Welcome to the Emerson second quarter fiscal 2009 results conference call. (Operator Instructions) Emerson's commentary and responses to your questions may contain forward-looking statements including the company's outlook for the remainder of the year. Informational factors that could cause actual results to vary materially from those discussed today is available in Emerson's most recent annual report on Form 10-K as filed with the SEC. In this call Emerson management will discuss some non-GAAP measures in talking about the company's performance and the reconciliation of those measures to the most comparable GAAP measures is contained within the presentation that is posted in the investor relations area of Emerson's website at www.emerson.com. I would now like to turn the conference over to our host, Ms. Lynn Maxeiner, Director of Investor Relations. Please go ahead, ma'am.

Thank you. I am joined today by David Farr, Chairman, Chief Executive Officer and President of Emerson and Walter Galvin, Senior Executive Vice President and Chief Financial Officer. Today's call will summarize Emerson's second quarter 2009 results. A conference call slide presentation will accompany my comments and is available in the investor relations section of Emerson's corporate website. A replay of this conference call and slide presentation will be available on the website after the call for the next three months. I will start with the highlights of the quarter as shown on page two of the conference call slide presentation. Second quarter sales were down 15% to $5.1 billion and underlying sales declined 11%. Underlying sales in process management remained positive, up 3%. Operating profit margin was 14.1% and pre-tax earnings margin was 10.8%, impacted by restructuring expense of $64 million in the quarter. Earnings per share from continuing operations was $0.49 down 35% compared to the prior year quarter. Operating cash flow was $499 million and free cash flow was $359 million. Capital spending was down 22% versus prior year quarter. Our balance sheet remains strong and we've made progress on trade working capital. Inventory dollar levels were reduced by over $200 million from the first quarter fiscal year '09. We saw a dramatic weakening of the global economy in our second quarter. Next slide, the P&L, again, sales down 16% to $5.087 billion. Underlying sales were down 11% and currency subtracted five points. Operating profit was $718 million in the quarter or 14.1% of sales, the decline driven primarily by deleverage on lower sales volume, on favorable product mix and our aggressive inventory reduction. Net earnings from continuing ops for the quarter were $373 million, a decline of 38%. Diluted average shares in the quarter were 756.9…

We had a very interesting board meeting today as we reviewed all the actions we're taking across this company. As you can see from the numbers reported today in the commentary, we are now entered the heart of this global recession. With approximately 11% underlying sales decline this quarter, and as we look at the second half of this year down 12% to 15% on average somewhere in that range for underlying sales, and most likely down 10% in the first half of next year. The management team is taking the actions necessary to position this company for some extremely tough waters ahead, some tough quarters and a tough business environment. As I look at it today, we will be facing some very challenging times for most, if not all, of 2010. But as I discussed with the board today and the OCE discussed with the board today, we feel very comfortable we're taking the actions necessary to strengthen this company in the standpoint of our global positioning, our new products, our technology, the businesses that we have both through acquisitions and through divestitures, the management team are taking the necessary actions to strengthen this company. It's not easy taking some of these actions where you have somewhere between $200 million and $250 million restructuring. We've already impacted 20,000 people across this company around the world. It will be a benefit for us in the second half, as we move into that second half. I would expect to be another 10,000 people around the world over the next nine months are impacted by this global downturn. We have actions underway at 46 locations around the world as we position the company to making tough calls, fixing the cost structure of this company, and position this company for what I consider…

(Operator Instructions) Your first question comes from John Inch - Merrill Lynch.

Hey a let me start with process. The underlying sales up 3% but the margins eroded little bit more than perhaps I was thinking, you guys called that a mix, could you flush that out a little bit? What exactly do you mean by mix? Is it project specific? Is it systems? What exactly does that mean and what's the outlook there?

