UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

Commission file number 1-12383

 

Rockwell Automation, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		25-1797617 (I.R.S. Employer Identification No.)
1201 South 2nd Street Milwaukee, Wisconsin (Address of principal executive offices)		53204 (Zip Code)

Registrant’s telephone number, including area code:
(414) 382-2000

Title of each class		Name of each exchange on which registered
Common Stock, $1 Par Value		New York Stock Exchange

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

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

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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer þ		Accelerated Filer o		Non-accelerated Filer o		Smaller reporting company o

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

The aggregate market value of registrant’s voting stock held by non-affiliates of registrant on March 31, 2009 was approximately $3.0 billion.

142,253,411 shares of registrant’s Common Stock, par value $1 per share, were outstanding on October 31, 2009.

Certain information contained in the Proxy Statement for the Annual Meeting of Shareowners of registrant to be held on February 2, 2010 is incorporated by reference into Part III hereof.

 

 

PART I

FORWARD-LOOKING STATEMENTS

This Annual 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;

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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;

•

successful execution of our cost productivity, restructuring and globalization initiatives; 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 for more information.

Item 1.		Business

General

Rockwell Automation, Inc. (the Company or Rockwell Automation) is a leading global provider of industrial automation power, control and information solutions that help manufacturers achieve a competitive advantage for their businesses. Our products and services are designed to meet our customers’ needs to reduce total cost of ownership, maximize asset utilization, improve time to market and reduce manufacturing business risk.

The Company was incorporated in Delaware in 1996 in connection with a tax-free reorganization completed on December 6, 1996, pursuant to which we divested our former aerospace and defense businesses (the A&D Business) to The Boeing Company (Boeing). In the reorganization, the former Rockwell International Corporation (RIC) contributed all of its businesses, other than the A&D Business, to the Company and distributed all capital stock of the Company to RIC’s shareowners. Boeing then acquired RIC. RIC was incorporated in 1928.

On January 31, 2007, we divested our Dodge mechanical and Reliance Electric motors and motor repair services businesses. These were the principal businesses of our former Power Systems operating segment. We sold these businesses to Baldor Electric Company (Baldor) for $1.8 billion, comprised of $1.75 billion in cash and approximately 1.6 million shares of Baldor common stock. During 2007, we reported an after-tax gain on the sale of $868.2 million ($5.39 per diluted share). The results of operations and gain on sale of these businesses are reported in income from discontinued operations in the Financial Statements for all periods presented.

As used herein, the terms “we”, “us”, “our”, the “Company” or “Rockwell Automation” include subsidiaries and predecessors unless the context indicates otherwise. Information included in this Annual Report on Form 10-K refers to our continuing businesses unless otherwise indicated.

Whenever an Item of this Annual Report on Form 10-K refers to information in our Proxy Statement for our Annual Meeting of Shareowners to be held on February 2, 2010 (the 2010 Proxy Statement), or to information under specific captions in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), or in Item 8. Financial Statements and Supplementary Data (the Financial Statements), the information is incorporated in that Item by reference. All date references to years and quarters refer to our fiscal year and quarters unless otherwise stated.

Operating Segments

We have two operating segments: Architecture & Software and Control Products & Solutions. In 2009, our total sales were $4.3 billion. Financial information with respect to our operating segments, including their contributions to sales and operating earnings for each of the three years in the period ended September 30, 2009, is contained under the caption Results of Operations in MD&A, and in Note 18 in the Financial Statements.

Our Architecture & Software operating segment is headquartered in Mayfield Heights, Ohio, and our Control Products & Solutions operating segment is headquartered in Milwaukee, Wisconsin. Both operating segments conduct business in North America, Europe, Middle East and Africa, Asia Pacific and Latin America.

Architecture & Software

Our Architecture & Software operating segment recorded sales of $1.7 billion (40 percent of our total sales) in 2009. The Architecture & Software segment contains all of the elements of our integrated control and information architecture capable of controlling the customer’s plant floor and connecting with their manufacturing enterprise. Architecture & Software has a broad portfolio of products, including:

•

Control platforms that perform multiple control disciplines and monitoring of applications, including discrete, batch, continuous process, drives control, motion control and machine safety control. Our platform products include controllers, electronic operator interface devices, electronic input/output devices, communication and networking products, industrial computers and condition-based monitoring systems. The information-enabled Logix controllers provide integrated multi-discipline control that is modular and scaleable.

•

Software products that include configuration and visualization software used to operate and supervise control platforms, advanced process control software and manufacturing execution software (MES) that addresses information needs between the factory floor and a customer’s enterprise business system. Examples of MES applications are production scheduling, asset management, tracking, genealogy and manufacturing business intelligence.

•

Other Architecture & Software products, including rotary and linear motion control products, sensors and machine safety components.

The major competitors of our Architecture & Software operating segment include Siemens AG, Mitsubishi Corp., ABB Ltd, Honeywell International Inc., Schneider Electric SA and Emerson Electric Co.

Architecture & Software’s products are marketed primarily under the Allen-Bradley^®, A-B^®, Rockwell Software^® and FactoryTalk^® brand names. Major markets served include food and beverage, automotive, oil and gas, metals, mining, home and personal care and life sciences.

Control Products & Solutions

Our Control Products & Solutions operating segment recorded 2009 sales of $2.6 billion (60 percent of our total sales). The Control Products & Solutions segment combines a comprehensive portfolio of intelligent motor control and industrial control products with the customer support and application knowledge necessary to implement an automation or information solution on the plant floor. This comprehensive portfolio includes:

•

Low voltage and medium voltage electro-mechanical and electronic motor starters, motor and circuit protection devices, AC/DC variable frequency drives, contactors, push buttons, signaling devices, termination and protection devices, relays and timers and condition sensors.

•

Value-added packaged solutions, including configured drives, motor control centers and custom-engineered panels for Original Equipment Manufacturer (OEM) and end-user applications.

•

Automation and information solutions, including custom-engineered hardware and software systems for discrete, process, motion, safety, drives and manufacturing information applications.

•

Services designed to help maximize a customer’s automation investment and provide total life-cycle support, including multi-vendor customer technical support and repair, asset management, training and predictive and preventative maintenance.

The major competitors of our Control Products & Solutions operating segment include Siemens AG, ABB Ltd, Schneider Electric SA, Honeywell International Inc. and Emerson Electric Co.

Control Products & Solutions products are marketed primarily under the Allen Bradley^®, A-B^® and ICS Triplex™ brand names. Major markets served include food and beverage, oil and gas, metals, mining, automotive, pulp and paper and life sciences.

Geographic Information

In 2009, sales to customers in the United States accounted for 51 percent of our total sales. Our principal markets outside of the United States are in Canada, China, the United Kingdom, Italy, and Brazil. See Item 1A. Risk Factors for a discussion of risks associated with our operations outside of the United States. Sales and property information by major geographic area for each of the past three years is contained in Note 18 in the Financial Statements.

Competition

Depending on the product or service involved, our competitors range from large diversified businesses that sell products outside of industrial automation, to smaller companies that specialize in niche products and services. Factors that influence our competitive position include the breadth of our product portfolio and scope of solutions, technology leadership, knowledge of customer applications, large installed base, established distribution network, quality of products and services, price and global presence.

Distribution

In the United States and Canada, we sell our products primarily through independent distributors that typically do not carry products that compete with Allen-Bradley^® products. We sell large systems and service offerings principally through a direct sales force, though opportunities are sometimes identified through distributors. Outside the United States and Canada, we sell products through a combination of direct sales and sales through distributors. Sales to our largest distributor in 2009, 2008 and 2007 were between 9 and 10 percent of our total sales.

Research and Development

Our research and development spending for the years ended September 30, 2009, 2008 and 2007 was $170.0 million, $191.3 million, and $166.9 million, respectively. Customer-sponsored research and development was not significant in 2009, 2008 or 2007.

Employees

At September 30, 2009 we had approximately 19,000 employees. Approximately 8,300 were employed in the United States, and, of these employees, about two percent were represented by various local or national unions.

Raw Materials and Supplies

We purchase many items of equipment, components and materials used to produce our products from others. The raw materials essential to the conduct of each of our business segments generally are available at competitive prices. Although we have a broad base of suppliers and subcontractors, we depend upon the ability of our suppliers and subcontractors to meet performance and quality specifications and delivery schedules. See Item 1A. Risk Factors for a discussion of risks associated with our reliance on third party suppliers.

Backlog

Our total order backlog at September 30 was (in millions):

		2009				2008
Architecture & Software		$	130.6			$	161.2
Control Products & Solutions			761.3				872.6
		$	891.9			$	1,033.8

Backlog is not necessarily indicative of results of operations for future periods due to the short-cycle nature of most of our sales activities. Backlog orders scheduled for shipment beyond 2010 were approximately $73.2 million as of September 30, 2009.

Environmental Protection Requirements

Information about the effect of compliance with environmental protection requirements and resolution of environmental claims is contained in Note 17 in the Financial Statements. See also Item 3. Legal Proceedings.

Patents, Licenses and Trademarks

We own or license numerous patents and patent applications related to our products and operations. Various claims of patent infringement and requests for patent indemnification have been made to us. We believe that none of these claims or requests will have a material adverse effect on our financial condition. While in the aggregate our patents and licenses are important in the operation of our business, we do not believe that loss or termination of any one of them would materially affect our business or financial condition. See Item 1A. Risk Factors for a discussion of risks associated with our intellectual property.

The Company’s name and its registered trademark “Rockwell Automation^®” is important to each of our business segments. In addition, we own other important trademarks that we use, such as “Allen-Bradley^®,” “A-B^®” and “ICS Triplex^TM” for our control products and systems for industrial automation, and “Rockwell Software^®” and “FactoryTalk^®” for our software products.

Seasonality

Our business segments are not subject to significant seasonality. However, the calendarization of our results can vary and may be affected by the seasonal spending patterns of our customers due to their annual budgeting processes and their working schedules.

Available Information

We maintain an Internet site at http://www.rockwellautomation.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act), as well as our annual report to shareowners and Section 16 reports on Forms 3, 4 and 5, are available free of charge on this site as soon as reasonably practicable after we file or furnish these reports with the Securities and Exchange Commission (SEC). All reports we file with the SEC are also available free of charge via EDGAR through the SEC’s website at http://www.sec.gov. Our Guidelines on Corporate Governance and charters for our Board Committees are also available at our Internet site. These Guidelines and charters are also available in print to any shareowner upon request. The information contained on and linked from our Internet site is not incorporated by reference into this Annual Report on Form 10-K.

