# UNITED	STATES	SECURITIES	AND	EXCHANGE	COMMISSION

ý	ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

# 	For	the	fiscal	year	ended	September	30,	2017

# ¨	TRANSITION	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

	Commission	file	number	1-278

# EMERSON	ELECTRIC	CO.

(Exact	name	of	registrant	as	specified	in	its	charter)

Missouri

(State	or	other	jurisdiction	of incorporation	or	organization)

St.	Louis,	Missouri

(Address	of	principal	executive	offices)

logo_emerson.jpg

(I.R.S.	Employer Identification	No.)

(Zip	Code)

Registrant's	telephone	number,	including	area	code:	(314)	553-2000

Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

# Title	of	each	class

# Name	of	each	exchange	on	which	registered

Securities	registered	pursuant	to	Section	12(g)	of	the	Act:	 None

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.	Yes ý	No	¨

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.	Yes ¨	No	ý

Indicate	by	check	mark	whether	the	registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934 during	the	preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	file	such	reports),	and	(2)	has	been	subject	to	such	filing requirements	for	the	past	90	days.	Yes	ý	No	¨

Indicate	by	check	mark	whether	the	registrant	has	submitted	electronically	and	posted	on	its	corporate	Web	site,	if	any,	every	Interactive	Data	File required	to	be	submitted	and	posted	pursuant	to	Rule	405	of	Regulation	S-T	(§232.405	of	this	chapter)	during	the	preceding	12	months	(or	for	such shorter	period	that	the	registrant	was	required	to	submit	and	post	such	files).	Yes	ý	No	¨

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	(§229.405	of	this	chapter)	is	not	contained	herein,	and	will not	be	contained,	to	the	best	of	registrant's	knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K or	any	amendment	to	this	Form

Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer,	a	smaller	reporting	company,	or	an emerging	growth	company.	See	the	definitions	of	"large	accelerated	filer,"	"accelerated	filer,"	"smaller	reporting	company,"	and	"emerging	growth company"	in	Rule	12b-2	of	the	Exchange	Act.	Large	accelerated	filer	ý		Accelerated	filer	¨	Non-accelerated	filer	¨	(Do	not	check	if	a	smaller	reporting company)	Smaller	reporting	company	¨	Emerging	growth	company	¨

If	an	emerging	growth	company,	indicate	by	check	mark	if	the	registrant	has	elected	not	to	use	the	extended	transition	period	for	complying	with	any	new or	revised	financial	accounting	standards	provided	pursuant	to	Section	13(a)	of	the	Exchange	Act.	¨

Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Act).	Yes ¨	No	ý

Aggregate	market	value	of	the	voting	stock	held	by	nonaffiliates	of	the	registrant	as	of	close	of	business	on March	31,	2017:	$38.4	billion.

# Documents	Incorporated	by	Reference

1. Portions	of	Emerson	Electric	Co.	Notice	of	2018	Annual	Meeting	of	Shareholders	and	Proxy	Statement	incorporated	by	reference	into	Part	III	hereof.

# PART	I

# ITEM	1	-	BUSINESS

Emerson	("the	Company")	was	incorporated	in	Missouri	in	1890,	and	has	evolved	through	internal	growth	and	strategic	acquisitions	and	divestitures	from a	regional	manufacturer	of	electric	motors	and	fans	into	a	diversified	global	leader	that	brings	technology	and	engineering	together	to	provide	innovative solutions	for	customers	in	a	wide	range	of	industrial,	commercial	and	consumer	markets	around	the	world.

In	connection	with	the	strategic	portfolio	repositioning	actions	undertaken	to	transform	the	Company	into	a	more	focused	enterprise,	its	businesses	and organization	were	realigned.	In	fiscal	2017,	the	Company	began	reporting	three	segments:	Automation	Solutions,	and	Climate	Technologies	and Tools	&	Home	Products	which	together	comprise	the	Commercial	&	Residential	Solutions	business.	The	Automation	Solutions	segment	includes	the former	Process	Management	segment	and	the	remaining	businesses	in	the	former	Industrial	Automation	segment,	except	for	the	hermetic	motors business,	which	is	now	included	in	the	Climate	Technologies	segment.	The	new	Tools	&	Home	Products	segment	consists	of	the	businesses	previously reported	in	the	Commercial	&	Residential	Solutions	segment	in	fiscal	2016.	See	Note	18.	This	reference	and	all	other	Note	references	in	this	document refer	to	Notes	to	Consolidated	Financial	Statements	set	forth	in	Item	8	of	this	Annual	Report	on	Form	10-K,	which	notes	are	hereby	incorporated	by reference.	A	summary	of	the	Company's	businesses	is	described	below.

•Automation	Solutions	-	enables	process,	hybrid	and	discrete	manufacturers	to	maximize	production,	protect	personnel	and	the	environment,	and optimize	their	energy	efficiency	and	operating	costs	through	a	broad	offering	of	integrated	solutions	and	products,	including	measurement	and analytical	instrumentation,	industrial	valves	and	equipment,	and	process	control	systems.

•Commercial	&	Residential	Solutions	-	provides	products	and	solutions	that	promote	energy	efficiency,	enhance	household	and	commercial comfort,	and	protect	food	quality	and	sustainability	through	heating,	air	conditioning	and	refrigeration	technology,	as	well	as	a	broad	range	of tools	and	appliance	solutions.

Sales,	earnings	before	interest	and	income	taxes,	and	total	assets	attributable	to	each	business	segment	for	the	three	years	ended	September	30,	2017 are	set	forth	in	Note	18.	Sales	by	business	in	2017,	as	a	percentage	of	the	total	Company,	were:	Automation	Solutions,	62	percent	and	Commercial	& Residential	Solutions,	38	percent.	Total	Emerson	sales	by	geographic	destination	in	2017	were:	the	United	States	and	Canada,	52	percent;	Asia,	21 percent;	Europe,	16	percent;	Latin	America,	5	percent;	and	Middle	East/Africa,	6	percent.

The	Company's	strategic	repositioning	actions	resulted	in	the	sale	of	the	network	power	systems	business	which	closed	in	the	first	quarter	of	2017,	and the	sale	of	the	power	generation,	motors	and	drives	business	which	closed	in	the	second	quarter	of	2017.	These	businesses	have	been	reported	in discontinued	operations	for	all	periods	presented.	Additionally,	on	April	28,	2017,	the	Company	completed	the	acquisition	of	Pentair's	valves	&	controls business,	which	is	reported	in	the	Automation	Solutions	segment	and	complements	the	Valves,	Actuators	and	Regulators	product	offering.	Information with	respect	to	acquisition	and	divestiture	activity,	including	the	discontinued	businesses,	and	restructuring	costs	is	set	forth	in	Notes	3,	4	and	6.	See	also Item	1A	-	"Risk	Factors"	and	Item	7	-	"Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations."

# AUTOMATION	SOLUTIONS

The	Automation	Solutions	segment	offers	customers	products,	software	and	technology,	and	engineering,	project	management,	consulting	services	and integrated	manufacturing	solutions	for	precision	measurement,	control,	monitoring,	asset	optimization,	and	safety	and	reliability	of	oil	and	gas	reservoirs, manufacturing	operations	and	plants	that	process	or	treat	various	items.	The	Company's	array	of	products	and	services	enables	customers	to	optimize their	plant	capabilities	in	the	areas	of	plant	safety	and	reliability,	product	quality,	energy	and	emissions,	and	output	efficiency.	Significant	end	markets served	include	oil	and	gas,	refining,	chemicals	and	power	generation,	as	well	as	pharmaceuticals,	food	and	beverage,	automotive,	pulp	and	paper,	metals and	mining,	and	municipal	water	supplies.	Sales	by	geographic	destination	in	2017	for	Automation	Solutions	were:	the	United	States	and	Canada,	44 percent;	Asia,	23	percent;	Europe,	20	percent;	Latin	America,	5	percent;	and	Middle	East/Africa,	8	percent.

# Measurement	&	Analytical	Instrumentation

Measurement	instrumentation	measures	the	physical	properties	of	liquids	or	gases	in	a	process	stream,	such	as	pressure,	temperature,	level,	rate	and amount	of	flow,	and	communicates	this	information	to	a	process	control	system	or	other	software	applications.	Measurement	technologies	provided	by	the Company	include	Coriolis	direct	mass	flow,	magnetic	flow,	vortex	flow,	ultrasonic	flow,	differential	pressure,	ultra-low	flow	fluid	measurement,	temperature sensors,	radar-based	tank	gauging	and	magnetic	level	gauging.	The	Company's	measurement	products	are	also	often	used	in	custody	transfer applications,	such	as	the	transfer	of	gasoline	from	a	storage	tank	to	a	tanker	truck,	where	precise	metering	of	the	amount	of	fluid	transferred	helps	ensure accurate	asset	management.	Complementary	products	include	onshore	and	subsea	multi-phase	meters,	wet	gas	meters,	downhole	gauges	and corrosion/erosion	measuring	instruments.

Analytical	instrumentation	analyzes	the	chemical	composition	of	process	fluids	and	emissions	to	enhance	quality	and	efficiency,	as	well	as	environmental compliance.	The	Company's	analytical	technologies	include	process	gas	chromatographs,	in-situ	oxygen	analyzers,	infrared	gas	and	process	fluid analyzers,	combustion	analyzers	and	systems,	and	analyzers	that	measure	pH,	conductivity	and	water	quality.	The	Company	provides	sensors	to	detect combustible	and	toxic	gases,	and	flames.	These	devices	support	the	safety	of	both	people	and	process	plant	assets.

Measurement	and	analytical	instrumentation	technologies	are	also	available	with	highly	secure	and	reliable	wireless	communication	capability,	allowing customers	to	monitor	processes	or	equipment	that	were	previously	not	measurable	(remote,	moving/rotating)	or	not	economical	to	measure	due	to	the high	cost	and	difficulty	of	running	wires	in	industrial	process	plants.

# Valves,	Actuators	&	Regulators

The	primary	role	of	an	industrial	valve	is	to	control,	isolate,	or	regulate	the	flow	of	liquids	or	gases	to	achieve	safe	operation	along	with	reliability	and optimized	performance.

Control,	isolation	and	pressure	relief	valves	respond	to	commands	from	a	control	system	to	continuously	and	precisely	modulate	the	flow	of	process fluids.	Engineered	on/off	valves	are	typically	used	to	achieve	tight	shutoff,	even	in	high	pressure	and	temperature	processes.	The	Company	designs, engineers	and	manufactures	ball,	gate,	globe,	check,	sliding	stem,	rotary,	high	performance	butterfly,	triple	offset,	and	severe	services	valves	for	critical applications.	The	Company	also	designs	and	manufactures	sophisticated	smart	actuation	and	control	technologies	that	continuously	monitor	valve	health and	remotely	control	valve	positions	to	foster	proactive	and	predictive	maintenance	as	well	as	decrease	the	risk	of	unplanned	shutdowns.

The	Company	provides	pressure	management	products,	including	pressure	relief,	vacuum	relief,	and	gauge	valves	designed	to	control	fugitive	emissions. The	Company	also	supplies	a	line	of	industrial	and	residential	regulators,	whose	function	is	to	reduce	the	pressure	of	fluids	moving	from	high-pressure supply	lines	into	lower	pressure	systems,	and	also	manufactures	tank	and	terminal	safety	equipment,	including	hatches,	vent	pressure	and	vacuum	relief valves,	and	flame	arrestors	for	storage	tanks	in	the	oil	and	gas,	petrochemical,	refining	and	other	process	industries.

# Industrial	Solutions

Industrial	Solutions	include	fluid	power	and	control	mechanisms,	electrical	distribution	equipment,	and	materials	joining	and	precision	cleaning	products which	are	used	in	a	variety	of	manufacturing	operations	to	provide	integrated	solutions	to	customers.	Fluid	power	products	control	and	power	the	flow	of liquids	and	gases	in	manufacturing	operations	such	as	automobile	assembly,	food	processing,	textile	manufacturing	and	petrochemical	processing,	and include	products	such	as	solenoid	and	pneumatic	valves,	valve	position	indicators,	pneumatic	cylinders,	air	preparation	equipment,	and	pressure,	vacuum and	temperature	switches.	Electrical	distribution	consists	of	a	broad	line	of	components	for	current-	and	noncurrent-carrying	electrical	distribution	devices, including	conduit	and	cable	fittings,	plugs	and	other	receptacles,	industrial	lighting,	enclosures	and	controls.	Electrical	distribution	products	are	used	in hazardous,	industrial,	commercial	and	construction	environments,	such	as	oil	and	gas	drilling	and	production	sites,	pulp	and	paper	mills	and petrochemical	plants.	Plastic	and	metal	joining	technologies	and	equipment	are	supplied	to	a	diversified	manufacturing	customer	base,	including automotive,	medical	devices,	business	and	consumer	electronics,	and	toys.	The	Company	also	provides	precision	cleaning	and	liquid	processing solutions	to	industrial	and	commercial	manufacturers.	Products	include	ultrasonic	joining	and

cleaning	equipment;	linear	and	orbital	vibration	welding	equipment;	systems	for	hot	plate,	spin	and	laser	welding	equipment;	and	aqueous,	semi-aqueous and	vapor	cleaning	systems.

# Process	Control	Systems	&	Solutions

Process	control	systems	and	software	control	plant	processes	by	collecting	and	analyzing	information	from	measurement	devices	in	the	plant,	and	then use	that	information	to	adjust	valves,	pumps,	motors,	drives	and	other	control	hardware	for	maximum	product	quality	and	process	efficiency	and	safety. Software	capabilities	also	include	life	sciences	operations	management,	upstream	oil	and	gas	reservoir	simulation	and	production	optimization	modeling, pipeline	and	terminal	management,	operations	management	simulation,	and	training	systems.	The	Company's	process	control	systems	can	be	extended wirelessly	to	support	a	mobile	workforce	with	handheld	tools/communicators,	provide	site-wide	location	tracking	of	people	and	assets,	and	enable	video monitoring	and	communication	with	wireless	field	devices,	thereby	increasing	the	information	available	to	operators.

# Plantweb	Digital	Ecosystem

The	Plantweb	Digital	Ecosystem	combines	the	Company's	intelligent	field	sensors,	communication	gateways	and	controllers,	software,	and complementary	partner	technologies	to	create	a	comprehensive	Industrial	Internet	of	Things	(IIoT)	architecture	to	improve	customer	operational performance.	Newly	developed	sensors	(usually	wireless)	monitor	variables	such	as	equipment	health	and	energy	consumption,	providing	data	to software	applications.	Existing	sensor	information	from	control	systems	is	also	incorporated	using	secure	communication	designs.	These	applications contain	analytic	capabilities	that	provide	insights	into	production	performance,	energy	consumption,	reliability	of	specific	equipment	or	process	units,	and safety.	Alerts	are	generated	in	areas	such	as	impending	equipment	failure	or	excessive	energy	consumption.	Complete	solutions	range	from	covering	a few	assets,	such	as	pumps	or	steam	traps	with	small	applications,	to	complete	facility	monitoring	using	more	sophisticated	modeling.

Customers	may	also	subscribe	to	IIoT	"connected	services"	to	improve	the	performance	of	their	facilities.	In	this	model,	Company	personnel	who	are experts	in	specific	applications	or	asset	classes	monitor	and	analyze	customer	data	that	is	supplied	on	a	periodic	basis	and	generate	reports	that	provide specific	information	on	actions	to	take	to	improve	plant	operational	performance.

# Industry	Services

Automation	Solutions	provides	a	broad	portfolio	of	services	to	improve	automation	project	implementation	time	and	costs,	increase	process	availability and	productivity,	and	reduce	the	total	cost	of	ownership	in	industries	such	as	oil	and	gas,	chemicals,	power	generation,	food	and	beverage,	and	life sciences.	Consulting	services	help	plant	owners	and	operators	improve	plant	safety,	reliability,	availability,	cybersecurity,	and	operational	performance through	implementation	of	on-site	and	corporate-wide	programs.	Global	industry	centers	offer	engineering	and	project	management	services	to	help customers	optimize	cost	and	schedule	on	large	capital	projects.	Lifecycle	service	centers	provide	maintenance,	engineering,	process,	quality,	and troubleshooting	expertise	to	aid	in	process	optimization	for	efficient	and	consistent	operations,	regulatory	compliance,	asset	repair,	asset	replacement, shutdown/outage	management	and	employee	training.	These	offerings	are	available	on	demand	or	through	long-term	service	agreements.

# Distribution

The	principal	worldwide	distribution	channel	for	Automation	Solutions	is	a	direct	sales	force,	although	a	network	of	independent	sales	representatives,	and to	a	lesser	extent	independent	distributors	purchasing	products	for	resale,	are	also	utilized.	Approximately	half	of	the	sales	in	the	United	States	are	made through	a	direct	sales	force	with	the	remainder	primarily	through	independent	sales	representatives	and	distributors.	In	Europe	and	Asia,	sales	are primarily	made	through	a	direct	sales	force	with	the	remainder	split	evenly	between	independent	sales	representatives	and	distributors.

# Brands

Service/trademarks	and	trade	names	within	Automation	Solutions	include	Emerson	Automation	Solutions,	AMS,	Anderson	Greenwood,	Appleton,	ASCO, ASCO	Numatics,	Baumann,	Bettis,	Biffi,	Branson,	Bristol,	Crosby,	CSI,	Damcos,	Daniel,	DeltaV,	EIM,	El-O-Matic,	Fisher,	Go	Switch,	Guardian,	Keystone, KTM,	Micro	Motion,	Net	Safety,

Ovation,	O-Z/Gedney,	Plantweb,	ROC,	Rosemount,	Roxar,	Smart	Process,	SureService,	TESCOM,	TopWorx,	Vanessa	and	Virgo.

# COMMERCIAL	&	RESIDENTIAL	SOLUTIONS

The	Commercial	&	Residential	Solutions	business	consists	of	the	Climate	Technologies	and	Tools	&	Home	Products	segments,	and	provides	products and	solutions	that	promote	energy	efficiency,	enhance	household	and	commercial	comfort,	and	protect	food	quality	and	sustainability	through	heating,	air conditioning	and	refrigeration	technology,	as	well	as	a	broad	range	of	tools	and	appliance	solutions.	Sales	by	geographic	destination	in	2017	for Commercial	&	Residential	Solutions	were:	the	United	States	and	Canada,	64	percent;	Asia,	18	percent;	Europe,	9	percent;	Latin	America,	5	percent;	and Middle	East/Africa,	4	percent.

# CLIMATE	TECHNOLOGIES

The	Climate	Technologies	segment	provides	products	and	services	for	many	areas	of	the	climate	control	industry,	including	residential	heating	and cooling,	commercial	air	conditioning,	and	commercial	and	industrial	refrigeration.	The	Company's	technologies	enable	homeowners	and	businesses	to better	manage	their	heating,	air	conditioning	and	refrigeration	systems	for	improved	control	and	comfort,	and	lower	energy	costs.	Climate	Technologies also	provides	services	that	digitally	control	and	remotely	monitor	refrigeration	units	in	grocery	stores	and	other	food	distribution	outlets	to	enhance	food freshness	and	safety,	as	well	as	cargo	and	transportation	monitoring	solutions.	Sales	by	geographic	destination	in	2017	for	Climate	Technologies	were: the	United	States	and	Canada,	55	percent;	Asia,	24	percent;	Europe,	10	percent;	Latin	America,	7	percent;	and	Middle	East/Africa,	4	percent.

# Residential	and	Commercial	Heating	and	Air	Conditioning

This	business	provides	a	full	range	of	heating	and	air	conditioning	products	that	help	reduce	operational	and	energy	costs	and	create	comfortable environments	in	all	types	of	buildings.	These	products	include	reciprocating	and	scroll	compressors,	including	ultra-efficient	residential	scroll	compressors with	two	stages	of	cooling	capacity,	as	well	as	variable	speed	scroll	compressors;	system	protector	and	flow	control	devices;	standard,	programmable and	Wi-Fi	thermostats;	monitoring	equipment	and	electronic	controls	for	gas	and	electric	heating	systems;	gas	valves	for	furnaces	and	water	heaters; ignition	systems	for	furnaces;	sensors	and	thermistors	for	home	appliances;	and	temperature	sensors	and	controls.

# Commercial	and	Industrial	Refrigeration

Commercial	and	industrial	refrigeration	technologies	are	incorporated	into	equipment	to	refrigerate	food	and	beverages	in	supermarkets,	convenience stores,	food	service	operations,	refrigerated	trucks	and	refrigerated	marine	transport	containers.	Climate	Technologies	refrigeration	products	are	also used	in	a	wide	variety	of	industrial	applications,	including	medical	applications,	food	processing	and	cold	storage.	Products	include	reciprocating,	scroll and	screw	compressors;	precision	flow	controls;	system	diagnostics	and	controls	that	provide	precise	temperature	management;	and	environmental control	systems.	Transport	and	cargo	monitoring	solutions	are	also	offered,	which	extend	throughout	the	cold	chain	to	ensure	quality	and	safety	as	food travels	from	growers	to	processing	and	distribution	facilities	and	finally	to	retail	points	of	sale.

# Services	and	Solutions

Services	and	solutions	enable	global	customers	to	optimize	the	performance	of	facilities	including	large-scale	retailers,	supermarkets,	convenience	stores and	food	service	operations.	By	providing	expertise	in	air	conditioning,	refrigeration	and	lighting	control,	Climate	Technologies	performs	as	a	complete facility	manager	for	its	customers.	The	Company's	expertise	allows	customers	to	reduce	energy	and	maintenance	costs,	thereby	improving	overall	facility efficiency	and	uptime.	In	addition	to	industry-leading	controls,	services	include	facility	design	and	product	management,	site	commissioning,	facility monitoring	and	energy	modeling.

Climate	Technologies'	sales,	primarily	to	original	equipment	manufacturers	and	end	users,	are	made	predominately	through	worldwide	direct	sales	forces. Remaining	sales	are	primarily	through	independent	distributor	networks	throughout	the	world.

Service/trademarks	and	trade	names	within	the	Climate	Technologies	segment	include	Emerson	Climate	Technologies,	Control	Products,	Computer Process	Controls,	Copeland,	Design	Services	Network,	Dixell,	Emerson	Climate	Technologies	Distribution	Services,	Emerson	Climate	Technologies Educational	Services,	Emerson	Climate	Technologies	Retail	Services,	Fusite,	ProAct,	Sensi,	Therm-O-Disc,	Vilter,	and	White-Rodgers.

# TOOLS	&	HOME	PRODUCTS

The	Company's	Tools	&	Home	Products	segment	offers	tools	for	professionals	and	homeowners	and	appliance	solutions.	Sales	by	geographic	destination in	2017	for	this	segment	were:	the	United	States	and	Canada,	86	percent;	Asia,	4	percent;	Europe,	7	percent;	Latin	America,	2	percent;	and	Middle East/Africa,	1	percent.

# Professional	and	Do-It-Yourself	Tools

Pipe-working	tools	are	used	by	plumbing	and	mechanical	professionals	to	install	and	repair	piping	systems.	Products	include	pipe	wrenches,	pipe	cutters, pipe	threading	and	roll	grooving	equipment,	mechanical	crimping	tube	joining	systems,	drain	cleaners,	tubing	tools,	and	diagnostic	systems,	including closed-circuit	television	pipe	inspection	and	locating	equipment.	Other	professional	tools	include	water	jetters,	wet-dry	vacuums,	commercial	vacuums and	bolt	cutters.	Do-it-yourself	tools,	available	at	retail	home	improvement	outlets,	include	drain	cleaning	equipment,	pipe	and	tube	working	tools,	and wet-dry	vacuums.

# Appliance	Solutions

This	business	provides	a	number	of	appliance	solutions,	including	residential	and	commercial	food	waste	disposers,	ceiling	fans,	instant	hot	water dispensers	and	compact	electric	water	heaters.

The	principal	worldwide	distribution	channels	for	Tools	&	Home	Products	are	distributors	and	direct	sales	forces.	Professional	tools	are	sold	worldwide almost	exclusively	through	distributors.	Independent	sales	representatives	are	utilized	to	a	lesser	extent.	Appliance	solutions	are	sold	through	direct	sales force	networks	and	distributors.	Approximately	one-third	of	this	segment's	sales	are	made	to	a	small	number	of	big	box	outlets,	as	well	as	through	online retailers.

Service/trademarks	and	trade	names	within	the	Tools	&	Home	Products	segment	include	Emerson,	Grind2Energy,	InSinkErator,	Badger,	ProTeam, RIDGID	and	WORKSHOP.

On	October	2,	2017,	the	Company	sold	its	residential	storage	solutions	business.	This	business	provides	products	for	the	home	including	shelving systems,	cabinet	and	closet	organizers,	home	office	storage,	and	drawer	systems	and	containers,	available	in	wire,	stainless	steel	and	laminate.	See Note	3.

# DISCONTINUED	OPERATIONS

The	network	power	systems	business	and	the	power	generation,	motors	and	drives	business	were	sold	in	2017	and	are	reported	as	discontinued operations	in	the	Consolidated	Financial	Statements	for	all	years	presented.	See	Note	4.

The	network	power	systems	business	supplies	electric	power	conditioning,	power	reliability	and	environmental	control	products	for	telecommunications networks,	data	centers	and	other	critical	applications,	and	also	provides	comprehensive	data	center	infrastructure	management	solutions.	The	power generation,	motors	and	drives	business	supplies	alternators,	AC	motor/generator	sets,	traction	generators,	wind	power	generators,	wind	turbine	pitch control	systems	and	solar	photovoltaic	converters,	as	well	as	a	broad	line	of	drives	and	electric	motors	for	use	in	a	wide	variety	of	manufacturing operations	and	products.

# PRODUCTION

The	Company	utilizes	various	production	operations	and	methods.	The	principal	production	operations	are	electronics	assembly,	metal	stamping,	forming, casting,	machining,	welding,	plating,	heat	treating,	painting	and	assembly.	In	addition,	the	Company	uses	specialized	production	operations,	including automatic	and	semiautomatic	testing,	automated	material	handling	and	storage,	ferrous	and	nonferrous	machining,	and	special	furnaces	for	heat	treating and	foundry	applications.	Management	believes	the	equipment,	machinery	and	tooling	used	in	these	processes	are	of	modern	design	and	well maintained.

# RAW	MATERIALS

The	Company's	major	requirements	for	basic	raw	materials	include	steel,	copper,	cast	iron,	electronics,	rare	earth	metals,	aluminum	and	brass;	and	to	a lesser	extent,	plastics	and	petroleum-based	chemicals.	The	Company	seeks	to	have	many	sources	of	supply	for	each	of	its	major	requirements	in	order to	avoid	significant	dependence	on	any	one	or	a	few	suppliers.	However,	the	supply	of	materials	or	other	items	could	be	disrupted	by	natural	disasters	or other	events.	Despite	market	price	volatility	for	certain	requirements	and	materials	pricing	pressures	at	some	of	our	businesses,	the	raw	materials	and various	purchased	components	needed	for	the	Company's	products	have	generally	been	available	in	sufficient	quantities.

# PATENTS,	TRADEMARKS	AND	LICENSES

The	Company	maintains	an	intellectual	property	portfolio	it	has	developed	or	acquired	over	a	number	of	years,	including	patents,	trademarks	and licenses.	The	Company	also	continues	to	develop	or	acquire	new	intellectual	property	on	an	ongoing	basis.	New	patent	applications	are	continuously	filed to	protect	the	Company's	ongoing	research	and	development	activities.	The	Company's	trademark	registrations	may	be	renewed	and	their	duration	is dependent	upon	national	laws	and	trademark	use.	While	this	proprietary	intellectual	property	portfolio	is	important	to	the	Company	in	the	aggregate, management	does	not	regard	any	of	its	segments	as	being	dependent	on	any	single	patent,	trademark	registration	or	license.

# BACKLOG

The	Company's	estimated	consolidated	order	backlog	was	$4,894	million	and	 $3,925	million	at	September	30,	2017	and	2016,	respectively.	A	large majority	of	the	consolidated	backlog	as	of	September	30,	2017	is	expected	to	be	shipped	within	one	year.	Backlog	by	business	at	 September	30,	2017 and	2016	follows	(dollars	in	millions).

|  | 2016 | 2017 |
| :--- | :--- | :--- |
| Automation\tSolutions | $3,464 | 4,414 |
| Commercial\t&\tResidential\tSolutions | 461 | 480 |
| \t\t\t\t\tTotal\tBacklog | $3,925 | 4,894 |

The	increase	in	Automation	Solutions	primarily	reflects	the	acquisition	of	the	valves	&	controls	business.

# COMPETITION

The	Company's	businesses	operate	in	end	markets	that	are	highly	competitive.	The	Company	competes	based	on	product	performance,	quality, branding,	service	and/or	price	across	the	industries	and	markets	served.	A	significant	element	of	the	Company's	competitive	strategy	is	to	deliver solutions	to	our	customers	by	manufacturing	high-quality	products	at	the	best	relevant	global	cost.	Although	no	single	company	competes	directly	with Emerson	in	all	of	the	Company's	product	lines,	various	companies	compete	in	one	or	more	product	lines	with	the	number	of	competitors	varying	by product	line.	Some	competitors	have	substantially	greater	sales,	assets	and	financial	resources	than	Emerson	and	the	Company	also	competes	with many	smaller	companies.	Management	believes	Emerson	has	a	market	leadership	position	in	many	of	its	product	lines.

# RESEARCH	AND	DEVELOPMENT

Costs	associated	with	Company-sponsored	research	and	development	activities	for	continuing	operations	were $340	million,	$320	million	and	$336 million	in	2017,	2016	and	2015,	respectively.

# ENVIRONMENT

The	Company's	manufacturing	locations	generate	waste,	of	which	treatment,	storage,	transportation	and	disposal	are	subject	to	federal,	state,	foreign and/or	local	laws	and	regulations	relating	to	protection	of	the	environment.	Compliance	with	laws	regulating	the	discharge	of	materials	into	the environment	or	otherwise	relating	to	protection	of	the	environment	has	not	had	a	material	effect	on	the	Company's	capital	expenditures,	earnings	or competitive	position.	The	Company	does	not	anticipate	having	material	capital	expenditures	for	environmental	control	facilities	during	the	next	fiscal	year.

# EMPLOYEES

The	Company	and	its	subsidiaries	had	an	average	of	approximately	76,500	employees	during	2017.	Management	believes	that	the	Company's	employee relations	are	favorable.	Some	of	the	Company's	employees	are	represented	under	collective	bargaining	agreements,	but	none	of	these	agreements	are considered	significant.

