automation

2,635

2,506

(5)

—

(5)

Safety & Productivity

1,388

1,390

—

Total

11,588

12,161

—

Earnings:

Final Control

865

977

Measurement & Analytical

936

1,056

Discrete Automation

509

466

(9)

Safety & Productivity

306

308

Total

2,616

2,807

Margin

22.6

23.1

0.5 pts

Amortization of intangibles:

Final Control

Measurement & Analytical

Discrete Automation

Safety & Productivity

Total

170

202

Restructuring and related costs:

Final Control

Measurement & Analytical

Discrete Automation

Safety & Productivity

—

Total

Adjusted EBITA

2,854

3,094

Adjusted EBITA Margin

24.6

25.4

0.8 pts

2024 vs. 2023 - Intelligent Devices sales were $12.2 billion in 2024, an increase of $573, or 5 percent. Underlying sales increased 5 percent on 3 percent higher volume and 2 percent higher price. Underlying sales increased 3 percent in the Americas (U.S. up 1 percent), increased 5 percent in Europe and increased 9 percent in Asia, Middle East & Africa (China down 2 percent). Sales for Final Control increased $234, or 6 percent, reflecting strength in energy and power end markets. Sales for Measurement & Analytical increased $466, or 13 percent, reflecting robust growth in all geographies and strong backlog conversion. Discrete Automation sales decreased $129, or 5 percent, reflecting softness in all geographies. Safety & Productivity sales increased $2, essentially flat, reflecting moderate results across all geographies. Earnings for Intelligent Devices were $2,807, an increase of $191, or 7 percent, and margin increased 0.5 percentage points to 23.1 percent, reflecting leverage on higher sales and favorable price less net material inflation, partially offset by increases in other costs. Adjusted EBITA margin was 25.4 percent, an increase of 0.8 percentage points.

SOFTWARE AND CONTROL

2024

2025

Change

Acq/Div

U/L

Sales:

Control Systems & Software

3,935

4,205

—

Test & Measurement

1,464

1,486

(1)

—

Total

5,399

5,691

—

Earnings:

Control Systems & Software

572

895

Test & Measurement

(290)

(68)

Total

282

827

193

Margin

5.2

14.5

9.3 pts

Amortization of intangibles:

Control Systems & Software

512

468

Test & Measurement

560

425

Total

1,072

893

Restructuring and related costs:

Control Systems & Software

Test & Measurement

Total

104

Adjusted EBITA

1,458

1,763

Adjusted EBITA Margin

27.0

31.0

4.0 pts

2025 vs. 2024 - Software and Control sales were $5.7 billion in 2025, an increase of $292, or 5 percent compared to the prior year. Underlying sales increased 5 percent on 2.5 percent higher volume and 2.5 percent higher price. Underlying sales increased 9 percent in the Americas (U.S. up 10 percent), decreased 1 percent in Europe and increased 4 percent in Asia, Middle East & Africa (China down 6 percent). Sales for Control Systems & Software increased $270, or 7 percent, reflecting strong growth at AspenTech (including a favorable impact related to the timing of contract renewals) and favorable demand in process and power end markets across all geographies. Test & Measurement sales increased $22, or 2 percent, reflecting strong growth in the Americas, offset by softness in Europe and China. Earnings for Software and Control were $827, an increase of $545, or 193 percent, and margin increased 9.3 percentage points to 14.5 percent, reflecting leverage on higher Control Systems & Software sales (including a benefit related to the timing of AspenTech contract renewals), higher price, savings from cost reduction actions (primarily at Test & Measurement and AspenTech), lower intangibles amortization, and lower restructuring and related costs compared to the prior year. Adjusted EBITA margin was 31.0 percent, an increase of 4.0 percentage points.