The certifications of our Chief Executive Officer and Chief Financial Officer required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included as Exhibits to this Annual Report on Form 10-K and were included as Exhibits to each of our Quarterly Reports on Form 10-Q filed during 2009. Our Chief Executive Officer certified to the New York Stock Exchange (NYSE) on March 4, 2009 pursuant to Section 303A.12 of the NYSE’s listing standards that he was not aware of any violation by the Company of the NYSE’s corporate governance listing standards as of that date.

Item 1A.		Risk Factors

In the ordinary course of our business, we face various strategic, operating, compliance, and financial risks. These risks could have an impact on our business, financial condition, operating results and cash flows. Many of our most significant risks are set forth below and elsewhere in this Annual Report on Form 10-K. We can mitigate these risks and their impact on the company only to a limited extent.

Our Enterprise Risk Management (ERM) process seeks to identify and address significant risks. Our ERM process is a company wide initiative that is designed with the intent of prioritizing risks and giving risks appropriate consideration. We use the integrated risk framework of the Committee of Sponsoring Organizations (COSO) to assess, manage, and monitor risks.

A council of senior executives prioritizes identified risks based on the severity and likelihood of each risk and assigns an executive to address each major identified risk area and lead action plans to mitigate risks, where possible. Our Board of Directors provides oversight of the ERM process and reviews identified risks deemed most significant. The Audit Committee also reviews major financial risk exposures and the steps management has taken to monitor and seek to control them.

Our goal is to proactively manage risks in a structured approach and in conjunction with strategic planning, with the intent to preserve and enhance shareowner value. However, these and other risks and uncertainties could cause our results to vary materially from recent results or from our anticipated future results.

We generate a substantial portion of our revenues from international sales and are subject to the risks of doing business in many countries.

Approximately 49 percent of our revenues in 2009 were outside of the U.S. Future growth rates and success of our business depend in large part on growth in our non-U.S. sales. Numerous risks and uncertainties affect our non-U.S. operations. These risks and uncertainties include political and economic instability, changes in laws, regulations and policies, including those related to tariffs, investments, taxation, trade controls, employment regulations and repatriation of earnings, and enforcement of contract and intellectual property rights. International transactions may also involve increased financial and legal risks due to differing legal systems and customs, including risks of non-compliance with U.S. and local laws affecting our activities abroad. In addition, we are affected by changes in foreign currency exchange rates, inflation rates and interest rates. While these factors and their impacts are difficult to predict, any one or more of them could adversely affect our business, financial condition or operating results.

An inability to respond to changes in customer preferences could result in decreased demand for our products.

Our success depends in part on our ability to anticipate and offer products that appeal to the changing needs and preferences of our customers in the various markets we serve. Developing new products requires high levels of innovation and the development process is often lengthy and costly. If we are not able to anticipate, identify, develop and market products that respond to changes in customer preferences, demand for our products could decline and our operating results would be adversely affected.

A global recession, adverse changes in business or industry conditions and volatility and disruption of the capital and credit markets may result in additional decreases in our revenues and profitability.

Recent global economic events, including the tightening of credit markets and the failures or material deteriorations of financial institutions and other entities, have resulted in a global recession. If these conditions continue or worsen, we could experience additional declines in revenues, profitability and cash flow due to reduced orders, payment delays, supply chain disruptions or other factors caused by economic challenges faced by our customers, prospective customers and suppliers.

Demand for our products is sensitive to changes in levels of global or regional industrial production and the financial performance of major industries that we serve. As economic activity slows or credit markets tighten, companies tend to reduce their levels of capital spending, which could result in decreased demand for our products.

Our ability to access the credit markets, and the related costs of these borrowings, is affected by the strength of our credit rating and current market conditions. If our access to credit, including the commercial paper market, is adversely affected due to a change in market conditions or otherwise, our cost of borrowings may increase or our ability to fund operations may be reduced.

Information technology infrastructure failures could disrupt our business.

We depend heavily on our information technology (IT) infrastructure in order to achieve our business objectives. If we experience a problem that impairs this infrastructure, a problem with the functioning of an important IT application, a breach of security or an intentional disruption of our IT systems, the resulting disruptions could impede our ability to record or process orders, manufacture and ship in a timely manner, or otherwise carry on our business in the ordinary course. Any such events could cause us to lose customers or revenue and could require us to incur significant expense to eliminate these problems and address related security concerns.

We are implementing a global Enterprise Resource Planning (ERP) system that will redesign and deploy new processes, organization structures and a common information system over a period of several years. Significant roll-outs of the system occurred at our U.S. locations and certain locations in Mexico and Europe in 2007 to 2009, and are scheduled to continue at additional locations in 2010 and beyond. As we implement the ERP system, the new system may not perform as expected. This could have an adverse effect on our business.

There are inherent risks in our growing solutions businesses.

Risks inherent in the sale of systems and solutions include assuming greater responsibility for project completion and success, defining and controlling contract scope, efficiently executing projects, and managing the efficiency and quality of our subcontractors. If we are unable to control, manage, and mitigate these risks, our results of operations could be adversely affected.

Our industry is highly competitive.

We face strong competition in all of our market segments in several significant respects. We compete based on product performance, quality, integrated systems and applications that address our customers’ business challenges, pricing and customer service. The relative importance of these factors differs across the markets and product areas that we serve. We seek to maintain acceptable pricing levels by continually developing advanced technologies for new products and product enhancements and offering complete solutions for our customers’ business problems. If we fail to keep pace with technological changes or to provide high quality products and services, we may experience price erosion and lower revenues and margins. We expect the level of competition to remain high in the future, which could limit our ability to maintain or increase our market share or profitability.

A disruption to our distribution channel could reduce our revenues.

In the United States and Canada, approximately 90 percent of our sales is through a limited number of distributors. In certain other countries, the majority of our sales is also through a limited number of distributors. While we maintain the right to appoint new distributors, any unplanned disruption to the existing channel could adversely affect our revenues. A disruption could result from the sale of a distributor to a competitor, financial instability of a distributor, or other events.

Potential liabilities and costs from litigation (including asbestos claims) could increase our costs.

Various lawsuits, claims and proceedings have been or may be asserted against us relating to the conduct of our business, including those pertaining to product liability, safety and health, employment and contract matters. We have been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos that was used in certain of our products many years ago. The uncertainties of litigation (including asbestos claims) and the uncertainties related to the collection of insurance coverage make it difficult to predict the ultimate resolution.

We have, from time to time, divested certain of our businesses. In connection with these divestitures, certain lawsuits, claims and proceedings may be instituted or asserted against us related to the period that we owned the businesses, either because we agreed to retain certain liabilities related to these periods or because such liabilities fall upon us by operation of law. In some instances, the divested business has assumed the liabilities; however, it is possible that we might be responsible to satisfy those liabilities if the divested business is unable to do so.

Intellectual property infringement claims could harm our business and our customers.

Others may assert intellectual property infringement claims against us or our customers. We regularly provide a limited intellectual property indemnity in connection with our terms and conditions of sale to our customers and in other types of contracts with third parties. Indemnification payments and legal costs to defend claims could be costly. In addition, we own the rights to many patents, trademarks, brand names and trade names that are important to our business. The loss of patents or licenses used in principal portions of our business may have an adverse effect on our results of operations. Expenses related to enforcing our intellectual property rights could be significant.

We rely on vendors to supply raw materials, including commodities, which creates certain risks and uncertainties that may adversely affect our business.

Our manufacturing processes require that we buy a high volume of equipment, components and raw materials, including commodities such as copper, aluminum and steel. Our reliance on suppliers of these raw materials involves certain risks, including:

•

poor quality can adversely affect the reliability and reputation of our products;

•

the cost of these purchases may change due to inflation, exchange rates, commodity market volatility or other factors;

•

we may not be able recover any increase in costs for these purchases through price increases to our customers; and

•

a shortage of components, commodities or other materials could adversely affect our manufacturing efficiencies and ability to make timely delivery.

Any of these uncertainties could adversely affect our profitability and ability to compete. We also maintain several single-source supplier relationships, because either alternative sources are not available or the relationship is advantageous due to performance, quality, support, delivery, capacity, or price considerations. Unavailability or delivery delays of single-source components or products could adversely affect our ability to ship the related product in a timely manner. The effect of unavailability or delivery delays would be more severe if associated with our higher volume and more profitable products. Even where alternative sources of supply are available, qualifying the alternate suppliers and establishing reliable supplies could cost more or could result in delays and a loss of revenues.

Potential liabilities and costs for environmental remediation could reduce our profits.

Our operations, both in the United States and abroad, are subject to regulation by various environmental regulatory authorities concerned with the impact of the environment on human health, the limitation and control of emissions and discharges into the air, ground and waters, the quality of air and bodies of water, and the handling, use and disposal of specified substances. Environmental laws and regulations can be complex and may change. Our financial responsibility to clean up contaminated property or for natural resource damages may extend to previously owned or used properties, waterways and properties owned by unrelated companies or individuals, as well as properties that we currently own and use, regardless of whether the contamination is attributable to prior owners. We have been named as a potentially responsible party at cleanup sites and may be so named in the future, and the costs associated with these current and future sites may be significant.

We must successfully defend any claims from taxing authorities to avoid an adverse effect on our tax expense and financial position.

We conduct business in many countries, which requires us to interpret the income tax laws and rulings in each of those taxing jurisdictions. Due to the ambiguity of tax laws among those jurisdictions as well as the subjectivity of factual interpretations, our estimates of income tax liabilities may differ from actual payments or assessments. Claims by taxing authorities related to these differences could have an adverse impact on our operating results and financial position.

Our competitiveness depends on successfully executing our globalization and cost productivity initiatives.

Our globalization strategy includes localization of our products and services to be closer to our customers and identified growth opportunities. Localization of our products and services includes expanding our capabilities, including supply chain and sourcing activities, product design, manufacturing, engineering, marketing and sales and support. These activities expose us to risks, including those related to political and economic uncertainties, transportation delays, labor market disruptions, and challenges to protect our intellectual property. In addition, we continue with our initiative to invest in actions to reduce our cost structure. The failure to achieve our objectives on these initiatives could have an adverse effect on our operating results.

We face the potential harms of natural disasters, terrorism, acts of war, international conflicts or other disruptions to our operations.

