OVERVIEW

The second quarter and first six months of fiscal 2009 were very challenging for the Company as the significant declines in gross domestic product, and in particular business investment, consumer spending and housing and nonresidential construction, have adversely impacted sales and earnings for most of Emerson's businesses. These declines began in the second half of calendar 2008 and have continued into calendar 2009. The Company anticipates continued weakness stemming from these factors for the remainder of the year. The Company's diverse international presence helped mitigate some of the adverse economic impact as underlying sales for both periods grew in Asia, Canada and Middle East/Africa while declining in the United States and Europe. Sales for Latin America declined in the second quarter but were up year-to-date. Unfavorable foreign currency translation also negatively impacted results for the first six months due to the strength in the U.S. dollar. Overall, sales and earnings for the first six months decreased versus prior year for the Industrial Automation, Network Power, Climate Technologies and Appliance and Tools segments on reductions in customer inventories and resulting lower spending levels as business and consumer confidence levels continued to decline, while sales and earnings for the Process Management segment increased primarily due to strong first quarter results. Despite the economic downturn, Emerson's financial position remains strong and the Company continues to generate substantial operating cash flow.

THREE MONTHS ENDED MARCH 31, 2009, COMPARED WITH THREE MONTHS ENDED MARCH 31,
2008

RESULTS OF OPERATIONS

Three months ended March 31,                       2008        2009        Change
(dollars in millions, except per share amounts)

Net sales                                         $ 6,023       5,087          (16 )%
Gross profit                                      $ 2,242       1,837          (18 )%
Percent of sales                                     37.2 %      36.1 %
SG&A                                              $ 1,252       1,119
Percent of sales                                     20.8 %      22.0 %
Other deductions, net                             $    67         121
Interest expense, net                             $    51          50
Earnings from continuing operations
 before income taxes                              $   872         547          (37 )%
Earnings from continuing operations               $   598         373          (38 )%
Net earnings                                      $   547         373          (32 )%
Percent of sales                                      9.1 %       7.3 %

EPS - Continuing operations                       $  0.75        0.49          (35 )%
EPS - Net earnings                                $  0.69        0.49          (29 )%

Net sales for the quarter ended March 31, 2009 were $5,087 million, a decrease of $936 million, or 16 percent, compared with net sales of $6,023 million for the quarter ended March 31, 2008. The consolidated results reflect an 11 percent ($624 million) decrease in underlying sales (which exclude acquisitions, divestitures and foreign currency translation), a 5 percent ($282 million) unfavorable impact from foreign currency translation and a negligible ($30 million) unfavorable impact from acquisitions. Underlying sales for the second quarter decreased 19 percent in the United States and 3 percent internationally. International sales decreases in Europe (10 percent) and Latin America (1 percent) were partially offset by growth in Canada (7 percent), Asia (1 percent) and Middle East/Africa (3 percent). Underlying sales reflect a less than 12 percent loss from volume, which includes an estimated 1 percent positive impact from penetration gains, and a 1 percent positive impact from higher sales prices. Process Management sales declined moderately, while sales in the Industrial Automation, Network Power, Climate Technologies and Appliance and Tools businesses had significant declines as these segments continued to be impacted by the slowdown in residential, nonresidential and capital related businesses.

EMERSON ELECTRIC CO AND SUBSIDIARIES FORM 10-Q

Costs of sales for the second quarters of fiscal 2009 and 2008 were $3,250 million and $3,781 million, respectively. Cost of sales as a percent of net sales was 63.9 percent in the second quarter of 2009, compared with 62.8 percent in the second quarter of 2008. Gross profit was $1,837 million and $2,242 million for the second quarters ended March 31, 2009 and 2008, respectively, resulting in gross profit margins of 36.1 percent and 37.2 percent. The decrease in gross profit margin during the second quarter of 2009 primarily reflects deleverage on the lower sales volume, unfavorable product mix and lower commodity hedging gains, partially offset by savings from cost reduction efforts. Higher sales prices were partially offset by higher wage costs. Foreign currency translation negatively impacted the gross margin amount.

Selling, general and administrative (SG&A) expenses for the second quarter of 2009 were $1,119 million, or 22.0 percent of net sales, compared with $1,252 million, or 20.8 percent of net sales, for the second quarter of 2008. The decrease of $133 million was largely due to lower sales volume and cost reductions. The increase in SG&A as a percent of sales was primarily the result of deleverage on lower sales volume, partially offset by lower incentive stock compensation expense of $23 million due to a decline in Emerson's stock price.

