Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Forward-Looking Statement
This Quarterly Report contains statements (including certain projections and business trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Words such as "believe", "estimate", "project", "plan", "expect", "anticipate", "will", "intend" and other similar expressions may identify forward-looking statements. Actual results may differ materially from those projected as a result of certain risks and uncertainties, many of which are beyond our control, including but not limited to:
• economic changes in global markets where we compete, such as currency exchange rates, inflation rates, recession, interest rates and the volatility and disruption of the capital and credit markets for us, our customers and our suppliers;

• laws, regulations and governmental policies affecting our activities in the countries where we do business;

• successful development of advanced technologies and demand for and market acceptance of new and existing products;

• general global and regional economic, business or industry conditions, including levels of capital spending in industrial markets;

• the availability, effectiveness and security of our information technology systems;

• competitive product and pricing pressures;

• disruption of our operations due to natural disasters, acts of war, strikes, terrorism or other causes;

• intellectual property infringement claims by others and the ability to protect our intellectual property;

• our ability to successfully address claims by taxing authorities in the various jurisdictions where we do business;

• our ability to attract and retain qualified personnel;

• the uncertainties of litigation;

• disruption of our distribution channels;

• the availability and price of components and materials;

• the ability of our divested businesses to satisfy certain obligations that they have assumed;

• successful execution of our cost productivity, restructuring and globalization initiatives;

• our ability to execute strategic actions, including acquisitions and integration of acquired businesses; and

• other risks and uncertainties, including but not limited to those detailed from time to time in our Securities and Exchange Commission filings.

These forward-looking statements reflect our beliefs as of the date of filing this report. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. See Item 1A, Risk Factors of our Annual Report on Form 10-K for the fiscal year ended September 30, 2008 for more information. Non-GAAP Measures
The following discussion includes organic sales and free cash flow, which are non-GAAP measures. See Supplemental Sales Information for a reconciliation of reported sales to organic sales and a discussion of why we believe this non-GAAP measure is useful to investors. See Financial Condition for a reconciliation of cash flows from operating activities to free cash flow and a discussion of why we believe this non-GAAP measure is useful to investors.

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ROCKWELL AUTOMATION, INC. Overview
We are a leading global provider of industrial automation power, control and information solutions that help manufacturers achieve a competitive advantage for their businesses. Overall demand for our products and services is driven by:
• investments in manufacturing capacity, including upgrades, modifications and expansions of existing manufacturing facilities, and the creation of new manufacturing facilities;

• our customers' needs for greater productivity, sustainable production (cleaner, safer and more energy efficient), cost reduction, quality assurance and improvement and overall global competitiveness;

• industry factors that include our customers' new product introductions, trends in the actual and forecasted demand for our customers' products or services, and the regulatory and competitive environments in which our customers operate;

• levels of global industrial production and capacity utilization;

• regional factors that include local political, social, regulatory and economic circumstances; and

• the seasonal spending patterns of our customers due to their annual budgeting processes and their working schedules.

Long-term Strategy
Our long-term growth and performance strategy is characterized by the careful balance of sustained organic growth and profitability. This strategy seeks to:
• deploy human and financial resources in order to strengthen our technology leadership and allow us to capture a larger share of our customers' spending and continue to transform our business model into one that is based less on tangible assets and more on intellectual capital;

• enhance our market access by increasing our solutions and service capabilities, advancing our global presence and delivering our products and solutions to a wider range of industries;

• expand our served market by increasing our ability to meet our customers' needs in the areas of process control, safety and information software;

• look for potential acquisitions that serve as catalysts to organic growth and add complementary technology, expand our served market, increase our domain expertise and/or continue our geographic diversification; and

• foster a robust productivity culture.

As we execute our long-term growth and performance strategy, we expect to provide value for our shareowners through revenue and earnings growth, free cash flow generation and superior returns over the long term. Technological Advancement and Domain Expertise We seek a technology leadership position in all facets of plant-wide control. We believe our core technologies are the foundation for long-term sustainable growth at a multiple of global Gross Domestic Product (GDP) growth. Our customers face increasingly complex and volatile customer demand patterns, which are driving the need for flexible manufacturing. Our investments in new technology and domain expertise have expanded our served market beyond discrete control into process, safety and information. Our value proposition is to help our customers gain the benefits of faster time to market, lower total cost of ownership, better asset utilization and reduced business risks.
We believe that process automation is the largest growth opportunity for our company. Our Logix architecture enables us to compete effectively with traditional Distributed Control Systems (DCS) control solutions for many process applications. Our Logix architecture can integrate information across the plant floor to the enterprise systems and the external supply chain. Our Logix architecture continues to be an important differentiator and the anchor of our comprehensive automation offerings.