# DOMESTIC	AND	FOREIGN	OPERATIONS

International	sales	from	continuing	operations	were	$7,991	million	in	2017,	$7,582	million	in	2016	and	$8,641	million	in	2015,	including	U.S.	exports	of $927	million,	$888	million	and	$1,187	million	in	2017,	2016	and	2015,	respectively.	There	are	additional	risks	attendant	to	foreign	operations,	such	as possible	nationalization	of	facilities,	currency	fluctuations	and	potential	restrictions	on	the	movement	of	funds.	See	Note	18	for	further	information	with respect	to	foreign	operations.

# INTERNET	ACCESS

Emerson's	reports	on	Forms	10-K,	10-Q,	8-K	and	all	amendments	to	those	reports	are	available	without	charge	through	the	Company's	website	on	the internet	as	soon	as	reasonably	practicable	after	they	are	electronically	filed	with,	or	furnished	to,	the	U.S.	Securities	and	Exchange	Commission	(SEC). They	may	be	accessed	as	follows:	www.Emerson.com,	Investors,	SEC	Filings.	Information	on	the	Company's	website	does	not	constitute	part	of	this Form	10-K.

The	information	set	forth	under	Item	1A	-	"Risk	Factors"	is	hereby	incorporated	by	reference.

# ITEM	1A	-	RISK	FACTORS

Investing	in	our	securities	involves	risks.	We	may	amend	or	supplement	the	risk	factors	described	below	from	time	to	time	by	other	reports	we	file	with	the SEC.

Our	Proposed	Acquisition	of	Rockwell	Automation,	Inc.	May	Not	Be	Completed	or	Completed	On	the	Terms	and	Conditions	Contemplated,	or	With	the Expected	Benefits

We	are	currently	pursuing	a	potential	acquisition	of	Rockwell	Automation,	Inc.	Rockwell	has	not	engaged	with	the	Company	on	this	or	previous proposals.	If	the	proposed	transaction	were	to	proceed,	we	can	make	no	assurance	as	to	the	completion,	terms,	timing,	costs	or	benefits	anticipated	from any	such	acquisition.	The	acquisition	would	involve	increases	in	the	Company's	debt	levels	and	outstanding	shares.	Unforeseen	developments,	including delays	in	obtaining	various	tax,	regulatory	and	other	approvals,	could	delay	any	acquisition,	or	cause	it	to	occur	on	terms	and	conditions	that	are	less favorable,	or	at	a	higher	cost,	than	expected.	In	addition,	the	Company	may	encounter	difficulties	in	integration	and	may	not	realize	the	degree	or	timing of	the	anticipated	benefits	of	the	acquisition.

# We	Operate	in	Businesses	That	Are	Subject	to	Competitive	Pressures	That	Could	Affect	Prices	or	Demand	for	Our	Products

Our	businesses	operate	in	markets	that	are	highly	competitive	and	potentially	volatile,	and	we	compete	on	the	basis	of	product	performance,	quality, service	and/or	price	across	the	industries	and	markets	served.	Our	businesses	are	largely	dependent	on	the	current	and	future	business	environment, including	capital	and	consumer	spending.	A	significant	element	of	our	competitive	strategy	is	to	deliver	solutions	to	our	customers	by	manufacturing	high- quality	products	at	the	best	relevant	global	cost.	Various	companies	compete	with	us	in	one	or	more	product	lines	and	the	number	of	competitors	varies by	product	line.	Some	of	our	competitors	have	substantially	greater	sales,	assets	and	financial	resources	than	our	Company	and	we	also	compete	with many	smaller	companies.	Competitive	pressures	could	adversely	affect	prices	or	customer	demand	for	our	products,	impacting	our	sales	or	profit margins,	and/or	resulting	in	a	loss	of	market	share.

Our	Operating	Results	Depend	in	Part	on	Continued	Successful	Research,	Development	and	Marketing	of	New	and/or	Improved	Products	and	Services, and	There	Can	Be	No	Assurance	That	We	Will	Continue	to	Successfully	Introduce	New	Products	and	Services

The	success	of	new	and	improved	products	and	services	depends	on	their	initial	and	continued	acceptance	by	our	customers.	Our	businesses	are affected	by	varying	degrees	of	technological	change	and	corresponding	shifts	in	customer	demand,	which	result	in	unpredictable	product	transitions, shortened	life	cycles	and	increased	importance	of	being	first	to	market	with	new	products	and	services.	We	may	experience	difficulties	or	delays	in	the research,	development,	production	and/or	marketing	of	new	products	and	services	which	may	negatively	impact	our	operating	results	and	prevent	us	from recouping	or	realizing	a	return	on	the	investments	required	to	continue	to	bring	new	products	and	services	to	market.

# If	We	Are	Unable	to	Defend	or	Protect	Our	Intellectual	Property	Rights	the	Company's	Competitive	Position	Could	Be	Adversely	Affected

The	Company's	intellectual	property	rights	are	important	to	its	business	and	include	numerous	patents,	trademarks,	copyrights,	trade	secrets	and	other confidential	information.	This	intellectual	property	may	be	subject	to	challenge,	infringement,	invalidation	or	circumvention	by	third	parties.	Despite extensive	security	measures,	our	intellectual	property	may	be	subject	to	misappropriation	through	unauthorized	access	of	our	information	technology systems,	employee	theft,	or	other	acts	of	industrial	espionage.	Should	the	Company	be	unable	to	adequately	defend	or	protect	its	intellectual	property,	it may	suffer	competitive	harm.

We	Engage	in	Acquisitions	and	Divestitures,	Which	Are	Subject	to	Domestic	and	Foreign	Regulatory	Requirements,	and	May	Encounter	Difficulties	in Integrating	and	Separating	These	Businesses	and	Therefore	We	May	Not	Realize	the	Anticipated	Benefits

We	regularly	seek	growth	through	strategic	acquisitions	as	well	as	evaluate	our	portfolio	for	potential	divestitures.	These	activities	require	favorable environments	to	execute	these	transactions,	and	we	may	encounter	difficulties	in	obtaining	the	necessary	regulatory	approvals	in	both	domestic	and foreign	jurisdictions.	In	2017	and	in	past	years,	we	have	made	various	acquisitions,	including	the	valves	&	controls	business,	and	entered	into	joint venture	arrangements	intended	to	complement	or	expand	our	business,	and	may	continue	to	do	so	in	the	future.	The	success	of	these	transactions	will depend	on	our	ability	to	integrate	assets	and	personnel	acquired	in	these	transactions	and	to	cooperate	with	our	strategic	partners.	We	may	encounter difficulties	in	integrating	acquisitions	with	our	operations	as	well	as	separating	divested	businesses,	and	in	managing	strategic	investments.	Furthermore, we	may	not	realize	the	degree,	or	timing,	of	benefits	we	anticipate	when	we	first	enter	into	a	transaction.	Any	of	the	foregoing	could	adversely	affect	our business	and	results	of	operations.

We	Use	a	Variety	of	Raw	Materials	and	Components	in	Our	Businesses,	and	Significant	Shortages	or	Price	Increases	Could	Increase	Our	Operating Costs	and	Adversely	Impact	the	Competitive	Positions	of	Our	Products

Our	major	requirements	for	raw	materials	include	steel,	copper,	cast	iron,	electronics,	rare	earth	metals,	aluminum,	brass	and,	to	a	lesser	extent,	plastics and	petroleum-based	chemicals.	The	Company	seeks	multiple	sources	of	supply	for	each	of	its	major	requirements	in	order	to	avoid	significant dependence	on	any	one	or	a	few	suppliers.	However,	the	supply	of	materials	or	other	items	could	be	disrupted	by	natural	disasters	or	other	events. Significant	shortages	or	price	increases	could	impact	the	prices	our	affected	businesses	charge,	their	operating	costs	and	the	competitive	position	of	their products	and	services,	which	could	adversely	affect	our	results	of	operations.	While	we

monitor	market	prices	of	the	commodities	we	require	and	attempt	to	mitigate	price	exposure	through	hedging	activities,	this	risk	could	adversely	affect	our operating	results.

Our	Operations	Depend	on	Production	Facilities	Throughout	the	World,	a	Majority	of	Which	Are	Located	Outside	the	United	States	and	Subject	to Increased	Risks	of	Disrupted	Production	Causing	Delays	in	Shipments	and	Loss	of	Customers	and	Revenue

We	manage	businesses	with	manufacturing	facilities	worldwide,	a	majority	of	which	are	located	outside	the	United	States,	and	also	source	certain materials	internationally.	Emerging	market	sales	represent	over	one-third	of	total	sales	and	serving	a	global	customer	base	requires	that	we	place	more materials	sourcing	and	production	in	emerging	markets	to	capitalize	on	market	opportunities	and	maintain	our	best-cost	position.	Our	and	our	suppliers' international	production	facilities	and	operations	could	be	disrupted	by	a	natural	disaster,	labor	strife,	war,	political	unrest,	terrorist	activity	or	public	health concerns,	particularly	in	emerging	countries	that	are	not	well-equipped	to	handle	such	occurrences.

Our	manufacturing	facilities	abroad	are	dependent	on	the	stability	of	governments	and	business	conditions	and	may	be	more	susceptible	to	changes	in laws,	policies	and	regulation	in	host	countries,	as	well	as	economic	and	political	upheaval,	than	our	domestic	facilities.	These	facilities	face	increased risks	of	nationalization	as	well	as	operational	disruptions	which	could	cause	delays	in	shipments	of	products	and	the	loss	of	sales	and	customers,	and insurance	proceeds	may	not	adequately	compensate	us.

Our	Substantial	Sales	Both	in	the	U.S.	and	Abroad	Subject	Us	to	Economic	Risk	as	Our	Results	of	Operations	May	Be	Adversely	Affected	by	Changes	in Local	Government	Regulations	and	Policies	and	Foreign	Currency	Fluctuations

We	sell,	manufacture,	engineer	and	purchase	products	globally,	with	significant	sales	in	both	mature	and	emerging	markets.	We	expect	sales	in	non-U.S. markets	to	continue	to	represent	a	significant	portion	of	our	total	sales.	Our	U.S.	and	international	operations	are	subject	to	changes	in	local	government regulations	and	policies,	including	those	related	to	tariffs	and	trade	barriers,	investments,	taxation,	exchange	controls	and	repatriation	of	earnings,	which could	adversely	affect	our	results.	In	addition,	changes	in	the	relative	values	of	currencies	occur	from	time	to	time	and	have	affected	our	operating	results and	could	do	so	in	the	future.	While	we	monitor	our	exchange	rate	exposures	and	attempt	to	mitigate	this	exposure	through	hedging	activities,	this	risk could	adversely	affect	our	operating	results.

# Recessions,	Adverse	Market	Conditions	or	Downturns	in	End	Markets	We	Serve	May	Negatively	Affect	Our	Operations

In	the	past,	our	operations	have	been	exposed	to	significant	volatility	due	to	changes	in	general	economic	conditions,	recessions	or	adverse	conditions	in the	end	markets	we	serve.	In	the	future,	similar	changes	could	adversely	impact	overall	sales,	operating	results	and	cash	flows.	Moreover,	during economic	downturns	we	may	undertake	more	extensive	restructuring	actions	and	incur	higher	costs.	If	our	restructuring	actions	are	not	sufficiently effective,	we	may	not	be	able	to	achieve	our	anticipated	operating	results.	In	addition,	these	factors	could	lead	to	impairment	charges	for	goodwill	or	other long-lived	assets.

Access	to	Funding	Through	the	Capital	Markets	Is	Essential	to	the	Execution	of	Our	Business	Plan	and	if	We	Are	Unable	to	Maintain	Such	Access	We Could	Experience	a	Material	Adverse	Effect	on	Our	Business	and	Financial	Results

Our	ability	to	invest	in	our	businesses,	make	strategic	acquisitions	and	refinance	maturing	debt	obligations	requires	access	to	the	capital	markets	and sufficient	bank	credit	lines	to	support	short-term	borrowings.	Volatility	in	the	capital	markets	may	increase	costs	associated	with	issuing	commercial	paper or	other	debt	instruments,	or	affect	the	Company's	ability	to	access	those	markets.	If	we	are	unable	to	continue	to	access	the	capital	markets,	we	could experience	a	material	adverse	effect	on	our	business	and	financial	results.	Additionally,	if	our	customers,	suppliers	or	financial	institutions	are	unable	to access	the	capital	markets	to	meet	their	commitments	to	the	Company,	our	business	could	be	adversely	impacted.

# Our	Business	Success	Depends	on	the	Ability	to	Attract,	Develop	and	Retain	Key	Personnel

Our	success	depends	in	part	on	the	efforts	and	abilities	of	our	management	and	key	employees.	Their	skills,	experience	and	industry	knowledge significantly	benefit	our	operations	and	performance.	The	failure	to	attract,	develop	and	retain	highly	qualified	personnel	could	adversely	affect	our business	and	operating	results.

# Security	Breaches	or	Disruptions	of	Our	Information	Technology	Systems	Could	Adversely	Affect	Our	Business

The	Company	utilizes	a	variety	of	information	technology	systems	to	manage	and	operate	its	businesses.		Despite	the	implementation	of	extensive security	measures	(including	access	controls,	data	encryption,	vulnerability	assessments,	continuous	monitoring,	and	maintenance	of	backup	and protective	systems),	the	Company's	information	technology	systems	are	potentially	vulnerable	to	unauthorized	access,	computer	viruses,	cyberattack	and other	events,	ranging	from	individual	attempts	to	advanced	persistent	threats.	Although	considered	unlikely,	it	is	possible	a	security	breach	could	result	in theft	of	trade	secrets	or	other	intellectual	property	or	disclosure	of	confidential	customer,	supplier	or	employee	information.	Should	the	Company	be unable	to	prevent	security	breaches,	disruptions	could	have	an	adverse	effect	on	our	operations,	as	well	as	expose	the	Company	to	litigation,	increased cybersecurity	protection	costs	and	reputational	damage.

# We	Are	Subject	to	Litigation	and	Environmental	Regulations	That	Could	Adversely	Impact	Our	Operating	Results

We	are,	and	may	in	the	future	be,	a	party	to	a	number	of	legal	proceedings	and	claims,	including	those	involving	intellectual	property,	product	liability	and environmental	matters,	several	of	which	claim,	or	may	in	the	future	claim,	significant	damages.	Given	the	inherent	uncertainty	of	litigation,	we	can	offer no	assurance	that	existing	litigation	or	a	future	adverse	development	will	not	have	a	material	adverse	impact.	We	also	are	subject	to	various	laws	and regulations	relating	to	environmental	protection	and	the	discharge	of	materials	into	the	environment,	and	we	could	incur	substantial	costs	as	a	result	of the	noncompliance	with	or	liability	for	cleanup	or	other	costs	or	damages	under	environmental	laws.

# ITEM	1B	-	UNRESOLVED	STAFF	COMMENTS

None.

# ITEM	2	-	PROPERTIES

At	September	30,	2017,	the	Company	had	approximately	200	manufacturing	locations	worldwide,	of	which	approximately	130	were	located	outside	the United	States,	primarily	in	Europe	and	Asia,	and	to	a	lesser	extent	in	Canada	and	Latin	America.	Manufacturing	locations	by	business	are:	Automation Solutions,	150,	and	Commercial	&	Residential	Solutions,	50,	including	40	in	the	Climate	Technologies	segment	and	10	in	the	Tools	&	Home	Products segment.	The	majority	of	the	locations	are	owned,	with	the	remainder	occupied	under	lease.	The	Company	considers	its	facilities	suitable	and	adequate for	the	purposes	for	which	they	are	used.

# ITEM	3	-	LEGAL	PROCEEDINGS

The	Company	and	its	subsidiaries	are	party	to	various	legal	proceedings,	some	of	which	claim	substantial	amounts	of	damages.	It	is	not	possible	to predict	the	outcome	of	these	matters,	but	historically	the	Company	has	been	largely	successful	in	both	prosecuting	and	defending	claims	and	lawsuits.

The	Company	believes	a	material	adverse	impact	of	any	pending	litigation	is	unlikely.	Nevertheless,	given	the	uncertainties	of	litigation,	a	remote possibility	exists	that	litigation	could	have	a	material	adverse	impact	on	the	Company.

Information	regarding	legal	proceedings	is	set	forth	in	Note	13.

# ITEM	4	-	MINE	SAFETY	DISCLOSURES

Not	applicable.

# EXECUTIVE	OFFICERS	OF	THE	REGISTRANT

The	following	sets	forth	certain	information	as	of	 November	20,	2017	with	respect	to	the	Company's	executive	officers.	The	Fiscal	Year	column	indicates the	first	year	the	executive	served	as	an	officer	of	the	Company.	These	officers	have	been	elected	or	appointed	to	terms	which	expire	February	6,	2018:

*Also	chairman	of	the	Executive	Committee	of	the	Board	of	Directors.

There	are	no	family	relationships	among	any	of	the	executive	officers	and	directors.

David	N.	Farr	has	been	Chief	Executive	Officer	since	October	2000,	was	appointed	Chairman	of	the	Board	in	September	2004,	and	also	served	as President	from	November	2005	to	October	2010.

Frank	J.	Dellaquila	was	appointed	Senior	Executive	Vice	President	in	November	2016,	Executive	Vice	President	in	November	2012	and	Senior	Vice President	and	Chief	Financial	Officer	in	February	2010.

Edward	L.	Monser	was	appointed	President	in	October	2010	and	was	Chief	Operating	Officer	from	November	2001	to	January	2015.

Edgar	M.	Purvis	was	appointed	Chief	Operating	Officer	in	January	2015.	Prior	to	his	current	position,	Mr.	Purvis	was	Executive	Vice	President responsible	for	the	Climate	Technologies	business	segment	from	2008	to	January	2015.

Steven	J.	Pelch	was	appointed	Executive	Vice	President	in	November	2016,	Senior	Vice	President	in	November	2015	and	Vice	President	-	Organization Planning	and	Development	in	November	2014.	Prior	to	that,	Mr.	Pelch	was	Vice	President	-	Organization	Planning	from	October	2012	to	November	2014 and	Vice	President	-	Planning	from	October	2005	to	October	2012.

Robert	T.	Sharp	was	appointed	Executive	President	-	Commercial	&	Residential	Solutions	in	October	2016.	Prior	to	his	current	position,	Mr.	Sharp	was Executive	Vice	President	-	Commercial	&	Residential	Solutions	from	February	2016	through	October	2016,	Executive	Vice	President	-	Climate Technologies	from	February	2015	through	February	2016,	Vice	President	-	Profit	Planning	from	2013	through	January	2015	and	President	-	Emerson Process	Management	Europe	from	2009	through	2013.

Michael	H.	Train	was	appointed	Executive	President	-	Automation	Solutions	in	October	2016.	Prior	to	his	current	position,	Mr.	Train	was	Executive	Vice President	-	Automation	Solutions	from	May	2016	through	October	2016	and	President	of	Global	Sales	for	Emerson	Process	Management	from	2010 through	May	2016.

Sara	Y.	Bosco	was	appointed	to	the	position	of	Senior	Vice	President,	Secretary	and	General	Counsel	in	May	2016.	Prior	to	her	current	position,	Ms. Bosco	was	President,	Emerson	Asia-Pacific	from	2008	through	May	2016.

Mark	J.	Bulanda	was	appointed	Senior	Vice	President	in	November	2016	and	Vice	President	-	Acquisition	Planning	and	Development	in	May	2016.	Prior to	his	current	position,	Mr.	Bulanda	was	Executive	Vice	President	-	Emerson	Industrial	Automation	from	2012	through	May	2016	and	President	of	Control Techniques	from	2010	through	2012.

Katherine	Button	Bell	was	appointed	Senior	Vice	President	in	November	2016	and	Vice	President	and	Chief	Marketing	Officer	in	1999.

Richard	J.	Schlueter	was	appointed	Controller	in	October	2011.	He	has	been	Vice	President	Accounting	since	1999	and	was	appointed	Chief	Accounting Officer	in	February	2003.

On	November	9,	2017,	the	Company	announced	that	Mr.	Purvis	will	retire	as	Executive	Vice	President	and	Chief	Operating	Officer	on	December	31, 2017,	and	that	Mr.	Pelch	will	be	appointed	as	the	Company's	Chief	Operating	Officer	and	Executive	Vice	President	Organizational	Development	as	of	that same	date.

# PART	II

# ITEM	5	-	MARKET	FOR	REGISTRANT'S	COMMON	EQUITY,	RELATED	STOCKHOLDER	MATTERS	AND	ISSUER	PURCHASES	OF	EQUITY SECURITIES

Information	regarding	the	market	for	the	Company's	common	stock,	quarterly	market	price	ranges	and	dividend	payments	is	set	forth	in	Note	20.	There were	approximately	19,066	stockholders	of	record	at	September	30,	2017.

In	November	2015,	the	Board	of	Directors	authorized	the	purchase	of	up	to	70	million	shares,	and 56.9	million	shares	remain	available.	No	shares	were purchased	in	the	fourth	quarter	of	2017.

# ITEM	6	-	SELECTED	FINANCIAL	DATA

# Years	ended	September	30

(dollars	in	millions,	except	per	share	amounts)

|  | 2013	(a) | 2014 | 2015	(b) | 2016 | 2017 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Net\tsales | $17,935 | 17,733 | 16,249 | 14,522 | 15,264 |
| Earnings\tfrom\tcontinuing\toperations\t–\tcommon\n\t\t\tstockholders | $1,506 | 2,201 | 2,517 | 1,590 | 1,643 |
| Basic\tearnings\tper\tcommon\tshare\tfrom\tcontinuing\n\t\t\toperations | $2.09 | 3.13 | 3.72 | 2.46 | 2.54 |
| Diluted\tearnings\tper\tcommon\tshare\tfrom\tcontinuing\n\t\t\toperations | $2.08 | 3.11 | 3.71 | 2.45 | 2.54 |
| Cash\tdividends\tper\tcommon\tshare | $1.64 | 1.72 | 1.88 | 1.90 | 1.92 |
| Long-term\tdebt | $4,055 | 3,559 | 4,289 | 4,051 | 3,794 |
| Total\tassets | $24,711 | 24,177 | 22,088 | 21,732 | 19,589 |

(a)	Includes	goodwill	impairment	and	income	tax	charges	of	$566	million	and	$0.78	per	share.

(b)	Includes	gains	from	divestitures	of	businesses	of	$611	million	and	$0.90	per	share.

See	Notes	3	and	4	for	information	regarding	the	Company's	acquisition	and	divestiture	activities	for	the	last	three	years.

# 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	our	strategic	repositioning	actions,	other	acquisitions	or	divestitures,	changes	in	reporting	segments,	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	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	and	income	taxes)	and	total	segment	EBIT,	and	EBIT	margin	(defined	as	EBIT	divided	by	net	sales) and	total	segment	EBIT	margin,	are	commonly	used	financial	measures	that	exclude	the	impact	of	financing	on	the	capital	structure	and	income	taxes.	All these	measures	are	utilized	by	management	to	evaluate	performance	(U.S.	GAAP	measures:	pretax	earnings	or	pretax	profit	margin ).

Earnings,	earnings	per	share,	return	on	common	stockholders'	equity	and	return	on	total	capital	excluding	certain	gains	and	losses,	impairments,	costs, impacts	of	the	strategic	portfolio	repositioning	actions,	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	earnings, earnings	per	share,	return	on	common	stockholders'	equity	and	return	on	total	capital	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,	return	on	common	stockholders' equity,	return	on	total	capital).

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	measure:	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	the	three	years	ended	September	30,	2017	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	control.	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.	The	design	of this	system	recognizes	that	errors	or	irregularities	may	occur	and	that	estimates	and	judgments	are	required	to	assess	the	relative	cost	and	expected benefits	of	the	controls.	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,	2017.

The	valves	&	controls	business	was	acquired	on	April	28,	2017.	Management	has	excluded	this	business	from	its	assessment	of	internal	control	over financial	reporting	as	of	September	30,	2017.	Valves	&	controls'	total	assets	and	revenues	excluded	from	the	assessment	represented	approximately	20 percent	and	4	percent,	respectively,	of	the	Company's	related	consolidated	financial	statement	amounts	as	of	and	for	the	year	ended	September	30, 2017.

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.

David	N.	Farr

Chairman	of	the	Board

and	Chief	Executive	Officer

/s/	Frank	J.	Dellaquila

Frank	J.	Dellaquila

Senior	Executive	Vice	President

and	Chief	Financial	Officer

# Results	of	Operations

|  | 2015 | 2016 | 2017 | 16	vs.	15 | 17	vs.	16 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Net\tsales | $16,249 | 14,522 | 15,264 | (11)% | 5\t% |
| Gross\tprofit | $7,008 | 6,262 | 6,404 | (11)% | 2\t% |
| Percent\tof\tsales | 43.1% | 43.1% | 42.0% |  |  |
| SG&A | $3,735 | 3,464 | 3,618 |  |  |
| Percent\tof\tsales | 23.0% | 23.8% | 23.7% |  |  |
| Gains\ton\tdivestitures\tof\tbusinesses | $1,039 | — | — |  |  |
| Other\tdeductions,\tnet | $330 | 294 | 286 |  |  |
| Interest\texpense,\tnet | $175 | 188 | 165 |  |  |
| Earnings\tfrom\tcontinuing\toperations |  |  |  |  |  |
| \t\tbefore\tincome\ttaxes | $3,807 | 2,316 | 2,335 | (39)% | 1\t% |
| Percent\tof\tsales | 23.4% | 16.0% | 15.3% |  |  |
| Earnings\tfrom\tcontinuing\toperations |  |  |  |  |  |
| \t\tcommon\tstockholders | $2,517 | 1,590 | 1,643 | (37)% | 3\t% |
| Net\tearnings\tcommon\tstockholders | $2,710 | 1,635 | 1,518 | (40)% | (7)% |
| Percent\tof\tsales | 16.7% | 11.3% | 9.9% |  |  |
| Diluted\tEPS\t–\tEarnings\tfrom\tcontinuing\toperations | $3.71 | 2.45 | 2.54 | (34)% | 4\t% |
| Diluted\tEPS\t–\tNet\tearnings | $3.99 | 2.52 | 2.35 | (37)% | (7)% |
| Return\ton\tcommon\tstockholders'\tequity | 29.8% | 20.9% | 18.6% |  |  |
| Return\ton\ttotal\tcapital | 22.8% | 15.5% | 15.3% |  |  |

# OVERVIEW

In	2017,	Emerson	successfully	completed	the	previously	announced	strategic	actions	to	streamline	its	portfolio	and	drive	growth	in	its	core	businesses. These	actions	resulted	in	the	divestiture	of	the	network	power	systems,	and	power	generation,	motors	and	drives	businesses,	which	are	reported	in discontinued	operations	for	all	years	presented.	Additionally,	on	April	28,	2017,	the	Company	completed	the	acquisition	of	Pentair's	valves	&	controls business.

Sales	from	continuing	operations	for	2017	were	$15.3	billion,	an	increase	of	$742	million,	or	5	percent,	supported	by	the	acquisition	of	the	valves	& controls	business,	which	added	4	percent.	Underlying	sales	were	up	1	percent	compared	with	the	prior	year	reflecting	improving	economic	conditions	and industrial	end	markets.

Earnings	from	continuing	operations	common	stockholders	were	 $1,643	million	in	2017,	up	3	percent	compared	with	prior	year	earnings	of	 $1,590 million.	Diluted	earnings	per	share	from	continuing	operations	were	 $2.54,	up	4	percent	versus	$2.45	per	share	in	2016.	Earnings	per	share	from continuing	operations	were	$2.64,	up	8	percent,	excluding	first	year	acquisition	accounting	charges	of	$0.10	per	share	related	to	the	valves	&	controls business	which	deducted	4	percentage	points.

Discontinued	operations	in	2017	was	a	net	loss	of	$125	million,	$0.19	per	share,	reflecting	the	impact	of	completing	the	divestitures.	Discontinued operations	income	in	2016	was	$45	million,	$0.07	per	share.	See	Note	4	for	further	information.

Net	earnings	common	stockholders,	which	includes	the	impact	of	discontinued	operations,	were	 $1,518	million	in	2017,	down	7	percent	compared	with prior	year	earnings	of	$1,635	million.	Diluted	earnings	per	share	were	$2.35,	down	7	percent	versus	$2.52	per	share	in	2016.

Sales	increased	in	both	businesses.	Automation	Solutions	sales	increased	5	percent	due	to	the	acquisition	of	the	valves	&	controls	business,	while underlying	sales	decreased	slightly,	reflecting	weakness	in	energy-related	markets	which	began	to	improve	in	the	second	half	of	the	year.	Commercial	& Residential	Solutions	sales	increased	5	percent	reflecting	favorable	conditions	in	HVAC,	refrigeration	and	construction	related	markets.

The	Company	generated	operating	cash	flow	from	continuing	operations	of	 $2.7	billion	in	2017,	an	increase	of	$191	million,	or	8	percent.	Total	operating cash	flow	of	$1.9	billion	was	reduced	by	cash	used	for	discontinued	operations	of	 $778	million	to	execute	the	repositioning,	primarily	for	income	taxes	on completion	of	the	divestitures	and	repatriation	of	cash.

# NET	SALES

Net	sales	for	2017	were	$15.3	billion,	an	increase	of	$742	million,	or	5	percent	compared	with	2016.	Underlying	sales,	which	exclude	foreign	currency translation,	acquisitions	and	divestitures,	increased	1	percent	($168	million)	on	higher	volume	and	slightly	lower	price.	Acquisitions	added	 4	percent	($628 million)	while	foreign	currency	translation	subtracted	 $54	million.	Underlying	sales	increased	2	percent	in	the	U.S.	and	were	flat	internationally.	Sales increased	$441	million	in	Automation	Solutions	and	$302	million	in	Commercial	&	Residential	Solutions.

Net	sales	for	2016	were	$14.5	billion,	a	decrease	of	$1,727	million,	or	11	percent	compared	with	2015.	Underlying	sales	decreased	7	percent	($1,046 million)	on	6	percent	lower	volume	and	1	percent	lower	price.	Foreign	currency	translation	subtracted	 2	percent	($266	million)	and	divestitures,	net	of acquisitions	subtracted	2	percent	($415	million).	Underlying	sales	decreased	5	percent	in	the	U.S.	and	8	percent	internationally.	Sales	in	Automation Solutions	decreased	$1,176	million	and	Commercial	&	Residential	solutions	decreased	 $76	million.