Natural disasters, acts or threats of war or terrorism, international conflicts, and the actions taken by governments in response to such events could cause damage to or disrupt our business operations, our suppliers or our customers, and could create political or economic instability. Although it is not possible to predict such events or their consequences, these events could decrease demand for our products, make it difficult or impossible for us to deliver products.

Our business success depends on attracting and retaining qualified personnel.

Our success depends in part on the efforts and abilities of our management team and key employees. Their skills, experience and industry knowledge significantly benefit our operations and administration. The failure to attract and retain members of our management team and key employees could have a negative effect on our operating results.

Risks associated with acquisitions could have an adverse effect on us.

We have acquired, and will continue to acquire, businesses in an effort to enhance shareowner value. Acquisitions involve risks and uncertainties, including:

•

difficulties in integrating the acquired business, retaining the acquired business’ customers, and achieving the expected benefits of the acquisition, such as revenue increases, cost savings and increases in geographic or product presence, in the desired time frames;

•

loss of key employees of the acquired business;

•

difficulties implementing and maintaining consistent standards, controls, procedures, policies and information systems; and

•

diversion of management’s attention from other business concerns.

Future acquisitions could result in debt, dilution, liabilities, increased interest expense, restructuring charges and amortization expenses related to intangible assets.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

At September 30, 2009, we operated 55 plants. Manufacturing space occupied approximately 4.8 million square feet, of which 52 percent was in the United States and Canada. Our Architecture & Software segment occupied approximately 0.7 million square feet, our Control Products & Solutions segment occupied approximately 2.9 million square feet and the remaining approximately 1.2 million square feet of manufacturing space was shared by our operating segments. We also had 269 sales and administrative offices and a total of 28 warehouses, service centers and other facilities. The aggregate floor space of our facilities was approximately 10.6 million square feet. Of this floor space, we owned approximately 22 percent and leased approximately 78 percent. At September 30, 2009, approximately 266,000 square feet of floor space was not in use, mostly in owned facilities.

There are no major encumbrances (other than financing arrangements, which in the aggregate are not significant) on any of our plants or equipment. In our opinion, our properties have been well maintained, are in sound operating condition and contain all equipment and facilities necessary to operate at present levels.

Item 3. Legal Proceedings

Rocky Flats Plant. RIC operated the Rocky Flats Plant (the Plant), Golden, Colorado, from 1975 through December 1989 for the Department of Energy (DOE). Incident to Boeing’s acquisition of RIC in 1996, we agreed to indemnify RIC and Boeing for any liability arising out of RIC’s activities at the Plant to the extent such liability is not assumed or indemnified by the U.S. government.

On January 30, 1990, a class action was filed in the United States District Court for the District of Colorado against RIC and another former operator of the Plant. The action alleges the improper production, handling and disposal of radioactive and other hazardous substances, constituting, among other things, violations of various environmental, health and safety laws and regulations, and misrepresentation and concealment of the facts relating thereto. On October 8, 1993, the court certified separate medical monitoring and property value classes. Effective August 1, 1996, the DOE assumed control of the defense of the contractor defendants, including RIC, in the action and has either reimbursed or paid directly the costs of RIC’s defense. On February 14, 2006, a jury empanelled to try certain of the class action plaintiffs’ property damage claims found the contractor defendants liable for trespass and nuisance, and awarded $176 million in compensatory damages and $200 million in punitive damages against the two defendants. The jury also found RIC to be 10% responsible for the trespass and 70% responsible for the nuisance. On June 2, 2008, the district court entered judgment against RIC in the amount of $598 million, including prejudgment interest. RIC has appealed the judgment, at the direction of the DOE. Execution of the judgment is currently stayed. By letter dated June 5, 2008, the DOE confirmed its obligation to indemnify RIC for any judgment or settlement arising out of this action and attorney’s fees and other costs associated with this action, and acknowledged that the ultimate financial responsibility for this action lies with the U.S. government. Accordingly, we do not believe that the action will have a material adverse effect on our financial condition.

On May 4, 2005, RIC filed a claim with the DOE, seeking recovery of $11.3 million in unreimbursed costs incurred in defense of a qui tam suit against RIC related to Rocky Flats. On September 30, 2005, the DOE Contracting Officer denied that claim and demanded repayment of $4 million in previously reimbursed defense costs. On November 10, 2005, RIC appealed both aspects of the Contracting Officer’s decision regarding defense costs to the Civilian Board of Contract Appeals (Board). On July 9, 2007, the Board ruled that RIC was not entitled to be reimbursed for costs incurred by it in defense of the qui tam action and that the DOE was entitled to be repaid the previously reimbursed costs. As a result of further proceedings, on December 17, 2008 the Board held allowable those costs incurred by RIC in defense of claims other than the claims on which it was found liable in the qui tam case. The actual amounts that RIC may be required to repay to the DOE and that the DOE must reimburse RIC will be determined in further proceedings. The DOE has appealed the Board’s previous ruling in that proceeding, and RIC has cross-appealed.

McGregor, Texas NWIRP Facility Environmental Claim. RIC operated the Naval Weapons Industrial Reserve Plant (NWIRP) in McGregor, Texas from 1958 through 1978 for the United States Navy. Incident to Boeing’s acquisition of RIC in 1996, we agreed to indemnify RIC and Boeing for any liability arising out of RIC’s activities at the NWIRP to the extent such liability is not assumed or indemnified by the U.S. government.

On December 3, 2007, the United States Department of Justice (DOJ) notified RIC that the United States Navy was seeking to recover environmental cleanup costs incurred at the NWIRP. The DOJ now asserts that it has incurred more than $50 million (excluding interest, attorneys fees and other indirect costs) in environmental cleanup costs at the NWIRP, and it believes that it may have a potential cause of action against RIC and other former contractors at the NWIRP for recovery of those costs. Along with the initial notification, the DOJ also proposed a tolling agreement so that the parties could discuss settlement. RIC and several other former contractors have entered into the tolling agreement with the DOJ. To date, no lawsuit has been filed and only one settlement discussion has taken place. Moreover, we believe that RIC has several meritorious defenses to the DOJ’s claim. At this time, RIC has indicated that it cannot estimate its potential exposure in this matter, if any, but it intends to continue discussion with the DOJ.

Asbestos. We (including our subsidiaries) have been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos that was used in certain components of our products many years ago. Currently there are thousands of claimants in lawsuits that name us as defendants, together with hundreds of other companies. In some cases, the claims involve products from divested businesses, and we are indemnified for most of the costs. However, we have agreed to defend and indemnify asbestos claims associated with products manufactured or sold by our Dodge mechanical and Reliance Electric motors and motor repair services businesses prior to their divestiture by us, which occurred on January 31, 2007. We also are responsible for half of the costs and liabilities associated with asbestos cases against RIC’s divested measurement and flow control business. But in all cases, for those claimants who do show that they worked with our products or products of divested businesses for which we are responsible, we nevertheless believe we have meritorious defenses, in substantial part due to the integrity of the products, the encapsulated nature of any asbestos-containing components, and the lack of any impairing medical condition on the part of many claimants. We defend those cases vigorously. Historically, we have been dismissed from the vast majority of these claims with no payment to claimants.

We have maintained insurance coverage that we believe covers indemnity and defense costs, over and above self-insured retentions, for claims arising from our former Allen-Bradley subsidiary. Following litigation against Nationwide Indemnity Company and Kemper Insurance, the insurance carriers that provided liability insurance coverage to Allen-Bradley, we entered into separate agreements on April 1, 2008 with both insurance carriers to further resolve responsibility for ongoing and future coverage of Allen-Bradley asbestos claims. In exchange for a lump sum payment, Kemper bought out its remaining liability and has been released from further insurance obligations to Allen-Bradley. Nationwide administers the Kemper buyout funds and has entered into a cost share agreement with us to pay the substantial majority of future defense and indemnity costs for Allen-Bradley asbestos claims once the Kemper buyout funds are depleted. We believe that these arrangements will continue to provide coverage for Allen-Bradley asbestos claims throughout the remaining life of the asbestos liability.

The uncertainties of asbestos claim litigation make it difficult to predict accurately the ultimate outcome of asbestos claims. That uncertainty is increased by the possibility of adverse rulings or new legislation affecting asbestos claim litigation or the settlement process. Subject to these uncertainties and based on our experience defending asbestos claims, we do not believe these lawsuits will have a material adverse effect on our financial condition.

Foreign Corrupt Practices Act. As a result of an internal review, we determined during the fourth quarter of 2006 that actions by a small number of employees at certain of our operations in one jurisdiction may have violated the U.S. Foreign Corrupt Practices Act (FCPA) or other applicable laws. We and some of our distributors do business in this jurisdiction with government owned enterprises or government owned enterprises that are evolving to commercial businesses. These actions involved payments for non-business travel expenses and certain other business arrangements involving potentially improper payment mechanisms for legitimate business expenses. Special outside counsel has been engaged to investigate the actions and report to the Audit Committee. Their review is ongoing.

We voluntarily disclosed these actions to the DOJ and the SEC beginning in September 2006. We have implemented thorough remedial measures, and are cooperating on these issues with the DOJ and SEC. We have agreed to update the DOJ and SEC periodically regarding any further developments as the investigation continues.

If violations of the FCPA occurred, we may be subject to consequences that could include fines, penalties, other costs and business-related impacts. We could also face similar consequences from local authorities. We do not believe the consequences of this investigation, the remediation or any related penalties or business related impacts will have a material adverse effect on our business, results of operations or financial condition.

Other. Various other lawsuits, claims and proceedings have been or may be instituted or asserted against us relating to the conduct of our business, including those pertaining to product liability, environmental, safety and health, intellectual property, employment and contract matters. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, we believe the disposition of matters that are pending or have been asserted will not have a material adverse effect on our business or financial condition.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of 2009.

