Letter to shareholders

By concentrating on the most complex and important challenges facing process, industrial, commercial and residential markets, we have the opportunity to make the world a better place.

David N. Farr
Chairman and Chief Executive Officer

Dear Shareholders:

Our global team began fiscal 2017 with a unified vision for the future. We set a course to strengthen our core businesses, serve our customers in new and innovative ways, increase revenue, expand our margins and return to a premium valuation. Thanks to the hard work of employees around the world, that vision is taking shape. Today, I see One Emerson – unified in our efforts and working to address critical world needs. By concentrating on the most complex and important challenges facing process, industrial, commercial and residential markets, we have the opportunity to make the world a better place.

As I reflect on 2017, I am proud of all that we have accomplished. This year we completed our strategic portfolio repositioning, a journey we started more than two years ago. Building on a foundation we’ve laid over decades, we enhanced our expertise and solidified our leadership positions in key industries. We are now strongly aligned around the two platforms that will propel us forward: Automation Solutions and Commercial & Residential Solutions. These platforms share many strategic leverage points and enable us to expand into adjacent markets, fuel growth, and serve as stewards for our industries. And we have already seen growth – organically, by adapting to meet customer challenges in new and innovative ways, and through targeted M&A such as the acquisition of the Pentair Valves & Controls business.

Adding Valves & Controls to our business is an example of the opportunities we see to expand key areas of our business and deliver end-to-end customer solutions. We now have the most complete valves portfolio in the market. With Valves & Controls, we can work with customers in new ways, such as serving as their main valve partner on greenfield projects or providing comprehensive, data-driven lifecycle management across a complete portfolio of valve assets. We are fortunate to have expanded our talented global workforce through this acquisition. Over the past six months it has been gratifying to see firsthand that the Valves & Controls employees share a common culture with Emerson, one focused on growth and serving customers with distinction. I welcome them to the Emerson family and I am proud to say that our combined valves workforce brings unparalleled skill and knowledge to serve our customers.

We see our markets evolving to be digitally enabled and reliant on data as a means to improve operational execution and profitability. But solutions must go well beyond just collecting data from devices. The data must be interpreted and transformed into actionable information – information that gives customers concrete steps to fix problems and enhance performance. Whether it’s monitoring food throughout the cold chain or replacing a deteriorating valve that could cause costly downtime, we enable customers to optimize operations and increase reliability, efficiency and safety. Further, our strong market presence and ability to expand existing products and technologies means we will continue to provide customers with additional layers of actionable data in key areas, such as simulation, monitoring and security.

We see our markets evolving to be digitally enabled and reliant on data as a means to improve operational execution and profitability.

Investing in the people who work on these technologies is just as important as investing in the technology itself. We could not have achieved success in 2017 without the dedication and commitment of our employees worldwide. As we look to maintain leadership in our industries and deliver results for customers, our employees are leading the digital transformation. Emerson is committed to ensuring our employees have the training and tools to fulfill their potential. We are also building the future of our industries by supporting the development of the next generation of innovators and problem-solvers through our “We Love STEM” program. From “We Love STEM” days, which support schoolage activities, to partnering with colleges on programs to develop and retrain workers for the digital manufacturing era, Emerson is promoting STEM awareness. We see these efforts as foundational to developing needed talent for the future of Emerson and the industries we serve.

Just as our people are critical to our success, so are the core values that guide us and serve as the common language across our global organization. Emerson has always operated with the highest ethical standards – it is ingrained in our DNA. However, as we grow and evolve as One Emerson, we recognize the need to do more, which is why we introduced a renewed discussion on values this year. We interviewed more than 100 of our senior executives across the globe and reviewed 14,000 employee survey responses on the topic of ethics and values within local organizations. These efforts surfaced the things we hold most important as Emerson employees: integrity, safety and quality, supporting our people, customer focus, continuous improvement, collaboration and innovation. These intrinsic values affect not only the way we work, but our strategic framework for investment, which has evolved to meet our changing environment. Our values also unify us around a common understanding and provide clear direction and priorities. For more information on our values, I encourage you to visit OneEmerson.com.

Emerson has always operated with the highest ethical standards – it is ingrained in our DNA.

The communities in which we operate and where our employees live are just as important as their work environment. Every year, we contribute to organizations and initiatives around the world that improve quality of life. Through our corporate philanthropy and employee volunteerism, we work to make our communities better and more attractive places to live and work – not just for the benefit of our own employees and their families, but for everyone who calls them home. Emerson has long embraced a culture of taking responsibility for our actions and that includes the impact we have on the environment. In that spirit of responsibility, we enhanced our Corporate Social Responsibility (CSR) report to align with key industry reporting standards and inform our stakeholders of our efforts to reduce energy consumption, improve productivity, ensure the safety and well-being of our employees, and enhance our communities. As a global citizen and good steward of the environment, we are committed to continuing these efforts. This report is a demonstration of that commitment, and we will continue to keep all of our stakeholders informed of our progress. Our CSR report is available on our website, and I encourage you to read it.

I would like to extend thanks to our Board of Directors for faithful and insightful counsel and guidance. The Board has been actively engaged throughout Emerson’s transition, and their oversight and support has been instrumental in transforming the company.

On a sad note, this year we lost a legendary leader and a great friend with the passing of Charles F. Knight. He had an immeasurable impact on Emerson and on everyone who knew him. I encourage you to read the tribute to Chuck on the inside back cover of this report.

Finally, on behalf of the Board of Directors and all of us at Emerson, we thank our shareholders for the continued support and trust you place in us. Together, we will continue to grow the business profitably for a successful future.

Thank you, and we wish you a healthy and prosperous 2018,


David N. Farr
Chairman and Chief Executive Officer
THE OFFICE OF THE CHIEF EXECUTIVE
Steven J. Pelch
Steven J. Pelch
The Office of the Chief Executive
Frank J. Dellaquila
Frank J. Dellaquila
Sara Yang Bosco
Sara Yang Bosco
Edgar M. Purvis Jr.
Edgar M. Purvis Jr.
Michael H. Train
Michael H. Train
Robert T. Sharp
Robert T. Sharp
Katherine T. Button Bell
Katherine T. Button Bell
Mark J. Bulanda
Mark J. Bulanda
Edward L. Monser
Edward L. Monser