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ROCKWELL AUTOMATION, INC. We have one of the most comprehensive safety offerings in the industry, as our portfolio contains both machine and process safety products. We see significant potential in the growing safety market. We successfully integrated safety into the Logix platform with our launch of GuardLogixฎ safety controllers. Our safety products are designed to bring a dual benefit to our customers: a safe environment for their employees and productivity in their operations. Through internal investment and acquisitions, we have expanded our capability in the area of plant-wide information. This opportunity involves optimizing processes and assets while integrating between the plant floor, enterprise business system and the supply chain.
Our broad power and motor control offering is one of our core competencies. Many of our motor control products are intelligent, configurable and manageable. These products enhance the availability, efficiency and safe operation of our customers' critical plant assets.
We augment our product portfolio with solutions and service offerings. We have grown our repeatable solutions, which enables us to gain efficiency, drive innovation and improve the global deployment of our solutions to our customers. The combination of our leading technologies, such as integrated architecture, with the industry-specific domain expertise of our people enables us to solve our customers' manufacturing challenges. Global Expansion and Enhanced Market Access As the manufacturing world continues to globalize, we must be able to meet our customers' needs in emerging markets. We expect to continue to add delivery resources and expand our sales force in emerging markets over the long term. We currently have more than half of our employees outside the U.S., and achieved our goal of about 50 percent of our revenues outside of the U.S. during 2008. As we expand in markets with considerable growth potential and shift our global footprint, we expect to continue to broaden the portfolio of products, services and solutions that we provide to our customers in these regions. We have made significant investments to globalize our manufacturing and customer facing resources in order to be closer to our customers throughout the world. The emerging markets of Asia Pacific, including China and India, Latin America and eastern Europe have the potential to exceed global GDP rates, due to higher levels of infrastructure investment and the growing role of consumer spending in these markets. We believe that increased demand for consumer products in these markets will drive manufacturing investment and provide us with additional growth opportunities in the future.
Original Equipment Manufacturers (OEMs) represent another growth opportunity for us. The OEM market is large and we have an opportunity to increase market share with OEMs, particularly outside of North America. To remain competitive, OEMs need to continually improve their costs and machine performance and reduce their time to market. Our modular and scaleable Logix offering combined with motion and safety can assist OEMs in addressing these business needs. Industry Views
We apply our knowledge of manufacturing applications to help customers solve their business challenges. We serve customers in a wide range of industries, including consumer, resource-based and transportation.
Our consumer industry customers are engaged in the food and beverage, home and personal care and life sciences industries. These customers' needs include global expansion, incremental capacity from existing facilities, an increasingly flexible manufacturing environment and regulatory compliance. In addition, these customers operate in an environment where product innovation and time to market are critical factors.
We serve customers in resource-based industries, including oil and gas, mining, aggregates, cement, metals, water/wastewater and forest products. Companies in these industries typically invest in capacity and productivity when commodity prices are high and global demand for basic materials is increasing. In the transportation industry, factors such as geographic expansion, investment in new model introductions and more flexible manufacturing technologies influence customers' purchasing decisions regarding our products, services and solutions.

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ROCKWELL AUTOMATION, INC. Demand for our products, services and solutions across all industries benefits from outsourcing and sustainability needs of our customers. Customers increasingly desire to outsource engineering services to achieve a more flexible cost base. Our manufacturing application knowledge enables us to serve these customers globally. The sustainability needs of our customers include energy efficiency and better environmental and safety results. Higher energy prices have historically caused customers across all industries to invest in more energy-efficient manufacturing processes and technologies, such as intelligent motor controls and energy-efficient solutions and services. In addition, environmental and safety objectives often spur customers to make investments to ensure compliance and implement sustainable business practices. Productivity
Productivity and continuous improvement are important components of our culture. We have programs in place that drive ongoing process improvement, functional streamlining, material cost savings and manufacturing productivity. We are in the process of developing and implementing common global process standards and an enterprise-wide information system. These are designed to result in improved profitability that can be used to fund investment in growth and technology and to offset inflation and dilution from acquisitions. Our ongoing productivity initiatives target both cost and improved asset utilization. Charges for workforce reductions and facility rationalization may be required in order to execute our productivity programs.
Acquisitions
In March 2009, we acquired a majority of the assets and assumed certain liabilities of the automation business of Rutter Hinz Inc., which is expected to accelerate our business growth in Canada, in the oil and gas and other resource-based industries.
In January 2009, we purchased the assets and assumed certain liabilities of Xi'An Hengsheng Science & Technology Limited. This acquisition also advances our globalization strategy and strengthens our ability to deliver project management and engineering solutions primarily to our customers in China.
During 2008 we acquired CEDES Safety & Automation AG (CEDES), Incuity Software, Inc. (Incuity) and Pavilion Technologies, Inc. (Pavilion).
With our acquisition of CEDES, we have expanded our comprehensive machine safety component portfolio for our customers worldwide. CEDES is a supplier of safety and measuring light curtains, a leading product offering in the machine safety market.
Our acquisition of Incuity positions us for continued growth in the information solutions market. Incuity's enterprise manufacturing intelligence offerings, which we have named FactoryTalkฎ VantagePoint, enable us to accelerate specific aspects of our plant-wide information strategy and extend the capabilities of our integrated architecture.
We believe that Pavilion's expertise in advanced process control, production optimization and environmental compliance solutions, paired with our Logix architecture, positions us to help our customers create a more agile, efficient and productive environment. It also benefits, in particular, our process growth initiative.
We believe the acquired companies will help us expand our market share and deliver value to our customers.