Item 4A. Executive Officers of the Company

The name, age, office and position held with the Company and principal occupations and employment during the past five years of each of the executive officers of the Company as of October 31, 2009 are:

Name, Office and Position, and Principal Occupations and Employment		Age
Keith D. Nosbusch — Chairman of the Board since February 2005 and President and Chief Executive Officer			58
Sujeet Chand — Senior Vice President and Chief Technology Officer since September 2005; Vice President and Chief Technical Officer prior thereto			51
Kent G. Coppins — Vice President and General Tax Counsel			56
Theodore D. Crandall — Senior Vice President and Chief Financial Officer since October 2007; Interim Chief Financial Officer from April 2007 to October 2007; Senior Vice President prior thereto			54
David M. Dorgan — Vice President and Controller			45
Steven A. Eisenbrown — Senior Vice President			56
Steven W. Etzel — Vice President and Treasurer since November 2007; Assistant Treasurer from November 2006 to November 2007; Director, Finance from January 2006 to November 2006; Vice President, Risk Management and Financial Planning prior thereto			49
Douglas M. Hagerman — Senior Vice President, General Counsel and Secretary			48
John P. McDermott — Senior Vice President			51
John M. Miller — Vice President and Chief Intellectual Property Counsel			42
Rondi Rohr-Dralle — Vice President, Investor Relations and Corporate Development			53
Robert A. Ruff — Senior Vice President			61
Susan J. Schmitt — Senior Vice President, Human Resources since July 2007; Director, Human Resources United Kingdom and European Functions, Kellogg Company (producer of cereal and convenience foods) from August 2006 to July 2007; Vice President, Human Resources, U.S. Morning Foods division of Kellogg Company prior thereto			46
A. Lawrence Stuever — Vice President and General Auditor			57
Martin Thomas — Senior Vice President, Operations and Engineering Services since February 2007; Vice President, Operations and Engineering Services from November 2005 to February 2007; President, General Electric’s Trailer Fleet Services and Modular Space businesses (leasing for modular space and tractor trailers) prior thereto			51

There are no family relationships, as defined by applicable SEC rules, between any of the above executive officers and any other executive officer or director of the Company. No officer of the Company was selected pursuant to any arrangement or understanding between the officer and any person other than the Company. All executive officers are elected annually.

PART II

Item 5.		Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on the New York Stock Exchange and trades under the symbol “ROK.” On October 31, 2009 there were 27,316 shareowners of record of our common stock.

The following table sets forth the high and low sales price of our common stock on the New York Stock Exchange-Composite Transactions reporting system during each quarter of our fiscal years ended September 30, 2009 and 2008:

		2009								2008
Fiscal Quarters		High				Low				High				Low
First		$	37.21			$	21.51			$	73.86			$	64.85
Second			35.00				17.50				69.72				50.00
Third			35.56				20.97				61.49				42.75
Fourth			45.12				29.55				49.92				32.83

We declare and pay dividends at the sole discretion of our Board of Directors. During each of 2009 and 2008, we declared and paid aggregate cash dividends of $1.16 ($0.29 per quarter) per common share.

On November 7, 2007, our Board of Directors approved a $1.0 billion share repurchase program. Our repurchase program allows management to repurchase shares at its discretion. However, during quarter-end “quiet periods,” defined as the period of time from quarter-end until two days following the filing of our quarterly earnings results with the SEC on Form 8-K, shares are repurchased at our broker’s discretion pursuant to a share repurchase plan subject to price and volume parameters. We repurchased no shares under this program during the three months ended September 30, 2009. The dollar value of shares remaining under the repurchase program as of September 30, 2009 was $621,188,198.

Item 6. Selected Financial Data

The following table sets forth selected consolidated financial data of our continuing operations. The data should be read in conjunction with MD&A and the Financial Statements. The consolidated statement of operations data for each of the following five years ended September 30, the related consolidated balance sheet data and other data have been derived from our audited consolidated financial statements.

		Year Ended September 30,
		2009(a)				2008(b)				2007(c)				2006(d)				2005
		(in millions, except per share data)
Consolidated Statement of Operations Data:
Sales		$	4,332.5			$	5,697.8			$	5,003.9			$	4,556.4			$	4,111.5
Interest expense			60.9				68.2				63.4				56.6				45.8
Income from continuing operations before accounting change			217.9				577.6				569.3				529.3				447.7
Earnings per share from continuing operations before accounting change:
Basic			1.54				3.94				3.59				3.00				2.45
Diluted			1.53				3.90				3.53				2.94				2.39
Cumulative effect of accounting change per diluted share (e)			—				—				—				(0.10	)			—
Cash dividends per share			1.16				1.16				1.16				0.90				0.78
Consolidated Balance Sheet Data: (at end of period)
Total assets		$	4,305.7			$	4,593.6			$	4,545.8			$	4,735.4			$	4,525.1
Short-term debt and current portion of long-term debt			—				100.1				521.4				219.0				0.1
Long-term debt			904.7				904.4				405.7				748.2				748.2
Shareowners’ equity			1,316.4				1,688.8				1,742.8				1,918.2				1,649.1
Other Data:
Capital expenditures		$	98.0			$	151.0			$	131.0			$	122.3			$	102.7
Depreciation			101.7				101.3				93.5				96.2				109.0
Other intangible asset amortization			32.4				35.2				24.4				21.2				18.4

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

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.

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, including upgrades, modifications, and expansions of existing facilities, and the creation of new facilities;

•

our customers’ needs for greater cost reduction, sustainable production (cleaner, safer and more energy efficient), productivity, quality assurance 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 strategic framework incorporates our vision of being the most valued global provider of innovative industrial automation and information products, services and solutions, and our growth and performance strategy, which seeks to:

•

deploy human and financial resources 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;

•

expand our served market by increasing our capabilities in new applications, including process control, safety and information software;

•

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;

•

build our channel capability and partnerships and increase penetration at OEMs;

•

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

•

drive continuous improvement by driving quality into all we do, improving customer experience and satisfaction, driving aggressive productivity and optimizing end-to-end business processes.

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) 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.

We have one of the most comprehensive safety offerings in the industry, including both machine and process safety products and solutions. We see significant potential in the growing safety market. We successfully integrated safety into the Logix platform with our launch of GuardLogix^® 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, the 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 and configurable. 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 expanded our portfolio of 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 with the industry-specific domain expertise of our people enables us to solve many of 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 middle 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 lead to manufacturing investment and provide us with additional growth opportunities in the future.

OEMs represent another growth opportunity. The OEM market is large and we have an opportunity to increase market share within it, 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, particularly when 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 when commodity prices are relatively 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.

Demand for our products, services and solutions across all industries benefits from the 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. We help our customers meet their sustainability needs pertaining to energy efficiency, environmental and safety goals. 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 invest to ensure compliance and implement sustainable business practices.

Acquisitions

In March 2009, we bought 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 and in the oil and gas and other resource-based industries. In January 2009, we bought the assets and assumed certain liabilities of Xi’an Hengsheng Science & Technology Limited. This acquisition 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. CEDES is a supplier of safety and measuring light curtains, a leading product offering in the machine safety market. Incuity positions us for continued success in the information solutions market. Incuity’s enterprise manufacturing intelligence offerings, which we have named FactoryTalk^® 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.

Continuous Improvement

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 processes and an enterprise-wide information system. These are intended to improve profitability that can be used to fund investment in growth and technology and to offset inflation. Our ongoing productivity initiatives target both cost and improved asset utilization. Charges for workforce reductions and facility rationalization may be required in order to effectively execute our productivity programs.

U. S. Industrial Economic Trends

In 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:

•

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. Historically there has been a meaningful correlation between the Industrial Production Index 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.

•

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 levels of U.S. industrial production.

The table below depicts the trends in these indicators from fiscal 2007 to 2009. Recent trends in most metrics show signs of possible stabilization; however, we continue to operate in a period of uncertainty with respect to the U.S. economy.

										Industrial
		Industrial								Equipment				Capacity
		Production								Spending				Utilization
		Index				PMI				(in billions)				(percent)
Fiscal 2009
Quarter ended:
September 2009			97.6				52.6			$	147.2				69.8
June 2009			96.4				44.8				151.4				68.7
March 2009			99.1				36.3				157.8				70.4
December 2008			104.4				32.9				187.9				74.2
Fiscal 2008
Quarter ended:
September 2008			108.1				43.4				194.8				76.9
June 2008			110.7				49.5				197.3				78.9
March 2008			112.0				49.0				195.3				80.1
December 2007			112.0				49.1				192.9				80.4
Fiscal 2007
Quarter ended:
September 2007			111.7				50.5				199.0				80.7
June 2007			111.1				52.9				198.8				80.6
March 2007			110.5				51.1				182.1				80.6
December 2006			109.8				52.2				183.7				80.6

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

Non-U.S. Regional Trends

In 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, partly in response to higher end-product pricing; and
	•		expanding consumer markets.

We use changes in GDP as one indicator of the growth opportunities in each region where we do business. GDP either declined or grew slowly in all regions during fiscal 2009, contributing to reduced customer demand. We have observed the most significant effects of the GDP deceleration in the developed economies of Canada, Western Europe and Asia Pacific, all of which experienced year-over-year GDP declines. We also saw GDP declines in Latin America, beginning in the second fiscal quarter of 2009. GDP growth rates in certain Asia Pacific emerging economies exceeded the global average, as growth in these economies began to accelerate in the second half of fiscal 2009. Signs indicating potential stabilization in global economic conditions began to appear in the fourth fiscal quarter of 2009, but the market outlook in all regions continues to remain uncertain.

Revenue by Geographic Region

The table below presents our actual sales for the year ended September 30, 2009 by geographic region and the change in sales from the year ended September 30, 2008 (in millions, except percentages):

										Change in
						Change vs.				Organic Sales
		Year Ended				Year Ended				vs. Year Ended
		September 30, 2009(1)				September 30, 2008				September 30, 2008(2)
United States		$	2,209.2				(23	%)			(22	%)
Canada			257.1				(35	%)			(28	%)
Europe, Middle East and Africa			962.1				(27	%)			(19	%)
Asia-Pacific			579.3				(19	%)			(11	%)
Latin America			324.8				(22	%)			(6	%)
Total sales		$	4,332.5				(24	%)			(19	%)

Summary of Results of Operations

Our 2009 results reflect the severity of the global economic recession. Market conditions quickly deteriorated across most industries and all regions. Turmoil in the financial markets intensified the economic decline and was a contributing factor in most industrial companies’ decisions to slow production, reduce spending and conserve cash. All of these factors contributed to 2009 being one of the most challenging years in our history.

In this economic environment, we experienced a full year organic revenue decline of 19 percent. However, we saw demand levels in our products business start to stabilize in the latter part of the year and our revenue grew sequentially in the fourth quarter of 2009. While macroeconomic conditions appear to be stabilizing, the outlook for manufacturing investment remains uncertain.

During 2009, we acted decisively throughout the year to right-size our cost structure, allowing us to achieve cost savings in 2009 and expected incremental cost savings in 2010. These actions required us to record restructuring charges of $60.4 million ($41.8 million after tax, or $0.29 per diluted share). We carefully balanced these actions with preserving investments in our core technologies and global domain expertise. We also generated significant cash flow this year by quickly aligning inventory levels to lower demand, effectively managing receivables in a difficult credit environment and appropriately constraining capital spending. Our balance sheet and liquidity position remain strong.