We had a couple of things going on. First of all we did also go after the inventories in their facilities. So we have a situation there where some of their facilities will deleverage as they take the inventory down. You also will see that, I think we mentioned in the April call, that the chemical industry in particular has taken a very dramatic downturn in purchases and, therefore, some of our instrumentation businesses have been hit early on as this cutback in capital spending in some these chemical industries. They will also come back as those industries start stabilizing and start seeing their improvement from a sales and a profitability standpoint they'll start spending money again. So we saw a mix relative to certain industries in particular, the chemical industry which really dropped off, we saw an area where we cutback our own inventory and production. And we also saw some completion on some very large projects around the world, which are lower margin relative to the systems and solutions side. But you're going to see this fairly rough patch here as we go forward here so we mix around these businesses and a mix within the instrumentation and systems business, but still we'll have very good profitability for the whole year as I look forward.

Dave, does the fact that margins are coming down with revenue still going up though imply, because of mix, that proportionately more of the kind of profit degradation, if you will, happens upfront and then as you roll into sort of down revenues, you don't get as much of a degradation just because the higher ends already been skimmed off the top so to speak.

It's hard to say that's the case, John. I think that after running the process business you see some of the earlier cycle guide within the process of the cycle guide that work or heavy instrumentation via safe in particular the flow, the measurement side, the flow side that they go after first. They will come back, but I don't think you're going to see, that you can make that statement and say okay, we're going to have more profit degradation now and then it will stabilize later. I still think you are going to see this business cycle down, as I believe I said in April, and the profitability will cycle down but it will stay at higher levels than it did the last cycle. We hit 20% operating margins here, or EBIT margins here and I would expect those to go back down and take 200 or 300 basis points off that as we cycle.

Has the rising price of oil changed the outlook in '10 or is sort of '10 already in the cards and that maybe it becomes more of an '11 issue?

No, I think the '10 is more in the cards for projects but if you go to capital spending and MRO type of spending and maybe some chemical industry spending, that could help us. Rising oil will help us and from the standpoint of spending and the company. You know the customer base also is quickly taking action relative to their inventories and their capital spending, but as soon as they start delivering higher levels of profitability, you'll start seeing them spend money and I think that will happen later this year going into the early year. But we are still forecasting a down process business for 2010. That will be the issue in my opinion. It will go down because of the, it's coming off of very high levels both from a sales and profit standpoint.

Just lastly, what was the $25 million in gains?

We actually had a long time ago when in our leasing business we actually owned part of a Mazda-Ford plant and we sold it back to Mazda-Ford.

For $25 million in gains, Congratulations.

We wanted to get out when we could. It's been there for how long, Walter?

At least 19 years.

Long time, John, it was when we had an active finance company.

Your next question comes from Jeff Sprague – Citigroup Investment Research

Dave, could we get a little bit further into kind of these cost delta issues, you mentioned the $100 million, I believe that's second half versus first half, but taking a little bit different cut at that. When you look at the restructuring that you did in '08 and what you have under way in '09, what kind of savings do you expect from those actions in '09 separate and apart from the seasonality issue?

Not going to give it to you.

Okay and the $100 million you gave us was a combination of seasonality and restructuring benefits?

Yes, primarily restructuring. The reason I'm not going to tell you, it's not something you can nail down by quarter. It's not that easy to do, but in total, let me give you some numbers. If February we talked about restructuring around $175 million to $200 million. It's now up to say $200 million to $250 million, let's pick $225 as a mid-point. We gave you average annual savings of $125 million to $140 million in February, now the number is more like $135 million to $190 million, let's say $160 mid-point. The issue that Walter and I, why we're struggling relative to giving this out is we are going after what I would call longer term projects from a savings standpoint. So the average return is going to be longer for us this time because I'm going after projects that costs us more money up front and the payback is going to be slower, but it will fundamentally change the cost structure of the company two years from now. I can tell you what we've been doing since say July, August, September time period all the way up to this period and I look at the savings, I look at our 20,000 less people, and I can see that we are going to get a benefit of around $100 million in the second half of this year. It's very difficult for me to sit here and give you forecasts because of the other things and it's not something I want to get tied down to, but I can tell you we will get the savings because we're going after the projects and we see the headcount coming down and we see the facilities coming offline.

Can you help us actually frame the margin impact of the inventory reduction in the quarter?

Not really. I mean it's a function of where that inventories coming out. Its $200 million we know. If you look at the operating margins the company came down significantly from the standpoint of the sales and the production. We know that we deleveraged, Walter for the quarter what was the number 35?