Other deductions, net were $121 million for the second quarter of 2009, a $54 million increase from the same period in the prior year, primarily due to a $48 million increase in rationalization expense. During the second quarter of 2009, the Company recognized a gain of $25 million from the sale of an asset, which was offset by various other immaterial deductions. See notes 5 and 6 for further details regarding other deductions, net and rationalization costs.

Earnings from continuing operations before income taxes for the second quarter of 2009 decreased $325 million, or 37 percent, to $547 million, compared with $872 million for the second quarter of 2008, primarily due to lower sales, lower gross profit and higher SG&A relative to sales, and an increase in other deductions, net. Earnings results predominantly reflect decreases of $82 million in Network Power, $78 million in Appliance and Tools, $76 million in Climate Technologies and $74 million in Industrial Automation.

Income taxes were $174 million and $274 million for the three months ended March 31, 2009 and 2008, respectively, resulting in effective tax rates of 32 percent and 31 percent, respectively.

Earnings from continuing operations were $373 million and earnings per share from continuing operations were $0.49 for the three months ended March 31, 2009, decreases of 38 percent and 35 percent, respectively, compared with $598 million and $0.75 for the three months ended March 31, 2008. Higher restructuring expenses in 2009 versus the prior year negatively impacted earnings per share comparisons by $0.04 per share. The 35 percent decrease in earnings per share also reflects the favorable impact of treasury share purchases.

As there were no discontinued operations in the second quarter of fiscal 2009, net earnings were also $373 million and earnings per share were also $0.49 for the three months ended March 31, 2009, decreases of 32 percent and 29 percent, respectively, compared with the $547 million and $0.69 for the three months ended March 31, 2008. Net earnings for the second quarter of fiscal 2008 included a loss from discontinued operations of $51 million, or $0.06 per share, related to the European appliance motor and pump business.

BUSINESS SEGMENTS

Following is an outline of operating results for the Company's business segments
for the second quarter ended March 31, 2009, compared with the second quarter
ended March 31, 2008. The Company defines segment earnings as earnings before
interest and taxes.

Process Management

Three months ended March 31,    2008        2009        Change
(dollars in millions)

Sales                          $ 1,597       1,530           (4 )%
Earnings                       $   286         258          (10 )%
Margin                            17.9 %      16.9 %       (1.0 ) pts

EMERSON ELECTRIC CO AND SUBSIDIARIES FORM 10-Q

Process Management reported second quarter sales of $1,530 million, a decrease of 4 percent from the prior year. Nearly all of the businesses reported lower sales and earnings, including declines for the measurement and flow and system and solutions businesses, primarily as a result of weakness in the chemical and refining markets, partially offset by growth in the valves business. Underlying sales increased 3 percent, reflecting more than 2 percent from volume and 1 percent from higher sales prices. Unfavorable foreign currency translation of 7 percent ($119 million) more than offset the positive underlying sales growth. The increase in underlying sales reflects strong international growth in Asia (21 percent) and Canada (20 percent) and modest growth in Europe (1 percent), Latin America (3 percent) and Middle East/Africa (5 percent). Underlying sales in the United States were down 7 percent. Earnings decreased 10 percent for the period, to $258 million from $286 million in the prior year, reflecting unfavorable product mix which was partially offset by savings from cost reductions. The margin decrease of 1 percentage point also reflects negative product mix, partially offset by a favorable impact from foreign currency translation. The increase in sales prices was more than offset by higher wage costs.

Industrial Automation

Three months ended March 31,    2008        2009       Change
(dollars in millions)

Sales                          $ 1,176        960          (18 )%
Earnings                       $   171         97          (43 )%
Margin                            14.5 %     10.1 %       (4.4 ) pts

Sales decreased 18 percent to $960 million in the Industrial Automation segment for the second quarter. Sales results reflect declines across the segment due to the slowdown in the capital goods markets, particularly for power generating alternators, as well as for the fluid automation, electronic drives and electrical distribution businesses. Underlying sales decreased 15 percent, foreign currency translation had a 5 percent ($64 million) unfavorable impact and the System Plast and Trident Power acquisitions made a 2 percent ($24 million) positive contribution. The underlying sales decrease reflects an approximate 17 percent decline from volume, as well as an estimated 2 percent positive impact from price. Underlying sales decreased 13 percent internationally, including a 14 percent decline in Europe, and were down 18 percent in the United States. Earnings were $97 million compared with $171 million in the prior year period, reflecting deleverage on lower sales volume of higher margin businesses and negative product mix, partially offset by savings from cost reductions. Higher sales prices were partially offset by higher material and wage costs.