We will continue our operating discipline, with a focus on cost control and cash management, into 2010. We believe our ongoing commitment to innovation, technology differentiation, domain expertise and thought leadership will enable us to continue to meet our customers’ global productivity and sustainability needs.

The following tables reflect our sales and operating results for the years ended September 30, 2009, 2008 and 2007 (in millions, except per share amounts):

		Year Ended September 30,
		2009				2008				2007
Sales
Architecture & Software		$	1,723.5			$	2,419.7			$	2,221.3
Control Products & Solutions			2,609.0				3,278.1				2,782.6
Total		$	4,332.5			$	5,697.8			$	5,003.9
Segment operating earnings (a)(b)
Architecture & Software		$	223.0			$	584.7			$	587.7
Control Products & Solutions			206.7				440.5				397.0
Purchase accounting depreciation and amortization			(18.6	)			(24.2	)			(16.4	)
General corporate — net			(80.3	)			(77.2	)			(72.8	)
Interest expense			(60.9	)			(68.2	)			(63.4	)
Special items (b)			4.0				(46.7	)			(43.5	)
Income from continuing operations before income taxes			273.9				808.9				788.6
Provision for income taxes			(56.0	)			(231.3	)			(219.3	)
Income from continuing operations			217.9				577.6				569.3
Income from discontinued operations (c)			2.8				—				918.5
Net income		$	220.7			$	577.6			$	1,487.8
Diluted earnings per share:
Continuing operations		$	1.53			$	3.90			$	3.53
Discontinued operations			0.02				—				5.70
Net income		$	1.55			$	3.90			$	9.23
Diluted weighted average outstanding shares			142.5				148.2				161.2

2009 Compared to 2008

(in millions, except per share amounts)		2009				2008				Change
Sales		$	4,332.5			$	5,697.8			$	(1,365.3	)
Income from continuing operations			217.9				577.6				(359.7	)
Diluted earnings per share from continuing operations			1.53				3.90				(2.37	)

Sales

Sales decreased 24 percent in 2009 compared to 2008. The effects of currency translation contributed 5 percentage points to the decrease. We experienced a significant decline in customer demand during 2009 due to deteriorating economic, financial and credit market conditions in most regions and industries. Sales to customers in the United States declined 22 percent organically as compared to 2008, as plant shutdowns occurred and production slowed across many industries. The Canadian organic sales decline of 28 percent compared to 2008 was driven by weakness in all industrial sectors, including transportation and general manufacturing. Sales to customers in EMEA declined 19 percent organically compared to 2008. EMEA weakness occurred in all industries as well as in sales to OEMs, due to a large number of plant shutdowns and production cutbacks. Organic sales in Asia-Pacific declined by 11 percent compared to 2008. Korea and Japan contributed most to the decline in the region. Organic sales in Latin America declined by 6 percent as compared to 2008. The Latin America region benefited from demand in resource-based industries during the first two quarters of the year, but experienced year-over-year organic sales declines in the second half of the year.

In 2009 we experienced significant year-over-year declines in all of our end markets, including transportation, metals, and to a lesser extent, consumer products industries. However, the decline in process sales was lower than our average rate of decline.

Purchase Accounting Depreciation and Amortization

Purchase accounting depreciation and amortization was $18.6 million in 2009 compared to $24.2 million in 2008. The decrease was primarily due to completed amortization of certain intangible assets and currency translation.

General Corporate — Net

General corporate expenses were $80.3 million in 2009 compared to $77.2 million in 2008. The increase was primarily due to increased charitable contributions and a gain recognized in the first nine months of 2008 in connection with the divestiture of Power Systems, partially offset by cost reductions.

Interest Expense

Interest expense was $60.9 million in 2009 compared to $68.2 million in 2008. The decrease was due to lower interest rates and lower short-term debt balances.

Income Taxes

The effective tax rate for 2009 was 20.4 percent compared to 28.6 percent in 2008. The 2009 and 2008 effective tax rates were lower than the U.S. statutory tax rate of 35 percent because we benefited from lower tax rates on income outside the United States and in 2008 we benefited from the use of foreign tax credits.

The 2009 rate was lower than 2008 because we benefited from a lower proportionate share of income in higher tax rate jurisdictions as compared to 2008. During 2009, we also recognized discrete tax benefits of $20.5 million related to the retroactive extension of the U.S. federal research tax credit, the resolution of a contractual tax obligation and various state tax matters, partially offset by discrete tax expenses of $4.2 million related to a non-U.S. subsidiary.

See Note 16 in the Financial Statements for a complete reconciliation of the United States statutory tax rate to the effective tax rate and more information on tax events in 2009 and 2008 affecting the respective tax rates.

Income from Continuing Operations

Income from continuing operations decreased 62 percent in 2009 to $217.9 million, compared to 2008. The decrease is primarily due to our significant decline in sales volume. Inflation, the unfavorable impact of currency exchange rates and restructuring charges also contributed to the decrease. These items were partially offset by cost reductions, lower interest expense and a lower effective tax rate.

During 2009, we recorded restructuring charges of $60.4 million ($41.8 million after tax, or $0.29 per diluted share) related to actions designed to better align our cost structure with current economic conditions. We recorded $35.2 million of the restructuring charges as a reduction of Architecture & Software operating earnings and $25.2 million as a reduction of Control Products & Solutions operating earnings. Special items of $4.0 million in 2009 include the reversal of a portion of restructuring accruals established in prior years.

During 2008, we recorded restructuring charges of $50.7 million ($34.0 million after tax, or $0.23 per diluted share) related to actions designed to better align resources with growth opportunities and to reduce costs as a result of current and anticipated market conditions. This charge was partially offset by the reversal of $4.0 million ($3.6 million net of tax or $0.02 per diluted share) of severance accruals established as part of our 2007 restructuring actions, as employee attrition differed from our original estimates. We recorded these net charges in special items in 2008.

See Note 14 in the Financial Statements for more information on restructuring charges and special items.

Architecture & Software

(in millions, except percentages)		2009				2008				Change
Sales		$	1,723.5			$	2,419.7			$	(696.2	)
Segment operating earnings			223.0				584.7				(361.7	)
Segment operating margin			12.9	%			24.2	%		(11.3		) pts

Sales

Architecture & Software sales decreased 29 percent in 2009 compared to 2008 as plant shutdowns occurred and production slowed across many industries. Organic sales decreased 24 percent, as the effects of currency translation contributed approximately 5 percentage points to the decline. We experienced year-over-year declines in sales of this segment as a result of the global recession and the short-cycle nature of this segment’s sales activities. Logix sales declined 17 percent in 2009 compared to 2008, while the decline in sales of our legacy processor products was greater than the segment’s average rate of decline.

Operating Margin

Architecture & Software segment operating margin decreased by 11.3 points to 12.9 percent in 2009 compared to 2008. The decrease was primarily due to significant declines in sales volume. The unfavorable impact of currency exchange rates and restructuring charges also contributed to the decrease, partially offset by cost reductions.

Control Products & Solutions

(in millions, except percentages)		2009				2008				Change
Sales		$	2,609.0			$	3,278.1			$	(669.1	)
Segment operating earnings			206.7				440.5				(233.8	)
Segment operating margin			7.9	%			13.4	%		(5.5		) pts

Sales

Control Products & Solutions sales decreased 20 percent in 2009 compared to 2008. Organic sales decreased 15 percent as the effects of currency translation contributed 5 percentage points to the decrease. We experienced significant year-over-year declines in sales by the products businesses of this segment as a result of the global recession and the short-cycle nature of these businesses’ sales activities. Sales by our solutions and services businesses declined at a lower rate than the segment’s average rate of decline, as we delivered solutions from our backlog.

Operating Margin

Control Products & Solutions segment operating margin decreased by 5.5 points to 7.9 percent in 2009 compared to 2008. The decrease resulted primarily from significant declines in sales volume. Inflation, the unfavorable impact of currency exchange rates and restructuring charges also contributed to the decrease, which was partially offset by cost reductions.

2008 Compared to 2007

(in millions, except per share amounts)		2008				2007				Change
Sales		$	5,697.8			$	5,003.9			$	693.9
Income from continuing operations			577.6				569.3				8.3
Diluted earnings per share from continuing operations			3.90				3.53				0.37

Sales

Sales increased 14 percent in 2008 compared to 2007. Organic sales increased 6 percent, with effects of currency translation and acquisitions adding 5 and 3 percentage points to the growth rate, respectively. In 2008, we continued the execution of our ongoing globalization strategy and our focus on emerging markets, as approximately 50 percent of our sales during 2008 were to non-U.S. customers. Sales in emerging markets grew at above our average growth rate. We demonstrated improved performance in the Asia-Pacific region, with particular strength in China and India. The growth rate in Asia-Pacific accelerated every quarter during 2008, resulting in a full year organic growth rate of 15 percent compared to 2007. We continued to see strong organic growth in Latin America of 14 percent, benefiting from strength in resource-based industries. Sales to customers in the United States, Canada and EMEA each grew at 4-5 percent organically.

In 2008, we experienced considerable growth in our key process and OEM growth initiatives, demonstrating the ongoing diversification of our revenue base. We achieved above average growth in resource-based industries, primarily due to higher commodity prices, infrastructure spending and continued demand for oil, gas and other resources, particularly in emerging markets. Sales to global automotive customers grew at about our average growth rate, but U.S. automotive growth was below our average growth rate. Sales to customers in the life sciences industries were significantly below our average growth rate. Our sales growth in the food and beverage and home and personal care industries was also below our average growth rate; however, these industries tend to provide for more consistent rates of growth over time.

Purchase Accounting Depreciation and Amortization

Purchase accounting depreciation and amortization was $24.2 million in 2008 compared to $16.4 million in 2007. The increase was due to amortization of intangibles from recent acquisitions, particularly CEDES, Incuity, Pavilion and Industrial Control Services Group Limited, which does business as ICS Triplex.

General Corporate — Net

General corporate expenses were $77.2 million in 2008 compared to $72.8 million in 2007. The increase was primarily due to lower interest and dividend income in 2008 compared to 2007, partially offset by reduced charitable contributions in 2008 and lower environmental remediation charges at legacy sites compared to 2007.

Interest Expense

Interest expense was $68.2 million in 2008 compared to $63.4 million in 2007. The increase was due to higher average outstanding borrowings, partially offset by lower interest rates than the prior year.