# INTERNATIONAL	SALES

Emerson	is	a	global	business	with	international	sales	representing	52	percent	of	total	sales,	including	U.S.	exports.	Although	economic	conditions	are currently	soft	worldwide,	the	Company	generally	expects	faster	economic	growth	in	emerging	markets	in	Asia,	Latin	America,	Eastern	Europe	and	Middle East/Africa	in	the	future.

International	destination	sales,	including	U.S.	exports,	increased	5	percent,	to	$8.0	billion	in	2017,	reflecting	increases	in	both	the	Automation	Solutions and	Commercial	&	Residential	Solutions	businesses.	U.S.	exports	of	$927	million	were	up	4	percent	compared	with	2016,	reflecting	increases	in	both Automation	Solutions,	which	benefited	from	the	valves	&	controls	acquisition,	and	Commercial	&	Residential	Solutions.	Underlying	international destination	sales	were	flat,	as	foreign	currency	translation	had	a	1	percent	unfavorable	impact,	while	acquisitions	had	a	6	percent	favorable	impact	on	the comparison.	Underlying	sales	were	down	1	percent	in	Europe	and	up	6	percent	in	Asia	(China	up	15	percent).	Underlying	sales	decreased	12	percent	in Latin	America,	3	percent	in	Canada	and	6	percent	in	Middle	East/Africa.	Origin	sales	by	international	subsidiaries,	including	shipments	to	the	U.S.,	totaled $7.2	billion	in	2017,	up	6	percent	compared	with	2016,	primarily	reflecting	the	valves	&	controls	acquisition.

International	destination	sales,	including	U.S.	exports,	decreased	12	percent,	to	$7.6	billion	in	2016,	reflecting	decreases	in	all	segments,	partially	due	to divestitures.	U.S.	exports	of	$888	million	were	down	25	percent	compared	with	2015,	reflecting	reduced	spending	by	global	oil	and	gas	customers, weakness	in	industrial	spending	and	the	stronger	U.S.	dollar.	Underlying	international	destination	sales	declined	8	percent,	as	foreign	currency	translation and	divestitures	had	a	3	percent	and	a	1	percent	unfavorable	impact,	respectively,	on	the	comparison.	Underlying	sales	were	up	2	percent	in	Europe	and decreased	10	percent	in	both	Asia	and	Latin	America.	Sales	decreased	21	percent	in	Canada	and	15	percent	in	Middle	East/Africa.	Weakness	in	energy- related	and	industrial	end	markets	and	global	economic	uncertainty	challenged	growth	in	these	areas.	Origin	sales	by	international	subsidiaries,	including shipments	to	the	U.S.,	totaled	$6.8	billion	in	2016,	down	10	percent	compared	with	2015,	reflecting	the	weakness	in	industrial	capital	spending, unfavorable	foreign	currency	translation	and	divestitures.

# ACQUISITIONS	AND	DIVESTITURES

The	Company	is	currently	pursuing	a	potential	acquisition	of	Rockwell	Automation,	Inc.	On	November	16,	2017,	the	Company	announced	that	it	proposed to	acquire	Rockwell	for	$29	billion,	or	$225	per	share,	consisting	of	$135	per	share	in	cash,	financed	primarily	with	newly	issued	debt,	and	$90	per	share in	Emerson	stock,	which	would	result	in	Rockwell	shareholders	owning	approximately	22	percent	of	the	combined	company.	Rockwell	has	not	engaged with	the	Company	on	this	or	previous	proposals.	Rockwell	had	fiscal	2017	sales	of	approximately	$6.3	billion.	See	Item	1A	-	"Risk	Factors"	for	additional information.

See	information	under	"Discontinued	Operations"	for	a	discussion	of	the	Company's	divestitures	related	to	its	portfolio	repositioning	actions.

On	April	28,	2017,	the	Company	completed	the	acquisition	of	Pentair's	valves	&	controls	business	for	$2.960	billion,	net	of	cash	acquired	of	$207	million, subject	to	certain	post-closing	adjustments.	This	business,	with	annualized	sales	of	approximately	$1.4	billion,	is	a	manufacturer	of	control,	isolation	and pressure	relief	valves	and	actuators,	and	complements	the	Valves,	Actuators	&	Regulators	product	offering	within	Automation	Solutions.	The	Company also	acquired	two	smaller	businesses	in	the	Automation	Solutions	segment.	Total	cash	paid	for	all	businesses	was	$3.0	billion,	net	of	cash	acquired.	See Note	3.

On	October	2,	2017,	the	Company	sold	its	residential	storage	business	for	$200	million	in	cash,	subject	to	post-closing	adjustments,	and	expects	to recognize	a	loss	of	approximately	$40	million	in	2018	due	to	income	taxes	resulting	from	nondeductible	goodwill.	The	Company	expects	to	realize approximately	$140	million	in	after-tax	cash	proceeds	from	the	sale.	This	business,	with	sales	of	$298	million	and	pretax	earnings	of	$15	million	in	2017, is	a	leader	in	home	organization	and	storage	systems,	and	was	reported	within	the	Tools	&	Home	Products	segment.

The	Company	acquired	six	businesses	in	2016,	four	in	Automation	Solutions	and	two	in	Climate	Technologies.	Total	cash	paid	for	these	businesses	was $132	million,	net	of	cash	acquired.	Annualized	sales	for	these	businesses	were	approximately	$51	million	in	2016.	The	Company	completed	eight acquisitions	in	2015,	seven	in	Automation	Solutions	and	one	in	Tools	&	Home	Products,	which	had	combined	annualized	sales	of	approximately	$115 million.	Total	cash	paid	for	all	businesses	was	 $324	million,	net	of	cash	acquired.

In	January	2015,	the	Company	completed	the	sale	of	its	mechanical	power	transmission	solutions	business	for	 $1.4	billion,	and	recognized	a	pretax	gain from	the	transaction	of	$939	million	($532	million	after-tax,	$0.78	per	share).	Proceeds	from	the	divestiture	were	used	for	share	repurchase.	This business	was	previously	reported	in	the	former	Industrial	Automation	segment,	and	had	partial	year	sales	of	$189	million	in	2015	and	related	pretax earnings	of	$21	million.	Power	transmission	solutions	designs	and	manufactures	market-leading	couplings,	bearings,	conveying	components	and	gearing and	drive	components,	and	provides	supporting	services	and	solutions.

On	September	30,	2015,	the	Company	sold	its	InterMetro	commercial	storage	business	for	 $411	million	in	cash	and	recognized	a	pretax	gain	from	the transaction	of	$100	million	($79	million	after-tax,	$0.12	per	share).	This	business	was	previously	reported	in	the	former	Commercial	&	Residential Solutions	segment,	and	had	annual	sales	of	$288	million	and	pretax	earnings	of	$42	million	in	2015.	InterMetro	is	a	leading	manufacturer	and	supplier	of storage	and	transport	products	in	the	food	service,	commercial	products	and	health	care	industries.

# COST	OF	SALES

Cost	of	sales	for	2017	were	$8.9	billion,	an	increase	of	$600	million	compared	with	$8.3	billion	in	2016.	The	increase	reflects	the	acquisition	of	the	valves &	controls	business	and	higher	volume,	partially	offset	by	cost	reduction	actions	and	the	impact	of	foreign	currency	translation.	Gross	profit	was	$6.4 billion	in	2017	compared	to	$6.3	billion	in	2016.	Gross	margin	of	 42.0	percent	reflected	dilution	of	1.2	percentage	points	due	to	the	valves	&	controls operations	and	first	year	acquisition	accounting	charges	of	$74	million	related	to	inventory.	Slightly	lower	price	also	contributed	to	the	decline,	while savings	from	cost	reduction	actions	partially	offset	these	decreases.	Gross	profit	margin	was	43.1	percent	in	2016.

Cost	of	sales	for	2016	were	$8.3	billion,	a	decrease	of	$981	million	compared	with	$9.2	billion	in	2015,	primarily	due	to	reduced	sales	volume,	the	impact of	foreign	currency	translation	($186	million)	and	prior	year	divestitures	($273	million).	Gross	profit	was	$6.3	billion	in	2016	compared	with	$7.0	billion	in 2015.	Gross	margin	of	 43.1	percent	was	flat	compared	with	2015,	as	savings	from	cost	reduction	and	containment	actions	were	offset	by	deleverage	on lower	volume	and	unfavorable	mix.

# SELLING,	GENERAL	AND	ADMINISTRATIVE	EXPENSES

Selling,	general	and	administrative	(SG&A)	expenses	of	 $3.6	billion	in	2017	increased	$154	million	compared	with	2016,	primarily	due	to	the	valves	& controls	acquisition.	Savings	from	cost	reduction	actions	and	lower	incentive	stock	compensation	of	$35	million,	reflecting	the	impact	of	changes	in	the stock	price,	were	partially	offset	by	higher	other	costs.	SG&A	as	a	percent	of	sales	of	23.7	percent	decreased	0.1	percentage	points	compared	with	2016.

SG&A	expenses	of	$3.5	billion	in	2016	decreased	$271	million	compared	with	2015.	The	decrease	reflects	savings	from	cost	reduction	actions,	reduced costs	from	lower	sales	volume,	and	prior	year	divestitures	($137	million),	partially	offset	by	higher	incentive	stock	compensation	of	$121	million.	SG&A	as a	percent	of	sales	of	23.8	percent	increased	0.8	percent	in	2016,	reflecting	deleverage	on	lower	sales	volume	and	higher	incentive	stock	compensation, primarily	due	to	changes	in	the	stock	price	and	overlap	of	awards,	partially	offset	by	savings	from	restructuring	actions.

# GAINS	ON	DIVESTITURES	OF	BUSINESSES

In	2015,	the	Company	sold	its	power	transmission	solutions	and	commercial	storage	businesses	and	recorded	pretax	gains	of	$939	million	($532	million after-tax,	$0.78	per	share)	and	$100	million	($79	million	after-tax,	$0.12	per	share),	respectively.	See	Note	3.

# OTHER	DEDUCTIONS,	NET

Other	deductions,	net	were	$286	million	in	2017,	a	decrease	of	$8	million	compared	with	2016.	The	decrease	primarily	reflects	favorable	foreign	currency transactions	comparisons	of	$78	million	(unfavorable	in	the	prior	year)	and	lower	restructuring	expense	of	 $18	million.	These	decreases	were substantially	offset	by	intangibles	and	backlog	amortization	related	to	the	valves	&	controls	acquisition	of	$29	million	and	$19	million,	respectively,	and higher	acquisition/divestiture	costs	of	$24	million.	Additionally,	2016	results	included	a	$21	million	gain	from	payments	received	related	to	dumping	duties. See	Note	5.

Other	deductions,	net	were	$294	million	in	2016,	a	$36	million	decrease	from	2015	primarily	due	to	lower	restructuring	costs	of	 $42	million,	decreased litigation	costs	of	$30	million	and	a	$21	million	gain	on	payments	received	related	to	dumping	duties.	The	decrease	in	other	deductions	was	partially	offset by	unfavorable	foreign	currency	transactions	of	$67	million.

# INTEREST	EXPENSE,	NET

Interest	expense,	net	was	$165	million,	$188	million	and	$175	million	in	2017,	2016	and	2015,	respectively.	The	decrease	of	$23	million	in	2017	reflects the	maturity	of	long-term	debt	with	relatively	higher	interest	rates	and	higher	interest	income.

# INCOME	TAXES

Income	taxes	were	$660	million,	$697	million	and	$1,267	million	for	2017,	2016	and	2015,	respectively,	resulting	in	effective	tax	rates	of	 28	percent,	30 percent	and	33	percent	in	2017,	2016	and	2015,	respectively.	The	2	percentage	point	decrease	versus	the	prior	year	is	largely	due	to	tax	benefits	from restructuring	a	foreign	subsidiary.	The	3	percentage	point	higher	rate	in	2015	was	due	to	taxes	on	the	gains	from	the	divestitures	of	the	power transmission	solutions	and	commercial	storage	businesses.

# EARNINGS	FROM	CONTINUING	OPERATIONS

Earnings	from	continuing	operations	attributable	to	common	stockholders	in	 2017	were	$1,643	million,	up	3	percent	compared	with	2016,	and	diluted earnings	per	share	were	$2.54	in	2017,	up	4	percent.	Valves	&	controls	reduced	both	comparisons	by	6	percentage	points,	or 	$97	million,	$0.15	per share,	including	restructuring	expense,	intangibles	amortization,	and	first	year	pretax	acquisition	accounting	charges	related	to	inventory	and	backlog	of $93	million	($65	million	after-tax,	$0.10	per	share)	which	are	reported	in	Corporate	and	other.	Earnings	increased	$66	million	in	the	Automation	Solutions segment	in	2017	and	$72	million	in	Commercial	&	Residential	Solutions.	See	the	Business	discussion	that	follows	and	Note	18.

Earnings	from	continuing	operations	attributable	to	common	stockholders	in	 2016	were	$1,590	million,	down	37	percent	compared	with	2015,	and	diluted earnings	per	share	were	$2.45,	down	34	percent.	Divestiture	gains	in	the	prior	year	negatively	impacted	earnings	from	continuing	operations	and earnings	per	share	comparisons	by	20	and	21	percentage	points,	respectively.	In	2016,	earnings	decreased	$390	million	in	the	Automation	Solutions segment	and	increased	$87	million	in	Commercial	&	Residential	Solutions.

On	November	30,	2016,	the	Company	completed	the	sale	of	its	network	power	systems	business	for	$4.0	billion	in	cash	and	retained	a	subordinated interest	in	distributions,	contingent	upon	the	equity	holders	first	receiving	a	threshold	return	on	their	initial	investment.	This	business	comprised	the	former Network	Power	segment.	Additionally,	on	January	31,	2017,	the	Company	completed	the	sale	of	its	power	generation,	motors	and	drives	business	for approximately	$1.2	billion,	subject	to	post-closing	adjustments.	This	business	was	previously	reported	in	the	former	Industrial	Automation	segment.	The results	of	operations	for	these	businesses	were	reported	in	discontinued	operations	for	all	years	presented,	and	the	assets	and	liabilities	were	reflected	as held-for-sale.	See	Note	4	and	Item	1A	-	"Risk	Factors."

Discontinued	operations	was	a	net	loss	of	$125	million	in	2017,	and	income	of	$45	million	and	$193	million	for	2016	and	2015,	respectively.	In	2017,	the net	loss	of	$125	million,	$0.19	per	share,	included	an	after-tax	gain	on	the	divestiture	of	the	network	power	systems	business	of	$125	million,	a	$173 million	after-tax	loss	on	the	divestiture	of

the	power	generation,	motors	and	drives	business,	income	tax	expense	of	$109	million	for	repatriation	of	sales	proceeds,	and	lower	expense	of	$32 million	primarily	due	to	ceasing	depreciation	and	amortization	for	the	discontinued	businesses	held-for-sale.	Operating	cash	flow	used	by	discontinued operations	was	$778	million	for	2017,	which	primarily	included	payments	of	approximately	$700	million	for	income	taxes	on	completion	of	the	divestitures and	repatriation	of	cash,	cash	used	by	operations	and	other	costs.	Capital	expenditures	were	$20	million.

Discontinued	operations	income	of	$45	million,	$0.07	per	share,	in	2016	included	earnings	from	operations	of	$344	million	and	costs	to	execute	the portfolio	repositioning	of	$299	million.	These	costs	are	comprised	of	income	tax	expense	of	$143	million	for	repatriation	of	cash	from	these	businesses, reorganization	of	their	legal	structures	prior	to	sale,	and	basis	differences	for	book	and	tax,	as	well	as	costs	for	legal,	consulting,	investment	banking	and other	expenses	of	$77	million.	In	addition,	net	earnings	for	2016	included	a	loss	of	$103	million	to	write	down	the	power	generation,	motors	and	drives business	to	the	sales	price	less	costs	to	sell,	and	lower	expense	of	$24	million	due	to	ceasing	depreciation	and	amortization	for	the	discontinued businesses	held-for-sale.	Discontinued	operations	income	of	$193	million,	$0.28	per	share,	in	2015	included	earnings	from	operations	of	$245	million	and separation	costs	of	$52	million,	comprised	of	income	tax	expense	of	$42	million	and	fees	of	$10	million.	Operating	cash	flow	from	discontinued	operations was	$382	million	(net	of	payments	of	$179	million	for	separation	costs)	and	 $489	million	for	2016	and	2015,	respectively.	Capital	expenditures	were	$76 million	for	2016	and	$97	million	for	2015.

# NET	EARNINGS	AND	EARNINGS	PER	SHARE;	RETURNS	ON	EQUITY	AND	TOTAL	CAPITAL

Net	earnings	attributable	to	common	stockholders	in	 2017	were	$1,518	million,	down	7	percent	compared	with	2016,	and	diluted	earnings	per	share	were $2.35,	down	7	percent.	These	results	include	the	impact	of	discontinued	operations	discussed	above	which	negatively	impacted	net	earnings	and earnings	per	share	comparisons	10	and	11	percentage	points,	respectively.

Net	earnings	attributable	to	common	stockholders	in	 2016	were	$1,635	million,	down	40	percent	compared	with	2015,	and	diluted	earnings	per	share were	$2.52,	down	37	percent.	Net	earnings	and	earnings	per	share	comparisons	were	negatively	impacted	approximately	24	percentage	points	due	to divestiture	gains	of	$611	million	($0.90	per	share)	in	2015	and	discontinued	operations	in	both	years.

Return	on	common	stockholders'	equity	(net	earnings	attributable	to	common	stockholders	divided	by	average	common	stockholders'	equity)	was 18.6 percent	in	2017	compared	with	20.9	percent	in	2016	and	29.8	percent	in	2015.	Return	on	total	capital	was	 15.3	percent	in	2017	compared	with	15.5 percent	in	2016	and	22.8	percent	in	2015	(computed	as	net	earnings	attributable	to	common	stockholders	excluding	after-tax	net	interest	expense, divided	by	average	common	stockholders'	equity	plus	short-	and	long-term	debt	less	cash	and	short-term	investments).	Discontinued	operations	and	the acquisition	of	the	valves	&	controls	business	reduced	the	2017	return	on	common	stockholders'	equity	approximately	19	percentage	points	and	return	on total	capital	11	percentage	points.	Discontinued	operations	reduced	the	2016	return	on	common	stockholders'	equity	approximately	23	percentage	points and	return	on	total	capital	9	percentage	points.	For	2015,	the	combined	impact	of	the	divestiture	gains	and	discontinued	operations	reduced	the	return	on common	stockholders'	equity	approximately	12	percentage	points	and	return	on	total	capital	3	percentage	points.

# Business	Segments

Following	is	an	analysis	of	segment	results	for	2017	compared	with	2016,	and	2016	compared	with	2015.	The	Company	defines	segment	earnings	as earnings	before	interest	and	income	taxes.	In	connection	with	the	strategic	portfolio	repositioning	actions	completed	in	fiscal	2017,	the	Company	began reporting	three	segments:	Automation	Solutions,	and	Climate	Technologies	and	Tools	&	Home	Products	which	together	comprise	the	Commercial	& Residential	Solutions	business.	See	Note	18.

| (dollars	in	millions) | 2015 | 2016 | 2017 | 16	vs.	15 | 17	vs.	16 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Sales | $10,153 | 8,977 | 9,418 | (12)% | 5% |
| Earnings | $1,846 | 1,456 | 1,522 | (21)% | 5% |
| Margin | 18.2% | 16.2% | 16.2% |  |  |
| Sales\tby\tMajor\tProduct\tOffering |  |  |  |  |  |
| Measurement\t&\tAnalytical\tInstrumentation | $3,619 | 3,137 | 3,070 | (13)% | (2)% |
| Valves,\tActuators\t&\tRegulators | 2,559 | 2,137 | 2,668 | (16)% | 25\t% |
| Industrial\tSolutions | 1,779 | 1,621 | 1,680 | (9)% | 4\t% |
| Process\tControl\tSystems\t&\tSolutions | 2,196 | 2,082 | 2,000 | (5)% | (4)% |
| \t\t\t\t\tTotal | $10,153 | 8,977 | 9,418 | (12)% | 5\t% |

2017	vs.	2016	-	Automation	Solutions	reported	sales	of	$9.4	billion	in	2017,	an	increase	of	$441	million,	or	5	percent.	Underlying	sales	decreased	1 percent	($128	million)	on	lower	volume	and	slightly	lower	price.	The	valves	&	controls	acquisition	added	 7	percent	($603	million),	while	foreign	currency translation	subtracted	1	percent	($34	million).	Sales	for	Measurement	&	Analytical	Instrumentation	decreased	 2	percent	and	Process	Control	Systems	& Solutions	decreased	4	percent	due	to	weakness	in	energy-related	markets,	but	began	to	improve	in	the	second	half	of	the	year	as	oil	prices	stabilized. Valves,	Actuators	&	Regulators	increased	$531	million,	or	25	percent,	due	to	the	valves	&	controls	acquisition.	Industrial	Solutions	sales	increased $59 million,	or	4	percent,	on	improving	economic	conditions	and	industrial	end	markets,	especially	automotive.	Chemical,	power	and	life	sciences	were favorable.	Underlying	sales	increased	1	percent	in	the	U.S.,	were	down	2	percent	in	Europe	and	increased	1	percent	in	Asia	(China	up	9	percent).	Latin America	decreased	20	percent,	Canada	decreased	6	percent	and	Middle	East/Africa	was	down	6	percent.	Earnings	of	$1.5	billion	increased	$66	million from	the	prior	year.	Savings	from	cost	reduction	actions	and	favorable	foreign	currency	transactions	comparisons	of	$64	million	(unfavorable	in	the	prior year)	were	partially	offset	by	lower	volume,	and	$25	million	of	restructuring	expense	and	$29	million	of	intangibles	amortization	related	to	the	valves	& controls	acquisition.	Materials	cost	containment	offset	lower	price.	Margin	was	flat,	primarily	reflecting	the	benefit	from	cost	reduction	actions	offset	by dilution	from	the	valves	&	controls	acquisition	of	1.5	percentage	points.	Strong	order	rates	in	the	second	half	of	the	year	were	supported	by	broad-based momentum	across	end	markets	and	regions.	Going	forward,	strong	demand	for	MRO	and	mid-sized	projects	together	with	increasing	momentum	in international	markets	supports	the	outlook	for	solid	underlying	growth	in	fiscal	2018.

2016	vs.	2015	-	Automation	Solutions	reported	sales	of	$9.0	billion	in	2016,	a	decrease	of	$1.2	billion	or	12	percent.	Underlying	sales	decreased	10 percent	($1,027	million)	on	9	percent	lower	volume	and	1	percent	lower	price	as	global	oil	and	gas	customers	continued	to	curtail	spending	levels	in	a difficult	environment.	Foreign	currency	translation	had	a	2	percent	($206	million)	unfavorable	impact,	while	acquisitions	added	 $57	million.	Sales	for Measurement	&	Analytical	Instrumentation,	Valves,	Actuators	&	Regulators,	and	Process	Control	Systems	&	Solutions	decreased	13	percent,	16	percent and	5	percent,	respectively,	compared	with	the	prior	year.	These	decreases	reflect	lower	capital	and	operational	spending	by	global	oil	and	gas customers,	particularly	in	upstream	markets,	while	sales	growth	was	positive	in	life	sciences	and	power.	Industrial	Solutions	sales	decreased	9	percent on	weakness	in	industrial	spending	and	upstream	oil	and	gas	markets.	Underlying	sales	decreased	10	percent	in	the	U.S.,	were	up	2	percent	in	Europe and	decreased	13	percent	in	Asia	(China	down	16	percent).	Latin	America	decreased	13	percent,	Canada	was	down	26	percent	and	Middle	East/Africa decreased	18	percent.	Earnings	of	$1.5	billion	decreased	$390	million	and	margin	was	down	2.0	percentage	points	due	to	sharply	lower	volume, deleverage	and	unfavorable	mix,	partially	offset	by	savings	from	cost	reduction	actions	and	lower	restructuring	costs	of	$22	million.	Materials	cost containment	offset	lower	pricing.	Results	also	reflect	unfavorable	foreign	currency	transactions	of	$65	million,	partially	offset	by	a	favorable	comparison from	litigation	costs	of	$20	million	in	2015.

| (dollars	in	millions) | 2015 | 2016 | 2017 | 16	vs.	15 | 17	vs.	16 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Sales: |  |  |  |  |  |
| Climate\tTechnologies | $4,006 | 3,944 | 4,212 | (2)% | 7\t% |
| Tools\t&\tHome\tProducts | 1,625 | 1,611 | 1,645 | (1)% | 2\t% |
| \t\t\t\t\tTotal | $5,631 | 5,555 | 5,857 | (1)% | 5\t% |
| Earnings: |  |  |  |  |  |
| Climate\tTechnologies | $835 | 902 | 975 | 8\t% | 8\t% |
| Tools\t&\tHome\tProducts | 364 | 384 | 383 | 5\t% | —\t% |
| \t\t\t\t\tTotal | $1,199 | 1,286 | 1,358 | 7\t% | 6\t% |
| Margin | 21.3% | 23.2% | 23.2% |  |  |

2017	vs.	2016	-	Commercial	&	Residential	Solutions	sales	were	$5.9	billion	in	2017,	an	increase	of	$302	million,	or	5	percent,	reflecting	favorable conditions	in	HVAC	and	refrigeration	markets	in	the	U.S.,	Asia	and	Europe,	as	well	as	U.S.	and	Asian	construction	markets.	Underlying	sales	increased	5 percent	($297	million)	on	6	percent	higher	volume,	partially	offset	by	1	percent	lower	price.	Foreign	currency	translation	deducted	 $20	million	and acquisitions	added	$25	million.	Climate	Technologies	sales	were	$4.2	billion	in	2017,	an	increase	of	$268	million,	or	7	percent.	Global	air	conditioning sales	were	solid,	led	by	strength	in	the	U.S.	and	Asia	and	robust	growth	in	China	partially	due	to	easier	comparisons,	while	sales	were	up	modestly	in Europe	and	declined	moderately	in	Middle	East/Africa.	Global	refrigeration	sales	were	strong,	reflecting	robust	growth	in	China	on	increased	adoption	of energy-efficient	solutions	and	slight	growth	in	the	U.S.	Sensors	and	solutions	had	strong	growth,	while	temperature	controls	was	up	modestly.	Tools	& Home	Products	sales	were	$1.6	billion	in	2017,	up	$34	million	compared	to	the	prior	year.	Professional	tools	had	strong	growth	on	favorable	demand from	oil	and	gas	customers	and	in	other	construction	related	markets.	Wet/dry	vacuums	sales	were	up	moderately	as	favorable	conditions	continued	in U.S.	construction	markets.	Food	waste	disposers	increased	slightly,	while	the	storage	business	declined	moderately.	Overall,	underlying	sales	increased 3	percent	in	the	U.S.,	4	percent	in	Europe	and	17	percent	in	Asia	(China	up	27	percent).	Sales	increased	3	percent	in	Latin	America	and	4	percent	in Canada,	while	sales	decreased	5	percent	in	Middle	East/Africa.	Earnings	were	$1.4	billion,	an	increase	of	$72	million	driven	by	Climate	Technologies, while	margin	was	flat.	Increased	volume	and	resulting	leverage,	savings	from	cost	reduction	actions,	and	lower	customer	accommodation	costs	of	$16 million	were	largely	offset	by	higher	materials	costs,	lower	price	and	unfavorable	product	mix.	In	fiscal	2018,	global	demand	is	expected	to	remain favorable	in	air	conditioning,	refrigeration	and	construction	markets,	supporting	the	outlook	for	moderate	underlying	growth.

2016	vs.	2015	-	Commercial	&	Residential	Solutions	sales	were	$5.6	billion	in	2016,	a	decrease	of	$76	million,	or	1	percent.	Underlying	sales	decreased less	than	1	percent	(down	$21	million)	on	lower	price,	offset	by	slightly	higher	volume.	Foreign	currency	translation	deducted	 1	percent	($60	million),	while acquisitions	added	$5	million.	Climate	Technologies	sales	were	$3.9	billion	in	2016,	a	decrease	of	$62	million,	or	2	percent.	Global	air	conditioning	sales were	down	while	global	refrigeration	sales	were	up	modestly,	as	the	U.S.	exhibited	growth	and	Europe	and	China	were	down,	with	more	significant declines	in	air	conditioning.	Sales	of	temperature	controls,	sensors	and	solutions	decreased.	Tools	&	Home	Products	sales	were	$1.6	billion	in	2016, down	$14	million	compared	to	the	prior	year.	Food	waste	disposers	had	solid	sales	growth	and	the	wet/dry	vacuums	business	was	up	modestly,	while sales	decreased	moderately	in	the	professional	tools	and	storage	businesses.	Overall,	underlying	sales	were	up	1	percent	in	the	U.S.	and	3	percent	in Europe,	while	Asia	decreased	4	percent.	Latin	America	decreased	3	percent,	Canada	was	down	4	percent,	and	Middle	East/Africa	decreased	 3	percent. Earnings	of	$1.3	billion	increased	$87	million	and	margin	improved	1.9	percentage	points,	primarily	due	to	savings	from	cost	reduction	actions,	materials cost	containment	and	lower	restructuring	costs	of	$24	million,	partially	offset	by	lower	price	and	higher	customer	accommodation	costs.

# Financial	Position,	Capital	Resources	and	Liquidity

The	Company	continues	to	generate	substantial	cash	from	operations	and	has	the	resources	available	to	reinvest	for	growth	in	existing	businesses, pursue	strategic	acquisitions	and	manage	its	capital	structure	on	a	short-	and	long-term	basis.

