We Drive Innovation That Makes the World Healthier, Safer, Smarter and More Sustainable 3 | 2020 Emerson Annual Report

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We Drive Innovation That Makes the World Healthier, Safer, Smarter and More Sustainable 3 | 2020 Emerson Annual Report 2020 Annual Report We drive innovation that makes the world healthier, safer, smarter and more sustainable 3 | 2020 Emerson Annual Report Our Purpose We drive innovation that makes the world healthier, safer, smarter and more sustainable Our Causes Champion Future We deliver sustainable We strive to advance We lead our customers We cultivate an We promote STEM solutions that improve health, comfort, through complex environment education and programs efficiency, reduce food quality technical, regulatory based on trust and that prepare the next emissions and conserve and safety. and economic support. generation of critical resources. challenges. thinkers and problem solvers. Our Values Integrity, Collaboration, Safety & Quality, Continuous Improvement, Customer Focus, Innovation, Support Our People Financial Highlights $3.1B $16.8B Operating Cash Flow Net Sales Return on Total Capital Sales by Geographic Destination (After Tax) Asia, 20.6% 19.5% Middle East 16.8% & Africa 15.5% 15.3% 29% Americas 53% Europe 2016 2017 2018 2019 2020 18% $3.46 ADJUSTED 64 Years of EARNINGS PER SHARE* Increased Dividends Emerson’s people, processes and investments are focused on building sustainable long-term value for shareholders $2.00 – 64 years and counting. DIVIDENDS PER SHARE 1956 2020 *2020 earnings per share excludes restructuring costs and special advisory fees of $0.42 and discrete tax benefits of $0.20. Healthier We believe that health is vital to human advancement. Emerson’s expertise and technologies in life sciences, food and beverage, the cold chain and environmentally responsible home comfort are helping make it more possible than ever for people to live comfortable and health-conscious lives. More Sustainable We have a pivotal role to play in the global effort to activate sustainable business practices and manage resources efficiently. In addition to our internal sustainability efforts, Emerson technologies and expertise are helping customers achieve sustainability targets, fulfill environmental regulations and implement responsible solutions. Safer Our customers operate in the world’s most critical industries, where employee and customer safety are paramount. With deep experience and a broad portfolio of safety and security solutions, Emerson is helping customers reduce risk, protect employees and communities, and operate with increased reliability and certainty. Smarter Our advanced technologies have transformed the ways our customers operate, empowering improvements in efficiency, productivity, reliability and profitability. Emerson customers have a trusted partner to help navigate the digital transformation journey and implement solutions with a real ROI that drives their businesses forward. David N. Farr Chairman and Chief Executive Officer 2020 Emerson Annual Report | 3 Dear Shareholders, For more than a century, Emerson’s history has been filled with achievements and challenges that have driven innovative thinking and bold transformations, molding us into the company we are today. After all, an organization cannot grow and create long-term value for 130 years without a rigorous, disciplined management approach that enables the flexibility to adapt to changing markets and customers. In that regard, our 130th year was no different. 2020 will be long remembered as a defining moment in the history of our company. This year brought obstacles of a magnitude that were impossible to foresee, but it also opened up new opportunities to adapt and rise to the needs and expectations of our employees, customers, communities and shareholders. The COVID-19 pandemic transformed the global economic landscape and brought to the foreground the importance of prioritizing the health of employees and customers to a successful business. The pandemic also highlighted the immense responsibility we have to support critical industries around the world: life sciences, water, food and beverage, power Supporting Our Communities and energy, the cold chain, and indoor air comfort and quality, just to name through the Pandemic a few. In my two decades as CEO, never has a single external shock had Families around the world have been such far-reaching and lasting effects on the world – and never have I been impacted by the uncertainty and prouder of our company’s ability to meet and overcome the toughest upheaval surrounding COVID-19, and of challenges. we moved quickly in the first 30 days of the crisis. To strengthen our hometown My core leadership team, the Office of the Chief Executive and community, we provided financial 20 additional leaders, remained in our offices every day throughout the support to address food, housing, health challenging and dynamic days of the spring and summer. Our priorities were care, mental health, senior care and to keep our 83,500 employees safe, ensure business continuity and serve child care