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ROCKWELL AUTOMATION, INC. U.S. Industrial Economic Trends
In the second quarter of 2009, sales to U.S. customers accounted for 51 percent of our total sales. The various indicators we use to gauge the direction and momentum of our U.S. served markets include:
• Industrial Equipment Spending, which is an economic statistic compiled by the Bureau of Economic Analysis (BEA). This statistic provides insight into spending trends in the broad U.S. industrial economy. This measure over the longer term has proven to demonstrate a reasonable correlation with our domestic growth.

• Capacity Utilization (Total Industry), which is an indication of plant operating activity published by the Federal Reserve. Historically there has been a meaningful correlation between Capacity Utilization and the level of capital investment made by our U.S. customers in their manufacturing base.

• The Manufacturing Purchasing Managers' Index (PMI), published by the Institute for Supply Management (ISM), which is an indication of the current and near-term state of manufacturing activity in the U.S. According to the ISM, a PMI measure above 50 indicates that the U.S. manufacturing economy is generally expanding while a measure below 50 indicates that it is generally contracting.

• The Industrial Production Index (Total Index), published by the Federal Reserve, which measures the real output of manufacturing, mining, and electric and gas utilities. The Industrial Production Index is expressed as a percentage of real output in a base year, currently 2002.

As key economic indicators and projections weakened, we saw a significant deceleration in customer demand. While there are some signs that economic and market conditions may have stabilized, key economic indicators have been at historically low levels. The table below depicts the trends in these indicators since September 2007. U.S. Industrial Equipment Spending declined slightly in fiscal 2008 and declined sharply in the first two quarters of fiscal 2009. Capacity Utilization steadily declined since September 2007, with a more significant decrease in the most recent quarter, due to a pronounced reduction in overall demand for manufactured goods. The PMI remained near 50 during the first three quarters of fiscal 2008. Since September 2008, the PMI has been significantly below 50, which indicates future expected weakness in the U.S. manufacturing sector. However, the increase in the PMI in March 2009 compared to December 2008 showed signs of possible stabilization. The Industrial Production Index gradually increased from September 2007 through March of 2008, followed by significant declines over the last four quarters. We continue to operate in a period of unprecedented volatility and uncertainty with respect to the U.S. economy.

Industrial Equipment Capacity Industrial Spending Utilization Production (in billions) (percent) PMI Index Fiscal 2009 Quarter ended: March 2009 $ 149.5 70.3 36.3 98.8 December 2008 175.1 74.3 32.9 104.5 Fiscal 2008 Quarter ended: September 2008 182.2 76.9 43.4 108.1 June 2008 183.2 78.9 49.5 110.7 March 2008 182.0 80.1 49.0 112.0 December 2007 179.9 80.4 49.1 112.0 Fiscal 2007 Quarter ended: September 2007 185.2 80.7 50.5 111.7

Note: Economic indicators are subject to revisions by the issuing organizations.