35%

Thirty-five percent, so we know that as we come off of that we will deleverage less so let's say we'll move down towards the 25% to 30% level.

So that means the inventory just the reduction of the inventory would more like 20% deleveraged.

That would be about the average right there, exactly.

And just to hit good old appliance and tools, which gets ignored a lot. If you break that apart, was the performance in appliance and tools similar or is there some divergence in the performance of those businesses now?

I wouldn't say there's a divergence I would say that those businesses are what I would say stabilizing because of the mass of inventory reduction that's happened in those businesses over the last 18 months. And so you're going to still see negative sales comps in the second half of the year, but they'll be less negative, and I think that we will see pleasantly some upside potential as they move forward. If you look at the numbers, they're not that much different, Lynne's just showing me, between tools and applicant, I mean they are about identical from a negative standpoint. So you're going to see them get easier comps and I think you'll start seeing some positives as some of the inventories are replenished back out there in the second half of the year.

Your next question comes from Eli Lustgarten - Longbow Securities.

I have a probably a rather tough question to ask you. With the weight of second quarters come in order to meet your guidance you've got to get basically $0.65 a quarter in the second half. Right now you have a consensus that doesn't believe that the 239, the 240 plus and yet actually a bigger declined scheduled next year if you look at the consensus. How do I bridge the gap from $0.49 in the quarter with restructuring equal or greater in the second half of the year and maybe have a $0.25 gain in lower volume, how do I bridge the gap to get that bigger step up from $0.49 to $0.65 a quarter? What's driving that? Can you help me bridge that gap to get those kind of numbers, which seems difficult on the surface with the buy-in continuing to be soft?

The issue really boils down to is maybe what we're forecasting internally the improvement operating profits in the second based on the restructuring and the slightly higher volume and the fact that our plants would have less people producing a little bit higher level volume because we've got the actions undertaken. .:

So that $100 million number that you quoted is just sort of the tip of the iceberg of what you're expecting?

Eli, one way to look at it might help you, if you look at the absolute level of sales volume, first half to second half, even though it's still down versus the prior year, the actual run rate using your estimate would probably be sales would be higher by about $300 million. On that $300 million higher sales volume, you would probably leverage say at around a third or about $100 million. As you look at what Dave told you with regard to the headcount being down already the action is completed, as well as additional actions, you will have a reduction on the average headcount both hourly and salary between the first half of the year and the second half of the year, where the average will be down in round numbers at least 10,000 people. If you say that, just pick a number, say the average because it's hourly and salary around the world, is $20,000, that means you have a difference of about $10,000 because it's a half the year. That gives you $100 million. We've also commented on, in different segments, that we were behind in price costs in the first half versus the prior year. We will get that back in the second half versus the first half, which will be a favorable impact of about $100 million. Another way to look at it would be if you look at normally over the last couple of years, second half profitability versus first half profitability, for a number of seasonal reasons, seasonal pattern reasons, is generally higher by about 150 basis points. Now it's more than that this time, but the other contributing fact is on catching up in the price cost issues in certain segments, and the reduction in the headcount, because clearly the drop between the first quarter run rate of being flat, to the second quarter run rate I'm thinking organically underlying to being down 11%, you deleverage more when you get the shock in the first 90 days as you get those costs out. I hope that answers your question on the market.

I mean very helpful, it sort of explains some of the gap going, and is there any part of the business at this point that you think didn't see probably relatively trough margins in the second quarter versus the rest of the year?

Industrial automation, I would say industrial automation is going to have I think a very difficult second half because of Europe, and our number one customer in that market place in that segment is Caterpillar, and they're continuing to cutback, so I would say that they're going to struggle the hardest in the second half of the year. And in addition they have more inventory reduction than the other businesses because of the way they are in the power curve right now.

So you expect this 11% to go down to what, the mid to high single digits as sort of the target for that?

It would definitely go under 10.

Well, when you cut that Caterpillar is going we're going to have more than that, thank you.

We're a little bit quicker.