# CASH	FLOW	FROM	CONTINUING	OPERATIONS

| (dollars	in	millions) | 2015 | 2016 | 2017 |
| :--- | :--- | :--- | :--- |
| Operating\tCash\tFlow | $2,040 | 2,499 | 2,690 |
| \t\t\t\t\tPercent\tof\tsales | 12.6% | 17.2% | 17.6% |
| Capital\tExpenditures | $588 | 447 | 476 |
| \t\t\t\t\tPercent\tof\tsales | 3.6% | 3.1% | 3.1% |
| Free\tCash\tFlow\t(Operating\tCash\tFlow\tless\tCapital\tExpenditures) | $1,452 | 2,052 | 2,214 |
| \t\t\t\t\tPercent\tof\tsales | 8.9% | 14.1% | 14.5% |
| Operating\tWorking\tCapital | $1,177 | 755 | 1,007 |
| \t\t\t\t\tPercent\tof\tsales | 7.2% | 5.2% | 6.6% |

Operating	cash	flow	from	continuing	operations	for	2017	was	$2.7	billion,	a	$191	million,	or	8	percent	increase	compared	with	2016,	reflecting	higher earnings	and	favorable	changes	in	working	capital.	Operating	cash	flow	from	continuing	operations	of	$2.5	billion	in	2016	was	a	23	percent	increase compared	to	$2.0	billion	in	2015,	as	comparisons	benefited	from	income	taxes	of	$424	million	paid	on	the	gains	from	divestitures	in	2015.	At September	30,	2017,	operating	working	capital	as	a	percent	of	sales	increased	to	 6.6	percent	due	to	higher	levels	of	working	capital	in	the	acquired	valves &	controls	business,	compared	with	5.2	percent	and	7.2	percent	in	2016	and	2015,	respectively.	Operating	cash	flow	from	continuing	operations	funded capital	expenditures	of	$476	million,	dividends	of	$1,239	million,	common	stock	purchases	of	$400	million,	and	was	also	used	to	partially	pay	down	debt in	2017.	Proceeds	of	$5.1	billion	from	the	sales	of	the	network	power	systems	and	power	generation,	motors	and	drives	businesses	funded	acquisitions	of $2,990	million,	cash	used	for	discontinued	operations	of	$778	million	and	repayments	of	short-term	borrowings	and	long-term	debt	of	approximately	$1.3 billion.	Contributions	to	pension	plans	were	$45	million	in	2017,	$66	million	in	2016	and	$53	million	in	2015.

Capital	expenditures	related	to	continuing	operations	were	$476	million,	$447	million	and	$588	million	in	2017,	2016	and	2015,	respectively.	Free	cash flow	from	continuing	operations	(operating	cash	flow	less	capital	expenditures)	was	$2.2	billion	in	2017,	up	8	percent.	Free	cash	flow	was	$2.1	billion	in 2016,	compared	with	$1.5	billion	in	2015.	The	Company	is	targeting	capital	spending	of	approximately	$550	million	in	 2018.	Net	cash	paid	in	connection with	acquisitions	was	$2,990	million,	$132	million	and	$324	million	in	2017,	2016	and	2015,	respectively.	Proceeds	from	divestitures	not	classified	as discontinued	operations	were	$39	million	in	2017	and	$1,812	million	in	2015.

The	Board	of	Directors	authorized	the	purchase	of	up	to	70	million	common	shares	in	November	2015,	and	56.9	million	shares	remain	available	for purchase	under	this	authorization.	The	Company	purchased	6.6	million	shares	in	2017	under	the	November	2015	authorization.	In	2016,	the	Company purchased	12.5	million	shares	under	a	combination	of	the	November	2015	authorization	and	the	remainder	of	the	May	2013	authorization.	A	total	of	43.1 million	shares	were	purchased	in	2015	under	the	May	2013	authorization.

# LEVERAGE/CAPITALIZATION

| (dollars	in	millions) | 2015 | 2016 | 2017 |
| :--- | :--- | :--- | :--- |
| Total\tAssets | $22,088 | 21,732 | 19,589 |
| Long-term\tDebt | $4,289 | 4,051 | 3,794 |
| Common\tStockholders'\tEquity | $8,081 | 7,568 | 8,718 |
| Total\tDebt-to-Total\tCapital\tRatio | 45.8% | 46.7% | 34.8% |
| Net\tDebt-to-Net\tCapital\tRatio | 31.3% | 31.3% | 15.4% |
| Operating\tCash\tFlow-to-Debt\tRatio | 29.8% | 37.7% | 57.8% |
| Interest\tCoverage\tRatio | 20.2X | 11.8X | 12.6X |

The	total	debt-to-capital	ratio	and	the	net	debt-to-net	capital	ratio	(less	cash	and	short-term	investments)	decreased	in	 2017	due	to	lower	total	debt outstanding	and	higher	common	stockholders'	equity	from	changes	in	other	comprehensive	income.	The	total	debt-to-capital	ratio	and	the	net	debt-to-net capital	ratio	(less	cash	and	short-term	investments)	increased	in	2016	due	to	lower	common	stockholders'	equity	from	share	repurchases	and	changes	in other	comprehensive	income.	The	operating	cash	flow	from	continuing	operations-to-debt	ratio	increased	in	2017	primarily	due	to	lower	debt	in	the current	year.	The	operating	cash	flow	from	continuing	operations-to-debt	ratio	increased	in	2016	primarily	due	to	taxes	paid	in	2015	on	the	divestiture gains	and	lower	debt	in	2016.	The	interest	coverage	ratio	is	computed	as	earnings	from	continuing	operations	before	income	taxes	plus	interest	expense, divided	by	interest	expense.	The	increase	in	interest	coverage	in	2017	reflects	lower	interest	expense	in	the	current	year.	The	decrease	in	interest coverage	in	2016	reflects	lower	pretax	earnings,	largely	due	to	the	divestiture	gains	of	$1,039	million	in	2015,	and	slightly	higher	interest	expense.

In	April	2014,	the	Company	entered	into	a	$3.5	billion	five-year	revolving	backup	credit	facility	with	various	banks,	which	replaced	the	December	2010 $2.75	billion	facility.	The	credit	facility	is	maintained	to	support	general	corporate	purposes,	including	commercial	paper	borrowing.	The	Company	has	not incurred	any	borrowings	under	this	or	previous	facilities.	The	credit	facility	contains	no	financial	covenants	and	is	not	subject	to	termination	based	on	a change	of	credit	rating	or	material	adverse	changes.	The	facility	is	unsecured	and	may	be	accessed	under	various	interest	rate	and	currency denomination	alternatives	at	the	Company's	option.	Fees	to	maintain	the	facility	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.

Emerson's	financial	structure	provides	the	flexibility	necessary	to	achieve	its	strategic	objectives.	The	Company	has	been	successful	in	efficiently deploying	cash	where	needed	worldwide	to	fund	operations,	complete	acquisitions	and	sustain	long-term	growth.	At	September	30,	2017,	$3.1	billion	of the	Company's	cash	was	held	outside	the	U.S.	(primarily	in	Europe	and	Asia),	$1.4	billion	of	which	income	taxes	have	been	provided	for,	and	was generally	available	for	repatriation	to	the	U.S.	Under	current	tax	law,	repatriated	cash	may	be	subject	to	U.S.	federal	income	taxes,	net	of	available foreign	tax	credits.	The	Company	routinely	repatriates	a	portion	of	its	non-U.S.	cash	from	earnings	each	year,	or	otherwise	when	it	can	be	accomplished tax	efficiently,	and	provides	for	U.S.	income	taxes	as	appropriate.	The	Company	has	been	able	to	readily	meet	all	its	funding	requirements	and	currently believes	that	sufficient	funds	will	be	available	to	meet	the	Company's	needs	in	the	foreseeable	future	through	operating	cash	flow,	existing	resources, short-	and	long-term	debt	capacity	or	backup	credit	lines.

# CONTRACTUAL	OBLIGATIONS

At	September	30,	2017,	the	Company's	contractual	obligations,	including	estimated	payments,	are	as	follows:

|  |  | Amounts	Due	By	Period | Amounts	Due	By	Period |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Less\tThan\t1 | 1\t-\t3 | 3\t-\t5 | More\tThan |
| (dollars\tin\tmillions) | Total | Year | Years | Years | 5\tYears |
| Long-term\tDebt\t(including\tInterest) | $5,342 | 428 | 1,434 | 966 | 2,514 |
| Operating\tLeases | 536 | 171 | 206 | 80 | 79 |
| Purchase\tObligations | 746 | 655 | 71 | 14 | 6 |
| \t\t\t\t\tTotal | $6,624 | 1,254 | 1,711 | 1,060 | 2,599 |

Purchase	obligations	consist	primarily	of	inventory	purchases	made	in	the	normal	course	of	business	to	meet	operational	requirements.	The	table	above does	not	include	$2.0	billion	of	other	noncurrent	liabilities	recorded	in	the	balance	sheet	and	summarized	in	Note	19,	which	consist	primarily	of	pension and	postretirement	plan	liabilities,	deferred	income	taxes	and	unrecognized	tax	benefits,	because	it	is	not	certain	when	these	amounts	will	become	due. See	Notes	11	and	12	for	estimated	future	benefit	payments	and	Note	14	for	additional	information	on	deferred	income	taxes.

# FINANCIAL	INSTRUMENTS

The	Company	is	exposed	to	market	risk	related	to	changes	in	interest	rates,	foreign	currency	exchange	rates	and	commodity	prices,	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,	a	10	percent	decrease	in	commodity	prices	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,	and	lower	commodity	prices	would	benefit	future	earnings	through	lower	cost	of	sales.	See Notes	1,	and	8	through	10.

# 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	recognizes	a	large	majority	of	its	revenue	through	the	sale	of	manufactured	products	and	records	the	sale	when	products	are	shipped	or delivered,	title	and	risk	of	loss	pass	to	the	customer,	and	collection	is	reasonably	assured.	In	certain	circumstances,	revenue	is	recognized	using	the percentage-of-completion	method,	as	performance	occurs,	or	in	accordance	with	ASC	985-605	related	to	software.	Sales	arrangements	sometimes involve	delivering	multiple	elements,	which	requires	management	judgment	that	affects	the	amount	and	timing	of	revenue	recognized.	In	these	instances, the	revenue	assigned	to	each	element	is	based	on	vendor-specific	objective	evidence,	third-party	evidence	or	a	management	estimate	of	the	relative selling	price.	Revenue	is	recognized	for	delivered	elements	if	they	have	value	to	the	customer	on	a	stand-alone	basis	and	performance	related	to	the undelivered	items	is	probable	and	substantially	in	the	Company's	control,	or	the	undelivered	elements	are	inconsequential	or	perfunctory	and	there	are	no unsatisfied	contingencies	related	to	payment.	The	vast	majority	of	deliverables	are	tangible	products,	with	a	smaller	portion	attributable	to	installation, service	or	maintenance.	Management	believes	that	all	relevant	criteria	and	conditions	are	considered	when	recognizing	revenue.

# INVENTORIES

Inventories	are	stated	at	the	lower	of	cost	or	market.	The	majority	of	inventory	is	valued	based	on	standard	costs,	which	approximate	average	costs,	while the	remainder	is	principally	valued	on	a	first-in,	first-out	basis.	Cost	standards	are	revised	at	the	beginning	of	each	year.	The	annual	effect	of	resetting standards	plus	any	operating

variances	incurred	during	each	period	are	allocated	to	inventories	and	recognized	in	cost	of	sales	as	product	is	sold.	The	Company's	businesses	review inventory	for	obsolescence,	make	appropriate	provisions	and	dispose	of	obsolete	inventory	on	a	regular	basis.	Various	factors	are	considered	in	these reviews,	including	sales	history	and	recent	trends,	industry	conditions	and	general	economic	conditions.	If	actual	circumstances	indicate	a	decline	in	any of	these	factors,	particularly	an	abrupt	change	in	economic	conditions,	the	Company	could	incur	higher	levels	of	obsolescence	expense.

# 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	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.	Management	believes	the	estimates	of	future	cash	flows	and	fair	values are	reasonable;	however,	changes	in	estimates	due	to	variance	from	assumptions	could	materially	affect	the	evaluations.

# 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.	Management	believes	the	assumptions	used	are	appropriate;	however,	actual	experience	may	differ.	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	transitioned	from	defined	benefit	to	defined	contribution	retirement plans	in	2016.	The	principal	U.S.	defined	benefit	plan	is	closed	to	employees	hired	after	January	1,	2016	while	shorter-tenured	current	employees	ceased accruing	benefits	effective	October	1,	2016.	Affected	employees	transitioned	to	an	enhanced	defined	contribution	plan.	See	Notes	11	and	12.

During	2017,	the	funded	status	of	the	Company's	pension	plans	improved	by	$667	million.	As	of	 September	30,	2017,	the	U.S.	pension	plans	were underfunded	by	$77	million	in	total,	including	unfunded	plans	totaling	$201	million.	The	non-U.S.	plans	were	underfunded	by	 $253	million,	including unfunded	plans	totaling	$215	million.	The	Company	contributed	a	total	of	 $45	million	to	defined	benefit	plans	in	 2017	and	expects	to	contribute approximately	$60	million	in	2018.	At	year-end	2017,	the	discount	rate	for	U.S.	plans	was	3.76	percent,	and	was	3.50	percent	in	2016.	The	assumed investment	return	on	plan	assets	was	7.25	percent	in	2017	and	7.50	percent	in	2016	and	2015,	and	is	expected	to	be	7.0	percent	for	2018.	Deferred actuarial	losses	to	be	amortized	to	expense	in	future	years	were	$1,161	million	($753	million	after-tax)	as	of	 September	30,	2017.

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.

The	Company	also	pays	U.S.	federal	income	taxes,	net	of	available	foreign	tax	credits,	on	cash	repatriated	from	non-U.S.	locations.	No	provision	is	made for	U.S.	income	taxes	on	the	undistributed	earnings	of	non-U.S.	subsidiaries	where	these	earnings	are	considered	permanently	invested	or	otherwise indefinitely	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	14.

# Other	Items

# LEGAL	MATTERS

At	September	30,	2017,	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	May	2014,	the	FASB	amended	ASC	606,	 Revenue	from	Contracts	with	Customers,	to	update	and	consolidate	revenue	recognition	guidance	from multiple	sources	into	a	single,	comprehensive	standard	to	be	applied	for	all	contracts	with	customers.	The	fundamental	principle	of	the	revised	standard	is to	recognize	revenue	based	on	the	transfer	of	goods	and	services	to	customers	at	an	amount	that	the	Company	expects	to	be	entitled	to	in	exchange	for those	goods	and	services.	Also	required	are	additional	disclosures	regarding	the	nature,	extent,	timing	and	uncertainty	of	revenues	and	associated	cash flows.	The	new	standard	is	effective	for	the	Company	in	the	first	quarter	of	fiscal	2019	and	may	be	adopted	on	either	a	prospective	or	retrospective	basis. The	Company	currently	expects	to	adopt	the	new	standard	prospectively	with	the	cumulative	effect	of	adoption	recognized	in	retained	earnings.	The Company	continues	to	evaluate	the	impact	of	the	revised	standard	and	does	not	currently	expect	that	the	updates	will	materially	impact	its	financial statements.	The	Company	is	also	in	the	process	of	evaluating	and	implementing	changes	to	its	business	processes,	systems,	controls	and	accounting policies	to	support	recognition	and	disclosure	under	the	new	guidance.

In	February	2016,	the	FASB	amended	ASC	842,	 Leases,	to	require	recognition	on	the	balance	sheet	of	assets	and	liabilities	related	to	the	rights	and obligations	associated	with	all	lease	arrangements.	Currently,	obligations	classified	as	operating	leases	are	not	recorded	on	the	balance	sheet	but	must be	disclosed.	The	new	standard	is	effective	for	the	Company	in	the	first	quarter	of	fiscal	2020.	The	Company	is	in	the	process	of	evaluating	the	impact	of the	revised	standard	on	its	financial	statements.	The	Company	expects	the	revised	standard	to	have	a	material	impact	on	its	balance	sheet	due	to	the recognition	of	right-of-use	assets	and	lease	liabilities	related	to	operating	leases.	Contractual	obligations	related	to	operating	leases	totaled	$536	million at	September	30,	2017.	The	Company	does	not	expect	the	new	standard	will	materially	impact	its	results	of	operations.

In	March	2017,	the	FASB	issued	updates	to	ASC	715,	 Compensation	-	Retirement	Benefits,	which	only	permit	the	service	cost	component	of	net	periodic pension	and	postretirement	expense	to	be	reported	with	other	compensation	costs,	while	all	other	components	are	required	to	be	reported	separately	in other	deductions.	These	updates	are	effective	in	the	first	quarter	of	fiscal	2019,	with	early	adoption	permitted,	and	must	be	adopted	on	a	retrospective basis.	The	updates	change	presentation	only	and	will	not	impact	the	Company's	results	of	operations.

In	August	2017,	the	FASB	issued	updates	to	ASC	815,	 Derivatives	and	Hedging,	which	permit	hedging	contractually	specified	risk	components.	The updates	also	eliminate	the	requirement	to	separately	measure	and	report	hedge	ineffectiveness	and	simplify	hedge	documentation	and	effectiveness assessment	requirements.	These	updates	are	effective	for	the	Company	in	the	first	quarter	of	fiscal	2020,	with	early	adoption	permitted,	and	must	be adopted	using	a	modified	retrospective	approach.	The	Company	is	in	the	process	of	evaluating	the	impact	of	the	revised	standard	on	its	financial statements.

In	January	2017,	the	FASB	issued	updates	to	ASC	350,	 Intangibles	-	Goodwill	and	Other,	eliminating	the	requirement	to	measure	impairment	based	on the	implied	fair	value	of	goodwill	compared	to	the	carrying	amount	of	a	reporting	unit's	goodwill.	Instead,	goodwill	impairment	will	be	measured	as	the excess	of	a	reporting	unit's	carrying	amount	over	its	estimated	fair	value.	These	updates	are	effective	prospectively	for	impairment	tests	beginning	in fiscal	2021,	with	early	adoption	permitted,	and	are	not	expected	to	materially	impact	the	Company's	results	of	operations.

# FISCAL	2018	OUTLOOK

Market	conditions	began	trending	favorably	in	the	second	half	of	fiscal	2017	and	are	expected	to	continue	into	2018.	Oil	and	gas	prices	are	expected	to remain	stable	in	a	range	favorable	for	energy-related	markets,	while	growth	in	air	conditioning,	refrigeration	and	global	construction	markets	is	expected to	continue.	Automation	Solutions	net	sales	are	expected	to	be	up	14	to	16	percent,	with	underlying	sales	up	5	to	7	percent	excluding	an	approximate	8 percent	impact	from	acquisitions	and	1	percent	from	currency	translation.	Commercial	&	Residential	Solutions	net	sales	are	expected	to	be	down	1 percent	to	up	1	percent,	with	underlying	sales	up	3	to	5	percent	excluding	an	approximate	5	percent	negative	impact	from	divestitures	and	1	percent	from favorable	currency	translation.	Consolidated	net	sales	are	expected	to	be	up	8	to	10	percent,	with	underlying	sales	up	4	to	6	percent,	excluding	an approximate	3	percent	impact	from	acquisitions	and	divestitures	and	1	percent	from	currency	translation.	Reported	earnings	per	share	are	expected	to	be $2.66	to	$2.86.	Earnings	per	share	are	expected	to	be	$2.75	to	$2.95,	excluding	a	$0.03	impact	from	valves	&	controls	first	year	acquisition	accounting charges	related	to	inventory	and	backlog	amortization,	and	a	$0.06	impact	from	a	tax-related	loss	on	the	divestiture	of	the	residential	storage	business.

# ITEM	7A	-	QUANTITATIVE	AND	QUALITATIVE	DISCLOSURES	ABOUT	MARKET	RISK

The	information	from	this	Annual	Report	on	Form	10-K	set	forth	in	Item	8	under	"Financial	Instruments"	is	hereby	incorporated	by	reference.

# ITEM	8	-	FINANCIAL	STATEMENTS	AND	SUPPLEMENTARY	DATA

See	the	Company's	consolidated	financial	statements	and	accompanying	notes	and	the	report	thereon	of	KPMG	LLP	that	follow.

# Consolidated	Statements	of	Earnings

# EMERSON	ELECTRIC	CO.	&	SUBSIDIARIES

|  | 2015 | 2016 | 2017 |
| :--- | :--- | :--- | :--- |
| Net\tsales | $16,249 | 14,522 | 15,264 |
| Costs\tand\texpenses: |  |  |  |
| \t\t\tCost\tof\tsales | 9,241 | 8,260 | 8,860 |
| \t\t\tSelling,\tgeneral\tand\tadministrative\texpenses | 3,735 | 3,464 | 3,618 |
| \t\t\tGains\ton\tdivestitures\tof\tbusinesses | 1,039 | — | — |
| \t\t\tOther\tdeductions,\tnet | 330 | 294 | 286 |
| \t\t\tInterest\texpense,\tnet\tof\tinterest\tincome\tof:\t2015,\t$23;\n\t\t\t2016,\t$27;\t2017,\t$36 | 175 | 188 | 165 |
| Earnings\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes | 3,807 | 2,316 | 2,335 |
| Income\ttaxes | 1,267 | 697 | 660 |
| Earnings\tfrom\tcontinuing\toperations | 2,540 | 1,619 | 1,675 |
| Discontinued\toperations,\tnet\tof\ttax:\t2015,\t$161;\t2016,\t$269;\t2017,\t$671 | 193 | 45 | (125) |
| Net\tearnings | 2,733 | 1,664 | 1,550 |
| Less:\tNoncontrolling\tinterests\tin\tearnings\tof\tsubsidiaries | 23 | 29 | 32 |
| Net\tearnings\tcommon\tstockholders | $2,710 | 1,635 | 1,518 |
| Earnings\tcommon\tstockholders: |  |  |  |
| \t\t\tEarnings\tfrom\tcontinuing\toperations | $2,517 | 1,590 | 1,643 |
| \t\t\tDiscontinued\toperations,\tnet\tof\ttax | 193 | 45 | (125) |
| Net\tearnings\tcommon\tstockholders | $2,710 | 1,635 | 1,518 |
| Basic\tearnings\tper\tshare\tcommon\tstockholders: |  |  |  |
| \t\t\tEarnings\tfrom\tcontinuing\toperations | $3.72 | 2.46 | 2.54 |
| \t\t\tDiscontinued\toperations | 0.29 | 0.07 | (0.19) |
| Basic\tearnings\tper\tcommon\tshare | $4.01 | 2.53 | 2.35 |
| Diluted\tearnings\tper\tshare\tcommon\tstockholders: |  |  |  |
| \t\t\tEarnings\tfrom\tcontinuing\toperations | $3.71 | 2.45 | 2.54 |
| \t\t\tDiscontinued\toperations | 0.28 | 0.07 | (0.19) |
| Diluted\tearnings\tper\tcommon\tshare | $3.99 | 2.52 | 2.35 |

See	accompanying	Notes	to	Consolidated	Financial	Statements.

# Consolidated	Statements	of	Comprehensive	Income

(Dollars	in	millions)

|  | 2015 | 2016 | 2017 |
| :--- | :--- | :--- | :--- |
| Net\tearnings | $2,733 | 1,664 | 1,550 |
| Other\tcomprehensive\tincome\t(loss),\tnet\tof\ttax: |  |  |  |
| Foreign\tcurrency\ttranslation | (794) | (188) | 441 |
| Pension\tand\tpostretirement | (206) | (210) | 500 |
| Cash\tflow\thedges | (43) | 18 | 37 |
| \t\t\t\t\t\t\t\tTotal\tother\tcomprehensive\tincome\t(loss) | (1,043) | (380) | 978 |
| Comprehensive\tincome | 1,690 | 1,284 | 2,528 |
| Less:\tNoncontrolling\tinterests\tin\tcomprehensive\tincome\tof\tsubsidiaries | 22 | 31 | 30 |
| Comprehensive\tincome\tcommon\tstockholders | $1,668 | 1,253 | 2,498 |

# Consolidated	Balance	Sheets

September	30	(Dollars	in	millions,	except	per	share	amounts)

|  | 2016 | 2017 |
| :--- | :--- | :--- |
| ASSETS |  |  |
| Current\tassets |  |  |
| \t\t\t\t\tCash\tand\tequivalents | $3,182 | 3,062 |
| \t\t\t\t\tReceivables,\tless\tallowances\tof\t$92\tin\t2016\tand\t$91\tin\t2017 | 2,701 | 3,072 |
| \t\t\t\t\tInventories | 1,208 | 1,696 |
| \t\t\t\t\tOther\tcurrent\tassets | 669 | 349 |
| \t\t\t\t\tCurrent\tassets\theld-for-sale | 2,200 | 73 |
| \t\t\t\t\t\t\t\t\t\tTotal\tcurrent\tassets | 9,960 | 8,252 |
| Property,\tplant\tand\tequipment,\tnet | 2,931 | 3,321 |
| Other\tassets |  |  |
| \t\t\t\t\tGoodwill | 3,909 | 5,316 |
| \t\t\t\t\tOther\tintangible\tassets | 902 | 1,890 |
| \t\t\t\t\tOther | 200 | 634 |
| \t\t\t\t\tNoncurrent\tassets\theld-for-sale | 3,830 | 176 |
| \t\t\t\t\t\t\t\t\t\tTotal\tother\tassets | 8,841 | 8,016 |
| Total\tassets | $21,732 | 19,589 |
| LIABILITIES\tAND\tEQUITY |  |  |
| Current\tliabilities |  |  |
| \t\t\t\t\tShort-term\tborrowings\tand\tcurrent\tmaturities\tof\tlong-term\tdebt | $2,584 | 862 |
| \t\t\t\t\tAccounts\tpayable | 1,517 | 1,776 |
| \t\t\t\t\tAccrued\texpenses | 2,126 | 2,286 |
| \t\t\t\t\tIncome\ttaxes | 180 | 65 |
| \t\t\t\t\tCurrent\tliabilities\theld-for-sale | 1,601 | 56 |
| \t\t\t\t\t\t\t\t\t\tTotal\tcurrent\tliabilities | 8,008 | 5,045 |
| Long-term\tdebt | 4,051 | 3,794 |
| Other\tliabilities | 1,729 | 1,975 |
| Noncurrent\tliabilities\theld-for-sale | 326 | 5 |
| Equity |  |  |
| 642,796,490\tshares\tin\t2016;\t641,691,971\tshares\tin\t2017 | 477 | 477 |
| \t\t\t\t\tAdditional\tpaid-in-capital | 205 | 297 |
| \t\t\t\t\tRetained\tearnings | 21,716 | 21,995 |
| \t\t\t\t\tAccumulated\tother\tcomprehensive\tincome\t(loss) | (1,999) | (1,019) |
|  | 20,399 | 21,750 |
| \t\t\t\t\tLess:\tCost\tof\tcommon\tstock\tin\ttreasury,\t310,557,522\tshares\tin\t2016;\t311,662,041\tshares\tin\t2017 | 12,831 | 13,032 |
| Common\tstockholders'\tequity | 7,568 | 8,718 |
| \t\t\t\t\tNoncontrolling\tinterests\tin\tsubsidiaries | 50 | 52 |
| Total\tequity | 7,618 | 8,770 |
| Total\tliabilities\tand\tequity | $21,732 | 19,589 |

# Consolidated	Statements	of	Equity

|  | 2015 | 2016 | 2017 |
| :--- | :--- | :--- | :--- |
| Common\tstock | $477 | 477 | 477 |
| Additional\tpaid-in-capital |  |  |  |
| \t\t\t\t\tBeginning\tbalance | 161 | 170 | 205 |
| \t\t\t\t\tStock\tplans | 31 | 35 | 92 |
| \t\t\t\t\tPurchase\tof\tnoncontrolling\tinterests | (22) | — | — |
| \t\t\t\t\t\t\t\tEnding\tbalance | 170 | 205 | 297 |
| Retained\tearnings |  |  |  |
| \t\t\t\t\tBeginning\tbalance | 19,867 | 21,308 | 21,716 |
| \t\t\t\t\tNet\tearnings\tcommon\tstockholders | 2,710 | 1,635 | 1,518 |
| \t\t\t\t\tDividends\tpaid\t(per\tshare:\t2015,\t$1.88;\t2016,\t$1.90;\t2017,\t$1.92) | (1,269) | (1,227) | (1,239) |
| \t\t\t\t\t\t\t\tEnding\tbalance | 21,308 | 21,716 | 21,995 |
| Accumulated\tother\tcomprehensive\tincome\t(loss) |  |  |  |
| \t\t\t\t\tBeginning\tbalance | (575) | (1,617) | (1,999) |
| \t\t\t\t\tForeign\tcurrency\ttranslation | (793) | (190) | 443 |
| \t\t\t\t\tPension\tand\tpostretirement | (206) | (210) | 500 |
| \t\t\t\t\tCash\tflow\thedges | (43) | 18 | 37 |
| \t\t\t\t\t\t\t\tEnding\tbalance | (1,617) | (1,999) | (1,019) |
| Treasury\tstock |  |  |  |
| \t\t\t\t\tBeginning\tbalance | (9,811) | (12,257) | (12,831) |
| \t\t\t\t\tPurchases | (2,487) | (601) | (400) |
| \t\t\t\t\tIssued\tunder\tstock\tplans | 41 | 27 | 199 |
| \t\t\t\t\t\t\t\tEnding\tbalance | (12,257) | (12,831) | (13,032) |
| Common\tstockholders'\tequity | 8,081 | 7,568 | 8,718 |
| Noncontrolling\tinterests\tin\tsubsidiaries |  |  |  |
| \t\t\t\t\tBeginning\tbalance | 48 | 47 | 50 |
| \t\t\t\t\tNet\tearnings | 23 | 29 | 32 |
| \t\t\t\t\tOther\tcomprehensive\tincome\t(loss) | (1) | 2 | (2) |
| \t\t\t\t\tDividends\tpaid | (23) | (28) | (28) |
| \t\t\t\t\t\t\t\tEnding\tbalance | 47 | 50 | 52 |
| Total\tequity | $8,128 | 7,618 | 8,770 |

# Consolidated	Statements	of	Cash	Flows

Years	ended	September	30	(Dollars	in	millions)

|  | 2015 | 2016 | 2017 |
| :--- | :--- | :--- | :--- |
| Operating\tactivities |  |  |  |
| Net\tearnings | $2,733 | 1,664 | 1,550 |
| (Earnings)\tLoss\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | (193) | (45) | 125 |
| Adjustments\tto\treconcile\tnet\tearnings\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| \t\t\t\t\t\t\t\tDepreciation\tand\tamortization | 573 | 568 | 636 |
| \t\t\t\t\t\t\t\tChanges\tin\toperating\tworking\tcapital | (181) | 93 | 160 |
| \t\t\t\t\t\t\t\tPension\tfunding | (53) | (66) | (45) |
| \t\t\t\t\t\t\t\tGains\ton\tdivestitures\tof\tbusinesses,\tafter\ttax | (611) | — | — |
| \t\t\t\t\t\t\t\tIncome\ttaxes\tpaid\ton\tdivestiture\tgains | (424) | — | — |
| \t\t\t\t\t\t\t\tOther,\tnet | 196 | 285 | 264 |
| \t\t\t\t\t\t\t\t\t\t\t\tCash\tfrom\tcontinuing\toperations | 2,040 | 2,499 | 2,690 |
| \t\t\t\t\t\t\t\t\t\t\t\tCash\tfrom\tdiscontinued\toperations | 489 | 382 | (778) |
| \t\t\t\t\t\t\t\t\t\t\t\tCash\tprovided\tby\toperating\tactivities | 2,529 | 2,881 | 1,912 |
| Investing\tactivities |  |  |  |
| Capital\texpenditures | (588) | (447) | (476) |
| Purchases\tof\tbusinesses,\tnet\tof\tcash\tand\tequivalents\tacquired | (324) | (132) | (2,990) |
| Divestitures\tof\tbusinesses | 1,812 | — | 39 |
| Other,\tnet | (221) | 30 | (106) |
| \t\t\t\tCash\tfrom\tcontinuing\toperations | 679 | (549) | (3,533) |
| \t\t\t\tCash\tfrom\tdiscontinued\toperations | (88) | (77) | 5,047 |
| \t\t\t\tCash\tprovided\tby\t(used\tin)\tinvesting\tactivities | 591 | (626) | 1,514 |
| Financing\tactivities |  |  |  |
| Net\tincrease\t(decrease)\tin\tshort-term\tborrowings | 1,116 | (34) | (1,635) |
| Proceeds\tfrom\tshort-term\tborrowings\tgreater\tthan\tthree\tmonths | 2,515 | 1,264 | — |
| Payments\tof\tshort-term\tborrowings\tgreater\tthan\tthree\tmonths | (3,286) | (1,174) | (90) |
| Proceeds\tfrom\tlong-term\tdebt | 1,000 | — | — |
| Payments\tof\tlong-term\tdebt | (504) | (254) | (254) |
| Dividends\tpaid | (1,269) | (1,227) | (1,239) |
| Purchases\tof\tcommon\tstock | (2,501) | (601) | (400) |
| Other,\tnet | (19) | (19) | 27 |
| \t\t\t\tCash\tused\tin\tfinancing\tactivities | (2,948) | (2,045) | (3,591) |
| Effect\tof\texchange\trate\tchanges\ton\tcash\tand\tequivalents | (267) | (82) | 45 |
| Increase\t(Decrease)\tin\tcash\tand\tequivalents | (95) | 128 | (120) |
| Beginning\tcash\tand\tequivalents | 3,149 | 3,054 | 3,182 |
| Ending\tcash\tand\tequivalents | $3,054 | 3,182 | 3,062 |
| Changes\tin\toperating\tworking\tcapital |  |  |  |
| Receivables | $241 | 162 | (25) |
| Inventories | (11) | 58 | 32 |
| Other\tcurrent\tassets | (140) | (4) | (12) |
| Accounts\tpayable | (256) | (22) | 135 |
| Accrued\texpenses | (4) | (57) | 74 |
| Income\ttaxes | (11) | (44) | (44) |
| Total\tchanges\tin\toperating\tworking\tcapital | $(181) | 93 | 160 |

# Notes	to	Consolidated	Financial	Statements

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

# (1)	SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES

# Financial	Statement	Presentation

The	preparation	of	the	financial	statements	in	conformity	with	U.S.	generally	accepted	accounting	principles	(U.S.	GAAP)	requires	management	to	make estimates	and	assumptions	that	affect	reported	amounts	and	related	disclosures.	Actual	results	could	differ	from	these	estimates.	Certain	prior	year amounts	have	been	reclassified	to	conform	with	current	year	presentation.