Special Items

In 2008, we incurred special charges of $50.7 million ($34.0 million after tax, or $0.23 per diluted share) related to restructuring actions designed to better align resources with growth opportunities and to reduce costs as a result of current and anticipated market conditions. This charge was partially offset by the reversal of $4.0 million ($3.6 million net of tax or $0.02 per diluted share) of severance accruals established as part of our 2007 restructuring actions as employee attrition differed from our original estimates. The 2008 restructuring actions include workforce reductions aimed at streamlining administrative functions, realigning selling resources to the highest anticipated growth opportunities and consolidating business units.

Special items of $43.5 million in 2007 include costs related to various restructuring actions designed to execute on our cost productivity initiatives and to advance our globalization strategy. Actions included workforce reductions, realignment of administrative functions and rationalization and consolidation of global operations.

See Note 14 in the Financial Statements for more information on restructuring charges and special items.

Income Taxes

The effective tax rate for 2008 was 28.6 percent compared to 27.8 percent in 2007. The effective tax rate in 2008 was lower than the statutory tax rate of 35 percent because of lower tax rates on income outside the United States and because we used foreign tax credits. The tax rate in 2008 was higher than 2007 because we favorably resolved various federal and state matters in the prior year.

The 2007 effective tax rate differed from the federal statutory rate of 35 percent because we benefited from lower non-U.S. tax rates, resolved certain tax matters and claims related to the closure of the 2005 U.S. federal audit cycle and various state tax audits and made other provision adjustments.

See Note 16 in the Financial Statements for a complete reconciliation of the United States statutory tax rate to the effective tax rate and more information on tax events in 2008 and 2007 affecting the respective tax rates.

Income from Continuing Operations

Income from continuing operations in 2008 increased $8.3 million compared to 2007. The increase was primarily due to productivity performance and higher volume, partially offset by increased investment spending to support globalization, growth and technology, increased purchase accounting depreciation and amortization, inflation and a higher effective income tax rate.

Discontinued Operations

Amounts reported for discontinued operations in 2007 primarily relate to the operating results of the principal businesses of our former Power Systems operating segment for periods before the divestiture and the gain on sale of the principal businesses of that operating segment. Net income on operating activities of Power Systems was $42.3 million in 2007. We reported an after-tax gain on the sale of Power Systems of $868.2 million ($5.39 per share) in 2007.

We also reported after-tax income of $8.0 million during 2007 related to other discontinued operations activities. See Note 13 in the Financial Statements for more information on discontinued operations.

(in millions, except percentages)		2008				2007				Change
Sales		$	2,419.7			$	2,221.3			$	198.4
Segment operating earnings			584.7				587.7				(3.0	)
Segment operating margin			24.2	%			26.5	%		(2.3		) pts

Sales

Architecture & Software sales increased 9 percent compared to 2007. Organic growth accounted for 3 percentage points of the increase, as foreign currency translation and acquisitions added 5 and 1 percentage points to the growth rate, respectively. Logix sales grew 12 percent in 2008 compared to 2007, partially offset by a decline in our legacy processor sales.

Operating Margin

Segment operating margin decreased by 2.3 points in 2008 compared to 2007 and was negatively impacted by increased investment spending to support technology and growth, year-over-year impact of acquisitions and the impact of foreign currency, partially offset by volume leverage and productivity.

Control Products & Solutions

(in millions, except percentages)		2008				2007				Change
Sales		$	3,278.1			$	2,782.6			$	495.5
Segment operating earnings			440.5				397.0				43.5
Segment operating margin			13.4	%			14.3	%		(0.9		) pts

Sales

Control Products & Solutions sales increased 18 percent compared to 2007. Organic sales growth was 9 percent, as foreign currency translation and acquisitions added 5 and 4 percentage points to the growth rate, respectively. Year-over-year results benefited from our growth initiatives and strong results from our solutions businesses, especially in resource-based end markets.

Operating Margin

Segment operating margin decreased 0.9 points in 2008 compared to 2007. The decrease was primarily due to the mix between our product and solutions businesses, the impact of foreign currency, increased investment spending and the negative impact of acquisitions, partially offset by strong productivity performance, volume leverage and price.

Financial Condition

The following is a summary of our cash flows from operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows (in millions):

		Year Ended September 30,
		2009				2008				2007
Cash provided by (used for):
Operating activities		$	526.4			$	596.8			$	444.9
Investing activities			(132.4	)			(220.7	)			1,398.9
Financing activities			(307.4	)			(442.8	)			(1,673.1	)
Effect of exchange rate changes on cash			(24.5	)			30.7				38.8
Cash provided by (used for) continuing operations		$	62.1			$	(36.0	)		$	209.5
The following table summarizes free cash flow (in millions):
Cash provided by continuing operating activities		$	526.4			$	596.8			$	444.9
Capital expenditures of continuing operations			(98.0	)			(151.0	)			(131.0	)
Tax payments related to the gain on divestiture of Power Systems			—				7.9				190.0
Excess income tax benefit from share-based compensation			2.4				4.6				27.1
Free cash flow		$	430.8			$	458.3			$	531.0

Our definition of free cash flow, which is a non-GAAP financial measure, takes into consideration capital investments required to maintain the operations of our businesses and execute our strategy. Our accounting for share-based compensation requires us to report the excess income tax benefit from the exercise of stock options as a financing cash flow rather than as an operating cash flow. We have added this benefit back to our calculation of free cash flow in order to generally classify cash flows arising from income taxes as operating cash flows. In our opinion, free cash flow provides useful information to investors regarding our ability to generate cash from business operations that is available for acquisitions and other investments, service of debt principal, dividends and share repurchases. We use free cash flow as one measure to monitor and evaluate performance. Our definition of free cash flow may differ from definitions used by other companies.

Our definition of free cash flow excludes the operating cash flows and capital expenditures related to our discontinued operations. Operating, investing and financing cash flows of our discontinued operations are presented separately in our statement of cash flows. Cash flows from the operating activities of our discontinued operations are reported in our statement of cash flows net of their separately calculated income tax effects. U.S. federal and state income taxes paid as a result of the gain on sale of the principal businesses of our former Power Systems operating segment have been classified within continuing operations consistent with the cash proceeds. These taxes paid in 2008 and 2007 have been excluded from free cash flow to present free cash flow that is representative of the performance of our continuing businesses.

Free cash flow was a source of $430.8 million for the year ended September 30, 2009 compared to a source of $458.3 million for the year ended September 30, 2008. This decrease in free cash flow was primarily due to a decrease in current year earnings and an increase in payments related to restructuring actions, partially offset by improvements in working capital resulting from our lower sales volume, refunds related to a contractual tax matter and lower capital expenditures.

In December 2007, we issued an aggregate of $500 million principal amount of our 5.65% notes due 2017 and 6.25% debentures due 2037. The debt offering yielded approximately $493.5 million of proceeds, which were used to repay at maturity our 6.15% notes due January 15, 2008 and for general corporate purposes.

In January 2007, we received $1.75 billion of cash proceeds from the sale of our Dodge mechanical and Reliance Electric motors and motor repair services businesses. We used the cash proceeds to repurchase shares of our common stock to offset the dilutive effect of the divestiture, to pay taxes on the gain on sale and to acquire ICS Triplex.

Commercial paper is our principal source of short-term financing. At September 30, 2009, we had no commercial paper borrowings outstanding. At September 30, 2008, commercial paper borrowings outstanding were $100.0 million, with a weighted average interest rate of 2.2 percent.

In 2009, we repurchased approximately 1.7 million shares of our common stock, all of which occurred in October 2008. The total cost of these shares was $50.0 million. This is compared to purchases of approximately 6.7 million shares of our common stock at a cost of $355.1 million in 2008. Of these purchases, 0.1 million shares amounting to $3.5 million did not settle until October 2008 and were recorded in accounts payable at September 30, 2008. Our decision to repurchase stock in 2010 will depend on business conditions, free cash flow generation, other cash requirements and stock price. At September 30, 2009 we had approximately $621.2 million remaining for stock repurchases under our existing board authorization. See Part II, Item 5, Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, for additional information regarding share repurchases.

We expect future uses of cash to include dividends to shareowners, capital expenditures, additional contributions to our pension plans, acquisitions of businesses, repurchases of common stock and repayments of debt. We expect capital expenditures in 2010 to be about $110 million. We expect to fund these future uses of cash with a combination of existing cash balances, cash generated by operating activities, commercial paper borrowings or a new issuance of debt or other securities.

In addition to cash generated by operating activities, we have access to existing financing sources, including the public debt markets and unsecured credit facilities with various banks. Our debt-to-total-capital ratio was 40.7 percent at September 30, 2009 and 37.3 percent at September 30, 2008. This increase is primarily due to a $360.3 million reduction in shareowners’ equity, net of tax, related to the funded status of our pension plans, which decreased as a result of lower discount rates and a decrease in our pension plan assets.

On March 16, 2009 we replaced our former five-year $600.0 million unsecured revolving credit facility with two new unsecured revolving credit facilities totaling $535.0 million. Both new facilities have borrowing limits of $267.5 million each. One facility has a three-year term and the other facility has a 364-day term. Our 364-day credit facility includes a term-out option that allows us to borrow, on March 15, 2010, up to $267.5 million as a term loan for one year. We have not drawn down under any of these credit facilities at September 30, 2009 or 2008. Borrowings under these credit facilities bear interest based on short-term money market rates in effect during the period the borrowings are outstanding. The terms of these credit facilities contain covenants under which we would be in default if our debt-to-total-capital ratio was to exceed 60 percent. We were in compliance with all covenants under these credit facilities at September 30, 2009 and 2008. In addition to our two $267.5 million credit facilities, short-term unsecured credit facilities of approximately $169.7 million at September 30, 2009 were available to non-U.S. subsidiaries.

The following is a summary of our credit ratings as of September 30, 2009:

Credit Rating Agency

Short Term Rating

Long Term Rating

Outlook

Standard & Poor’s

A-1

A

Negative

Moody’s

P-2

A3

Stable

Fitch Ratings

F1

A

Negative

Among other uses, we can draw on our credit facilities as standby liquidity facilities to repay our outstanding commercial paper as it matures. This access to funds to repay maturing commercial paper is an important factor in maintaining the commercial paper ratings set forth in the table above. Under our current policy with respect to these ratings, we expect to limit our other borrowings under our credit facilities, if any, to amounts that would leave enough credit available under the facilities so that we could borrow, if needed, to repay all of our then outstanding commercial paper as it matures.