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ROCKWELL AUTOMATION, INC. Non-U.S. Regional Trends
In the second quarter of 2009, sales to non-U.S. customers accounted for 49 percent of our total sales. Outside the U.S., demand for our products and services is principally driven by the strength of the industrial economy in each region and by our customers' ability and propensity to invest in their manufacturing assets. These customers include both multinational companies with expanding global presence and indigenous companies. Demand has historically been driven, in part, by investments in infrastructure in developing economies, investments in basic materials production capacity in response to higher end-product pricing and expanding consumer markets.
We use changes in global GDP as one indication of the growth opportunities in each region where we do business. GDP slowed considerably in all regions during the second fiscal quarter of 2009, contributing to a significant decline in worldwide customer demand. We have observed the most significant effects of the GDP deceleration in the developed economies of North America, Western Europe and Asia Pacific, all of which are experiencing year-over-year GDP declines. Growth in China, India, and Latin America continues to decelerate, but still exceeds the global average. Markets remain uncertain and our revenue trends are mixed across each region. We are operating in a very weak economic environment that will result in very challenging business conditions for the remainder of 2009. Revenue by Geographic Region
The table below presents our sales for the quarter ended March 31, 2009 by geographic region and the change in sales from the quarter ended March 31, 2008 (in millions, except percentages):

Change in Organic Sales Three Change vs. Three vs. Three Months Ended Months Ended Months Ended Mar. 31, 2009(1) Mar. 31, 2008 Mar. 31, 2008(2) United States $ 538.3 (25 %) (24 %) Canada 62.2 (36 %) (21 %) Europe, Middle East and Africa 244.4 (28 %) (16 %) Asia-Pacific 133.3 (19 %) (9 %) Latin America 79.9 (11 %) 12 % Total Sales $ 1,058.1 (25 %) (18 %)

The table below presents our sales for the six months ended March 31, 2009 by geographic region and the change in sales from the six months ended March 31, 2008 (in millions, except percentages):

Change in Organic Sales Six Change vs. Six vs. Six Months Ended Months Ended Months Ended Mar. 31, 2009(1) Mar. 31, 2008 Mar. 31, 2008(2) United States $ 1,179.5 (15 %) (14 %) Canada 128.3 (33 %) (17 %) Europe, Middle East and Africa 493.2 (23 %) (13 %) Asia-Pacific 275.6 (16 %) (5 %) Latin America 170.7 (9 %) 11 % Total Sales $ 2,247.3 (18 %) (11 %)

(1) We attribute sales to the geographic regions based upon country of destination.

(2) Organic sales is a non-GAAP measure. See Supplemental Information for information on this non-GAAP measure.

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ROCKWELL AUTOMATION, INC. Summary of Results of Operations
Our 2009 second quarter results reflect the severity of the global economic recession. Market conditions quickly deteriorated across most industries and all regions. As a result of the sharp revenue decline during the quarter, we continued to aggressively adjust our cost structure. During the second quarter of 2009, we made significant progress in our cost reduction actions and we recorded pre-tax restructuring charges of $20.2 million, which included headcount reductions. We also instituted unpaid time off to further reduce payroll costs and suspended the 401(k) match for U.S. employees.
We generated strong free cash flow during the quarter, primarily due to reduced working capital. In particular, inventory was appropriately managed down, consistent with declining sales levels. We also acquired two engineering firms based in China and Canada in the second quarter of 2009 that enhance our global domain expertise and demonstrate our commitment to our long-term diversification strategy. We believe our balance sheet is an important strength, particularly in these uncertain market conditions.
The following tables reflect the sales and operating results for the three and six months ended March 31, 2009 and 2008 (in millions, except per share amounts):

Three Months Ended Six Months Ended March 31, March 31, 2009 2008 2009 2008 Sales Architecture & Software $ 393.5 $ 599.0 $ 899.9 $ 1,176.9 Control Products & Solutions 664.6 807.6 1,347.4 1,561.6 Total $ 1,058.1 $ 1,406.6 $ 2,247.3 $ 2,738.5 Segment Operating Earnings Architecture & Software $ 33.2 $ 139.9 $ 142.8 $ 288.4 Control Products & Solutions 53.0 100.4 121.0 209.4 Purchase accounting depreciation and amortization (4.8 ) (6.5 ) (9.8 ) (12.8 ) General corporate - net (14.7 ) (16.6 ) (32.8 ) (30.8 ) Interest expense (15.3 ) (17.5 ) (30.3 ) (35.5 ) Special items 4.0 - 4.0 - Income tax provision (14.8 ) (56.9 ) (38.7 ) (119.3 ) Income from continuing operations 40.6 142.8 156.2 299.4 Discontinued operations - - 2.8 - Net income $ 40.6 $ 142.8 $ 159.0 $ 299.4 Diluted earnings per share: Continuing operations $ 0.29 $ 0.96 $ 1.10 $ 2.00 Discontinued operations - - 0.02 - Net income $ 0.29 $ 0.96 $ 1.12 $ 2.00 Diluted weighted average outstanding shares 142.1 148.7 142.1 149.9

See Note 16 in the Condensed Consolidated Financial Statements for the definition of segment operating earnings.

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ROCKWELL AUTOMATION, INC. . . .