SOFTWARE AND CONTROL

2023

2024

Change

Acq/Div

U/L

Sales:

Control Systems & Software

3,648

3,935

—

Test & Measurement

—

1,464

—

Total

3,648

5,399

—

(40)

Earnings:

Control Systems & Software

422

572

Test & Measurement

—

(290)

Total

422

282

(33)

Margin

11.6

5.2

(6.4) pts

Amortization of intangibles:

Control Systems & Software

508

512

Test & Measurement

—

560

Total

508

1,072

Restructuring and related costs:

Control Systems & Software

Test & Measurement

—

Total

104

Adjusted EBITA

940

1,458

Adjusted EBITA Margin

25.8

27.0

1.2 pts

2024 vs. 2023 - Software and Control sales were $5.4 billion in 2024, an increase of $1,751, or 48 percent compared to 2023, reflecting the impact of the NI acquisition. Underlying sales increased 8 percent on 5 percent higher volume and 3 percent higher price. Underlying sales increased 8 percent in the Americas (U.S. up 7 percent), increased 9 percent in Europe and increased 8 percent in Asia, Middle East & Africa (China down 5 percent). Sales for Control Systems & Software increased $287, or 8 percent, reflecting strong international demand in process and hybrid end markets while power end markets were strong globally. AspenTech sales were up modestly. Test & Measurement sales were $1,464. Earnings for Software and Control were $282, a decrease of $140, or 33 percent, and margin decreased 6.4 percentage points to 5.2 percent, reflecting the impact from $560 of incremental intangibles amortization related to the Test & Measurement acquisition. Adjusted EBITA margin was 27.0 percent, an increase of 1.2 percentage points, reflecting leverage on higher sales and higher price, partially offset by the impact of the Test & Measurement acquisition.

Financial Position, Liquidity and Capital Resources

Emerson maintains a conservative financial structure to provide the strength and flexibility necessary to achieve our strategic objectives and efficiently deploy cash where needed worldwide to fund operations, complete acquisitions and sustain long-term growth. Emerson is in a strong financial position, with total assets of $42 billion and 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.

The Company continues to generate substantial operating cash flow, including approximately $3.7 billion from continuing operations in 2025. Cash flows have been and are expected to be sufficient for at least the next 12 months to meet the Company’s operating requirements, including those related to salaries and wages, working capital, capital expenditures, and other liquidity requirements associated with operations. The Company also has certain contractual obligations, primarily long-term debt and operating leases (see Notes 9, 12 and 13). The Company has been able to readily meet all its funding requirements and currently believes that sufficient funds will be available to meet its needs for the foreseeable future through operating cash flow, existing resources, short- and long-term debt capacity, or its revolving backup credit facilities under which it has not incurred any borrowings.

CASH FLOW

2023

2024

2025

Operating Cash Flow

2,710

3,317

3,676

Percent of sales

17.9

19.0

20.4

Capital Expenditures

363

419

431

Percent of sales

2.4

Free Cash Flow (Operating Cash Flow less Capital Expenditures)

2,347

2,898

3,245

Percent of sales

15.5

16.6

18.0

Operating Working Capital

1,283

1,394

2,039

Percent of sales

8.5

8.0

11.3

Operating cash flow from continuing operations for 2025 was $3.7 billion, an increase of $359, or 11 percent compared with 2024, reflecting higher earnings and favorable changes in working capital. Operating cash flow from continuing operations for 2024 was $3.3 billion, an increase of 22 percent compared to $2.7 billion in 2023, reflecting higher earnings (excluding the impact of non-cash items related to the NI acquisition and the loss on the Copeland note receivable). Acquisition-related costs and integration activities negatively impacted 2024 operating cash flow by approximately $235.

At September 30, 2025, operating working capital as a percent of sales was 11.3 percent compared with 8.0 percent in 2024 and 8.5 percent in 2023. The change in operating working capital compared to the prior year was due to the payment of income taxes of approximately $0.6 billion in 2025 related to the sale of the Company's 40 percent non-controlling common equity interest in Copeland. Total operating working capital increased in 2024 due to the NI acquisition, but improved as a percent of sales compared to 2023 due to improvements in inventory levels.