Your next question comes from Stephen Tusa, Jr. – JP Morgan. Stephen Tusa, Jr. – JP Morgan : On process, so you made a comment about down 2 to 300 basis points, so what's the base you're talking about, you think the trough is 200, 300 basis points from here or from the peak. I'm just curious as to what you're….

I would say from what we saw the peak last year which was around let's say 20. Stephen Tusa, Jr. – JP Morgan: Okay, so you're there. So you're there this quarter.

You got one quarter, I mean you think a quarter is the whole year? You've got to watch, we might have a couple of tough quarters here with these guys but these guys are still going to do pretty well this year, from a process stand point. They're going after the action right now I think over the next couple of years you're going to see more challenging process market place. But if we saw some stability in the energy market, we saw recovery in the economy you're going to start seeing that process guide come back pretty quickly. Stephen Tusa, Jr. – JP Morgan: Okay, great and then you keep, I'm not sure if this is just maybe I'm missing something you're talking about but you keep saying 15.6 to 15.8 operating margin, does that….

What I'm saying is I said 15.6 to 15.8. Stephen Tusa, Jr. – JP Morgan: So is that the same as 15.7 to 16, or is that a different metric you're referring to?

The guidance provided is 15.7% to 16% for operating profit margin for '09. Stephen Tusa, Jr. – JP Morgan: Okay and then just one more, you keep taking about these comps getting better in the back half but if you look….

Easier. Stephen Tusa, Jr. – JP Morgan: Easier in the back half, I mean when you look at the order rates are clearly running ahead of where you were, the revenue comps you had in the second quarter, at least from a downside perspective, and you basically had pretty consistent organic growth throughout 2008. I think organic was 7% throughout 2008, so I mean how do these comps get easier, are you just talking about for appliance and tools or are you talking about for the whole business, I just want a little clarity on that.

I think you're going to start seeing some of the early cycle businesses, appliance and tools you're going to see the climate technology comps because of how much they went down before this cycle started back last year. They'll get easier to compare against, they'll be less negative. From the capital side, I don't think you're going to see any easier comps going forward here until we get well into 2010. So I'm just saying as we look at the various businesses and where they're coming from, the comps from the standpoint of how far they're going to go down and how negative they're going to be, it's gets easier after awhile it's all this. Stephen Tusa, Jr. – JP Morgan: So it's sort of housing, it's generally housing related.

Housing and some spending, yes. Stephen Tusa, Jr. – JP Morgan: Okay, and then one more thing just on pension, is there any update on where we stand for 2010?

Yes, we talked about in February I thought it'd be a little bit over $100 million, right now I'd say it's going to be somewhere between $50 million and $75 million.

Steve, one thing when you talk about comps you have to keep in mind that orders in 2008 exceeded sales by quite a bit, so when you look at the delta you're looking at orders, you can have a higher percentage than when you're looking at the sales impact. Stephen Tusa, Jr. – JP Morgan: Okay, you say the book to bill is high so you're just basically coming off an elevated book to bill.

Correct.

Your next question comes from Michael Schneider – Robert W. Baird. Michael Schneider – Robert W. Baird: Maybe we'll just go to climate we haven't touched on it, I'm curious about what you've seen at least heading out of April and into early May now because clearly the season hasn't done strong, but I'm curious if there's a potential at least for the orders in this seasonal period to be concentrated now in the months of May and June rather than starting back in March just given the distribution fears out there and the distribution destocking that's going on?

Yes, Michael, I think that the inventory in the channel and everywhere are extremely tight. Everyone has, because of the lower volumes everyone has the manufacturing capacity flexibility right now to react very quickly. So I think you're going to see a quick bang so if you get a little heat and any improvement they're going to have to replenish on those channel and it's going to happen pretty quickly. So we're getting ready for that. We don't know if it is going to happen, but we're ready. We have the flex and we can go, but my gut tells me this could be a very quick season, and where you could have come May, June and July boom, boom, boom, three months and it's going to be, they need the product and you got to ship it tomorrow. That's what's going to happen I think. Michael Schneider – Robert W. Baird: And are the OEMs telling you guys that, that they understand they you guys have excess inventory so they basically relying upon you to take that risk?