Network Power

Three months ended March 31,    2008        2009        Change
(dollars in millions)

Sales                          $ 1,520       1,280          (16 )%
Earnings                       $   187         105          (44 )%
Margin                            12.3 %       8.2 %       (4.1 ) pts

Sales in the Network Power segment decreased 16 percent to $1,280 million for the second quarter 2009 compared with the prior year, reflecting declines in the uninterruptible power supply, precision cooling and embedded power businesses due to the slowdown in customers' capital spending, partially offset by strength in the China power systems businesses. The sales decrease reflects an underlying sales decline of less than 10 percent, a 4 percent ($62 million) unfavorable impact from foreign currency translation and a 2 percent ($54 million) unfavorable impact from the Embedded Computing acquisition. The underlying sales decrease reflects a volume decline of less than 10 percent, which includes an estimated 2 percent from penetration gains. Geographically, underlying sales reflect decreases of 22 percent in the United States and 15 percent in Europe, partially offset by an increase of 6 percent in Asia and 6 percent in Latin America. The Company's market penetration in China and other Asian markets continued. Earnings of $105 million decreased 44 percent compared to the prior year primarily due to lower sales volume and higher restructuring costs of $25 million (including acquisition integration costs). The margin decrease also reflects a negative impact from acquisitions and deleverage from the lower sales volume, which was partially offset by savings from cost reduction actions.

EMERSON ELECTRIC CO AND SUBSIDIARIES FORM 10-Q



Climate Technologies

            Three months ended March 31,     2008      2009       Change
            (dollars in millions)

            Sales                           $  956       733          (23 )%
            Earnings                        $  142        66          (54 )%
            Margin                            14.9 %     9.0 %       (5.9 ) pts

Climate Technologies sales decreased 23 percent in the second quarter to $733 million, reflecting declines across all of the businesses, primarily the compressor and heater controls businesses. The sales decrease was driven by a 21 percent decrease in underlying sales and a 2 percent ($25 million) unfavorable impact from foreign currency translation. The underlying sales decrease includes an estimated 22 percent decline from lower volume, which includes an approximate 1 percent benefit from penetration gains, and a more than 1 percent positive impact from higher sales prices. Sales declines in the compressor business reflect the slowdown in the U.S. and Asian air-conditioning and refrigeration markets. Sales in the United States decreased 21 percent and international sales decreased 21 percent, including declines in Asia (31 percent) and Europe (6 percent). Earnings decreased 54 percent to $66 million, primarily on lower sales volume and a negative $8 million impact from foreign currency transactions related to strengthening of the U.S. dollar in 2009 versus weakening in the prior year. The decrease in margin also reflects deleverage on the lower sales volume, partially offset by savings from cost reductions. Higher material and wage costs were only partially offset by sales price increases.

Appliance and Tools

            Three months ended March 31,     2008      2009       Change
            (dollars in millions)

            Sales                           $  956       727          (24 )%
            Earnings                        $  139        61          (56 )%
            Margin                            14.6 %     8.4 %       (6.2 ) pts

Appliance and Tools segment sales decreased 24 percent to $727 million in the second quarter of 2009, reflecting a 23 percent decline in underlying sales and a 1 percent ($12 million) unfavorable impact from foreign currency translation. Declines in the storage, tools and appliance businesses were driven by the continued downturn in the U.S. residential and nonresidential markets, while declines in the motors and appliance solutions businesses reflect major customers reducing inventory and production levels due to the difficult economic conditions. The underlying sales decrease of 23 percent reflects an estimated 26 percent decline in volume and an approximate 3 percent positive impact from price. Underlying international sales declined approximately 15 percent during the quarter, while underlying sales in the United States decreased 24 percent. Earnings were $61 million, a decrease of 56 percent compared with the prior year period. The decrease reflects deleverage on the lower sales volume and higher restructuring costs of $10 million, partially offset by savings from cost reductions. Higher sales prices were partially offset by higher raw material and wage costs.