Free cash flow from continuing operations (operating cash flow less capital expenditures) was $3,245 in 2025, up 12 percent, reflecting the increase in operating cash flow. Free cash flow from continuing operations was $2,898 in 2024, compared with $2,347 in 2023. Net cash paid in connection with acquisitions was $37, $8,342 and $705 in 2025, 2024 and 2023, respectively.

Total cash provided by operating activities including the impact of discontinued operations was $3,098, $3,332 and $637 in 2025, 2024 and 2023, respectively. The decrease in 2025 reflected higher operating cash flow from continuing operations, offset by approximately $0.6 billion of income taxes paid related to the sale of the Company's 40 percent non-controlling common equity interest in Copeland. The lower cash flow in 2023 was due to approximately $2.3 billion of income taxes paid related to the gains on the Copeland transaction and InSinkErator divestiture and subsidiary restructurings related to the Copeland transaction.

Dividends were $1,192 ($2.11 per share) in 2025, compared with $1,201 ($2.10 per share) in 2024 and $1,198 ($2.08 per share) in 2023. In November 2025, the Board of Directors voted to increase the quarterly cash dividend to an annualized rate of $2.22 per share.

Purchases of Emerson common stock totaled $1,167, $435 and $2,000 in 2025, 2024 and 2023, respectively, at average per share prices of $125.66, $99.04 and $94.09. AspenTech repurchases were $208 in 2024. In November 2025, the Board of Directors authorized the purchase of up 50 million shares. This is in addition to the authorization approved by the Board in March 2020 for the purchase of up to 60 million shares, of which approximately 19.6 million shares remain available at September 30, 2025. The Company purchased 9.3 million shares in 2025, 4.4 million shares in 2024 and 21.3 million shares in 2023.

LEVERAGE/CAPITALIZATION

2023

2024

2025

Total Assets

42,746

44,246

41,964

Long-term Debt

7,610

7,155

8,319

Common Stockholders' Equity

20,689

21,636

20,282

Total Debt-to-Total Capital Ratio

28.3

26.2

39.3

Net Debt-to-Net Capital Ratio

0.5

15.9

36.2

Operating Cash Flow-to-Debt Ratio

33.2

43.2

28.0

Interest Coverage Ratio

12.1X

7.2X

8.6X

Total debt, which includes long-term debt, current maturities of long-term debt, commercial paper and other short-term borrowings, was $13,116, $7,687 and $8,157 as of September 30, 2025, 2024 and 2023, respectively. The increase in 2025 reflects increased short-term borrowings and long-term debt to fund the AspenTech transaction. Overall, the Company's commercial paper borrowings increased to approximately $4.2 billion at September 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. The decrease in 2024 reflected the repayment of €500 of 0.375% euro notes that matured in May 2024. See Note 4 and Note 13.

The increase in the debt-to-total capital ratios in 2025 reflects the increased commercial paper and long-term debt discussed above. The total debt-to-capital ratio decreased slightly in 2024, reflecting repayments of long-term debt, while the net debt-to-net capital ratio increased reflecting the use of cash held on the balance sheet at September 30, 2023 that was used to complete the NI acquisition. 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 disciplined capital allocation, which includes using a portion of its cash flows to reduce net debt.

The interest coverage ratio is computed as earnings before income taxes plus interest expense, divided by interest expense. The interest coverage ratio in 2025 reflects higher interest expense due to the increased short-term borrowings and long-term debt discussed above. The lower ratio in 2024 reflects lower GAAP pretax earnings largely due to the NI acquisition. Excluding the impact from acquisition-related inventory step-up amortization of $231, higher intangibles amortization of $595, acquisition/divestiture fees and related costs of $220, higher restructuring and related costs of $152, the loss of $279 on the Copeland note receivable and the gain on the subordinated interest of $79, the interest coverage ratio was 11.6X.