I think they're pushing it back through the channel, the answer is yes, I mean but I wouldn't say we don't have excess inventory, what we have is flex. And we're going to have to flex very, very quickly up and down our channel, and we're making sure that's the case, because I think the season is going to be quick, quick this year, and we got to be ready so we don't miss it. Michael Schneider – Robert W. Baird: And from what I understand, pricing has remained fairly firm in that channel, is that one of the reasons because you do have that leverage at this point?

The pricing remaining fairly firm because the commodities like copper have already started seeing a bottom and come back up again already, so I think you're seeing people are worried about the inflation so they're being very careful here, and so people are being prudent relative to what they're trying to do from a price cost situation because we're all worried about the fact that commodities could come right roaring back at us, so we're being very careful and disciplined as I would say. Michael Schneider – Robert W. Baird: Okay, and then just curious, in Asia it remains extremely strong from process, I guess what do the backlogs look like there and do you expect that or I guess what have you seen most recently out of China with this stimulus money already hitting, have you booked new orders, just any update on Asia process.

I would say Asia process is still very strong and has continued to do well from a book to bill. In Asia, our network power business has been very strong. The stimulus is very aimed at those two businesses. When you go into our industrial automation or our climate or the other businesses, it's been weak. So what we've been seeing is our Network Power China and Asia business in profits has held in there quite nicely and our China business was up for the quarter. And I would expect our China business to be up somewhere between 5% or 6% for the whole year. Down from what I said originally, Mike, but I think that we're going to see our China business hold up and I'm still believing that they're going to maybe actually put some additional stimulus in there, which will help us significantly as we move into 2010. Michael Schneider – Robert W. Baird: And then the energy efficiency rebates on the act, everything centers around that domestically. Can you just look across your businesses now and give us an update as to whether you've seen any benefit from these initiatives, whether the stimulus bill or the energy act, etc.?

No. I assume there will be nothing. The only place I've seen any effective stimulus is in China. Europe has no flexibility from stimulus. U.S. stimulus is very much based on what I would call transfer payments. Paving of runways and airports and things like that doesn't do much for us, and I've not seen any stimulus from the standpoint of Telecom or power or anything in the United States that I would say has helped us. Michael Schneider – Robert W. Baird: Have you even seen a benefit though as some of the appliance rebates at least prompt people to trade up in SEER ratings? Has that helped your mix?

Not seeing that. The mix is fine because the movement of 13 SEERS already happened, but I haven't seen anyone out there trying to go out there and buy new air conditioners or new appliances for higher efficiency. I mean, if you don't have money to spend, you're not going to go out and trade up to a higher efficiency where the payback will be 20 years.

Your next question comes from Terry Darling – Goldman Sachs. Terry Darling – Goldman Sachs : Walter, wondering if you could call out the FX headwind in the quarter at the EPS line?

Do you mean just the …

Sales, we use 16%.

Yes, let me just, do you have another question? Terry Darling – Goldman Sachs: Yes. I was just trying to think about the translation the second half versus first half. Presumably that gets a little less of a headwind and I wonder what your expectations are there as well.

Well, the point of sales, because that is how we track it.

Just give him a second he's looking at a [board] chart right now.

Not the second quarter but the full year. Terry Darling – Goldman Sachs: Dave, maybe I'll ask you one while he's looking on that. You had mentioned that expectation for a pickup in 3Q, 4Q kind of sequentially from 2Q in the appliance and tools business as the inventories have kind of worked their way to tighter levels. Can you talk a little bit about how significant a pickup sequentially you are thinking there?

Historically we would pick up a couple hundred million, as Walter said, $200 million to $300 million of sales. I'm looking at a little bit of pickup. We're seeing some replacement from the standpoint of inventories and some programs in some of the channels as these guys are starting to replenish and start selling. So, I mean, we will see in the second half this year somewhere between $200 million and $300 million higher levels of sales just from seasonality, but I also believe that it'll be closer to $300 million because we'll see some replenishment of inventory both on the appliance side and also on the, what I would call, the tool side. We're already seeing a little bit of it. Terry Darling – Goldman Sachs: Plus 200 to 300 just in the appliance and tool side?