In	the	first	quarter	of	2017,	the	Company	adopted	updates	to	ASC	Subtopic	835-30,	 Interest-Imputation	of	Interest,	which	require	presentation	of	debt issuance	costs	as	a	deduction	from	the	related	debt	liability	rather	than	within	other	assets.	These	updates	were	adopted	on	a	retrospective	basis	and	did not	materially	impact	the	Company's	financial	statements.

In	the	fourth	quarter	of	2017,	the	Company	adopted	updates	to	ASC	718,	 Compensation	-	Stock	Compensation,	which	require	all	excess	tax	benefits	and deficiencies	related	to	share-based	payments	to	be	recognized	in	income	tax	expense	rather	than	through	additional	paid-in-capital,	and	to	be	presented as	operating	cash	flows	instead	of	financing.	These	updates	did	not	materially	impact	the	Company's	financial	statements.

In	the	fourth	quarter	of	2017,	the	Company	adopted	updates	to	ASC	740,	 Income	Taxes,	which	require	noncurrent	presentation	of	all	deferred	tax	assets and	liabilities	on	the	balance	sheet.	These	updates	were	adopted	on	a	prospective	basis	and	resulted	in	the	reclassification	of	current	deferred	tax	assets and	liabilities	to	noncurrent	presentation.

In	the	fourth	quarter	of	2017,	the	Company	adopted	updates	to	ASC	820,	 Fair	Value	Measurement,	which	require	investments	measured	using	the	net asset	value	per	share	practical	expedient	to	be	removed	from	the	fair	value	hierarchy	and	separately	reported	when	making	disclosures.	These	updates did	not	change	the	determination	of	fair	value	for	any	investments.	Adoption	affected	disclosure	presentation	only;	there	was	no	impact	on	the	Company's financial	results.

In	the	first	quarter	of	2015,	the	Company	adopted	updates	to	ASC	205,	 Presentation	of	Financial	Statements,	and	ASC	360,	Property,	Plant	and Equipment,	regarding	the	reporting	of	discontinued	operations.	These	updates	raised	the	threshold	for	reporting	discontinued	operations	to	a	strategic business	shift	having	a	major	effect	on	an	entity's	operations	and	financial	results.	The	updates	also	added	disclosures	for	disposals	of	business	units qualifying	for	discontinued	presentation,	and	for	some	dispositions	that	do	not	qualify	as	discontinued	operations	but	are	still	considered	individually significant	components	of	the	entity.	In	2017,	the	Company	completed	the	divestitures	of	its	network	power	systems,	and	power	generation,	motors	and drives	businesses.	The	results	of	operations	for	these	businesses	were	reported	within	discontinued	operations	for	all	years	presented,	and	the	assets and	liabilities	were	reflected	as	held-for-sale.	See	Note	4.

# Principles	of	Consolidation

The	consolidated	financial	statements	include	the	accounts	of	the	Company	and	its	controlled	affiliates.	Intercompany	transactions,	profits	and	balances are	eliminated	in	consolidation.	Investments	of	20	percent	to	50	percent	of	the	voting	shares	of	other	entities	are	accounted	for	by	the	equity	method. Investments	in	publicly	traded	companies	of	less	than	20	percent	are	carried	at	fair	value,	with	changes	in	fair	value	reflected	in	accumulated	other comprehensive	income.	Investments	in	nonpublicly	traded	companies	of	less	than	20	percent	are	carried	at	cost.

# Foreign	Currency	Translation

The	functional	currency	for	most	of	the	Company's	non-U.S.	subsidiaries	is	the	local	currency.	Adjustments	resulting	from	translating	local	currency financial	statements	into	U.S.	dollars	are	reflected	in	accumulated	other	comprehensive	income.

# Cash	Equivalents

Cash	equivalents	consist	of	highly	liquid	investments	with	original	maturities	of	three	months	or	less.

Inventories	are	stated	at	the	lower	of	cost	or	market.	The	majority	of	inventory	is	valued	based	on	standard	costs,	which	approximate	average	costs,	while the	remainder	is	principally	valued	on	a	first-in,	first-out	basis.	Cost	standards	are	revised	at	the	beginning	of	each	fiscal	year.	The	annual	effect	of resetting	standards	plus	any	operating	variances	incurred	during	each	period	are	allocated	to	inventories	and	recognized	in	cost	of	sales	as	product	is sold.	Following	are	the	components	of	inventory	as	of	September	30:

The	increase	is	primarily	due	to	the	valves	&	controls	acquisition.	See	Note	3.

# Fair	Value	Measurement

ASC	820,	Fair	Value	Measurement,	establishes	a	formal	hierarchy	and	framework	for	measuring	certain	financial	statement	items	at	fair	value,	and requires	disclosures	about	fair	value	measurements	and	the	reliability	of	valuation	inputs.	Under	ASC	820,	measurement	assumes	the	transaction	to	sell an	asset	or	transfer	a	liability	occurs	in	the	principal	or	at	least	the	most	advantageous	market	for	that	asset	or	liability.	Within	the	hierarchy,	Level	1 instruments	use	observable	market	prices	for	an	identical	item	in	active	markets	and	have	the	most	reliable	valuations.	Level	2	instruments	are	valued through	broker/dealer	quotation	or	other	approaches	using	market-observable	inputs	for	similar	items	in	active	markets,	including	forward	and	spot	prices, interest	rates	and	volatilities.	Level	3	instruments	are	valued	using	inputs	not	observable	in	an	active	market,	such	as	company-developed	future	cash flow	estimates,	and	are	considered	the	least	reliable.	Valuations	for	all	of	the	Company's	financial	instruments	fall	within	Level	2.	The	fair	value	of	the Company's	long-term	debt	is	Level	2,	estimated	using	current	interest	rates	and	pricing	from	financial	institutions	and	other	market	sources	for	debt	with similar	maturities	and	characteristics.

# Property,	Plant	And	Equipment

The	Company	records	investments	in	land,	buildings,	and	machinery	and	equipment	at	cost.	Depreciation	is	computed	principally	using	the	straight-line method	over	estimated	service	lives,	which	for	principal	assets	are	30	to	40	years	for	buildings	and	8	to	12	years	for	machinery	and	equipment.	Long- lived	tangible	assets	are	reviewed	for	impairment	whenever	events	or	changes	in	business	circumstances	indicate	the	carrying	value	of	the	assets	may not	be	recoverable.	Impairment	losses	are	recognized	based	on	estimated	fair	values	if	the	sum	of	estimated	future	undiscounted	cash	flows	of	the related	assets	is	less	than	the	carrying	values.	The	components	of	property,	plant	and	equipment	as	of	September	30	follow:

|  | 2016 | 2017 |
| :--- | :--- | :--- |
| Land | $210 | 295 |
| Buildings | 1,867 | 2,043 |
| Machinery\tand\tequipment | 4,932 | 5,175 |
| Construction\tin\tprogress | 318 | 360 |
| \t\t\t\tProperty,\tplant\tand\tequipment,\tat\tcost | 7,327 | 7,873 |
| Less:\tAccumulated\tdepreciation | 4,396 | 4,552 |
| \t\t\t\tProperty,\tplant\tand\tequipment,\tnet | $2,931 | 3,321 |

# Goodwill	and	Other	Intangible	Assets

Assets	and	liabilities	acquired	in	business	combinations	are	accounted	for	using	the	acquisition	method	and	recorded	at	their	respective	fair	values. Substantially	all	goodwill	is	assigned	to	the	reporting	unit	that	acquires	a	business.	A	reporting	unit	is	an	operating	segment	as	defined	in	ASC	280, Segment	Reporting,	or	a	business	one	level	below	an	operating	segment	if	discrete	financial	information	for	that	business	unit	is	prepared	and	regularly reviewed	by	the	segment	manager.	The	Company	conducts	annual	impairment	tests	of	goodwill	in	the	fourth	quarter.	If	an	initial	assessment	indicates	it is	more	likely	than	not	goodwill	might	be	impaired,	it	is	evaluated	by	comparing	the	reporting	unit's	estimated	fair	value	to	its	carrying	value.	Goodwill	is also	tested	for	impairment	between	annual	tests	if	events	or	circumstances	indicate	the	fair	value	of	a	unit	may	be	less	than	its	carrying	value.

If	the	carrying	amount	exceeds	the	estimated	fair	value,	impairment	is	recognized	to	the	extent	that	recorded	goodwill	exceeds	the	implied	fair	value	of that	goodwill.	Estimated	fair	values	of	reporting	units	are	Level	3	measures	and	are	developed	generally	under	an	income	approach	that	discounts estimated	future	cash	flows	using	risk-adjusted	interest	rates.

All	of	the	Company's	identifiable	intangible	assets	are	subject	to	amortization	on	a	straight-line	basis	over	their	estimated	useful	lives.	Identifiable intangibles	consist	of	intellectual	property	such	as	patents	and	trademarks,	customer	relationships	and	capitalized	software.	Identifiable	intangibles	are also	subject	to	evaluation	for	potential	impairment	if	events	or	circumstances	indicate	the	carrying	amount	may	not	be	recoverable.	See	Note	7.

# Product	Warranty

Warranties	vary	by	product	line	and	are	competitive	for	the	markets	in	which	the	Company	operates.	Warranties	generally	extend	for	a	period	of	 one	to two	years	from	the	date	of	sale	or	installation.	Provisions	for	warranty	are	determined	primarily	based	on	historical	warranty	cost	as	a	percentage	of	sales or	a	fixed	amount	per	unit	sold	based	on	failure	rates,	adjusted	for	specific	problems	that	may	arise.	Product	warranty	expense	is	less	than	one	percent	of sales.

The	Company	recognizes	a	large	majority	of	its	revenues	through	the	sale	of	manufactured	products	and	records	the	sale	when	products	are	shipped	or delivered,	title	and	risk	of	loss	pass	to	the	customer,	and	collection	is	reasonably	assured.	Less	than	ten	percent	of	the	Company's	revenues	are recognized	using	the	percentage-of-completion	method	as	performance	occurs,	and	revenue	from	software	sales	is	recognized	in	accordance	with	ASC 985-605.	Management	believes	that	all	relevant	criteria	and	conditions	are	considered	when	recognizing	revenue.

Sales	arrangements	sometimes	involve	delivering	multiple	elements.	In	these	instances,	the	revenue	assigned	to	each	element	is	based	on	vendor- specific	objective	evidence,	third-party	evidence	or	a	management	estimate	of	the	relative	selling	price.	Revenue	is	recognized	for	delivered	elements	if they	have	value	to	the	customer	on	a	stand-alone	basis	and	performance	related	to	the	undelivered	items	is	probable	and	substantially	in	the	Company's control,	or	the	undelivered	elements	are	inconsequential	or	perfunctory	and	there	are	no	unsatisfied	contingencies	related	to	payment.	Approximately	five percent	of	the	Company's	revenues	from	continuing	operations	arise	from	qualifying	sales	arrangements	that	include	the	delivery	of	multiple	elements, principally	in	the	Automation	Solutions	segment.	The	vast	majority	of	these	deliverables	are	tangible	products,	with	a	smaller	portion	attributable	to installation,	service	or	maintenance.	Generally,	contract	duration	is	short	term,	and	cancellation,	termination	or	refund	provisions	apply	only	in	the	event	of contract	breach	and	have	historically	not	been	invoked.

# Derivatives	and	Hedging

In	the	normal	course	of	business,	the	Company	is	exposed	to	changes	in	interest	rates,	foreign	currency	exchange	rates	and	commodity	prices	due	to	its worldwide	presence	and	diverse	business	profile.	The	Company's	foreign	currency	exposures	relate	to	transactions	denominated	in	currencies	that	differ from	the	functional	currencies	of	its	business	units,	primarily	in	euros,	Mexican	pesos,	Singapore	dollars	and	Indian	rupees.	Primary	commodity exposures	are	price	fluctuations	on	forecasted	purchases	of	copper	and	aluminum	and	related	products.	As	part	of	the	Company's	risk	management strategy,	derivative	instruments	are	selectively	used	in	an	effort	to	minimize	the	impact	of	these	exposures.	Foreign	exchange	forwards	and	options	are utilized	to	hedge	foreign	currency	exposures	impacting	sales	or	cost	of	sales	transactions,	firm	commitments	and	the	fair	value	of	assets	and	liabilities, while	swap	and	option	contracts	may	be	used	to	minimize	the	effect	of	commodity	price	fluctuations	on	the	cost	of	sales.	All	derivatives	are	associated with	specific	underlying	exposures	and	the	Company	does	not	hold	derivatives	for	trading	or	speculative	purposes.	The	duration	of	hedge	positions	is generally	two	years	or	less.

All	derivatives	are	accounted	for	under	ASC	815,	 Derivatives	and	Hedging,	and	recognized	at	fair	value.	For	derivatives	hedging	variability	in	future	cash flows,	the	effective	portion	of	any	gain	or	loss	is	deferred	in	stockholders'	equity	and	recognized	when	the	underlying	hedged	transaction	impacts earnings.	The	majority	of	the	Company's	derivatives	that	are	designated	as	hedges	and	qualify	for	deferral	accounting	are	cash	flow	hedges.	For derivatives	hedging	the	fair	value	of	existing	assets	or	liabilities,	both	the	gain	or	loss	on	the	derivative	and	the	offsetting	loss	or	gain	on	the	hedged	item are	recognized	in	earnings	each	period.	Currency	fluctuations	on	non-U.S.	dollar	obligations	that	have	been	designated	as	hedges	of	non-U.S.	dollar	net asset	exposures	are	reported	in	equity.	To	the	extent	that	any	hedge	is	not	fully	effective	at	offsetting	changes	in	the	underlying	hedged	item,	there	could be	a	net	earnings	impact.	The	Company	also	uses	derivatives	to	hedge	economic	exposures	that	do	not	receive	deferral	accounting	under	ASC	815.	The underlying	exposures	for	these	hedges	relate	primarily	to	purchases	of	commodity-based	components	used	in	the	Company's	manufacturing	processes, and	the	revaluation

of	certain	foreign-currency-denominated	assets	and	liabilities.	Gains	or	losses	from	the	ineffective	portion	of	any	hedge,	as	well	as	any	gains	or	losses	on derivative	instruments	not	designated	as	hedges,	are	recognized	in	the	income	statement	immediately.

Counterparties	to	derivative	arrangements	are	companies	with	high	credit	ratings,	and	the	Company	has	bilateral	collateral	arrangements	with	them	for which	credit	rating-based	posting	thresholds	vary	depending	on	the	arrangement.	If	credit	ratings	on	the	Company's	debt	fall	below	preestablished	levels, counterparties	can	require	immediate	full	collateralization	on	all	instruments	in	net	liability	positions.	No	collateral	was	posted	with	counterparties	and none	was	held	by	the	Company	at	year	end.	If	contractual	thresholds	had	been	exceeded,	the	maximum	collateral	the	Company	could	have	been required	to	post	was	$4.	The	Company	can	also	demand	full	collateralization	of	instruments	in	net	asset	positions	should	any	of	the	Company's counterparties'	credit	ratings	fall	below	certain	thresholds.	Risk	from	credit	loss	when	derivatives	are	in	asset	positions	is	not	considered	material.	The Company	has	master	netting	arrangements	in	place	with	its	counterparties	that	allow	the	offsetting	of	certain	derivative-related	amounts	receivable	and payable	when	settlement	occurs	in	the	same	period.	Accordingly,	counterparty	balances	are	netted	in	the	consolidated	balance	sheet	and	are	reported	in other	current	assets	or	accrued	expenses	as	appropriate,	depending	on	positions	with	counterparties	as	of	the	balance	sheet	date.	See	Note	8.

The	provision	for	income	taxes	is	based	on	pretax	income	reported	in	the	consolidated	statements	of	earnings	and	tax	rates	currently	enacted	in	each jurisdiction.	Certain	income	and	expense	items	are	recognized	in	different	time	periods	for	financial	reporting	and	income	tax	filing	purposes,	and	deferred income	taxes	are	provided	for	the	effect	of	temporary	differences.	The	Company	also	provides	for	U.S.	federal	income	taxes,	net	of	available	foreign	tax credits,	on	earnings	intended	to	be	repatriated	from	non-U.S.	locations.	No	provision	has	been	made	for	U.S.	income	taxes	on	approximately	$4.9	billion of	undistributed	earnings	of	non-U.S.	subsidiaries	as	of	September	30,	2017,	as	these	earnings	are	considered	permanently	invested	or	otherwise indefinitely	retained	for	continuing	international	operations.	Recognition	of	U.S.	taxes	on	undistributed	non-U.S.	earnings	would	be	triggered	by	a management	decision	to	repatriate	those	earnings.	Determination	of	the	amount	of	taxes	that	might	be	paid	on	these	undistributed	earnings	if	eventually remitted	is	not	practicable.	See	Note	14.

# (2)	WEIGHTED-AVERAGE	COMMON	SHARES

Basic	earnings	per	common	share	consider	only	the	weighted-average	of	common	shares	outstanding	while	diluted	earnings	per	common	share	also consider	the	dilutive	effects	of	stock	options	and	incentive	shares.	Options	to	purchase	approximately	4.5	million,	13.3	million	and	5.9	million	shares	of common	stock	were	excluded	from	the	computation	of	diluted	earnings	per	share	in	2017,	2016	and	2015,	respectively,	as	the	effect	would	have	been antidilutive.	Earnings	allocated	to	participating	securities	were	inconsequential	for	all	years	presented.	Reconciliations	of	weighted-average	shares	for basic	and	diluted	earnings	per	common	share	follow	(shares	in	millions):

|  | 2015 | 2016 | 2017 |
| :--- | :--- | :--- | :--- |
| Basic\tshares\toutstanding | 673.3 | 644.0 | 642.1 |
| Dilutive\tshares | 3.2 | 2.8 | 1.3 |
| \t\t\t\t\tDiluted\tshares\toutstanding | 676.5 | 646.8 | 643.4 |

On	April	28,	2017,	the	Company	completed	the	acquisition	of	Pentair's	valves	&	controls	business	for	 $2.960	billion,	net	of	cash	acquired	of	 $207,	subject to	certain	post-closing	adjustments.	This	business,	with	annualized	sales	of	approximately	$1.4	billion,	is	a	manufacturer	of	control,	isolation	and	pressure relief	valves	and	actuators,	and	complements	the	Valves,	Actuators	&	Regulators	product	offering	within	Automation	Solutions.	The	Company	recognized goodwill	of	$1,472	(none	of	which	is	expected	to	be	tax	deductible),	and	other	identifiable	intangible	assets	of	 $1,045,	primarily	customer	relationships and	intellectual	property	with	a	weighted-average	life	of	approximately	fifteen	years.	The	Company	also	acquired	 two	smaller	businesses	in	the Automation	Solutions	segment.	Total	cash	paid	for	all	businesses	was	$3.0	billion,	net	of	cash	acquired.

The	purchase	price	of	the	valves	&	controls	business	was	preliminarily	allocated	to	assets	and	liabilities	as	follows.	Valuations	of	acquired	assets	and liabilities	are	in-process	and	subject	to	refinement.

| liabilities	are	in-process	and	subject	to	refinement. |  |
| :--- | :--- |
| Accounts\treceivable | $350 |
| Inventory | 525 |
| Property,\tplant\t&\tequipment | 355 |
| Goodwill | 1,472 |
| Intangibles | 1,045 |
| Other\tassets | 289 |
| Total\tassets | 4,036 |
| Accounts\tpayable | 119 |
| Other\tcurrent\tliabilities | 300 |
| Deferred\ttaxes\tand\tother\tliabilities | 657 |
| Cash\tpaid,\tnet\tof\tcash\tacquired | $2,960 |

Results	of	operations	for	2017	included	sales	of	 $600	and	a	net	loss	of	$97,	$0.15	per	share,	including	restructuring	expense	of	$25	and	intangibles amortization	of	$29.	These	results	also	included	first	year	pretax	acquisition	accounting	charges	related	to	inventory	of 	$74	and	backlog	of	$19,	or	a	total of	$93	($65	after-tax,	$0.10	per	share),	which	are	reported	in	Corporate	and	other.	See	Note	18.

# Pro	Forma	Financial	Information

The	following	pro	forma	consolidated	condensed	financial	results	of	operations	are	presented	as	if	the	acquisition	of	the	valves	&	controls	business occurred	on	October	1,	2015.	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.

The	pro	forma	results	for	2016	were	adjusted	to	include	first	year	acquisition	accounting	charges	related	to	inventory	and	backlog	of	$ 122	in	2017.	The pro	forma	2016	results	also	include	acquisition	costs	of	$52,	while	the	2017	pro	forma	results	were	adjusted	to	exclude	these	charges.

On	October	2,	2017,	the	Company	sold	its	residential	storage	business	for	 $200	in	cash,	subject	to	post-closing	adjustments,	and	expects	to	recognize	a loss	of	approximately	$40	in	2018	due	to	income	taxes	resulting	from	nondeductible	goodwill.	The	Company	expects	to	realize	approximately $140	in after-tax	cash	proceeds	from	the	sale.	This	business,	with	sales	of	$298	and	pretax	earnings	of	$15	in	2017,	is	a	leader	in	home	organization	and	storage systems,	and	was	reported	within	the	Tools	&	Home	Products	segment.	Assets	and	liabilities	were	classified	as	held-for-sale	as	of	September	30,	2017.

The	Company	acquired	six	businesses	in	2016,	four	in	Automation	Solutions	and	two	in	Climate	Technologies.	Total	cash	paid	for	these	businesses	was $132,	net	of	cash	acquired.	Annualized	sales	for	these	businesses	were	approximately	 $51	in	2016.	The	Company	recognized	goodwill	of	 $83	($27	of which	is	expected	to	be	tax	deductible)	and	other	identifiable	intangible	assets	of	$50,	primarily	customer	relationships	and	intellectual	property	with	a weighted-average	life	of	approximately	nine	years.

The	Company	completed	eight	acquisitions	in	2015,	seven	in	Automation	Solutions	and	one	in	Tools	&	Home	Products,	which	had	combined	annualized sales	of	approximately	$115.	Total	cash	paid	for	all	businesses	was	 $324,	net	of	cash	acquired.	The	Company	recognized	goodwill	of	 $178	($42	of	which is	expected	to	be	tax	deductible)	and	other	intangible	assets	of	$128,	primarily	customer	relationships	and	intellectual	property	with	a	weighted-average life	of	approximately	ten	years.

In	January	2015,	the	Company	completed	the	sale	of	its	mechanical	power	transmission	solutions	business	for	 $1.4	billion,	and	recognized	a	pretax	gain from	the	transaction	of	$939	($532	after-tax,	$0.78	per	share).	Assets	and	liabilities	sold	were	as	follows:	current	assets,	 $182	(accounts	receivable, inventories,	other	current	assets);	other

assets,	$374	(property,	plant	and	equipment,	goodwill,	other	noncurrent	assets);	accrued	expenses,	 $56	(accounts	payable,	other	current	liabilities);	and other	liabilities,	$41.	Proceeds	from	the	divestiture	were	used	for	share	repurchase.	This	business	was	previously	reported	in	the	former	Industrial Automation	segment,	and	had	partial	year	sales	in	2015	of	$189	and	related	pretax	earnings	of	 $21.	Power	transmission	solutions	designs	and manufactures	market-leading	couplings,	bearings,	conveying	components	and	gearing	and	drive	components,	and	provides	supporting	services	and solutions.

On	September	30,	2015,	the	Company	sold	its	InterMetro	commercial	storage	business	for	 $411	in	cash	and	recognized	a	pretax	gain	from	the transaction	of	$100	($79	after-tax,	$0.12	per	share).	This	business	had	annual	sales	of	 $288	and	pretax	earnings	of	$42	in	2015	and	was	reported	in	the former	Commercial	&	Residential	Solutions	segment.	Assets	and	liabilities	sold	were	as	follows:	current	assets,	$62	(accounts	receivable,	inventories, other	current	assets);	other	assets,	$292	(property,	plant	and	equipment,	goodwill,	other	noncurrent	assets);	current	liabilities,	 $34	(accounts	payable, other	current	liabilities);	and	other	liabilities,	$9.	InterMetro	is	a	leading	manufacturer	and	supplier	of	storage	and	transport	products	in	the	food	service, commercial	products	and	health	care	industries.

The	results	of	operations	of	the	acquired	businesses	discussed	above	have	been	included	in	the	Company's	consolidated	results	of	operations	since	the respective	dates	of	acquisition.

In	2017,	the	Company	completed	the	previously	announced	strategic	actions	to	streamline	its	portfolio	and	drive	growth	in	its	core	businesses.	On November	30,	2016,	the	Company	completed	the	sale	of	its	network	power	systems	business	for	$4.0	billion	in	cash	and	retained	a	subordinated	interest in	distributions,	contingent	upon	the	equity	holders	first	receiving	a	threshold	return	on	their	initial	investment.	This	business	comprised	the	former Network	Power	segment.	Additionally,	on	January	31,	2017,	the	Company	completed	the	sale	of	its	power	generation,	motors	and	drives	business	for approximately	$1.2	billion,	subject	to	post-closing	adjustments.	This	business	was	previously	reported	in	the	former	Industrial	Automation	segment.	The results	of	operations	for	these	businesses	were	reported	within	discontinued	operations	for	all	years	presented,	and	the	assets	and	liabilities	were reflected	as	held-for-sale.

The	financial	results	of	the	network	power	systems	business	and	power	generation,	motors	and	drives	business	reported	as	discontinued	operations	for the	years	ending	September	30,	2017,	2016	and	2015,	were	as	follows:

|  | Network	Power	Systems | Network	Power	Systems |  | Power	Generation,	Motors	and | Drives |  |  | Total |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 |
| Net\tsales | $4,426 | 4,378 | 630 | 1,668 | 1,368 | 407 | 6,094 | 5,746 | 1,037 |
| Cost\tof\tsales | 2,810 | 2,708 | 394 | 1,244 | 1,033 | 307 | 4,054 | 3,741 | 701 |
| SG&A | 1,143 | 1,101 | 180 | 306 | 269 | 83 | 1,449 | 1,370 | 263 |
| Other\tdeductions,\tnet | 222 | 172 | (515) | 15 | 149 | 42 | 237 | 321 | (473) |
| Earnings\t(Loss)\tbefore\tincome\ttaxes | 251 | 397 | 571 | 103 | (83) | (25) | 354 | 314 | 546 |
| Income\ttaxes | 134 | 218 | 577 | 27 | 51 | 94 | 161 | 269 | 671 |
| Earnings\t(Loss),\tnet\tof\ttax | $117 | 179 | (6) | 76 | (134) | (119) | 193 | 45 | (125) |

In	2017,	the	net	loss	from	discontinued	operations	of	 $125,	$0.19	per	share,	included	an	after-tax	gain	on	the	divestiture	of	the	network	power	systems business	of	$125	($519	pretax),	a	$173	after-tax	loss	($36	pretax	loss)	on	the	divestiture	of	the	power	generation,	motors	and	drives	business,	income tax	expense	of	$109	for	repatriation	of	sales	proceeds,	and	lower	expense	of	 $32	primarily	due	to	ceasing	depreciation	and	amortization	for	the discontinued	businesses	held-for-sale.