needs in our headquarters customers in essential industries with our critical technologies and services. location of St. Louis. We stressed and tested every aspect of the Emerson Enterprise Risk Process and it stood up well. The global supply chain and regionalization strategy we had put in place long before the pandemic began ensured we were prepared to sustain our business, enact the appropriate safety measures for each region, and pivot quickly and efficiently to meet our customers’ needs. We shifted manufacturing facilities to enable development of critical medical devices and personal protective equipment. We protected the integrity of testing kits with our cold chain technology. And we innovated technologies that helped our customers adapt to social distancing guidelines and operate efficiently at lower capacities. 4 | 2020 Emerson Annual Report I am tremendously proud of how Emerson employees stood up to help the world and each other through this pivotal time. For additional color on some $2.55B of these remarkable efforts, please see pages 8-9. Free Cash Flow Amid the evolving market dynamics and uncertainties, we quickly shifted and accelerated our cost containment and restructuring actions to address the new demand environment. And, thanks to our disciplined management process, we continue to deliver strong and consistent performance even in the most challenging of conditions, marking in 2020 our 64th year $2.15B of consecutive increased dividends. We returned $2.15 billion to our shareholders in 2020 and invested over $1.7 billion in strategic acquisitions Returned to Shareholders for the future prosperity of Emerson. Our ability to adapt and rise to the call of our customers reflects a core dedication to leave the world in a better place than we found it. It’s this purpose-focused mindset that drives us to achieve our full potential. In $1.7B+ January of 2020, before COVID-19 hit, we started the process to define Emerson’s purpose and reimagine the causes we work toward every day. Strategic Acquisitions* Guided by input from more than 17,000 employees around the world, we aligned on our Purpose: We drive innovation that makes the world * Open Systems International, Inc. closed on healthier, safer, smarter and more sustainable. This report is structured October 1, 2020. around those four focus areas, and it includes more information about what this purpose means to us and how we strive toward living it every ONE-YEAR PERFORMANCE THREE-YEAR PERFORMANCE Years ended September 30 Years ended September 30 Dollars in millions, percent Dollars in millions, three-year except per share amounts 2019 2020 change except per share amounts 2017* 2020 cagr Sales $18,372 $16,785 (9) % Sales $15,264 $16,785 3% Gross profit $ 7,815 $ 7,009 (10)% Gross profit $ 6,404 $ 7,009 3% Adjusted EBIT $ 3,128 $ 2,808 (10)% Adjusted EBIT $ 2,671 $ 2,808 2% Adjusted EBITDA $ 3,950 $ 3,662 (7) % Adjusted EBITDA $ 3,307 $ 3,662 3% Adjusted net earnings $ 2,291 $ 2,103 (8) % Adjusted net earnings $ 1,714 $ 2,103 7% Adjusted earnings per share $ 3.69 $ 3.46 (6) % Adjusted earnings per share $ 2.65 $ 3.46 9% Dividends per share $ 1.96 $ 2.00 2 % Dividends per share $ 1.92 $ 2.00 1% Operating cash flow $ 3,006 $ 3,083 3 % Operating cash flow $ 2,690 $ 3,083 5% Free cash flow $ 2,412 $ 2,545 6 % Free cash flow $ 2,214 $ 2,545 5% Dividends as a percent Dividends as a percent of free cash flow 50% 48% of free cash flow 56% 48% Adjusted EBIT, EBITDA, net earnings and earnings per share exclude restructuring * 2017 results are presented on a continuing operations basis. costs and special advisory fees of $317 ($257 after-tax; $0.42 per share) and $95 ($72 after-tax; $0.12 per share) in 2020 and 2019, respectively. Adjusted net Adjusted EBIT, EBITDA, net earnings and earnings per share exclude restructuring earnings and earnings per share also exclude discrete tax benefits of $119 ($0.20 costs and special advisory fees of $317 ($257 after-tax; $0.42 per share) and $78 per share) and $87 ($0.14 per share) in 2020 and 2019, respectively. ($53 after-tax; $0.08 per share) in 2020 and 2017, respectively, and valves and controls first year acquisition accounting charges of $93 ($65 after-tax, $0.10 per share) in 2017. Adjusted net earnings and earnings per share also exclude discrete tax benefits of $119 ($0.20 per share) and $47 ($0.07 per share) in 2020 and 2017, respectively. 2020 Emerson Annual Report | 5 single day. Derived from this Purpose, our new set of Causes speaks to our commitment to responsibly steward our customers, employees and communities in everything we do. Our people are our most valuable asset and source for sustained success. And as a global technology organization, we’ve seen firsthand the energy and innovation that come from encouraging and honoring diverse perspectives and backgrounds. Tragic events of the past year brought into clear view the inequities that exist in our society. Let me be clear – there Our Purpose is no place for racism or discrimination of any form at Emerson or in any We drive innovation that modern business community.
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