No, no. I'm talking about the total comp that you would normally see and I think it's going to be closer to 300. Normally it would be around 200 and I think it might be closer to 300 just because of some of the pick back up that we're going to see in some of the businesses the second half of the year, that's all. Terry Darling – Goldman Sachs: And then, I wondered if you could talk a little bit about expectations for Roxar in terms of growth rates and your goals for getting those margins up and it does look like a little bit of a move upstream for you in that business into the realm of the Schlumberger and the Halliburton's, you talk about your longer term strategy there too.

Yes, from our standpoint, the underlying growth of this business is high single digits. It will have, I think, the next 12 months should be okay because we look at their backlog and I think that late 2010, early 2011 could be more of a challenge for them and then it will come back on. The profitability of that business is no reason why that profitability of that business can't be in the 16% to 20% range within five to six years. As we look at our own instrumentation business from a technology base within that industry, today I think that we could deal with that. What we're looking at right now is being able to serve from an instrumentation and software capability to help the big oil companies deal with finding and improving their oil productivity in the deepwater area and Roxar brings that to us, we didn't have that. So, I mean, the profitability is going to move up towards our average in that 16%, 18%, 19%, 20% range over five, six years. And I think the underlying growth rate at business will be for us through cycles in the high single digits. Terry Darling – Goldman Sachs: Should we continue to look for that to move upstream or is this about as far as you think you go?

I think this is about as far as we're going to go. Terry Darling – Goldman Sachs: And just finalizing on the FX question.

Yes, he's calculating that right now. He's got his calculator going, his little green shade on and everything like that.

The average impact is about, in the first quarter, is about four points of growth. Second, third, and fourth each five points of growth. So the impact for the year is about five points of growth, which is about $1.2 billion year-to-year. That, at our normal foreign margin impact, is about $180 million or about $0.16. Terry Darling – Goldman Sachs: And it's going to be pretty consistent second half versus first half, so that's not a major factor in terms of the improvement in EPS second half versus first?

Correct.

Your next question comes from Nigel Coe – Deutsche Bank. Nigel Coe – Deutsche Bank : I just want to dig in to the seasonality question a bit, a little deeper particularly within process management we typically see a fairly pronounced pickup in the second half versus first half. Given that that business has sunken down, do you think that that will be essentially flat through the quarters this year?

Yes, it could be a little bit but I don't think it will be flatter. You won't see as much pickup there. Nigel Coe – Deutsche Bank: So the seasonality second half versus first half comes from a little bit in appliance and tools and the climate?

Climate, yes. The other one that Walter and I will point out is Network Power will be up the second half too. Nigel Coe – Deutsche Bank: And then secondly, temporary cost savings have been a pretty big driver of margin upset in the industrials and we've heard about furloughs and pay cuts for executives, etc. We haven't heard so much of that from you. It's been much more headcount reduction, structural cost savings. Are you doing these temporary cost savings and is that a factor in the second half?

We did them in the fourth calendar quarter of last year. We already did them. And I don't typically put out PR releases on things like that, but we have across this company, I mean my compensations been taken back and my base salary has been taken back to the 2007 level, EOC went back one year. We have freezes around the company delayed six months to 12 months. We're doing everything everyone else is doing. But I don't think we need to go out and put press releases out and tell what we're doing. This company is very aggressive in doing the right things for the shareholders. Nigel Coe – Deutsche Bank: And then finally, I just want to touch on tax. As you know there's been a few headlines of the White House plans for …

Going after tax cheaters? Nigel Coe – Deutsche Bank: Exactly, but you're tax rate [inaudible]. It doesn't feel like you've pressed all the buttons in terms of minimizing all your tax rates. So have you thought about the implications of maybe if these changes are made what that might to do your taxes? It doesn't sound like it's going to be a big change for you guys.

It will. It will impact us. Now, we'll have to see what happens. I'm not going to give you a number yet, but it will impact us because we are a company that has a very strong global reach. We have global manufacturing, and we manufacture to go after marketplaces like China or India, and we manufacture in those marketplaces and they have lower tax rates than we do in the United States.