Discontinued	operations	income	of	$45,	$0.07	per	share,	in	2016	included	earnings	from	operations	of	 $344	and	costs	to	execute	the	portfolio repositioning	of	$299.	These	costs	are	comprised	of	income	tax	expense	of	 $143	for	repatriation	of	cash	from	these	businesses,	reorganization	of	their legal	structures	prior	to	sale,	and	basis	differences	for	book	and	tax,	as	well	as	costs	for	legal,	consulting,	investment	banking	and	other	expenses	of	$77. In	addition,	net	earnings	for	2016	included	a	loss	of	$103	to	write	down	the	power	generation,	motors	and	drives

business	to	the	sales	price	less	costs	to	sell,	and	lower	expense	of	 $24	due	to	ceasing	depreciation	and	amortization	for	the	discontinued	businesses held-for-sale.	Discontinued	operations	income	of	$193,	$0.28	per	share,	in	2015	included	earnings	from	operations	of	 $245	and	separation	costs	of	$52, comprised	of	income	tax	expense	of	$42	and	fees	of	$10.

The	aggregate	carrying	amounts	of	the	major	classes	of	assets	and	liabilities	classified	as	held-for-sale	as	of	September	30, 2016	are	summarized	as follows:

|  | Network	Power<br>Systems | Power	Generation,<br>Motors	and	Drives | Total |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2016 | 2016 |
| Assets |  |  |  |
| \t\t\tReceivables,\tless\tallowances | $1,202 | 290 | 1,492 |
| \t\t\tInventories | 381 | 197 | 578 |
| \t\t\tProperty,\tplant\t&amp;\tequipment,\tnet | 352 | 259 | 611 |
| \t\t\tGoodwill | 2,111 | 580 | 2,691 |
| \t\t\tOther\tassets | 581 | 77 | 658 |
| Total\tassets\theld-for-sale | $4,627 | 1,403 | 6,030 |
| Liabilities |  |  |  |
| \t\t\tAccounts\tpayable | $664 | 176 | 840 |
| \t\t\tOther\tcurrent\tliabilities | 620 | 141 | 761 |
| \t\t\tDeferred\ttaxes\tand\tother\tnoncurrent\tliabilities | 227 | 99 | 326 |
| Total\tliabilities\theld-for-sale | $1,511 | 416 | 1,927 |

The	net	cash	from	operating	activities	and	from	investing	activities	for	the	network	power	systems	business	and	the	power	generation,	motors	and	drives business	for	the	years	ending	September	30,	2017,	2016	and	2015,	were	as	follows:

|  | Network	Power	Systems | Network	Power	Systems | Network	Power	Systems | Power	Generation,<br>Motors	and	Drives | Power	Generation,<br>Motors	and	Drives |  |  | Total |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 |
| Cash\tfrom\toperating\tactivities | $378 | 343 | (615) | 111 | 39 | (163) | 489 | 382 | (778) |
| Cash\tfrom\tinvesting\tactivities | $(48) | (33) | 3,952 | (40) | (44) | 1,095 | (88) | (77) | 5,047 |

Operating	cash	flow	used	by	discontinued	operations	was	 $778	for	2017,	which	primarily	included	payments	of	approximately	$700	for	income	taxes	on completion	of	the	divestitures	and	repatriation	of	cash,	cash	used	by	operations	and	other	costs.	Operating	cash	flow	from	discontinued	operations	in 2016	was	net	of	payments	of	$179	for	separation	costs.

Other	deductions,	net	are	summarized	as	follows:

|  | 2015 | 2016 | 2017 |
| :--- | :--- | :--- | :--- |
| Amortization\tof\tintangibles\t(intellectual\tproperty\tand\tcustomer\trelationships) | $94 | 84 | 136 |
| Restructuring\tcosts | 138 | 96 | 78 |
| Other | 98 | 114 | 72 |
| \t\t\t\t\tTotal | $330 | 294 | 286 |

Other	is	composed	of	several	items,	including	foreign	currency	transaction	gains	and	losses,	bad	debt	expense,	equity	investment	income	and	losses, litigation	and	other	items.	The	decrease	in	other	for	2017	is	due	to	favorable	foreign	currency	transactions	comparisons	of	 $78	(unfavorable	in	the	prior year),	partially	offset	by	higher	acquisition/divestiture	costs	of	$24	and	the	comparative	impact	of	a	 $21	gain	from	payments	received	related	to

dumping	duties	in	2016.	The	increase	in	2016	is	primarily	due	to	an	unfavorable	foreign	currency	transactions	impact	of $67,	partially	offset	by	lower litigation	costs	of	$30	and	the	dumping	duties	gain.

# (6)	RESTRUCTURING	COSTS

Each	year	the	Company	incurs	costs	to	size	its	businesses	to	levels	appropriate	for	current	economic	conditions	and	to	continually	improve	its	cost structure	and	operational	efficiency,	deploy	assets	globally,	and	remain	competitive	on	a	worldwide	basis.	Costs	result	from	numerous	individual	actions implemented	across	the	Company's	various	operating	units	on	an	ongoing	basis	and	can	include	costs	for	moving	facilities	to	best-cost	locations, restarting	plants	after	relocation	or	geographic	expansion	to	better	serve	local	markets,	reducing	forcecount	or	the	number	of	facilities,	exiting	certain product	lines,	and	other	costs	resulting	from	asset	deployment	decisions.	By	category,	shutdown	costs	include	severance	and	benefits,	stay	bonuses, lease	and	other	contract	termination	costs	and	asset	write-downs.	Vacant	facility	costs	include	security,	maintenance,	utilities	and	other	costs.	Start-up and	moving	costs	include	the	costs	of	relocating	fixed	assets	and	employee	training	and	relocation.

Restructuring	expenses	were	$78,	$96	and	$138,	respectively,	for	2017,	2016	and	2015.	The	2017	restructuring	expense	included	$25	related	to	the acquired	valves	&	controls	business.	Restructuring	activity	in	2015	and	2016	was	initiated	in	connection	with	the	slowdown	in	global	capital	spending	and the	Company's	strategic	portfolio	repositioning	activities.	The	Company	currently	expects	2018	restructuring	expense	to	be	approximately	$80,	including costs	to	complete	actions	initiated	before	the	end	of	2017	and	for	actions	anticipated	to	be	approved	and	initiated	during	 2018.

Restructuring	costs	by	business	segment	follows:

|  | 2015 | 2016 | 2017 |
| :--- | :--- | :--- | :--- |
| Automation\tSolutions | $102 | 80 | 63 |
| Climate\tTechnologies | 20 | 5 | 10 |
| Tools\t&amp;\tHome\tProducts | 11 | 2 | 2 |
| Commercial\t&amp;\tResidential\tSolutions | 31 | 7 | 12 |
| Corporate | 5 | 9 | 3 |
| \t\t\t\t\t\tTotal | $138 | 96 | 78 |

Costs	incurred	in	2017	primarily	related	to	the	deployment	of	resources	to	better	serve	local	markets	and	higher	growth	areas,	and	the	integration	of	the valves	&	controls	business.	In	2016	and	2015	costs	primarily	related	to	the	reduction	and	selective	repositioning	of	the	Company's	cost	structure	to address	global	economic	weakness	and	in	connection	with	the	portfolio	repositioning	through	facilities	and	forcecount	rationalization	in	Europe	and	North America,	primarily	in	Automation	Solutions.	In	2017,	restructuring	activities	included	actions	to	exit	 10	production	or	office	facilities	worldwide	and eliminate	approximately	1,200	positions.	Expenses	incurred	in	2016	and	2015	included	actions	to	exit	 19	and	12	facilities,	and	eliminate	approximately 1,900	and	3,100	positions,	respectively.

The	change	in	the	liability	for	restructuring	costs	during	the	years	ended	September	30	follows:

|  | 2016 | Expense | Utilized/Paid | 2017 |
| :--- | :--- | :--- | :--- | :--- |
| Severance\tand\tbenefits | $44 | 49 | 33 | 60 |
| Lease\tand\tother\tcontract\tterminations | 5 | 4 | 5 | 4 |
| Asset\twrite-downs | — | 7 | 7 | — |
| Vacant\tfacility\tand\tother\tshutdown\tcosts | 3 | 5 | 7 | 1 |
| Start-up\tand\tmoving\tcosts | 2 | 13 | 15 | — |
| \t\t\t\t\tTotal | $54 | 78 | 67 | 65 |

|  | 2015 | Expense | Utilized/Paid | 2016 |
| :--- | :--- | :--- | :--- | :--- |
| Severance\tand\tbenefits | $64 | 66 | 86 | 44 |
| Lease\tand\tother\tcontract\tterminations | 1 | 9 | 5 | 5 |
| Asset\twrite-downs | — | 4 | 4 | — |
| Vacant\tfacility\tand\tother\tshutdown\tcosts | 3 | 7 | 7 | 3 |
| Start-up\tand\tmoving\tcosts | 2 | 10 | 10 | 2 |
| \t\t\t\t\tTotal | $70 | 96 | 112 | 54 |

# (7)	GOODWILL	AND	OTHER	INTANGIBLES

Purchases	of	businesses	are	accounted	for	under	the	acquisition	method,	with	substantially	all	goodwill	assigned	to	the	reporting	unit	that	acquires	the business.	Under	an	impairment	test	performed	annually,	if	the	carrying	amount	of	a	reporting	unit	exceeds	its	estimated	fair	value,	impairment	is recognized	to	the	extent	that	the	carrying	amount	of	the	unit's	goodwill	exceeds	the	implied	fair	value	of	the	goodwill.	Fair	values	of	reporting	units	are Level	3	measures	which	are	estimated	generally	using	an	income	approach	that	discounts	future	cash	flows	using	risk-adjusted	interest	rates,	as	well	as earnings	multiples	or	other	techniques	as	warranted.	Fair	values	are	subject	to	changes	in	underlying	economic	conditions.

The	change	in	the	carrying	value	of	goodwill	by	business	segment	follows:

|  | Automation<br>Solutions | Climate<br>Technologies | Tools	&amp;	Home<br>Products | Commercial	&amp;<br>Residential<br>Solutions | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Balance,\tSeptember\t30,\t2015 | $3,138 | 513 | 196 | 709 | 3,847 |
| \t\t\t\t\tAcquisitions | 39 | 44 | — | 44 | 83 |
| \t\t\t\t\tForeign\tcurrency\n\t\t\t\t\t\t\t\ttranslation\tand\tother | (17) | (4) | — | (4) | (21) |
| Balance,\tSeptember\t30,\t2016 | 3,160 | 553 | 196 | 749 | 3,909 |
| \t\t\t\t\tAcquisitions | 1,486 | — | — | — | 1,486 |
| \t\t\t\t\tDivestitures | — | — | (142) | (142) | (142) |
| \t\t\t\t\tForeign\tcurrency\n\t\t\t\t\t\t\t\ttranslation\tand\tother | 58 | 2 | 3 | 5 | 63 |
| Balance,\tSeptember\t30,\t2017 | $4,704 | 555 | 57 | 612 | 5,316 |

The	gross	carrying	amount	and	accumulated	amortization	of	identifiable	intangible	assets	by	major	class	follow:

|  | Customer	Relationships | Customer	Relationships | Intellectual	Property | Intellectual	Property | Capitalized	Software | Capitalized	Software |  | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 |
| Gross\tcarrying\tamount | $580 | 1,392 | 730 | 1,012 | 1,071 | 1,137 | 2,381 | 3,541 |
| Less:\tAccumulated\tamortization | 286 | 361 | 393 | 435 | 800 | 855 | 1,479 | 1,651 |
| \t\t\t\t\tNet\tcarrying\tamount | $294 | 1,031 | 337 | 577 | 271 | 282 | 902 | 1,890 |

The	increase	in	goodwill	and	intangibles	is	primarily	due	to	the	valves	&	controls	acquisition.	See	Note	3.

# Hedging	Activities

As	of	September	30,	2017,	the	notional	amount	of	foreign	currency	hedge	positions	was	approximately	 $1.8	billion,	while	commodity	hedge	contracts totaled	approximately	$115	(primarily	49	million	pounds	of	copper	and	aluminum).	All	derivatives	receiving	deferral	accounting	are	cash	flow	hedges.	The majority	of	hedging	gains	and	losses	deferred	as	of	September	30,	2017	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	deferral	accounting.

Amounts	included	in	earnings	and	other	comprehensive	income	follow:

|  |  | 2015 | Gain	(Loss)	to	Earnings<br>2016 | 2017 | 2015 | Gain	(Loss)	to	OCI<br>2016 | 2017 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Location |  |  |  |  |  |  |
| Commodity | Cost\tof\tsales | $(24) | (35) | 10 | (43) | (9) | 25 |
| Foreign\tcurrency | Sales,\tcost\tof\tsales | (12) | (41) | (15) | (61) | (38) | 30 |
| Foreign\tcurrency | Other\tdeductions,\tnet | 14 | (27) | (39) |  |  |  |
| \t\t\t\t\tTotal |  | $(22) | (103) | (44) | (104) | (47) | 55 |

Regardless	of	whether	derivatives	receive	deferral	accounting,	the	Company	expects	hedging	gains	or	losses	to	be	essentially	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	deferral	accounting	are	highly	effective	and	no	amounts	were	excluded	from	the assessment	of	hedge	effectiveness.	Hedge	ineffectiveness	was	immaterial	in	all	years	shown.

The	estimated	fair	value	of	long-term	debt	was	$4,385	and	$4,806,	respectively,	as	of	September	30,	2017	and	2016,	which	exceeded	the	carrying	value by	$321	and	$488,	respectively.	As	of	September	30,	2017,	the	fair	value	of	commodity	contracts	and	foreign	currency	contracts	was	reported	in	other current	assets	and	accrued	expenses.	Valuations	of	derivative	contract	positions	as	of	September	30	follow:

|  |  | 2016 |  | 2017 |
| :--- | :--- | :--- | :--- | :--- |
|  | Assets | Liabilities | Assets | Liabilities |
| Foreign\tcurrency | $7 | 49 | 26 | 18 |
| Commodity | $2 | 4 | 12 | — |

# (9)	SHORT-TERM	BORROWINGS	AND	LINES	OF	CREDIT

Short-term	borrowings	and	current	maturities	of	long-term	debt	are	as	follows:

|  | 2016 | 2017 |
| :--- | :--- | :--- |
| Current\tmaturities\tof\tlong-term\tdebt | $267 | 270 |
| Commercial\tpaper | 2,317 | 592 |
| \t\t\t\t\tTotal | $2,584 | 862 |
| Interest\trate\tfor\tweighted-average\tshort-term\tborrowings\tat\tyear\tend | 0.5% | 1.1% |

The	Company	routinely	issues	commercial	paper	as	a	source	of	short-term	financing.	In	April	2014,	the	Company	entered	into	a	 $3.5	billion	five-year revolving	backup	credit	facility	with	various	banks,	which	replaced	a	December	2010	$2.75	billion	facility.	The	credit	facility	is	maintained	to	support general	corporate	purposes,	including	commercial	paper	borrowing.	The	Company	has	not	incurred	any	borrowings	under	this	or	previous	facilities.	The credit	facility	contains	no	financial	covenants	and	is	not	subject	to	termination	based	on	a	change	of	credit	rating	or	material	adverse	changes.	The	facility is	unsecured	and	may	be	accessed	under	various	interest	rate	and	currency	denomination	alternatives	at	the	Company's	option.	Fees	to	maintain	the facility	are	immaterial.

The	details	of	long-term	debt	follow:

|  | 2016 | 2017 |
| :--- | :--- | :--- |
| 5.125%\tnotes\tdue\tDecember\t2016 | $250 | — |
| 5.375%\tnotes\tdue\tOctober\t2017 | 250 | 250 |
| 5.25%\tnotes\tdue\tOctober\t2018 | 400 | 400 |
| 5.0%\tnotes\tdue\tApril\t2019 | 250 | 250 |
| 4.875%\tnotes\tdue\tOctober\t2019 | 500 | 500 |
| 4.25%\tnotes\tdue\tNovember\t2020 | 300 | 300 |
| 2.625%\tnotes\tdue\tDecember\t2021 | 500 | 500 |
| 2.625%\tnotes\tdue\tFebruary\t2023 | 500 | 500 |
| 3.15%\tnotes\tdue\tJune\t2025 | 500 | 500 |
| 6.0%\tnotes\tdue\tAugust\t2032 | 250 | 250 |
| 6.125%\tnotes\tdue\tApril\t2039 | 250 | 250 |
| 5.25%\tnotes\tdue\tNovember\t2039 | 300 | 300 |
| Other | 68 | 64 |
| \t\t\t\t\tLong-term\tdebt | 4,318 | 4,064 |
| Less:\tCurrent\tmaturities | 267 | 270 |
| \t\t\t\t\tTotal,\tnet | $4,051 | 3,794 |

The	Company	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.

Retirement	plans	expense	includes	the	following	components:

|  | 2015 | U.S.	Plans<br>2016 | 2017 | 2015 | Non-U.S.	Plans<br>2016 | 2017 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Defined\tbenefit\tplans: |  |  |  |  |  |  |
| \t\t\t\t\tService\tcost\t(benefits\tearned\tduring\tthe\tperiod) | $69 | 59 | 60 | 37 | 26 | 19 |
| \t\t\t\t\tInterest\tcost | 182 | 148 | 134 | 46 | 39 | 30 |
| \t\t\t\t\tExpected\treturn\ton\tplan\tassets | (303) | (296) | (290) | (58) | (52) | (56) |
| \t\t\t\t\tNet\tamortization\tand\tother | 174 | 166 | 211 | 20 | 17 | 22 |
| \t\t\t\t\t\t\tNet\tperiodic\tpension\texpense | 122 | 77 | 115 | 45 | 30 | 15 |
| Defined\tcontribution\tplans | 111 | 104 | 96 | 61 | 56 | 47 |
| \t\t\t\t\t\t\t\t\t\t\t\t\tTotal\tretirement\tplans\texpense | $233 | 181 | 211 | 106 | 86 | 62 |

The	increase	in	net	periodic	pension	expense	in	2017	is	attributable	to	higher	amortization	compared	to	the	prior	year.	Beginning	in	2016,	the	Company refined	the	method	used	to	determine	the	service	and	interest	cost	components	of	pension	expense	for	its	U.S.	retirement	plans.	The	specific	spot	rates along	the	yield	curve,	rather	than	the	single	weighted-average	rate	previously	used,	are	applied	to	the	projected	cash	flows	to	provide	more

precise	measurement	of	these	costs.	This	is	a	change	in	estimate	which	has	been	accounted	for	prospectively	beginning	with	the	2016	financial statements.	The	change	reduced	the	2016	service	and	interest	cost	by	a	total	of	$38	compared	with	the	cost	measured	using	the	weighted-average approach.	Net	periodic	pension	expense	includes	$3,	$12	and	$14	and	defined	contribution	expense	includes	 $6,	$34	and	$33,	for	2017,	2016	and 2015,	respectively,	related	to	discontinued	operations.	For	defined	contribution	plans,	the	Company	makes	cash	contributions	based	on	plan requirements,	which	are	expensed	as	incurred.

The	Company	transitioned	from	defined	benefit	to	defined	contribution	retirement	plans	in	2016.	The	principal	U.S.	defined	benefit	pension	plan	is	closed to	employees	hired	after	January	1,	2016,	and	current	employees	not	meeting	combined	age	and	years	of	service	criteria	ceased	accruing	benefits effective	October	1,	2016.	Affected	employees	were	enrolled	in	an	enhanced	defined	contribution	plan.	The	impact	of	these	actions	had	an inconsequential	impact	on	the	Company's	financial	statements	for	all	years	presented.	Over	time,	defined	benefit	plan	expense	will	decline	while	defined contribution	plan	expense	will	increase,	with	an	expectation	of	reduced	earnings	volatility.

All	of	the	following	tables	include	defined	benefit	plans	related	to	continuing	and	discontinued	operations.

Details	of	the	changes	in	the	actuarial	present	value	of	the	projected	benefit	obligation	and	the	fair	value	of	plan	assets	for	defined	benefit	pension	plans follow:

|  | U.S.	Plans |  | Non-U.S.	Plans |  |
| :--- | :--- | :--- | :--- | :--- |
|  | 2016 | 2017 | 2016 | 2017 |
| Projected\tbenefit\tobligation,\tbeginning | $4,263 | 4,696 | 1,248 | 1,320 |
| \t\t\t\t\tService\tcost | 59 | 60 | 26 | 19 |
| \t\t\t\t\tInterest\tcost | 148 | 134 | 39 | 30 |
| \t\t\t\t\tActuarial\t(gain)\tloss | 565 | (144) | 275 | (83) |
| \t\t\t\t\tBenefits\tpaid | (191) | (201) | (31) | (29) |
| \t\t\t\t\tSettlements | (151) | (125) | (82) | (25) |
| \t\t\t\t\tAcquisitions\t(Divestitures),\tnet | — | (55) | (6) | 163 |
| \t\t\t\t\tForeign\tcurrency\ttranslation\tand\tother | 3 | 4 | (149) | 94 |
| Projected\tbenefit\tobligation,\tending | $4,696 | 4,369 | 1,320 | 1,489 |
| Fair\tvalue\tof\tplan\tassets,\tbeginning | $3,928 | 4,110 | 935 | 909 |
| \t\t\t\t\tActual\treturn\ton\tplan\tassets | 491 | 516 | 155 | 61 |
| \t\t\t\t\tEmployer\tcontributions | 31 | 20 | 35 | 25 |
| \t\t\t\t\tBenefits\tpaid | (191) | (201) | (31) | (29) |
| \t\t\t\t\tSettlements | (151) | (125) | (82) | (25) |
| \t\t\t\t\tAcquisitions\t(Divestitures),\tnet | — | (30) | — | 232 |
| \t\t\t\t\tForeign\tcurrency\ttranslation\tand\tother | 2 | 2 | (103) | 63 |
| Fair\tvalue\tof\tplan\tassets,\tending | $4,110 | 4,292 | 909 | 1,236 |
| \t\t\t\t\tNet\tamount\trecognized\tin\tthe\tbalance\tsheet | $(586) | (77) | (411) | (253) |
| Location\tof\tnet\tamount\trecognized\tin\tthe\tbalance\tsheet: |  |  |  |  |
| Noncurrent\tasset | $— | 154 | 1 | 43 |
| Current\tliability | (11) | (11) | (7) | (11) |
| Noncurrent\tliability | (565) | (220) | (279) | (285) |
| Net\tliability\theld-for-sale | (10) | — | (126) | — |
| \t\t\t\t\tNet\tamount\trecognized\tin\tthe\tbalance\tsheet | (586) | (77) | (411) | (253) |
| Pretax\taccumulated\tother\tcomprehensive\tloss | $(1,527) | (923) | (389) | (238) |

Approximately	$142	of	the	$1,161	of	pretax	losses	deferred	in	accumulated	other	comprehensive	income	(loss)	at	 September	30,	2017	will	be	amortized to	expense	in	2018.	As	of	September	30,	2017,	U.S.	pension	plans	were	underfunded	by	 $77	in	total,	including	unfunded	plans	totaling	$201.	The	non- U.S.	plans	were	underfunded	by	$253,	including	unfunded	plans	totaling	$215.

As	of	the	September	30,	2017	and	2016	measurement	dates,	the	plans'	total	accumulated	benefit	obligation	was	 $5,607	and	$5,729,	respectively.	Also as	of	the	measurement	dates,	the	total	projected	benefit	obligation,	accumulated	benefit	obligation	and	fair	value	of	plan	assets	for	individual	plans	with accumulated	benefit	obligations	in	excess	of	plan	assets	were	$1,182,	$1,088	and	$663,	respectively,	for	2017,	and	$5,951,	$5,678	and	$4,958, respectively,	for	2016.

The	weighted-average	assumptions	used	in	the	valuation	of	pension	benefits	follow:

|  | 2015 | U.S.	Plans<br>2016 | 2017 | 2015 | Non-U.S.	Plans<br>2016 | 2017 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Net\tpension\texpense |  |  |  |  |  |  |
| Discount\trate\tused\tto\tdetermine\tservice\tcost | 4.25% | 4.60% | 3.75% | 3.6% | 3.3% | 2.3% |
| Discount\trate\tused\tto\tdetermine\tinterest\tcost | 4.25% | 3.50% | 2.90% | 3.6% | 3.3% | 2.3% |
| Expected\treturn\ton\tplan\tassets | 7.50% | 7.50% | 7.25% | 6.6% | 6.4% | 6.2% |
| Rate\tof\tcompensation\tincrease | 3.25% | 3.25% | 3.25% | 3.4% | 3.4% | 3.2% |
| Benefit\tobligations |  |  |  |  |  |  |
| Discount\trate | 4.35% | 3.50% | 3.76% | 3.3% | 2.3% | 2.6% |
| Rate\tof\tcompensation\tincrease | 3.25% | 3.25% | 3.25% | 3.4% | 3.2% | 3.4% |

The	discount	rate	for	the	U.S.	retirement	plans	was	3.76	percent	as	of	September	30,	2017.	An	actuarially	developed,	company-specific	yield	curve	is used	to	determine	the	discount	rate.	The	expected	return	on	plan	assets	assumption	is	determined	by	reviewing	the	investment	returns	of	the	plans	for the	past	10	years	plus	longer-term	historical	returns	of	an	asset	mix	approximating	the	Company's	asset	allocation	targets,	and	periodically	comparing these	returns	to	expectations	of	investment	advisors	and	actuaries	to	determine	whether	long-term	future	returns	are	expected	to	differ	significantly	from the	past.

The	Company's	asset	allocations	at	September	30,	2017	and	2016,	and	weighted-average	target	allocations	follow:

|  |  | U.S.	Plans |  |  | Non-U.S.	Plans |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2016 | 2017 | Target | 2016 | 2017 | Target |
| Equity\tsecurities | 66% | 67% | 60-70% | 51% | 52% | 50-60% |
| Debt\tsecurities | 29 | 28 | 25-35 | 36 | 38 | 25-35 |
| Other | 5 | 5 | 3-10 | 13 | 10 | 10-20 |
| \t\t\t\t\tTotal | 100% | 100% | 100% | 100% | 100% | 100% |

The	primary	objective	for	the	investment	of	pension	assets	is	to	secure	participant	retirement	benefits	by	earning	a	reasonable	rate	of	return.	Plan	assets are	invested	consistent	with	the	provisions	of	the	prudence	and	diversification	rules	of	ERISA	and	with	a	long-term	investment	horizon.	The	Company continuously	monitors	the	value	of	assets	by	class	and	routinely	rebalances	to	remain	within	target	allocations.	The	equity	strategy	is	to	minimize concentrations	of	risk	by	investing	primarily	in	a	mix	of	companies	that	are	diversified	across	geographies,	market	capitalization,	style,	sectors	and industries	worldwide.	The	approach	for	bonds	emphasizes	investment-grade	corporate	and	government	debt	with	maturities	matching	a	portion	of	the longer	duration	pension	liabilities.	The	bonds	strategy	also	includes	a	high-yield	element	which	is	generally	shorter	in	duration.	For	diversification,	a	small

portion	of	U.S.	plan	assets	is	allocated	to	private	equity	partnerships	and	real	asset	fund	investments,	providing	opportunities	for	above	market	returns. Leveraging	techniques	are	not	used	and	the	use	of	derivatives	in	any	fund	is	limited	and	inconsequential.

The	fair	values	of	defined	benefit	pension	assets	as	of	September	30,	organized	by	asset	class	and	by	the	fair	value	hierarchy	of	ASC	820, 	Fair	Value Measurement,	follow.	Investments	valued	based	on	the	net	asset	value	(NAV)	of	fund	units	held,	as	derived	from	the	fair	value	of	the	underlying	assets, are	excluded	from	the	fair	value	hierarchy.

|  | Level	1 | Level	2 | Level	3 | Measured	at<br>NAV | Total | % |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| 2017 |  |  |  |  |  |  |
| U.S.\tequities | $1,059 | 5 | 338 | 357 | 1,759 | 32% |
| International\tequities | 724 | 6 | — | 739 | 1,469 | 27% |
| Emerging\tmarket\tequities | — | — | — | 276 | 276 | 5% |
| Corporate\tbonds | — | 514 | — | 283 | 797 | 14% |
| Government\tbonds | 3 | 369 | — | 399 | 771 | 14% |
| High-yield\tbonds | — | — | — | 132 | 132 | 2% |
| Other | 132 | 6 | 113 | 73 | 324 | 6% |
| \t\t\t\t\tTotal | $1,918 | 900 | 451 | 2,259 | 5,528 | 100% |
| 2016 |  |  |  |  |  |  |
| U.S.\tequities | $1,081 | 4 | 292 | 301 | 1,678 | 33% |
| International\tequities | 627 | 8 | — | 599 | 1,234 | 25% |
| Emerging\tmarket\tequities | — | — | — | 257 | 257 | 5% |
| Corporate\tbonds | — | 476 | — | 172 | 648 | 13% |
| Government\tbonds | 3 | 392 | — | 357 | 752 | 15% |
| High-yield\tbonds | — | — | — | 122 | 122 | 2% |
| Other | 144 | 2 | 113 | 69 | 328 | 7% |
| \t\t\t\t\tTotal | $1,855 | 882 | 405 | 1,877 | 5,019 | 100% |

# Asset	Classes

U.S.	equities	reflect	companies	domiciled	in	the	U.S.,	including	multinational	companies.	International	equities	are	comprised	of	companies	domiciled	in developed	nations	outside	the	U.S.	Emerging	market	equities	are	comprised	of	companies	domiciled	in	portions	of	Asia,	Eastern	Europe	and	Latin America.	Corporate	bonds	represent	investment-grade	debt	of	issuers	primarily	from	the	U.S.	Government	bonds	include	investment-grade	instruments issued	by	federal,	state	and	local	governments,	primarily	in	the	U.S.	High-yield	bonds	include	noninvestment-grade	debt	from	a	diverse	group	of developed	market	issuers.	Other	includes	cash,	interests	in	mixed	asset	funds	investing	in	commodities,	natural	resources,	agriculture,	real	estate	and infrastructure	funds,	life	insurance	contracts	(U.S.),	and	shares	in	certain	general	investment	funds	of	financial	institutions	or	insurance	arrangements (non-U.S.)	that	typically	ensure	no	market	losses	or	provide	for	a	small	minimum	return	guarantee.

# Fair	Value	Hierarchy	Categories

Valuations	of	Level	1	assets	for	all	classes	are	based	on	quoted	closing	market	prices	from	the	principal	exchanges	where	the	individual	securities	are traded.	Cash	is	valued	at	cost,	which	approximates	fair	value.	Debt	securities	categorized	as	Level	2	assets	are	generally	valued	based	on	independent broker/dealer	bids	or	by	comparison	to	other	debt	securities	having	similar	durations,	yields	and	credit	ratings.	U.S.	equity	securities	classified	as	Level	3 are	fund	investments	in	private	companies.	Valuation	techniques	and	inputs	for	these	assets	include	discounted	cash	flow	analysis,	earnings	multiple approaches,	recent	transactions,	transfer	restrictions,	prevailing	discount	rates,	volatilities,	credit	ratings	and	other	factors.	In	the	Other	class,	interests	in mixed	asset	funds	are	Level	2,	and	U.S.	life	insurance	contracts	and	non-U.S.	general	fund	investments	and	insurance	arrangements	are	Level	3. Investments	measured	at	net	asset	value	are	primarily	nonexchange-traded	commingled	or	collective	funds	where	the	underlying	securities	have observable	prices	available	from	active	markets.