EMERSON ELECTRIC CO AND SUBSIDIARIES FORM 10-Q



SIX MONTHS ENDED MARCH 31, 2009, COMPARED WITH SIX MONTHS ENDED MARCH 31, 2008

RESULTS OF OPERATIONS

  Six months ended March 31,                          2008         2009        Change
  (dollars in millions, except per share amounts)

  Net sales                                         $ 11,543       10,502           (9 )%
  Gross profit                                      $  4,252        3,833          (10 )%
  Percent of sales                                      36.8 %       36.5 %
  SG&A                                              $  2,436        2,312
  Percent of sales                                      21.1 %       22.0 %
  Other deductions, net                             $     70          212
  Interest expense, net                             $    101           93
  Earnings from continuing operations
   before income taxes                              $  1,645        1,216          (26 )%
  Earnings from continuing operations               $  1,117          831          (26 )%
  Net earnings                                      $  1,112          831          (25 )%
  Percent of sales                                       9.6 %        7.9 %

  EPS - Continuing operations                       $   1.41         1.09          (23 )%
  EPS - Net earnings                                $   1.40         1.09          (22 )%

Net sales for the six months ended March 31, 2009 were $10,502 million, a decrease of $1,041 million, or 9 percent, compared with net sales of $11,543 million for the six months ended March 31, 2008. The consolidated results reflect a less than 6 percent ($612 million) decline in underlying sales, a 4 percent ($490 million) unfavorable impact from foreign currency translation and a 1 percent ($61 million) positive contribution from acquisitions. The decline in underlying sales for the first six months of fiscal 2009 was driven by a 13 percent decrease in the United States, slightly offset by a 2 percent increase in international sales. The international sales growth reflects increased international demand in most of the major geographic regions, including Asia (4 percent), Canada (11 percent), Latin America (7 percent) and Middle East/Africa (4 percent), while sales in Europe declined 3 percent. Underlying sales reflect an approximate 7 percent loss from volume, which includes an estimated 1 percent positive impact from penetration gains, and a more than 1 percent positive impact from higher sales prices. All segments continued to be impacted by the consumer and business slowdown. Sales declines in the Industrial Automation, Network Power, Climate Technologies and Appliance and Tools businesses were partially offset by a slight sales increase in the Process Management business.

Costs of sales for the first six months of fiscal 2009 and 2008 were $6,669 million and $7,291 million, respectively. Cost of sales as a percent of net sales was 63.5 percent in the first six months of 2009, compared with 63.2 percent in the first six months of 2008. Gross profit was $3,833 million and $4,252 million for the first six months ended March 31, 2009 and 2008, respectively, resulting in gross profit margins of 36.5 percent and 36.8 percent. The decrease in the gross profit margin during the first half of 2009 primarily reflects deleverage on the lower sales volume and negative product mix, which were partially offset by savings from productivity improvements. The negative impact of foreign currency translation and lower sales volume reduced the gross profit amount. Higher sales prices were substantially offset by higher raw material and wage costs.

Selling, general and administrative (SG&A) expenses for the first six months of 2009 were $2,312 million, or 22.0 percent of net sales, compared with $2,436 million, or 21.1 percent of net sales, for the first six months of 2008. The decrease of $124 million was largely due to lower sales volume, cost reductions and the negative impact of foreign currency translation. The increase in SG&A as a percent of sales was primarily the result of deleverage on lower sales volume, partially offset by lower incentive stock compensation expense of $54 million due to a decrease in Emerson's stock price.

Other deductions, net were $212 million for the first six months of 2009, a $142 million increase from the $70 million for the same period in the prior year, due to higher rationalization costs in 2009 and lower nonrecurring gains. For the six months ended March 31, 2009, ongoing costs for the rationalization of operations were $107 million, compared with $25 million in the prior year period. Gains were $29 million in the first six months of fiscal 2009, including the $25 million asset sale benefit in the second quarter, compared with gains of $64 million in the prior year. In the first six months of fiscal 2008, the Company recognized gains of $39 million ($20 million after-tax) on the sale of its equity investment in Industrial Motion Control Holdings and $18 million on the sale of a facility. See notes 5 and 6 for further details regarding other deductions, net and rationalization costs.