You can see in our footnote for the 2008 annual report how much money we make in the U.S. and how much money we make on a pre-tax basis outside the United States, and we are still a large U.S. taxpayer with the normal effective U.S. manufacturing tax rate.

Yes, we pay our fair share of taxes. I get a little bit pissed off when I'm called a tax cheat. Nigel Coe – Deutsche Bank: I agree and I'm not saying that, but the U.S. tax rate stays [inaudible] this year. I mean other industrials with a similar mix of sales at 25% or below. It doesn't feel like you're always as exposed to maybe some other industrials.

It depends how they structure it, but the answer is, we have always paid our fair share of taxes and we will be impacted by it though, Nigel.

You have to look at the relative profitability of the U.S. business.

A lot of headwinds coming both from the economy and Washington.

Your next question comes from Bob Cornell – Barclays Capital. Robert Cornell – Barclays Capital: Let's clear up a couple of things on process. Way back when John asked his first question, you mentioned as part of the answer that part of the margin issue is a function of project completions. Does that mean you had some adverse variances when you closed some contracts that were meaningful and depressed the margins below a normal rate?

No. The answer is no. Robert Cornell – Barclays Capital: And then the other question is, in terms of the 2010 outlook for process, you're looking for a down 10 to 20 and we should assume margins come down a bit for process in 2010?

I would say from a sales standpoint, I'm looking down more in the 10% to 12% and the 20 might be from an order standpoint. I think that's what was confused from last time. I would say that you're going to be down say 10% to 12% right now in sales as I see the process marketplace in 2010. I think the orders will be down more than that because of the way this thing works but we're working off of backlog and you start having mixed changes but right now if I was going to put a forecast down, a stake in the ground, you're probably looking at 10% to 12% down sales next year. Robert Cornell – Barclays Capital: And margins for process?

Will be down, I don't know how far yet based on the mix, but they will start cycling down, yes. Robert Cornell – Barclays Capital: Also I think everyone would like to know, do you guys think about a cycle time between orders and sales? Your orders were running down 20 now down less than 20 and maybe April better than that. I mean, when typically would the orders, I mean obviously backlog is an important part. Is there a way you think in the average cycle time between orders and sales?

Yes, we do but each business is different. Each business is different. You take appliance and tools and the cycle time is extremely fast. You take a look at climate, it's pretty fast. I mean, typically a month to two months. You take a process that could be anywhere, it got and its way outside of 9 to 12 months. Now, it's going to work its way back, Bob. I think that until you get some stability in our order pace and that backlog. We haven't seen a lot of massive cancellations but we've seen push out. So it's going to take us some time to dial that in. It's going to be hard for you. We're not trying to be stubborn here. It's just hard for us right now to get a feel for it. It appears to us in talking to Ed Feeney and the Network Power on the system side, there seems to be right now some stability in the order so that tells me we're starting to cycle into maybe a six-month cycle there right now which is pretty good. So that's a good sign and we're starting to see some stability there. So, we'll see. I think as we close out this year, we'll have a better view of how things are stabilizing in that regard. Robert Cornell – Barclays Capital: Another question is you mentioned Europe you thought would stay down. In this quarter, U.S. is down 19 and Europe down 10. I mean, where do you see your troughing in terms of declines. I mean, is this lagging us by three to six months, that type of thing?

I think you're going to see Europe go down 10% to 15%. I think you're going to see, the European economy as we look at our own internal forecast and we look at what's going on in Europe right now, you're going to see a second half as we go into the next, you're going to start seeing these numbers go down just like we saw in that second quarter for the U.S. 15% to 20%. Europe does not have, I'll say it again, does not have the financial flexibility that they had before. You have Eastern Europe that's struggling right now because of all the investments and the bad investments in the banks. And you have the Western European economy that don't have the financial flexibility to do short-term things in the economy. It's going to be tough in Europe for a while. Robert Cornell – Barclays Capital: I was confused by an answer you gave earlier Dave. In climate tech you said in the official part of the presentation that you had pricing pressure yet when you answered the prior question it seemed like you weren't having prior press pressure. What's the story?