Details	of	the	changes	in	value	for	Level	3	assets	follow:

|  | 2016 | 2017 |
| :--- | :--- | :--- |
| Level\t3,\tbeginning | $371 | 405 |
| \t\t\t\t\tGains\t(Losses)\ton\tassets\theld | 18 | 49 |
| \t\t\t\t\tGains\t(Losses)\ton\tassets\tsold | (20) | (28) |
| \t\t\t\t\tPurchases,\tsales\tand\tsettlements,\tnet | 36 | 25 |
| Level\t3,\tending | $405 | 451 |

# (12)	POSTRETIREMENT	PLANS

The	Company	sponsors	unfunded	postretirement	benefit	plans	(primarily	health	care)	for	certain	U.S.	retirees	and	their	dependents.	The	components	of net	postretirement	benefits	expense	for	the	years	ended	September	30	follow:

As	of	September	30,	2017	there	were	$141	of	deferred	actuarial	gains	in	accumulated	other	comprehensive	income,	of	which	approximately	 $19	will	be amortized	into	earnings	in	2018.	The	discount	rates	used	to	measure	the	benefit	obligation	as	of	 September	30,	2017,	2016	and	2015	were	3.45	percent, 3.10	percent	and	3.80	percent,	respectively.	The	health	care	cost	trend	rate	used	for	both	 2018	and	2017	is	assumed	to	be	7.5	percent	initially,	and declining	to	5.0	percent	over	the	subsequent	eleven	years.	A	one	percentage	point	increase	or	decrease	in	the	health	care	cost	trend	rate	assumption	for either	year	would	have	an	inconsequential	impact	on	postretirement	benefits	expense	and	the	benefit	obligation.	The	Company	estimates	that	future health	care	benefit	payments	will	be	approximately	$14	per	year	for	2018	through	2022,	and	$60	in	total	over	the	five	years	 2023	through	2027.

# (13)	CONTINGENT	LIABILITIES	AND	COMMITMENTS

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;	the	Company's	experience	in	contesting,	litigating	and	settling	similar	matters;	and	any related	insurance	coverage.	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.	The	Company	enters	into	certain	indemnification	agreements	in	the	ordinary	course of	business	in	which	the	indemnified	party	is

held	harmless	and	is	reimbursed	for	losses	incurred	from	claims	by	third	parties,	usually	up	to	a	prespecified	limit.	In	connection	with	divestitures	of certain	assets	or	businesses,	the	Company	often	provides	indemnities	to	the	buyer	with	respect	to	certain	matters	including,	for	example,	environmental or	unidentified	tax	liabilities	related	to	periods	prior	to	the	disposition.	Because	of	the	uncertain	nature	of	the	indemnities,	the	maximum	liability	cannot	be quantified.	As	such,	contingent	liabilities	are	recorded	when	they	are	both	probable	and	reasonably	estimable.	Historically,	payments	under	indemnity arrangements	have	been	inconsequential.

Pretax	earnings	from	continuing	operations	consist	of	the	following:

Non-U.S.	tax	holidays	reduce	tax	rates	in	certain	foreign	jurisdictions	and	are	expected	to	expire	over	the	next five	years.

Following	are	changes	in	unrecognized	tax	benefits	before	considering	recoverability	of	any	cross-jurisdictional	tax	credits	(federal,	state	and	non-U.S.) and	temporary	differences.	The	amount	of	unrecognized	tax	benefits	is	not	expected	to	change	significantly	within	the	next	12	months.

|  | 2016 | 2017 |
| :--- | :--- | :--- |
| Unrecognized\ttax\tbenefits,\tbeginning | $84 | 86 |
| \t\t\t\t\tAdditions\tfor\tcurrent\tyear\ttax\tpositions | 12 | 54 |
| \t\t\t\t\tAdditions\tfor\tprior\tyear\ttax\tpositions | 16 | 4 |
| \t\t\t\t\tReductions\tfor\tprior\tyear\ttax\tpositions | (13) | (6) |
| \t\t\t\t\tAcquisitions\tand\tdivestitures | — | 9 |
| \t\t\t\t\tReductions\tfor\tsettlements\twith\ttax\tauthorities | (4) | (4) |
| \t\t\t\t\tReductions\tfor\texpiration\tof\tstatutes\tof\tlimitations | (9) | (11) |
| Unrecognized\ttax\tbenefits,\tending | $86 | 132 |

If	none	of	the	unrecognized	tax	benefits	shown	is	ultimately	paid,	the	tax	provision	and	the	calculation	of	the	effective	tax	rate	would	be	favorably impacted	by	$100,	which	is	net	of	cross-jurisdictional	tax	credits	and	temporary	differences.	The	Company	accrues	interest	and	penalties	related	to income	taxes	in	income	tax	expense.	Total	interest	and	penalties	recognized	were	$(1),	$2	and	$(4)	in	2017,	2016	and	2015,	respectively.	As	of September	30,	2017	and	2016,	total	accrued	interest	and	penalties	were	 $16	and	$21,	respectively.

The	U.S.	is	the	major	jurisdiction	for	which	the	Company	files	income	tax	returns.	U.S.	federal	tax	returns	are	closed	through	2013.	The	status	of	state and	non-U.S.	tax	examinations	varies	due	to	the	numerous	legal	entities	and	jurisdictions	in	which	the	Company	operates.

The	principal	items	that	gave	rise	to	deferred	income	tax	assets	and	liabilities	follow:

|  | 2016 | 2017 |
| :--- | :--- | :--- |
| Deferred\ttax\tassets: |  |  |
| \t\t\tNet\toperating\tlosses\tand\ttax\tcredits | $164 | 444 |
| \t\t\tAccrued\tliabilities | 277 | 319 |
| \t\t\tPostretirement\tand\tpostemployment\tbenefits | 82 | 70 |
| \t\t\tEmployee\tcompensation\tand\tbenefits | 206 | 173 |
| \t\t\tPensions | 271 | 72 |
| \t\t\tOther | 158 | 196 |
| \t\t\t\t\t\t\t\tTotal | $1,158 | 1,274 |
| Valuation\tallowances | $(132) | (309) |
| Deferred\ttax\tliabilities: |  |  |
| \t\t\tIntangibles | $(510) | (753) |
| \t\t\tProperty,\tplant\tand\tequipment | (239) | (265) |
| \t\t\tUndistributed\tnon-U.S.\tearnings | (9) | (249) |
| \t\t\tOther | (42) | (37) |
| \t\t\t\t\t\t\t\tTotal | $(800) | (1,304) |
| \t\t\t\t\t\t\t\t\t\t\t\t\tNet\tdeferred\tincome\ttax\tasset\t(liability) | $226 | (339) |

As	of	September	30,	2017,	all	deferred	tax	assets	and	liabilities	were	presented	as	noncurrent.	As	of	September	30,	2016,	current	deferred	tax	assets, net	were	$400	and	noncurrent	deferred	tax	liabilities,	net	were	 $174.	Total	income	taxes	paid	were	approximately	 $1,420,	$950	and	$1,590	in	2017, 2016	and	2015,	respectively.	Approximately	one-third	of	the	$444	of	net	operating	losses	and	tax	credits	can	be	carried	forward	indefinitely,	 one-third expire	in	ten	years,	and	the	remainder	expire	over	varying	periods.

# (15)	STOCK-BASED	COMPENSATION

The	Company's	stock-based	compensation	plans	include	stock	options,	performance	shares,	restricted	stock	and	restricted	stock	units.	Although	the Company	has	discretion,	shares	distributed	under	these	plans	are	issued	from	treasury	stock.

# Stock	Options

The	Company's	stock	option	plans	permit	key	officers	and	employees	to	purchase	common	stock	at	specified	prices,	which	are	equal	to	 100	percent	of the	closing	market	price	of	the	Company's	stock	on	the	date	of	grant.	Options	generally	vest	one-third	in	each	of	the	three	years	subsequent	to	grant	and expire	10	years	from	the	date	of	grant.	Compensation	expense	is	recognized	ratably	over	the	vesting	period	based	on	the	number	of	options	expected	to vest.	As	of	September	30,	2017,	11.5	million	options	were	available	for	grant	under	the	plans.

Changes	in	shares	subject	to	options	during	the	year	ended	 September	30,	2017	follow	(shares	in	thousands):

|  | Weighted-	Average<br>Exercise	Price	Per<br>Share | Shares | Total<br>Intrinsic	Value	of<br>Shares | Average<br>Remaining	Life<br>(Years) |
| :--- | :--- | :--- | :--- | :--- |
| Beginning\tof\tyear | $54.87 | 15,276 |  |  |
| \t\t\t\t\tOptions\tgranted | $53.71 | 386 |  |  |
| \t\t\t\t\tOptions\texercised | $51.09 | (3,812) |  |  |
| \t\t\t\t\tOptions\tcanceled | $61.48 | (1,091) |  |  |
| End\tof\tyear | $55.49 | 10,759 | $87 | 5.8 |
| Exercisable\tat\tend\tof\tyear | $56.73 | 8,222 | $58 | 5.1 |

The	grant	date	fair	value	of	options	is	estimated	using	the	Black-Scholes	option-pricing	model.	The	weighted-average	assumptions	used	in	valuations	for 2017,	2016	and	2015	are,	respectively:	risk-free	interest	rate,	based	on	U.S.	Treasury	yields,	 1.7	percent,	1.9	percent	and	1.9	percent;	dividend	yield,	3.6 percent,	3.8	percent	and	3.1	percent;	and	expected	volatility,	based	on	historical	volatility,	 24	percent,	27	percent	and	28	percent.	The	expected	life	of each	option	awarded	is	seven	years	based	on	historical	experience	and	expected	future	exercise	patterns.

# Performance	Shares,	Restricted	Stock	and	Restricted	Stock	Units

The	Company's	incentive	shares	plans	include	performance	shares	awards	which	distribute	the	value	of	common	stock	to	key	management	employees subject	to	certain	operating	performance	conditions	and	other	restrictions.	The	form	of	distribution	is	primarily	shares	of	common	stock,	with	a	portion	in cash.	Compensation	expense	for	performance	shares	is	recognized	over	the	service	period	based	on	the	number	of	shares	ultimately	expected	to	be earned.	Performance	shares	awards	are	accounted	for	as	liabilities	in	accordance	with	ASC	718,	Compensation	-	Stock	Compensation,	with compensation	expense	adjusted	at	the	end	of	each	reporting	period	to	reflect	the	change	in	fair	value	of	the	awards.

As	of	September	30,	2016,	4,944,575	performance	shares	awarded	primarily	in	2013	were	outstanding,	contingent	on	the	Company	achieving	its performance	objectives	through	2016	and	the	provision	of	additional	service	by	employees.	The	objectives	for	these	shares	were	met	at	the	86	percent level	at	the	end	of	2016,	or	4,252,335	shares.	Of	these,	2,549,083	shares	were	distributed	in	early	2017	as	follows:	 1,393,715	issued	as	shares,	 944,002 withheld	for	income	taxes,	and	the	value	of	211,366	paid	in	cash.	An	additional	 1,691,986	shares	were	distributed	at	the	end	of	2017	to	employees	who provided	one	additional	year	of	service	as	follows:	1,070,264	issued	as	shares,	 616,734	withheld	for	income	taxes,	and	the	value	of	 4,988	paid	in	cash. There	were	11,266	shares	canceled	and	not	distributed.	Additionally,	the	rights	to	receive	a	maximum	of	2,388,125	and	2,178,388	common	shares awarded	in	2017	and	2016,	under	the	new	performance	shares	program,	are	outstanding	and	contingent	upon	the	Company	achieving	its	performance objectives	through	2019	and	2018,	respectively.

Incentive	shares	plans	also	include	restricted	stock	awards	which	involve	distribution	of	common	stock	to	key	management	employees	subject	to	cliff vesting	at	the	end	of	service	periods	ranging	from	three	to	ten	years.	The	fair	value	of	restricted	stock	awards	is	determined	based	on	the	average	of	the high	and	low	market	prices	of	the	Company's	common	stock	on	the	date	of	grant,	with	compensation	expense	recognized	ratably	over	the	applicable service	period.	In	2017,	130,641	shares	of	restricted	stock	vested	as	a	result	of	participants	fulfilling	the	applicable	service	requirements.	Consequently, 84,398	shares	were	issued	while	 46,243	shares	were	withheld	for	income	taxes	in	accordance	with	minimum	withholding	requirements.	As	of September	30,	2017,	there	were	1,194,500	shares	of	unvested	restricted	stock	outstanding.

The	total	fair	value	of	shares	vested	under	incentive	shares	plans	was	 $245,	$11	and	$9,	respectively,	in	2017,	2016	and	2015,	of	which	$101,	$4	and $5	was	paid	in	cash,	primarily	for	tax	withholding.	As	of	 September	30,	2017,	12.9	million	shares	remained	available	for	award	under	incentive	shares plans.

Changes	in	shares	outstanding	but	not	yet	earned	under	incentive	shares	plans	during	the	year	ended	 September	30,	2017	follow	(shares	in	thousands):

|  | Shares | Average	Grant	Date<br>Fair	Value	Per	Share |
| :--- | :--- | :--- |
| Beginning\tof\tyear | 7,328 | $49.17 |
| \t\t\t\t\tGranted | 2,134 | $51.91 |
| \t\t\t\t\tEarned/vested | (4,372) | $49.14 |
| \t\t\t\t\tCanceled | (91) | $51.18 |
| End\tof\tyear | 4,999 | $50.33 |

Total	compensation	expense	for	stock	options	and	incentive	shares	was	 $115,	$159	and	$30	for	2017,	2016	and	2015,	respectively,	of	which	$5,	$14 and	$6	was	included	in	discontinued	operations.	The	decrease	in	expense	for	2017	reflects	the	impact	of	changes	in	the	stock	price.	The	increase	in expense	for	2016	reflects	an	increasing	stock	price	in	the	current	year	compared	with	a	decreasing	price	in	2015,	and	overlap	of	awards.	Income	tax benefits	recognized	in	the	income	statement	for	these	compensation	arrangements	during	2017,	2016	and	2015	were	$33,	$45	and	$2,	respectively.	As of	September	30,	2017,	total	unrecognized	compensation	expense	related	to	unvested	shares	awarded	under	these	plans	was	 $149,	which	is	expected to	be	recognized	over	a	weighted-average	period	of	1.5	years.

In	addition	to	the	employee	stock	option	and	incentive	shares	plans,	in	 2017	the	Company	awarded	17,984	shares	of	restricted	stock	and	2,248	restricted stock	units	under	the	restricted	stock	plan	for	non-management	directors.	As	of	September	30,	2017,	174,335	shares	were	available	for	issuance	under this	plan.

# (16)	COMMON	AND	PREFERRED	STOCK

At	September	30,	2017,	40.0	million	shares	of	common	stock	were	reserved	for	issuance	under	the	Company's	stock-based	compensation	plans.	During 2017,	6.6	million	common	shares	were	purchased	and	 5.5	million	treasury	shares	were	reissued.	In	 2016,	12.5	million	common	shares	were	purchased and	0.7	million	treasury	shares	were	reissued.

At	September	30,	2017	and	2016,	the	Company	had	 5.4	million	shares	of	$2.50	par	value	preferred	stock	authorized,	with	 none	issued.

# (17)	ACCUMULATED	OTHER	COMPREHENSIVE	INCOME	(LOSS)

Activity	in	accumulated	other	comprehensive	income	(loss)	attributable	to	common	stockholders	is	shown	below:

| Foreign	currency	translation | 2015 | 2016 | 2017 |
| :--- | :--- | :--- | :--- |
| Beginning\tbalance | $171 | (622) | (812) |
| Other\tcomprehensive\tincome\t(loss) | (793) | (190) | 58 |
| Reclassified\tto\tgain/loss\ton\tsale\tof\tbusinesses | — | — | 385 |
| Ending\tbalance | (622) | (812) | (369) |
| Pension\tand\tpostretirement |  |  |  |
| Beginning\tbalance | (746) | (952) | (1,162) |
| Actuarial\tgains\t(losses)\tdeferred\tduring\tthe\tperiod | (315) | (310) | 315 |
| Amortization\tof\tdeferred\tactuarial\tlosses\tinto\tearnings | 109 | 100 | 135 |
| Reclassified\tto\tgain/loss\ton\tsale\tof\tbusinesses | — | — | 50 |
| Ending\tbalance | (952) | (1,162) | (662) |
| Cash\tflow\thedges |  |  |  |
| Beginning\tbalance | — | (43) | (25) |
| Gains\t(Losses)\tdeferred\tduring\tthe\tperiod | (66) | (30) | 34 |
| Reclassifications\tof\trealized\t(gains)\tlosses\tto\tsales\tand\tcost\tof\tsales | 23 | 48 | 3 |
| Ending\tbalance | (43) | (25) | 12 |
| Accumulated\tother\tcomprehensive\tincome\t(loss) | $(1,617) | (1,999) | (1,019) |

# (18)	BUSINESS	SEGMENTS	INFORMATION

The	Company	designs	and	manufactures	products	and	delivers	services	that	bring	technology	and	engineering	together	to	provide	innovative	solutions	for customers	in	a	wide	range	of	industrial,	commercial	and	consumer	markets	around	the	world.

In	connection	with	the	strategic	portfolio	repositioning	actions	undertaken	to	transform	the	Company	into	a	more	focused	enterprise,	its	businesses	and organization	were	realigned.	In	fiscal	2017,	the	Company	began	reporting	three	segments:	Automation	Solutions,	and	Climate	Technologies	and Tools	&	Home	Products	which	together	comprise	the	Commercial	&	Residential	Solutions	business.	Prior	year	information	has	been	reclassified	to conform	with	the	current	year	presentation.	The	Automation	Solutions	segment	includes	the	former	Process	Management	segment	and	the	remaining businesses	in	the	former	Industrial	Automation	segment,	except	for	the	hermetic	motors	business,	which	is	now	included	in	the	Climate	Technologies segment.	The	new	Tools	&	Home	Products	segment	consists	of	the	businesses	previously	reported	in	the	Commercial	&	Residential	Solutions	segment	in fiscal	2016	and	2015.

The	Automation	Solutions	segment	enables	process,	hybrid	and	discrete	manufacturers	to	maximize	production,	protect	personnel	and	the environment,	and	optimize	their	energy	efficiency	and	operating	costs	through	a	broad	offering	of	integrated	solutions	and	products,	including measurement	and	analytical	instrumentation,	industrial	valves	and	equipment,	and	process	control	systems.	Significant	end	markets	serviced	include	oil and	gas,	refining,	chemicals	and	power	generation,	as	well	as	pharmaceuticals,	food	and	beverage,	automotive,	pulp	and	paper,	metals	and	mining,	and municipal	water	supplies.	The	segment's	major	product	offerings	are	described	below.

•Measurement	&	Analytical	Instrumentation	products	measure	the	physical	properties	of	liquids	or	gases	in	a	process	stream	and communicate	this	information	to	a	process	control	system	or	other	software	applications,	and	analyze	the	chemical	composition	of	process	fluids and	emissions	to	enhance	quality	and	efficiency,	as	well	as	environmental	compliance.

•Valves,	Actuators	&	Regulators	consists	of	control,	isolation	and	pressure	relief	valves	which	respond	to	commands	from	a	control	system	to continuously	and	precisely	modulate	the	flow	of	process	fluids,	smart	actuation	and	control	technologies,	pressure	management	products,	and industrial	and	residential	regulators	that	reduce	the	pressure	of	fluids	moving	from	high-pressure	supply	lines	into	lower	pressure	systems.

•Industrial	Solutions	provides	fluid	power	and	control	mechanisms,	electrical	distribution	equipment,	and	materials	joining	and	precision	cleaning products	which	are	used	in	a	variety	of	manufacturing	operations	to	provide	integrated	solutions	to	customers.

•Process	Control	Systems	&	Solutions	provides	a	digital	ecosystem	that	controls	plant	processes	by	communicating	with	and	adjusting	the "intelligent"	plant	devices	described	above	to	provide	precision	measurement,	control,	monitoring,	asset	optimization,	and	plant	safety	and reliability	for	plants	that	produce	power,	or	process	fluids	or	other	items.

The	Commercial	&	Residential	Solutions	business	consists	of	the	Climate	Technologies	and	Tools	&	Home	Products	segments.	This	business provides	products	and	solutions	that	promote	energy	efficiency,	enhance	household	and	commercial	comfort,	and	protect	food	quality	and	sustainability through	heating,	air	conditioning	and	refrigeration	technology,	as	well	as	a	broad	range	of	tools	and	appliance	solutions.

The	Climate	Technologies	segment	provides	products,	services	and	solutions	for	all	areas	of	the	climate	control	industry,	including	residential	heating and	cooling,	commercial	air	conditioning,	commercial	and	industrial	refrigeration,	and	cold	chain	management.	Products	include	compressors, temperature	sensors	and	controls,	thermostats,	flow	controls,	and	stationary	and	mobile	remote	monitoring	technologies	and	services	that	enable homeowners	and	businesses	to	better	manage	their	heating,	air	conditioning	and	refrigeration	systems	for	improved	control	and	comfort,	and	lower energy	costs.

The	Tools	&	Home	Products	segment	offers	tools	for	professionals	and	homeowners	and	appliance	solutions.	Products	include	professional	pipe- working	tools,	residential	and	commercial	food	waste	disposers,	and	wet-dry	vacuums.

The	principal	distribution	method	for	each	segment	is	direct	sales	forces,	although	the	Company	also	uses	independent	sales	representatives	and distributors.	Due	to	its	global	presence,	certain	of	the	Company's	international	operations	are	subject	to	risks	including	the	stability	of	governments	and business	conditions	in	foreign	countries	which	could	result	in	adverse	changes	in	exchange	rates,	changes	in	regulation	or	disruption	of	operations.

The	primary	income	measure	used	for	assessing	segment	performance	and	making	operating	decisions	is	earnings	before	interest	and	income	taxes. Intersegment	selling	prices	approximate	market	prices.	Accounting	method	differences	between	segment	reporting	and	the	consolidated	financial statements	are	primarily	management	fees	allocated	to	segments	based	on	a	percentage	of	sales	and	the	accounting	for	pension	and	other	retirement plans.	Corporate	and	other	includes	corporate	operations,	stock	compensation	expense,	acquisition	related	costs	and	other	items.	Corporate	assets	are primarily	comprised	of	cash	and	equivalents,	investments	and	certain	fixed	assets.	Summarized	below	is	information	about	the	Company's	operations	by business	segment	and	by	geography.

|  |  | Sales |  |  | Earnings |  |  | Total	Assets |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 |
| Automation\tSolutions | $10,153 | 8,977 | 9,418 | $1,846 | 1,456 | 1,522 | $8,817 | 8,759 | 12,581 |
| Climate\tTechnologies | 4,006 | 3,944 | 4,212 | 835 | 902 | 975 | 2,455 | 2,489 | 2,547 |
| Tools\t&amp;\tHome\tProducts | 1,625 | 1,611 | 1,645 | 364 | 384 | 383 | 817 | 809 | 830 |
| Commercial\t&amp;\tResidential\nSolutions | 5,631 | 5,555 | 5,857 | 1,199 | 1,286 | 1,358 | 3,272 | 3,298 | 3,377 |
| Divested\tbusinesses\t(a) | 477 | — | — | 58 | — | — | — | — | — |
| Differences\tin\taccounting\nmethods |  |  |  | 174 | 189 | 148 |  |  |  |
| Corporate\tand\tother\t(b) |  |  |  | 705 | (427) | (528) | 9,999 | 9,675 | 3,631 |
| Eliminations/Interest | (12) | (10) | (11) | (175) | (188) | (165) |  |  |  |
| \t\t\t\t\tTotal | $16,249 | 14,522 | 15,264 | $3,807 | 2,316 | 2,335 | $22,088 | 21,732 | 19,589 |

(a)	Divested	businesses	includes	sales	and	earnings	related	to	the	power	transmission	solutions	and	commercial	storage	businesses,	which	were	reported	in	the	former	Industrial Automation	and	Commercial	&	Residential	Solutions	segments,	respectively.

(b)	Corporate	and	other	in	2017	includes	first	year	pretax	acquisition	accounting	charges	related	to	inventory	and	backlog	of	$93	($65	after-tax,	$0.10	per	share),	and	in	2015	includes pretax	gains	on	divestitures	of	$1,039	($611	after-tax,	$0.90	per	share)	related	to	the	power	transmission	solutions	and	commercial	storage	businesses.	See	Note	3.	Assets	held-for- sale	of	$6,030	and	$6,222	are	included	in	Corporate	and	other	for	2016	and	2015,	respectively.	See	Note	4.

Automation	Solutions	sales	by	major	product	offering	are	summarized	below:

# Geographic	Information

|  |  | Sales	by	Destination |  | Property,	Plant	and	Equipment | Property,	Plant	and	Equipment |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 |
| United\tStates\tand\tCanada | $8,370 | 7,505 | 7,854 | $1,756 | 1,780 | 1,852 |
| Asia | 3,363 | 2,926 | 3,253 | 481 | 459 | 525 |
| Europe | 2,381 | 2,300 | 2,434 | 426 | 435 | 626 |
| Latin\tAmerica | 981 | 834 | 767 | 216 | 203 | 203 |
| Middle\tEast/Africa | 1,154 | 957 | 956 | 50 | 54 | 115 |
| \t\t\t\t\tTotal | $16,249 | 14,522 | 15,264 | $2,929 | 2,931 | 3,321 |
|  |  |  |  |  | $1,540,\t$1,320\tand |  |

# (19)	OTHER	FINANCIAL	DATA

Items	reported	in	earnings	from	continuing	operations	during	the	years	ended	September	30	included	the	following:

|  | 2015 | 2016 | 2017 |
| :--- | :--- | :--- | :--- |
| Research\tand\tdevelopment\texpense | $336 | 320 | 340 |
| Depreciation\texpense | $399 | 391 | 414 |
| Rent\texpense | $287 | 273 | 289 |

The	Company	leases	certain	facilities,	transportation	and	office	equipment,	and	various	other	items	under	operating	lease	agreements.	Minimum	annual rentals	under	noncancelable	long-term	leases,	exclusive	of	maintenance,	taxes,	insurance	and	other	operating	costs,	will	approximate	$171	in	2018, $125	in	2019,	$81	in	2020,	$49	in	2021	and	$31	in	2022.

Items	reported	in	accrued	expenses	included	the	following:

The	increase	in	asbestos	litigation	primarily	reflects	the	valves	&	controls	acquisition,	which	added	approximately $240	of	asbestos	liabilities.	In	addition, other	long-term	assets	include	$133	of	related	insurance	receivables,	$95	of	which	were	acquired	with	valves	&	controls.

Other	operating	cash	flow	is	comprised	of	the	following:

|  | 2015 | 2016 | 2017 |
| :--- | :--- | :--- | :--- |
| Pension\texpense | $153 | 95 | 127 |
| Stock\tcompensation\texpense | 24 | 145 | 110 |
| Deferred\tincome\ttaxes\tand\tother | 19 | 45 | 27 |
| \t\t\t\tTotal | $196 | 285 | 264 |

# (20)	QUARTERLY	FINANCIAL	INFORMATION	(UNAUDITED)

|  | First	Quarter | First	Quarter | Second	Quarter | Second	Quarter | Third	Quarter | Third	Quarter | Fourth	Quarter | Fourth	Quarter | Full	Year |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 |
| Net\tsales | $3,337 | 3,216 | 3,579 | 3,574 | 3,674 | 4,039 | 3,932 | 4,435 | 14,522 | 15,264 |
| Gross\tprofit | $1,414 | 1,365 | 1,542 | 1,557 | 1,593 | 1,678 | 1,713 | 1,804 | 6,262 | 6,404 |
| Earnings\tfrom\tcontinuing\toperations\tcommon\nstockholders | $303 | 364 | 367 | 376 | 441 | 407 | 479 | 496 | 1,590 | 1,643 |
| Net\tearnings\tcommon\tstockholders | $349 | 309 | 369 | 292 | 479 | 413 | 438 | 504 | 1,635 | 1,518 |
| Earnings\tper\tcommon\tshare\tfrom\tcontinuing\noperations: |  |  |  |  |  |  |  |  |  |  |
| \t\t\t\t\tBasic | $0.47 | 0.56 | 0.57 | 0.58 | 0.68 | 0.63 | 0.74 | 0.77 | 2.46 | 2.54 |
| \t\t\t\t\tDiluted | $0.46 | 0.56 | 0.57 | 0.58 | 0.68 | 0.63 | 0.74 | 0.77 | 2.45 | 2.54 |
| Net\tearnings\tper\tcommon\tshare: |  |  |  |  |  |  |  |  |  |  |
| \t\t\t\t\tBasic | $0.54 | 0.48 | 0.57 | 0.45 | 0.74 | 0.64 | 0.68 | 0.78 | 2.53 | 2.35 |
| \t\t\t\t\tDiluted | $0.53 | 0.48 | 0.57 | 0.45 | 0.74 | 0.64 | 0.68 | 0.78 | 2.52 | 2.35 |
| Dividends\tper\tcommon\tshare | $0.475 | 0.48 | 0.475 | 0.48 | 0.475 | 0.48 | 0.475 | 0.48 | 1.90 | 1.92 |
| Common\tstock\tprices: |  |  |  |  |  |  |  |  |  |  |
| \t\t\t\t\tHigh | $51.47 | 58.28 | 55.54 | 64.36 | 56.82 | 61.63 | 56.72 | 64.18 | 56.82 | 64.36 |
| \t\t\t\t\tLow | $42.21 | 49.22 | 41.25 | 55.40 | 48.45 | 56.77 | 50.41 | 57.81 | 41.25 | 49.22 |

Earnings	per	share	are	computed	independently	each	period;	as	a	result,	the	quarterly	amounts	may	not	sum	to	the	calculated	annual	figure.

Emerson	Electric	Co.	common	stock	(symbol	EMR)	is	listed	on	the	New	York	Stock	Exchange	and	the	Chicago	Stock	Exchange.