Our ability to access the commercial paper market, and the related costs of these borrowings, is affected by the strength of our credit rating and market conditions. We have not experienced any difficulty in accessing the commercial paper market to date. If our access to the commercial paper market is adversely affected due to a change in market conditions or otherwise, we would expect to rely on a combination of available cash and our unsecured committed credit facility to provide short-term funding. In such event, the cost of borrowings under our unsecured committed credit facility could be higher than the cost of commercial paper borrowings.

We regularly monitor the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is primarily on safety and liquidity of principal and secondarily on maximizing yield on those funds. We diversify our cash and cash equivalents among counterparties to minimize exposure to any one of these entities.

We enter into contracts to hedge certain third-party sales and intercompany transactions denominated in foreign currencies forecasted to occur within the next two years and to offset transaction gains or losses associated with some of our assets and liabilities that are denominated in currencies other than their functional currencies resulting from intercompany loans and other transactions with third parties denominated in foreign currencies. Our foreign currency forward exchange contracts are denominated in currencies of major industrial countries. We diversify our foreign currency forward exchange contracts among counterparties to minimize exposure to any one of these entities.

Cash dividends to shareowners were $164.5 million in 2009, $170.2 million in 2008, and $184.7 million in 2007 ($1.16 per share each year). Our current quarterly dividend rate is $0.29 per outstanding share, which is determined at the sole discretion of our Board of Directors.

A summary of our projected contractual cash obligations at September 30, 2009 are (in millions):

						Payments by Period
		Total				2010				2011				2012				2013				2014				Thereafter
Long-term debt and interest (a)		$	2,245.7			$	56.9			$	56.9			$	56.9			$	56.9			$	56.9			$	1,961.2
Minimum operating lease payments			319.1				70.2				55.2				43.9				28.7				21.7				99.4
Postretirement benefits (b)			218.8				19.3				20.1				20.0				19.8				19.7				119.9
Pension funding contribution (c)			29.3				29.3				—				—				—				—				—
Purchase obligations (d)			129.4				38.0				11.6				11.0				10.9				10.9				47.0
Other long-term liabilities (e)			82.6				18.9				—				—				—				—				—
Unrecognized tax benefits (f)			144.3				—				—				—				—				—				—
Total		$	3,169.2			$	232.6			$	143.8			$	131.8			$	116.3			$	109.2			$	2,227.5

Supplemental Sales Information

We translate sales of subsidiaries operating outside of the United States using exchange rates effective during the respective period. Therefore, changes in currency rates affect our reported sales. Sales by businesses we acquired also affect our reported sales. We believe that organic sales, defined as sales excluding the effects of changes in currency exchange rates and acquisitions, which is a non-GAAP financial measure, provides useful information to investors because it reflects regional performance from the activities of our businesses without the effect of changes in currency rates or acquisitions. We use organic sales as one measure to monitor and evaluate our regional performance. We determine the effect of changes in currency exchange rates by translating the respective period’s sales using the currency exchange rates that were in effect during the prior year. We determine the effect of acquisitions by excluding sales in the current period for which there are no sales in the comparable prior period. Organic sales growth is calculated by comparing organic sales to reported sales in the prior year. We attribute sales to the geographic regions based on the country of destination.

The following is a reconciliation of our reported sales to organic sales (in millions):

																						Year Ended
																						September 30,
		Year Ended September 30, 2009																				2008
										Sales
						Effect of				Excluding
						Changes in				Changes in				Effect of				Organic
		Sales				Currency				Currency				Acquisitions				Sales				Sales
United States		$	2,209.2			$	14.8			$	2,224.0			$	(5.1	)		$	2,218.9			$	2,850.8
Canada			257.1				41.9				299.0				(11.9	)			287.1				396.4
Europe, Middle East and Africa			962.1				116.1				1,078.2				(3.9	)			1,074.3				1,319.0
Asia-Pacific			579.3				59.4				638.7				(1.3	)			637.4				717.2
Latin America			324.8				64.6				389.4				—				389.4				414.4
Total Company Sales		$	4,332.5			$	296.8			$	4,629.3			$	(22.2	)		$	4,607.1			$	5,697.8

																						Year Ended
																						September 30,
		Year Ended September 30, 2008																				2007
										Sales
						Effect of				Excluding
						Changes in				Changes in				Effect of				Organic
		Sales				Currency				Currency				Acquisitions				Sales				Sales
United States		$	2,850.8			$	(7.8	)		$	2,843.0			$	(44.3	)		$	2,798.7			$	2,687.0
Canada			396.4				(35.3	)			361.1				(2.9	)			358.2				341.1
Europe, Middle East and Africa			1,319.0				(127.9	)			1,191.1				(87.9	)			1,103.2				1,054.2
Asia-Pacific			717.2				(32.2	)			685.0				(9.8	)			675.2				588.8
Latin America			414.4				(33.9	)			380.5				—				380.5				332.8
Total Company Sales		$	5,697.8			$	(237.1	)		$	5,460.7			$	(144.9	)		$	5,315.8			$	5,003.9

The following is a reconciliation of our reported sales by operating segment to organic sales (in millions):

																						Year Ended
																						September 30,
		Year Ended September 30, 2009																				2008
										Sales
						Effect of				Excluding
						Changes in				Changes in				Effect of				Organic
		Sales				Currency				Currency				Acquisitions				Sales				Sales
Architecture & Software		$	1,723.5			$	116.7			$	1,840.2			$	(6.9	)		$	1,833.3			$	2,419.7
Control Products & Solutions			2,609.0				180.1				2,789.1				(15.3	)			2,773.8				3,278.1
Total Company Sales		$	4,332.5			$	296.8			$	4,629.3			$	(22.2	)		$	4,607.1			$	5,697.8

																						Year Ended
																						September 30,
		Year Ended September 30, 2008																				2007
										Sales
						Effect of				Excluding
						Changes in				Changes in				Effect of				Organic
		Sales				Currency				Currency				Acquisitions				Sales				Sales
Architecture & Software		$	2,419.7			$	(105.0	)		$	2,314.7			$	(29.0	)		$	2,285.7			$	2,221.3
Control Products & Solutions			3,278.1				(132.1	)			3,146.0				(115.9	)			3,030.1				2,782.6
Total Company Sales		$	5,697.8			$	(237.1	)		$	5,460.7			$	(144.9	)		$	5,315.8			$	5,003.9

Critical Accounting Policies and Estimates

We have prepared the consolidated financial statements in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. We believe the following critical accounting policies could have the most significant effect on our reported results or require subjective or complex judgments by management.

Retirement Benefits

Pension Benefits

Pension costs and obligations are actuarially determined and are influenced by assumptions used to estimate these amounts, including the discount rate, the expected rate of return on plan assets, the assumed annual compensation increase rate, the retirement rate, the mortality rate and the employee turnover rate. Changes in any of the assumptions and the amortization of differences between the assumptions and actual experience will affect the amount of pension expense in future periods.

Our global pension expense in 2009 was $32.7 million compared to $28.6 million in 2008. Approximately 51 percent of our 2009 global pension expense relates to our U.S. pension plan. The actuarial assumptions used to determine our 2009 U.S. pension expense included the following: discount rate of 6.75 percent (compared to 6.50 percent for 2008); expected rate of return on plan assets of 8.00 percent (compared to 8.00 percent for 2008); and an assumed long-term compensation increase rate of 4.20 percent (compared to 4.15 percent for 2008).

We changed our measurement date in 2009 from June 30 to September 30 as required by U.S. GAAP. We recorded a reduction in retained earnings of $8.2 million ($5.3 million net of tax) in the fourth quarter of 2009 related to this change.

The Pension Protection Act of 2006 was signed into law in August 2006. The Internal Revenue Service (IRS) issued final guidance with respect to certain aspects of this law; and, our 2009 pension plan valuation has been completed based on the final guidance. This valuation resulted in no minimum contributions being required in 2009.

We estimate our pension expense will be approximately $71.2 million in 2010, an increase of approximately $38.5 million from 2009. For 2010, our U.S. discount rate will decrease to 6.20 percent. The discount rate was set as of our September 30 measurement date and was determined by modeling a portfolio of bonds that match the expected cash flow of our benefit plans. Our assumed rate of return on U.S. plan assets will remain at 8.00 percent. We considered actual returns on plan assets over the long term as well as the current and expected mix of plan investments in setting this assumption. We have assumed a U.S. long-term compensation increase rate of 4.30 percent in 2010. We established this rate by analyzing all elements of compensation that are pension eligible earnings.

The changes in our discount rate and return on plan assets have an inverse relationship with our net periodic benefit cost. The change in our discount rate also has an inverse relationship with our projected benefit obligation. The following chart illustrates the estimated change in benefit obligation and net periodic pension cost assuming a change of 25 basis points in the key assumption for our U.S. pension plans (in millions):

		Pension Benefits
		Change in				Change in
		Projected Benefit				Net Periodic Benefit
		Obligation				Cost
Discount Rate		$	69.3			$	6.6

More information regarding pension benefits is contained in Note 12 in the Financial Statements.

Other Postretirement Benefits

We estimate the costs and obligations for postretirement benefits other than pensions using assumptions, including the discount rate and, for plans other than our primary U.S. postretirement healthcare benefit program, expected trends in the cost for healthcare services. Changes in these assumptions and differences between the assumptions and actual experience will affect the amount of postretirement benefit expense recognized in future periods. The discount rate used to calculate our 2009 other postretirement benefits expense was 6.50 percent (compared to 6.25 percent in 2008). For 2010, the discount rate assumption for other postretirement benefit expense will decrease to 6.00 percent. The discount rate was set as of our September 30 measurement date and was determined by modeling a portfolio of bonds that match the expected cash flow of our benefit plans.

Effective October 1, 2002, we amended our primary U.S. postretirement healthcare benefit program in order to mitigate our share of the increasing cost of postretirement healthcare services. As a result of this amendment, our obligation is less sensitive to increasing healthcare costs resulting from inflationary trends since January 1, 2005.

We changed our measurement date in 2009 from June 30 to September 30 as required by U.S. GAAP. We recorded a reduction in retained earnings of $4.0 million ($2.5 million net of tax) in the fourth quarter of 2009 related to this change.

Net periodic benefit cost in 2009 was $15.8 million compared to $15.4 million in 2008. We expect net periodic benefit cost in 2010 of approximately $14.0 million and the estimated postretirement projected benefit obligation to approximate $215.8 million.