The first half this year, we had some situations. We were out of sync between price costs. We are now back into sync in the second half this year in the price cost situation. And so that will help us in the second half of the year. In the first half of the year, we got hurt by it. In the second half of the year, we'll be helped by it. That industry is typically 6, 9, 12 months type of pricing and it takes us a while to get everything back in sync, and right now we're going to be back into sync.

It changes January and February.

Yes, as Walter said, our pricing changes more in January and February and so that's what's going on right now. That's why you heard Lynne say one thing, so you accuse me of saying it. Lynne said it. And then I said something different which is true, you did catch that one. Robert Cornell – Barclays Capital: Aren't you surprised at this point of the cycle you don't hear more people talking about price cutting. You've gone through the earning season. Why is that?

Because, as I told the board, people saw that it did no good in the last down cycle to cut prices. The volumes around the world are bad. The demand is bad. So trying to get an extra two widgets sold right now when your widgets are down 20% is bad to try to cut prices. It doesn't do you any good. So people are being very smart in all parts of this channel and that's a smart way to go and I'm glad to see that because and then also, as Walter keeps pointing out to me on the board meeting, is also inflation is coming. And so people are looking out of the right eye and seeing inflation is coming so they're going to be very, very careful here. Robert Cornell – Barclays Capital: The final question from me, why are payables down so much? What's going on there?

Because our inventory is reducing and our capital is going down, and so you buy less and you pay people less.

We're not changing our payment terms. What we are doing is we're buying a lot less raw materials to bring down our inventories because the dollars of inventories went down plus the output of the materials because cost of sales are down also went down, so you have a double impact on accounts payable. You also have the reduction in capital spending in the quarter that you reduce capital spending, that also reduces your payables.

And we're getting ready to reduce another $200 million of capital between now and year end as I said earlier.

Your next question comes from Christopher Glynn – Oppenheimer. Christopher Glynn – Oppenheimer : Just to clarify on that point, Walter, did you suggest that the decrementals excluding that impact would be running around 20%?

No, because you can't say one to one for that. You have entirely different dollars amount on the numerator than what you multiply it by. What I'm saying is, are you saying the inventory reduction I said was 20%. That's on a much smaller dollar than the overall sales volume was down is a much bigger number. You can't average those two, they're different calculations. The impact on absorption on the inventory decline is less than the significant decline in sales volume. Christopher Glynn – Oppenheimer: And on the process, David, sounds like you're talking about a tough couple of quarters here but decent for the year. Forecasting, I'm reading in a pretty strong margin in the fourth quarter. Is that kind of the fluctuations in the instrumentation side of that?

Yes. Interpretation, and also some restructuring kicking in. Christopher Glynn – Oppenheimer: And what kind of a read will we get on the climate tech from the April orders given the kind of cycle times, the lag there. It almost sounds like you could have a pretty vastly looking year-over-year comp in the third quarter with the inventories and the channel pretty cleaned up?

I think you're not going to see much happen here until May. I mean, I know what the weather was like in April and so, I mean April's done and so just looking at the weather, I would say that May, June would be the time. We're going to have a May, June, July season I think this year and depending on how hot August gets but there's not a lot of inventory out there so we have to move very quickly. So I do not expect to see anything happening in August, though I do see the U.S. getting their position. The inventories are lean and we're moving with them right now very quickly.

As in the retail, you have to keep in mind that the holidays in this year April are different than last year's April, therefore, if you have one less work day, that's 5% in the month. So you have to also look at those things as well. But, April heat was not high.

Again, I want to thank everybody for joining us today and we're looking forward to seeing people down in Florida at EPG and I appreciate everyone's patience. Right now, as I said, we're in period, we just entered the storm, not easy reading on what's going to happen relative to the various pieces but the company's taking the necessary actions. We're trying to keep the balance sheet as strong as possible and we're trying to position the company to truly have a strong recovery when that happens in 2011 and 2012. So with that, I'll thank everybody and I hope you all have a great rest of the week. Thanks. Bye.

Ladies and gentlemen, this concludes the Emerson second quarter fiscal 2009 results conference call. You may now disconnect and thank you for using AT&T conferencing.