# Report	of	Independent	Registered	Public	Accounting	Firm

# The	Board	of	Directors	and	Stockholders

We	have	audited	the	accompanying	consolidated	balance	sheets	of	Emerson	Electric	Co.	and	subsidiaries	as	of	 September	30,	2017	and	2016,	and	the related	consolidated	statements	of	earnings,	comprehensive	income,	equity,	and	cash	flows	for	each	of	the	years	in	the	three-year	period	ended September	30,	2017.	We	also	have	audited	Emerson	Electric	Co.'s	internal	control	over	financial	reporting	as	of	 September	30,	2017,	based	on	criteria established	in	Internal	Control	-	Integrated	Framework	(2013)	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission (COSO).	Emerson	Electric	Co.'s	management	is	responsible	for	these	consolidated	financial	statements,	for	maintaining	effective	internal	control	over financial	reporting,	and	for	its	assessment	of	the	effectiveness	of	internal	control	over	financial	reporting,	included	in	the	accompanying	Management's Report	on	Internal	Control	over	Financial	Reporting.	Our	responsibility	is	to	express	an	opinion	on	these	consolidated	financial	statements	and	an	opinion on	the	Company's	internal	control	over	financial	reporting	based	on	our	audits.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require that	we	plan	and	perform	the	audits	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material	misstatement	and	whether effective	internal	control	over	financial	reporting	was	maintained	in	all	material	respects.	Our	audits	of	the	consolidated	financial	statements	included examining,	on	a	test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the	financial	statements,	assessing	the	accounting	principles	used	and significant	estimates	made	by	management,	and	evaluating	the	overall	financial	statement	presentation.	Our	audit	of	internal	control	over	financial reporting	included	obtaining	an	understanding	of	internal	control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness	exists,	and	testing and	evaluating	the	design	and	operating	effectiveness	of	internal	control	based	on	the	assessed	risk.	Our	audits	also	included	performing	such	other procedures	as	we	considered	necessary	in	the	circumstances.	We	believe	that	our	audits	provide	a	reasonable	basis	for	our	opinions.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles.	A	company's	internal control	over	financial	reporting	includes	those	policies	and	procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable	assurance	that	transactions	are	recorded	as necessary	to	permit	preparation	of	financial	statements	in	accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of the	company	are	being	made	only	in	accordance	with	authorizations	of	management	and	directors	of	the	company;	and	(3)	provide	reasonable	assurance regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or	disposition	of	the	company's	assets	that	could	have	a	material	effect	on	the financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of compliance	with	the	policies	or	procedures	may	deteriorate.

As	described	in	Management's	Report	on	Internal	Control	Over	Financial	Reporting,	the	valves	&	controls	business	was	acquired	on	April	28,	2017	and management	has	excluded	this	business	from	its	assessment	of	internal	control	over	financial	reporting	as	of	September	30,	2017.	Valves	&	controls' total	assets	and	revenues	excluded	from	the	assessment	represented	approximately	20	percent	and	4	percent,	respectively,	of	the	Company's	related consolidated	financial	statement	amounts	as	of	and	for	the	year	ended	September	30,	2017.	Our	audit	of	internal	control	over	financial	reporting	of	the Company	also	excluded	an	evaluation	of	the	internal	control	over	financial	reporting	of	the	acquired	business.

In	our	opinion,	the	consolidated	financial	statements	referred	to	above	present	fairly,	in	all	material	respects,	the	financial	position	of	Emerson	Electric	Co. and	subsidiaries	as	of	September	30,	2017	and	2016,	and	the	results	of	its	operations	and	its	cash	flows	for	each	of	the	years	in	the	three-year	period ended	September	30,	2017,	in	conformity	with	U.S.	generally	accepted	accounting	principles.	Also	in	our	opinion,	Emerson	Electric	Co.	maintained,	in	all material	respects,	effective	internal	control	over	financial	reporting	as	of	September	30,	2017,

based	on	criteria	established	in	Internal	Control	-	Integrated	Framework	(2013)	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway Commission.

/s/	KPMG	LLP

# ITEM	9	-	CHANGES	IN	AND	DISAGREEMENTS	WITH	ACCOUNTANTS	ON	ACCOUNTING	AND	FINANCIAL	DISCLOSURE

# ITEM	9A	-	CONTROLS	AND	PROCEDURES

The	Company	maintains	a	system	of	disclosure	controls	and	procedures	which	is	designed	to	ensure	that	information	required	to	be	disclosed	by	the Company	in	the	reports	filed	or	submitted	under	the	Securities	Exchange	Act	of	1934	is	recorded,	processed,	summarized	and	reported	within	the	time periods	specified	in	the	SEC's	rules	and	forms	and	is	accumulated	and	communicated	to	management,	including	the	Company's	certifying	officers,	as appropriate	to	allow	timely	decisions	regarding	required	disclosure.	Based	on	an	evaluation	performed,	the	Company's	certifying	officers	have	concluded that	the	disclosure	controls	and	procedures	were	effective	as	of	September	30,	2017	to	provide	reasonable	assurance	of	achieving	these	objectives.

Notwithstanding	the	foregoing,	there	can	be	no	assurance	that	the	Company's	disclosure	controls	and	procedures	will	detect	or	uncover	all	failures	of persons	within	the	Company	and	its	consolidated	subsidiaries	to	report	material	information	otherwise	required	to	be	set	forth	in	the	Company's	reports. There	was	no	change	in	the	Company's	internal	control	over	financial	reporting	during	the	quarter	ended	September	30,	2017,	that	has	materially affected,	or	is	reasonably	likely	to	materially	affect,	the	Company's	internal	control	over	financial	reporting.	Management's	report	on	internal	control	over financial	reporting,	and	the	related	report	of	the	Company's	auditor,	KPMG	LLP,	an	independent	registered	public	accounting	firm,	set	forth	in	Item	7	and Item	8,	respectively,	of	this	Annual	Report	on	Form	10-K,	are	hereby	incorporated	by	reference.

# ITEM	9B	-	OTHER	INFORMATION

# PART	III

# ITEM	10	-	DIRECTORS,	EXECUTIVE	OFFICERS	AND	CORPORATE	GOVERNANCE

Information	regarding	nominees	and	directors	appearing	under	"Proxy	Item	No.	1:	Election	of	Directors"	in	the	Emerson	Electric	Co.	Notice	of	Annual Meeting	of	Shareholders	and	Proxy	Statement	for	the	February	2018	annual	shareholders'	meeting	(the	"2018	Proxy	Statement")	is	hereby	incorporated by	reference.	Information	regarding	executive	officers	is	set	forth	in	Part	I	of	this	report.	Information	appearing	under	"Section	16(a)	Beneficial	Ownership Reporting	Compliance"	in	the	2018	Proxy	Statement	is	hereby	incorporated	by	reference.	Information	regarding	the	Audit	Committee	and	Audit Committee	Financial	Expert	appearing	under	"Board	and	Committee	Operations	-	Board	and	Corporate	Governance	-	Committees	of	Our	Board	of Directors,"	"Board	and	Committee	Operations	-	Corporate	Governance	and	Nominating	Committee	-	Nomination	Process"	and	"-	Proxy	Access"	in	the 2018	Proxy	Statement	is	hereby	incorporated	by	reference.

The	Company	has	adopted	a	Code	of	Ethics	that	applies	to	the	Company's	Chief	Executive	Officer,	Chief	Financial	Officer	and	Chief	Accounting	Officer; has	posted	such	Code	of	Ethics	on	its	website;	and	intends	to	satisfy	the	disclosure	requirement	under	Item	5.05	of	Form	8-K	by	posting	such	information on	its	website.	The	Company	has	adopted	Charters	for	its	Audit	Committee,	Compensation	Committee,	and	Corporate	Governance	and	Nominating Committee	and	a	Code	of	Business	Ethics	for	directors,	officers	and	employees,	which	are	available	on	its	website	and	in	print	to	any	stockholder	who requests	them.	The	Company	has	also	adopted	Corporate	Governance	Principles	and	Practices,	which	are	available	on	its	website	and	in	print	to	any stockholder	who	requests	them.	The	Corporate	Governance	section	of	the	Company's	website	may	be	accessed	as	follows:	www.Emerson.com, Investors,	Corporate	Governance.

# ITEM	11	-	EXECUTIVE	COMPENSATION

Information	appearing	under	"Executive	Compensation"	(including	the	information	set	forth	under	"Compensation	Discussion	and	Analysis"), "Compensation	Tables,"	"Board	and	Committee	Operations—Corporate	Governance	and	Nominating	Committee—Director	Compensation,"	"Board	and Committee	Operations—Compensation	Committee"	(including,	but	not	limited	to,	the	information	set	forth	under	"Role	of	Executive	Officers	and	the Compensation	Consultant"	and	"Compensation	Committee	Report")	and	"Compensation	Committee	Interlocks	and	Insider	Participation"	in	the	2018 Proxy	Statement	is	hereby	incorporated	by	reference.

The	information	contained	in	"Compensation	Committee	Report"	shall	not	be	deemed	to	be	filed	with	the	SEC	or	subject	to	the	liabilities	of	Section	18	of the	Securities	Exchange	Act	of	1934	(the	"Exchange	Act"),	except	to	the	extent	that	the	Company	specifically	incorporates	such	information	into	future filings	under	the	Securities	Act	of	1933	or	the	Exchange	Act.

# ITEM	12	-	SECURITY	OWNERSHIP	OF	CERTAIN	BENEFICIAL	OWNERS	AND	MANAGEMENT	AND	RELATED	STOCKHOLDER	MATTERS

The	information	regarding	beneficial	ownership	of	shares	by	nominees	and	continuing	directors,	named	executive	officers,	five	percent	beneficial	owners, and	by	all	directors	and	executive	officers	as	a	group	appearing	under	"Ownership	of	Emerson	Equity	Securities"	in	the	2018	Proxy	Statement	is	hereby incorporated	by	reference.

The	following	table	sets	forth	aggregate	information	regarding	the	Company's	equity	compensation	plans	as	of	 September	30,	2017:

|  | Number	of	Securities<br>to	be	Issued	upon<br>Exercise	of<br>Outstanding	Options,<br>Warrants	and	Rights | Weighted-Average<br>Exercise	Price	of<br>Outstanding<br>Options,	Warrants<br>and	Rights | Future	Issuance	under<br>Equity	Compensation<br>Plans	(Excluding<br>Securities	Reflected	in	Column<br>(a)) |
| :--- | :--- | :--- | :--- |
| Plan\tCategory\nEquity\tcompensation\tplans\n\t\t\tapproved\tby\tsecurity\tholders\t(1) | (a)\n15,428,415 | (b)\n$55.49 | (c)\n24,580,373 |
| Equity\tcompensation\tplans\tnot\n\t\t\tapproved\tby\tsecurity\tholders | — | — | — |
| \t\t\t\t\tTotal | 15,428,415 | $55.49 | 24,580,373 |

(1) Includes	the	Stock	Option	and	Incentive	Shares	Plans	previously	approved	by	the	Company's	security	holders.	Included	in	column	(a)	are: (i)10,759,141	shares	reserved	for	outstanding	stock	option	awards,	(ii)	2,388,125	shares	reserved	for	performance	share	awards	granted	in	2017,	(iii) 2,178,388	shares	reserved	for	performance	share	awards	granted	in	2016	and	(iv)	102,761	reserved	for	outstanding	restricted	stock	unit	awards.	As provided	by	the	Company's	Incentive	Shares	Plans,	performance	shares	awards	represent	a	commitment	to	issue	such	shares	without	cash	payment by	the	employee,	contingent	upon	achievement	of	the	performance	objectives	and	continued	service	by	the	employee.

The	price	in	column	(b)	represents	the	weighted-average	exercise	price	for	outstanding	options.	Included	in	column	(c)	are	shares	remaining available	for	award	under	previously	approved	plans	as	follows:	(i)	11,483,140	under	the	2011	Stock	Option	Plan,	(ii)	10,481,900	under	the	2015 Incentive	Shares	Plan,	(iii)	2,440,978	under	the	2006	Incentive	Shares	Plan,	and	(iv)	174,355	under	the	Restricted	Stock	Plan	for	Non-Management Directors.

Information	regarding	stock	option	plans	and	incentive	shares	plans	is	set	forth	in	Note	15.

# ITEM	13	-	CERTAIN	RELATIONSHIPS	AND	RELATED	TRANSACTIONS,	AND	DIRECTOR	INDEPENDENCE

Information	appearing	under	"Board	and	Committee	Operations—Board	and	Corporate	Governance—Review,	Approval	or	Ratification	of	Transactions with	Related	Persons,"	"—Certain	Business	Relationships	and	Related

Party	Transactions"	and	"—Director	Independence"	in	the	 2018	Proxy	Statement	is	hereby	incorporated	by	reference.

# ITEM	14	-	PRINCIPAL	ACCOUNTANT	FEES	AND	SERVICES

Information	appearing	under	"Board	and	Committee	Operations—Audit	Committee—Fees	Paid	to	KPMG	LLP"	in	the 2018	Proxy	Statement	is	hereby incorporated	by	reference.

# PART	IV

# ITEM	15	-	EXHIBITS	AND	FINANCIAL	STATEMENT	SCHEDULES

A)	Documents	filed	as	a	part	of	this	report:

1. The	consolidated	financial	statements	and	accompanying	notes	of	the	Company	and	subsidiaries	and	the	report	thereon	of	KPMG	LLP	set	forth in	Item	8	of	this	Annual	Report	on	Form	10-K.

2. Financial	Statement	Schedules	-	All	schedules	are	omitted	because	they	are	not	required,	not	applicable	or	the	required	information	is	provided in	the	financial	statements	or	notes	thereto	contained	in	this	Annual	Report	on	Form	10-K.

3. Exhibits	(Listed	by	numbers	corresponding	to	the	Exhibit	Table	of	Item	601	in	Regulation	S-K).

3(a) Restated	Articles	of	Incorporation	of	Emerson	Electric	Co. ,	incorporated	by	reference	to	Emerson	Electric	Co.	Form	10-Q	for	the	quarter ended	March	31,	2001,	File	No.	1-278,	Exhibit	3(a);	Termination	of	Designated	Shares	of	Stock	and	Certificate	of	Designation, Preferences	and	Rights	of	Series	B	Junior	Participating	Preferred	Stock,	incorporated	by	reference	to	Emerson	Electric	Co.	1998	Form 10-K,	File	No.	1-278,	Exhibit	3(a).

3(b) Bylaws	of	Emerson	Electric	Co.,	as	amended	through	August	1,	2017,	incorporated	by	reference	to	Emerson	Electric	Co.	Form	8-K	filed August	2,	2017,	Exhibit	3.1.

4(a) Indenture	dated	as	of	December	10,	1998,	between	Emerson	Electric	Co.	and	The	Bank	of	New	York,	Trustee ,	incorporated	by reference	to	Emerson	Electric	Co.	1998	Form	10-K,	File	No.	1-278,	Exhibit	4(b).

No	other	long-term	debt	instruments	are	filed	since	the	total	amount	of	securities	authorized	under	any	such	instrument	does	not	exceed 10	percent	of	the	total	assets	of	Emerson	Electric	Co.	and	its	subsidiaries	on	a	consolidated	basis.	Emerson	Electric	Co.	agrees	to furnish	a	copy	of	such	instruments	to	the	SEC	upon	request.

10(a)* Third	Amendment	to	the	Emerson	Electric	Co.	1993	Incentive	Shares	Plan,	as	restated ,	incorporated	by	reference	to	Emerson	Electric Co.	1996	Form	10-K,	File	No.	1-278,	Exhibit	10(g),	and	Fourth	Amendment	thereto,	incorporated	by	reference	to	Emerson	Electric	Co. 2001	Form	10-K,	File	No.	1-278,	Exhibit	10(d).

10(b)* Amended	and	Restated	Emerson	Electric	Co.	Continuing	Compensation	Plan	for	Non-Management	Directors ,	incorporated	by	reference to	Emerson	Electric	Co.	2007	Form	10-K,	File	No.	1-278,	Exhibit	10(c).

10(c)* Amended	and	Restated	Deferred	Compensation	Plan	for	Non-Employee	Directors	and	Forms	of	Payment	Election	Form,	Initial	Notice	of Election	and	Notice	of	Election	Change,	incorporated	by	reference	to	Emerson	Electric	Co.	2007	Form	10-K,	File	No.	1-278,	Exhibit 10(d).

10(d)* First	Amendment	to	the	Emerson	Electric	Co.	Supplemental	Executive	Retirement	Plan ,	incorporated	by	reference	to	Emerson	Electric Co.	1999	Form	10-K,	File	No.	1-278,	Exhibit	10(h),	and	Form	of	Change	of	Control	Election,	incorporated	by	reference	to	Emerson Electric	Co.	Form	8-K	dated	October	1,	2004,	Exhibit	10.9	(applicable	only	with	respect	to	benefits	vested	as	of	December	31,	2004).

10(e)* Amended	and	Restated	Emerson	Electric	Co.	Pension	Restoration	Plan	dated	October	6,	2015 ,	incorporated	by	reference	to	Emerson Electric	Co.	2015	Form	10-K,	File	No.	1-278,	Exhibit	10(e);	Forms	of	Participation	Award	Letter,	Acceptance	of	Award	and	Benefit Election	Forms	(applicable	only	with	respect	to	benefits	after	January	1,	2005),	incorporated	by	reference	to	Emerson	Electric	Co.	2007 Form	10-K,	File	No.	1-278,	Exhibit	10(f);	and	Lump	Sum	Distribution	Election	Forms.

10(f)* Fifth	Amendment	to	the	Supplemental	Executive	Savings	Investment	Plan ,	incorporated	by	reference	to	Emerson	Electric	Co.	Form	10-Q for	the	quarter	ended	March	31,	1999,	File	No.	1-278,	Exhibit	10(j),	and	Form	of	Participation	Agreement	and	Form	of	Annual	Election , incorporated	by	reference	to	Emerson	Electric	Co.	Form	8-K	filed	October	1,	2004,	Exhibit	10.8	(applicable	only	with	respect	to	benefits vested	as	of	December	31,	2004).

10(g)* Amended	and	Restated	Emerson	Electric	Co.	Savings	Investment	Restoration	Plan	and	Forms	of	Participation	Agreement,	Annual Election	Form	and	Payment	Election	Form	(applicable	only	with	respect	to	benefits	after	January	1,	2005),	incorporated	by	reference	to Emerson	Electric	Co.	2007	Form	10-K,	File	No.	1-278,	Exhibit	10(h),	and	First	Amendment	to	Emerson	Electric	Co.	Savings	Investment Restoration	Plan,	incorporated	by	reference	to	Emerson	Electric	Co.	Form	10-Q	for	the	quarter	ended	March	31,	2008,	File	No.	1-278, Exhibit	10.1.

10(h)* Amended	and	Restated	Emerson	Electric	Co.	Annual	Incentive	Plan	and	Form	of	Acceptance	of	Award ,	incorporated	by	reference	to Emerson	Electric	Co.	2007	Form	10-K,	File	No.	1-278,	Exhibit	10(i).

10(i)* 1997	Incentive	Shares	Plan,	incorporated	by	reference	to	Emerson	Electric	Co.	1997	Proxy	Statement	dated	December	6,	1996,	File	No. 1-278,	Exhibit	A,	and	First	Amendment	thereto,	incorporated	by	reference	to	Emerson	Electric	Co.	2001	Form	10-K,	File	No.	1-278, Exhibit	10(j),	Amendment	for	409A	Compliance,	incorporated	by	reference	to	Emerson	Electric	Co.	2007	Form	10-K,	File	No.	1-278, Exhibit	10(j),	Form	of	Performance	Share	Award	Certificate,	Forms	of	Acceptance	of	Award	and	Change	of	Control	Election ,	incorporated by	reference	to	Emerson	Electric	Co.	Form	8-K	filed	October	1,	2004,	Exhibit	10.5,	and	Form	of	Restricted	Shares	Award	Agreement, incorporated	by	reference	to	Emerson	Electric	Co.	Form	8-K	filed	October	1,	2004,	Exhibit	10.6.

10(j)* 1998	Stock	Option	Plan,	incorporated	by	reference	to	Emerson	Electric	Co.	1998	Proxy	Statement	dated	December	12,	1997,	File	No.	1- 278,	Appendix	A,	and	Amendment	No.	1	thereto,	incorporated	by	reference	to	Emerson	Electric	Co.	2000	Form	10-K,	File	No.	1-278, Exhibit	10(l),	Form	of	Notice	of	Grant	of	Stock	Options	and	Option	Agreement	and	Form	of	Incentive	Stock	Option	Agreement , incorporated	by	reference	to	Emerson	Electric	Co.	Form	8-K	filed	October	1,	2004,	Exhibit	10.1,	and	Form	of	Notice	of	Grant	of	Stock Options	and	Option	Agreement	and	Form	of	Nonqualified	Stock	Option	Agreement,	incorporated	by	reference	to	Emerson	Electric	Co. Form	8-K	filed	October	1,	2004,	Exhibit	10.2.

10(k)* 2001	Stock	Option	Plan,	incorporated	by	reference	to	Emerson	Electric	Co.	2002	Proxy	Statement	dated	December	12,	2001,	File	No.	1- 278,	Appendix	A,	Form	of	Notice	of	Grant	of	Stock	Options	and	Option	Agreement	and	Form	of	Incentive	Stock	Option	Agreement , incorporated	by	reference	to	Emerson	Electric	Co.	Form	8-K	filed	October	1,	2004,	Exhibit	10.3	(used	on	or	prior	to	September	30,	2011), Forms	of	Notice	of	Grant	of	Stock	Options,	Option	Agreement	and	Incentive	Stock	Option	Agreement ,	incorporated	by	reference	to Emerson	Electric	Co.	Form	10-Q	for	the	quarter	ended	December	31,	2011,	File	No.	1-278,	Exhibit	10.1	(used	after	September	30, 2011),	Form	of	Notice	of	Grant	of	Stock	Options	and	Option	Agreement	and	Form	of	Nonqualified	Stock	Option	Agreement ,	incorporated by	reference	to	Emerson	Electric	Co.	Form	8-K	filed	October	1,	2004,	Exhibit	10.4	(used	on	or	prior	to	September	30,	2011),	Forms	of Notice	of	Grant	of	Stock	Options,	Option	Agreement	and	Nonqualified	Stock	Option	Agreement,	incorporated	by	reference	to	Emerson Electric	Co.	Form	10-Q	for	the	quarter	ended	December	31,	2011,	File	No.	1-278,	Exhibit	10.2	(used	after	September	30,	2011).

10(l)* Emerson	Electric	Co.	Description	of	Split	Dollar	Life	Insurance	Program	Transition ,	incorporated	by	reference	to	Emerson	Electric	Co. Form	8-K	filed	September	2,	2005,	Exhibit	10.1.

10(m)* Amended	and	Restated	Restricted	Stock	Plan	for	Non-Management	Directors ,	incorporated	by	reference	to	Emerson	Electric	Co.	Form 10-Q	for	the	quarter	ended	December	31,	2009,	File	No.	1-278,	Exhibit	10.1,	Form	of	Restricted	Stock	Award	Letter	under	the	Emerson Electric	Co.	Restricted	Stock	Plan	for	Non-Management	Directors,	incorporated	by	reference	to	Emerson	Electric	Co.	Form	8-K	filed February	1,	2005,	Exhibit	10.2,	and	Form	of	Restricted	Stock	Unit	Award	Letter	under	the	Emerson	Electric	Co.	Restricted	Stock	Plan	for Non-Management	Directors,	incorporated	by	reference	to	Emerson	Electric	Co.	Form	10-Q	for	the	quarter	ended	December	31,	2009, File	No.	1-278,	Exhibit	10.1.

# 10(n)* Description	of	Non-Management	Director	Compensation,	filed	herewith.

10(o)* Description	of	Named	Executive	Officer	Compensation,	filed	herewith.

10(p)* Emerson	Electric	Co.	2006	Incentive	Shares	Plan ,	incorporated	by	reference	to	Emerson	Electric	Co.	2006	Proxy	Statement	dated December	16,	2005,	Appendix	C,	Amendment	for	409A	Compliance,	incorporated	by	reference	to	Emerson	Electric	Co.	2007	Form	10- K,	File	No.	1-278,	Exhibit	10(q),	Forms	of	Performance	Shares	Award	Certificate	and	Acceptance	of	Award	(used	on	or	prior	to September	30,	2009)	and	Restricted	Shares	Award	Agreement	(used	on	or	prior	to	September	30,	2011),	incorporated	by	reference	to Emerson	Electric	Co.	2007	Form	10-K,	File	No.	1-278,	Exhibit	10(q),	Amendment	to	Emerson	Electric	Co.	2006	Incentive	Shares	Plan , incorporated	by	reference	to	Emerson	Electric	Co.	Form	10-Q	for	the	quarter	ended	June	30,	2008,	File	No.	1-278,	Exhibit	10.1,	Forms of	Performance	Shares	Award	Certificate,	Acceptance	of	Award	and	2010	Performance	Shares	Program	Award	Summary,	incorporated by	reference	to	Emerson	Electric	Co.	Form	10-Q	for	the	quarter	ended	December	31,	2009	(used	after	September	30,	2009	and	on	or prior	to	September	30,	2011),	File	No.	1-278,	Exhibit	10.2,	Forms	of	Performance	Shares	Award	Certificate	and	Acceptance	of	Award , incorporated	by	reference	to	Emerson	Electric	Co.	Form	10-Q	for	the	quarter	ended	December	31,	2011,	File	No.	1-278,	Exhibit	10.3 (used	after	September	30,	2011),	and	Form	of	Restricted	Shares	Award	Agreement,	incorporated	by	reference	to	Emerson	Electric	Co. Form	10-Q	for	the	quarter	ended	December	31,	2011,	File	No.	1-278,	Exhibit	10.4	(used	after	September	30,	2011).

10(r)* 2011	Stock	Option	Plan,	incorporated	by	reference	to	Emerson	Electric	Co.	2011	Proxy	Statement	dated	December	10,	2010,	File	No.	1- 278,	Appendix	B,	2011	Stock	Option	Plan	as	Amended	and	Restated	effective	October	1,	2012 ,	incorporated	by	reference	to	Emerson Electric	Co.	2012	Form	10-K,	File	No.	1-278,	Exhibit	10(r),	Forms	of	Notice	of	Grant	of	Stock	Options,	Option	Agreement	and	Incentive Stock	Option	Agreement	under	the	2011	Stock	Option	Plan,	incorporated	by	reference	to	Emerson	Electric	Co.	Form	10-Q	for	the quarter	ended	March	31,	2012,	File	No.	1-278,	Exhibit	10.1	and	Forms	of	Notice	of	Grant	of	Stock	Options,	Option	Agreement	and Nonqualified	Stock	Option	Agreement	under	the	2011	Stock	Option	Plan,	incorporated	by	reference	to	Emerson	Electric	Co.	Form	10-Q for	the	quarter	ended	March	31,	2012,	File	No.	1-278,	Exhibit	10.2.

10(s)* Emerson	Electric	Co.	2015	Incentive	Shares	Plan ,	incorporated	by	reference	to	Emerson	Electric	Co.	2015	Proxy	Statement	dated December	12,	2014,	Appendix	B,	Forms	of	Performance	Shares	Award	Certificate	and	Acceptance	of	Award,	Performance	Shares Program	Award	Summary	and	Form	of	Restricted	Shares	Award	Agreement,	incorporated	by	reference	to	Emerson	Electric	Co.	2015 Form	10-K,	File	No.	1-278,	Exhibit	10(u).

10(t)* Letter	Agreement	effective	as	of	January	15,	2014	between	Emerson	Electric	Co.	and	Edgar	M.	Purvis ,	incorporated	by	reference	to Emerson	Electric	Co.	2015	Form	10-K,	File	No.	1-278,	Exhibit	10(v).

10(u)* Letter	Agreement	dated	December	7,	2015	by	and	between	Emerson	Electric	Co.	and	Charles	A.	Peters ,	incorporated	by	reference	to Emerson	Electric	Co.	form	10-Q	for	the	quarter	ended	December	31,	2015,	Exhibit	10.1.

10(v)* Letter	Agreement	effective	as	of	January	15,	2014	between	Emerson	Electric	Co.	and	Steven	J.	Pelch ,	incorporated	by	reference	to Emerson	Electric	Co.	2016	Form	10-K,	File	No.	1-278,	Exhibit	10(v).

10(w) Transaction	Agreement	dated	as	of	July	29,	2016	among	Emerson	Electric	Co.,	Cortes	NP	Holdings,	LLC,	Cortes	NP	Acquisition Corporation,	ASCO	Power	Grp,	LLC	and	Cortes	NP	JV	Holdings,	LLC,	incorporated	by	reference	to	Emerson	Electric	Co.	2016	Form	10- K,	File	No.	1-278,	Exhibit	10(w).

10(x) Share	Purchase	Agreement	by	and	between	Emerson	Electric	Co.	and	Pentair	plc	dated	August	18,	2016 ,	incorporated	by	reference	to Emerson	Electric	Co.	2016	Form	10-K,	File	No.	1-278,	Exhibit	10(x).

99.1 Description	of	Capital	Stock

101 Attached	as	Exhibit	101	to	this	report	are	the	following	documents	formatted	in	XBRL	(Extensible	Business	Reporting	Language):	(i) Consolidated	Statements	of	Earnings	for	the	years	ended	September	30,	2015,	2016	and	2017,	(ii)	Consolidated	Statements	of Comprehensive	Income	for	the	years	ended	September	30,	2015,	2016,	and	2017	(iii)	Consolidated	Balance	Sheets	at	September	30, 2016	and	2017,	(iv)	Consolidated	Statements	of	Equity	for	the	years	ended	September	30,	 2015,	2016	and	2017,	(v)	Consolidated Statements	of	Cash	Flows	for	the	years	ended	September	30,	2015,	2016	and	2017,	and	(vi)	Notes	to	Consolidated	Financial Statements	for	the	year	ended	September	30,	2017.

*	Management	contract	or	compensatory	plan.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	report	to	be	signed	on	its behalf	by	the	undersigned,	thereunto	duly	authorized.

F.	J.	Dellaquila

# Senior	Executive	Vice	President	and

# Chief	Financial	Officer

J.	B.	Bolten

A.	F.	Golden

C.	Kendle

M.	S.	Levatich

	 Director

Attorney-in-Fact



Question: at the pace of 2017 how many years of issuance remain for the restricted stock plan for non-management directors?
Calculation:   restricted_stock = 17984 + 2248
 shares_available = 174335
answer = shares_available / restricted_stock
Answer: 8.6