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 with various banks, which was entered into in February 2023. The credit facilities are maintained to support general corporate purposes, including commercial paper borrowings. The Company has not incurred any borrowings under these or previous facilities. The credit facilities contain no financial covenants and are not subject to termination based on a change of credit rating or material adverse changes. The facilities are unsecured and may be accessed under various interest rate alternatives at the Company’s option. Fees to maintain the facilities are immaterial. The Company also maintains a universal shelf registration statement on file with the SEC under which it can issue debt securities, preferred stock, common stock, warrants, share purchase contracts or share purchase units without a predetermined limit. Securities can be sold in one or more separate offerings with the size, price and terms to be determined at the time of sale.

FINANCIAL INSTRUMENTS

In the normal course of business, the Company is exposed to changes in interest rates and foreign currency exchange rates due to its worldwide presence and diverse business profile and selectively uses derivative financial instruments, including forwards, swaps and purchased options to manage these risks. The Company does not hold derivatives for trading or speculative purposes. The value of derivatives and other financial instruments is subject to change as a result of market movements in rates and prices. Sensitivity analysis is one technique used to forecast

the impact of these movements. Based on a hypothetical 10 percent increase in interest rates or a 10 percent weakening in the U.S. dollar across all currencies, the potential losses in future earnings, fair value or cash flows are not material. Sensitivity analysis has limitations; for example, a weaker U.S. dollar would benefit future earnings through favorable translation of non-U.S. operating results. See Notes 1, and 11 through 13.

Critical Accounting Policies

Preparation of the Company's financial statements requires management to make judgments, assumptions and estimates regarding uncertainties that could affect reported revenue, expenses, assets, liabilities and equity. Note 1 describes the significant accounting policies used in preparation of the consolidated financial statements. The most significant areas where management judgments and estimates impact the primary financial statements are described below. Actual results in these areas could differ materially from management's estimates under different assumptions or conditions.

REVENUE RECOGNITION

The Company evaluates its contracts with customers to identify the promised goods or services and recognizes revenue for the identified performance obligations at the amount the Company expects to be entitled to in exchange for those goods or services. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. Revenue is recognized when, or as, performance obligations are satisfied and control has transferred to the customer, typically when products are shipped or delivered, title and risk of loss pass to the customer, and the Company has a present right to payment. 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, generally in accordance with shipping terms, or the first day of the contractual term for software. A portion of the Company's revenues relate to the sale of post-contract customer support, parts and labor for repairs, and engineering services.

In some circumstances, contracts include multiple performance obligations, where revenue is recognized separately for each good or service, as well as contracts where revenue is recognized over time as control transfers to the customer. Tangible products represent a large majority of the delivered items in contracts with multiple performance obligations or where revenue is recognized over time, while a smaller portion is attributable to installation, service and maintenance. In sales arrangements that involve multiple performance obligations, revenue is allocated based on the relative standalone selling price for each performance obligation. Observable selling prices from actual transactions are used whenever possible. In other instances, the Company determines the standalone selling price based on third-party pricing or management's best estimate. For projects where revenue is recognized over time, the Company typically uses an input method to determine progress and recognize revenue, based on costs incurred. The Company believes costs incurred closely correspond with its performance under the contract and the transfer of control to the customer. The Company also has software maintenance contracts where revenue is recognized ratably over the maintenance term.

VALUATION OF ASSETS AND LIABILITIES

Assets and liabilities acquired in business combinations, including intangible assets, are accounted for using the acquisition method and recorded at their respective fair values. In 2024, the Company completed the acquisition of National Instruments Corporation and engaged an independent third-party valuation specialist to assist in the determination of the fair value of intangible assets. This included the use of certain assumptions and estimates, including projected revenue for customer relationship and developed technology intangible assets, the attrition rate for customer relationship intangible assets, and the obsolescence rate for developed technology intangible assets. Although we believe the assumptions and estimates to be reasonable and appropriate, they require judgment and are based on experience and historical information obtained from National Instruments Corporation.