EMERSON ELECTRIC CO AND SUBSIDIARIES FORM 10-Q

Earnings from continuing operations before income taxes for the first six months of 2009 decreased $429 million, or 26 percent, to $1,216 million, compared with $1,645 million for the first six months of 2008, primarily due to lower sales, lower gross profit and higher SG&A relative to sales, and an increase in other deductions, net. Earnings predominantly reflect decreases of $131 million in Appliance and Tools, $125 million in Climate Technologies, $113 million in Network Power and $92 million in Industrial Automation, partially offset by a $16 million increase in Process Management.

Income taxes were $385 million and $528 million for the six months ended March 31, 2009 and 2008, respectively, resulting in an effective tax rate of 32 percent for both periods. The effective tax rate for the entire fiscal year 2009 is currently estimated to be 32 percent.

Earnings from continuing operations were $831 million and earnings per share from continuing operations were $1.09 for the six months ended March 31, 2009, decreases of 26 percent and 23 percent, respectively, compared with $1,117 million and $1.41 for the six months ended March 31, 2008. Higher restructuring expenses in 2009 combined with lower gains versus the prior year negatively impacted earnings per share comparisons by $0.10 per share. The 23 percent decrease in earnings per share also reflects the benefit of treasury share purchases.

As there were no discontinued operations in the first six months of fiscal 2009, net earnings were also $831 million and earnings per share were also $1.09 for the six months ended March 31, 2009, decreases of 25 percent and 22 percent, respectively, compared with $1,112 million and $1.40 for the six months ended March 31, 2008. Net earnings for the first six months of fiscal 2008 included a loss from discontinued operations of $5 million, or $0.01 per share, which included a $42 million gain related to the sale of the Brooks Instrument unit, a $52 million loss related to the European appliance motor and pump business and combined earnings of $5 million related to these businesses.

BUSINESS SEGMENTS

Following is an outline of segment results for the six months ended March 31,
2009 compared with the six months ended March 31, 2008. The Company defines
segment earnings as earnings before interest and taxes.

Process Management

            Six months ended March 31,     2008        2009       Change
            (dollars in millions)

            Sales                         $ 3,033       3,083           2 %
            Earnings                      $   544         560           3 %

Process Management sales were $3,083 million, an increase of 2 percent over the prior year. Results were mixed across the segment with sales strong for the valves business, flat for the measurement and flow businesses and down for the systems and solutions business, reflecting weakness in the chemical and refining markets. Underlying sales increased 8 percent, reflecting approximately 7 percent from volume, which includes less than 2 percent from penetration gains, and an estimated 1 percent from higher sales prices. Foreign currency translation had an unfavorable impact of more than 6 percent ($196 million). The underlying sales increase reflects strong international growth of 12 percent, led by Asia (22 percent), Europe (6 percent), Latin America (15 percent), and Canada (26 percent), and growth in the United States of 1 percent. Earnings for the first six months increased 3 percent to $560 million from $544 million, primarily reflecting higher sales volume led by the valves business. The margin increase reflects leverage on the higher volume and savings from productivity improvements, which were partially offset by negative product mix. Higher wage costs more than offset the increase in sales prices.

EMERSON ELECTRIC CO AND SUBSIDIARIES FORM 10-Q



Industrial Automation

           Six months ended March 31,     2008        2009        Change
           (dollars in millions)

           Sales                         $ 2,301       2,063          (10 )%
           Earnings                      $   342         250          (27 )%
           Margin                           14.9 %      12.1 %       (2.8 ) pts

Sales for the Industrial Automation segment decreased 10 percent to $2,063 million for the first six months. Sales results reflect a modest decline in the power generating alternator business and strong declines in the fluid automation, mechanical power transmission and electrical distribution businesses due to the slowdown in the capital goods markets. Underlying sales declined 7 percent, foreign currency translation had a 5 percent ($115 million) unfavorable impact and the System Plast and Trident Power acquisitions had a less than 2 percent ($30 million) positive contribution. The underlying sales decrease reflects an approximate 9 percent decline from volume, partially offset by an estimated 2 percent positive impact from price. The underlying sales decline included a 5 percent decrease internationally, primarily due to a decline of 7 percent in Europe and 5 percent in Asia, and a 9 percent decrease in the United States. Earnings were $250 million compared with $342 million in the prior year. The decrease reflects deleverage on lower sales volume of higher margin businesses and negative product mix, partially offset by savings from cost reductions. Additionally, higher sales prices were substantially offset by higher material and wage costs.

Network Power

            Six months ended March 31,     2008        2009        Change
            (dollars in millions)

            Sales                         $ 2,926       2,715           (7 )%
. . .