LONG-LIVED ASSETS

Long-lived assets, which include property, plant and equipment, goodwill and identifiable intangible assets, are reviewed for impairment whenever events or changes in business circumstances indicate impairment may exist. If the Company determines that the carrying value of a long-lived asset may not be recoverable, a permanent impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its estimated fair value. Reporting units are also reviewed for possible goodwill impairment at least annually, in the fourth quarter. If an initial assessment indicates it is more likely than not an impairment may exist, it is evaluated by comparing the reporting unit's estimated fair value to its carrying value. Fair value is generally estimated using an income approach that discounts estimated future cash flows using discount rates judged by management to be commensurate with the applicable risk. Estimates of future sales, operating results, cash flows and discount rates are subject to changes in the economic environment, including such factors as the general level of market interest

rates, expected equity market returns and the volatility of markets served, particularly when recessionary economic circumstances continue for an extended period of time.

RETIREMENT PLANS

The Company maintains a prudent long-term investment strategy consistent with the duration of pension obligations. The determination of defined benefit plan expense and liabilities is dependent on various assumptions, including the expected annual rate of return on plan assets, the discount rate and the rate of annual compensation increases. In accordance with U.S. generally accepted accounting principles, actual results that differ from the Company's assumptions are accumulated as deferred actuarial gains or losses and amortized to expense in future periods. The Company's principal U.S. defined benefit plan is closed to employees hired after January 1, 2016 while shorter-tenured employees ceased accruing benefits effective October 1, 2016. Effective January 1, 2025, the Company implemented a new profit sharing retirement program for all U.S. non-union employees. Eligible employees receive a base contribution to a cash balance account administered within the principal U.S. defined benefit plan, funded by surplus pension assets, as well as a potential profit sharing contribution to their defined contribution account. For employees that had continued to accrue benefits in the principal U.S. defined benefit plan, future service after December 31, 2024 is frozen.

As of September 30, 2025, the U.S. pension plans were overfunded by $856 in total (approximately 29 percent in excess of the projected benefit obligation), including unfunded plans totaling $161. The non-U.S. plans were underfunded by $65, including unfunded plans totaling $242. The Company contributed a total of $46 to defined benefit plans in 2025 and expects to contribute approximately $40 in 2026. At year-end 2025, the discount rate for U.S. plans was 5.27 percent, and was 4.97 percent in 2024. The assumed investment return on plan assets was 6.50 percent in 2025, 6.50 percent in 2024 and 6.00 percent in 2023, and will be 6.75 percent for 2026. While management believes its assumptions used are appropriate, actual experience may differ. A 0.25 percentage point decrease in the U.S. and non-U.S. discount rates would have increased the total projected benefit obligation at September 30, 2025 by $100 and increased 2026 pension expense by $10. A 0.25 percentage point decrease in the expected return on plan assets would increase 2026 pension expense by $10. See Note 14.

CONTINGENT LIABILITIES

The Company is a party to a number of pending legal proceedings and claims, including those involving general and product liability (including asbestos) and other matters, several of which claim substantial amounts of damages. The Company accrues for such liabilities when it is probable that future costs (including legal fees and expenses) will be incurred and such costs can be reasonably estimated. Accruals are based on developments to date; management's estimates of the outcomes of these matters; and the Company's experience in contesting, litigating and settling similar matters. The Company engages an outside expert to develop an actuarial estimate of its expected costs to resolve all pending and future asbestos claims, including defense costs, as well as its related insurance receivables. The reserve for asbestos litigation, which is recorded on an undiscounted basis, is based on projected claims through 2065.

Although it is not possible to predict the ultimate outcome of these matters, the Company historically has been largely successful in defending itself against claims and suits that have been brought against it, and will continue to defend itself vigorously in all such matters. While the Company believes a material adverse impact is unlikely, given the inherent uncertainty of litigation, a remote possibility exists that a future development could have a material adverse impact on the Company. See Note 15.

INCOME TAXES

Income tax expense and tax assets and liabilities reflect management's assessment of taxes paid or expected to be paid (received) on items included in the financial statements. Deferred tax assets and liabilities arise from temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and consideration of operating loss and tax credit carryforwards. Deferred income taxes are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled. The impact on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Valuation allowances are provided to reduce deferred tax assets to the amount that will more likely than not be realized. This requires management to make judgments and estimates regarding the amount and timing of the reversal of taxable temporary differences, expected future taxable income, and the impact of tax planning strategies.

Uncertainty exists regarding tax positions taken in previously filed tax returns which remain subject to examination, along with positions expected to be taken in future returns. The Company provides for unrecognized tax benefits,

based on the technical merits, when it is more likely than not that an uncertain tax position will not be sustained upon examination. Adjustments are made to the uncertain tax positions when facts and circumstances change, such as the closing of a tax audit; changes in applicable tax laws, including tax case rulings and legislative guidance; or expiration of the applicable statute of limitations.

Cash repatriated to the U.S. is generally not subject to U.S. federal income taxes. No provision is made for withholding taxes and any other applicable income taxes on the undistributed earnings of non-U.S. subsidiaries where these earnings are considered indefinitely reinvested or otherwise retained for continuing international operations. Determination of the amount of taxes that might be paid on these undistributed earnings if eventually remitted is not practicable. See Notes 1 and 16.

Other Items

LEGAL MATTERS

At September 30, 2025, there were no known contingent liabilities (including guarantees, pending litigation, taxes and other claims) that management believes will be material in relation to the Company's financial statements, nor were there any material commitments outside the normal course of business.

NEW ACCOUNTING PRONOUNCEMENTS

In the fourth quarter of 2025, the Company adopted ASU No. 2023-07 (Topic 280), Improvements to Reportable Segment Disclosures, which requires disclosure of significant segment expenses on an annual and interim basis. The new standard also requires disclosure of the Company's chief operating decision maker and interim disclosure of each reportable segment's total assets. This standard has no impact on the accounting for reportable segments. See Note 20.

In 2024, the Company adopted ASU No. 2022-04 (Subtopic 405-50), Liabilities - Supplier Finance Programs, which requires disclosures about the use of supplier finance programs. This standard has no impact on the accounting for supplier finance programs and did not materially impact the Company's disclosures.

In 2023, the Company adopted ASU No. 2021-10 (Topic 832), Government Assistance, which requires annual disclosures about certain types of government assistance received. This standard has no impact on the accounting for government assistance and did not materially impact the Company's disclosures.

In December 2023, the FASB issued ASU No. 2023-09 (Topic 740), Improvements to Income Tax Disclosures, which expands the disclosures required with respect to the income tax rate reconciliation and income taxes paid both in U.S. and foreign jurisdictions. The updates, which are effective in fiscal 2026, change disclosures only and will not impact the Company’s results of operations.

In November 2024, the FASB issued ASU No. 2024-03 (Subtopic 220-40), Disaggregation of Income Statement Expenses, which requires expanded disclosures of specific expense categories in the notes to financial statements. The updates, which are effective for annual periods in fiscal 2028 and interim periods in fiscal 2029, change disclosures only and will not impact the Company’s results of operations.

FISCAL 2026 OUTLOOK

For fiscal year 2026, consolidated net sales from continuing operations are expected to be up approximately 5.5 percent, with underlying sales up approximately 4 percent, excluding a 1.5 percent favorable impact from foreign currency translation. Earnings per share are expected to be $4.73 to $4.93, while adjusted earnings per share are expected to be $6.35 to $6.55 (see the following reconciliation).

Outlook for Fiscal 2026 Earnings Per Share

2026

Diluted earnings per share

$4.73 - $4.93

Amortization of intangibles

~ 1.42

Restructuring and related costs

~ 0.15

Acquisition/divestiture fees and related costs

~ 0.05

Adjusted diluted earnings per share

$6.35 - $6.55

Operating cash flow is expected to be $4.0 to $4.1 billion and free cash flow, which excludes projected capital spending of approximately $0.45 billion, is expected to be $3.5 to $3.6 billion. The fiscal 2026 outlook assumes approximately $2.2 billion returned to shareholders through approximately $1.0 billion of share repurchases and approximately $1.2 billion of dividend payments.