More information regarding postretirement benefits is contained in Note 12 in the Financial Statements.

Revenue Recognition

For approximately 80 percent of our consolidated sales, we record sales when all of the following have occurred: an agreement of sale exists; pricing is fixed or determinable; collection is reasonably assured; and product has been delivered and acceptance has occurred, as may be required according to contract terms, or services have been rendered.

We recognize substantially all of the remainder of our sales as construction-type contracts using either the percentage-of-completion or completed contract methods of accounting. We record sales relating to these contracts using the percentage-of-completion method when we determine that progress toward completion is reasonably and reliably estimable; we use the completed contract method for all others. Under the percentage-of-completion method, we recognize sales and gross profit as work is performed using either (i) the relationship between actual costs incurred and total estimated costs at completion or (ii) units-of-delivery. Under the percentage-of-completion method, we adjust sales and gross profit for revisions of estimated total contract costs or revenue in the period the change is identified. We record estimated losses on contracts when they are identified.

We use contracts and customer purchase orders to determine the existence of an agreement of sale. We use shipping documents and customer acceptance, when applicable, to verify delivery. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We assess collectibility based on the creditworthiness of the customer as determined by credit evaluations and analysis, as well as the customer’s payment history.

Returns, Rebates and Incentives

Our primary incentive program provides distributors with cash rebates or account credits based on agreed amounts that vary depending on the customer to whom our distributor ultimately sells the product. We also offer various other incentive programs that provide distributors and direct sale customers with cash rebates, account credits or additional products and services based on meeting specified program criteria. Certain distributors are offered a right to return product, subject to contractual limitations.

We record accruals for customer returns, rebates and incentives at the time of revenue recognition based primarily on historical experience. Adjustments to the accrual may be required if actual returns, rebates and incentives differ from historical experience or if there are changes to other assumptions used to estimate the accrual. A critical assumption used in estimating the accrual for our primary distributor rebate program is the time period from when revenue is recognized to when the rebate is processed. If the time period were to change by 10 percent, the effect would be an adjustment to the accrual of approximately $6.1 million.

Returns, rebates and incentives are recognized as a reduction of sales if distributed in cash or customer account credits. Rebates and incentives are recognized in cost of sales for additional products and services to be provided. Accruals are reported as a current liability in our balance sheet or, where a right of offset exists, as a reduction of accounts receivable. The accrual for customer returns, rebates and incentives was $116.1 million at September 30, 2009 and $137.8 million at September 30, 2008, of which $8.8 million at September 30, 2009 and $13.2 million at September 30, 2008 was included as an offset to accounts receivable.

Fair Value Measurements

Share-based compensation

Share-based compensation expense net of the related income tax benefit amounted to $18.7 million in 2009, $21.5 million in 2008 and $18.8 million in 2007. Compensation costs are based on the grant-date fair value of the instruments using a valuation model, and are recognized on a straight line basis over the vesting term. We estimate the average risk-free interest rate, expected dividend yield, expected volatility and expected term of the compensation instrument outstanding in order to determine fair value of stock options granted. The valuation model is most sensitive to the expected volatility and term assumptions.

Stock options granted during 2009 had a weighted average fair value of $7.75 per share. The chart below illustrates the weighted average fair value assuming a 10 percent change in the expected volatility and term assumptions:

		Weighted Average
		Fair Value per Share
		10 percent				10 percent
		increase				decrease
Expected volatility		$	8.52			$	6.95
Expected term (years)			7.98				7.48

Asset Retirement Obligations

We accrue for costs related to a legal obligation associated with the retirement of a tangible long-lived asset that results from the acquisition, construction, development or the normal operation of the long-lived asset. The obligation to perform the asset retirement activity is not conditional even though the timing or method may be conditional. Identified conditional asset retirement obligations include asbestos abatement and remediation of soil contamination beneath current and previously divested facilities. We estimate conditional asset retirement obligations using site-specific knowledge and historical industry expertise. A significant change in the costs or timing could have a significant effect on our estimates. We recorded these liabilities in the Consolidated Balance Sheet, which totaled $2.9 million in other current liabilities and $23.9 million in other liabilities at September 30, 2009 and $5.1 million in other current liabilities and $22.8 million in other liabilities at September 30, 2008.

Indemnifications

In conjunction with the sale of our Dodge mechanical and Reliance Electric motors and motor repair services businesses, we agreed to indemnify Baldor for costs and damages related to certain legacy legal, environmental and asbestos matters of these businesses arising before January 31, 2007, for which the maximum exposure would be capped at the amount received for the sale. We recorded a liability and a reduction to the gain on sale under relevant U.S. GAAP guarantor accounting rules related to these indemnification obligations. A significant change in the costs or timing could have a significant effect on our estimates. We estimate the potential future payments we could incur under these indemnifications may approximate $25.9 million, of which $11.1 million and $10.5 million has been accrued in other current liabilities and $11.3 million and $12.9 million has been accrued in other liabilities at September 30, 2009 and 2008, respectively.

Derivatives

We use foreign currency forward exchange contracts to manage foreign currency risks. We enter into these contracts to offset changes in the amount of future cash flows associated with certain third-party and intercompany transactions expected to occur within the next two years (cash flow hedges). We also enter into foreign currency forward exchange contracts that we do not designate as hedging instruments to offset transaction gains and losses associated with certain assets and liabilities resulting from intercompany loans and other transactions with third parties denominated in foreign currencies. The fair value of all derivative financial instruments is recorded in the balance sheet, which is based on the quoted market prices for contracts with similar maturities. Unrealized gains on derivative instruments are recorded in other current assets in the amounts of $25.0 million and $6.1 million and in other assets in the amounts of $11.4 million and $5.1 million at September 30, 2009 and 2008, respectively. Unrealized losses on derivative instruments are recorded in other current liabilities in the amounts of $19.1 million and $16.2 million and in other liabilities in the amounts of $9.4 million and $8.4 million at September 30, 2009 and 2008, respectively.

Purchase Accounting, Goodwill and Indefinite Lived Intangible Assets

When we acquire a business, we account for the assets and liabilities acquired at fair value at the date of acquisition. In order to value acquired identifiable intangible assets and determine their amortizable lives, management must use judgment in selecting relevant assumptions. See Note 2 in the Financial Statements for a discussion of acquisitions in 2009, 2008 and 2007.

In years subsequent to the year of acquisition, we perform an annual impairment test on our goodwill balance. We perform our goodwill impairment test at the reporting unit level. We have determined that our reporting units are our two operating segments: Control Products & Solutions and Architecture & Software, as we have concluded that components one level below these segments do not constitute reporting units.

We use a discounted cash flow valuation model to estimate the fair value of each of our reporting units. We also compare the sum of the computed fair values of our reporting units to our market capitalization to verify reasonableness. The fair value of each reporting unit determined during the 2009 impairment test significantly exceeded the net asset book value of each reporting unit. The valuation model is most sensitive to the discount rate, perpetuity growth rate and tax rate assumptions. A ten percent change in any one of these assumptions would not change the outcome of the goodwill impairment test, as the fair value of each reporting unit would continue to significantly exceed the net asset book value. We have not changed our goodwill impairment testing valuation techniques during the current year.

We also perform an annual impairment test on our Allen-Bradley^® and ICS Triplex^TM trademarks, as these trademarks have an indefinite life and are not subject to amortization. We use the relief-from-royalty method to determine the fair value of the trademarks, which we compare to the book value to determine whether impairment is warranted. Inputs into the model requiring the most judgment are revenue growth and discount factor. A ten percent change in either one of these assumptions would not result in impairment of either of our indefinite lived intangible assets.

Litigation, Claims and Contingencies

We record liabilities for litigation, claims and contingencies when an obligation is probable and when we have a basis to reasonably estimate the value of an obligation. We also record liabilities for environmental matters based on estimates for known environmental remediation exposures. The liabilities include accruals for sites we currently own or operate or formerly owned or operated and third-party sites where we were determined to be a potentially responsible party. At third-party sites where more than one potentially responsible party has been identified, we record a liability for our estimated allocable share of costs related to our involvement with the site as well as an estimated allocable share of costs related to the involvement of insolvent or unidentified parties. At environmental sites where we are the only responsible party, we record a liability for the total estimated costs of remediation. We do not discount future expenditures for environmental remediation obligations to their present value. Environmental liability estimates may be affected by changing determinations of what constitutes an environmental exposure or an acceptable level of cleanup. To the extent that remediation procedures change, additional contamination is identified, or the financial condition of other potentially responsible parties is adversely affected, the estimate of our environmental liabilities may change.

Our reserve for environmental matters was $33.4 million, net of related receivables of $24.8 million, at September 30, 2009 and $33.2 million, net of related receivables of $22.8 million, at September 30, 2008. Our recorded liability for environmental matters relates almost entirely to businesses formerly owned by us (legacy businesses) for which we retained the responsibility to remediate. The nature of our current business is such that the likelihood of new environmental exposures that could result in a significant charge to earnings is low. As a result of remediation efforts at legacy sites and limited new environmental matters, we expect that gradually, over a long period of time, our environmental obligations will decline. However, changes in remediation procedures at existing legacy sites or discovery of contamination at additional sites could result in increases to our environmental obligations.

Our principal self-insurance programs include product liability where we are self-insured up to a specified dollar amount. Claims exceeding this amount up to specified limits are covered by policies issued by commercial insurers. We estimate the reserve for product liability claims using our claims experience for the periods being valued. Adjustments to the product liability reserves may be required to reflect emerging claims experience and other factors such as inflationary trends or the outcome of claims. The reserve for product liability claims was $16.8 million at September 30, 2009 and $23.0 million at September 30, 2008.

Various lawsuits, claims and proceedings have been or may be instituted or asserted against us relating to the conduct of our business. As described in Part I, Item 3. Legal Proceedings, we have been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos that was used in certain components of our products many years ago. See Part I, Item 3 for further discussion.

More information regarding litigation, claims and contingencies is contained in Note 17 in the Financial Statements.

Income Taxes

We operate in numerous taxing jurisdictions and are subject to regular examinations by U.S. Federal, state and foreign jurisdictions. Additionally, we have retained tax liabilities and the rights to tax refunds in connection with various divestitures of businesses in prior years. Our income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which we do business. Due to the subjectivity of interpretations of laws and rulings in each jurisdiction, the differences and interplay in tax laws between those jurisdictions as well as the inherent uncertainty in estimating the final resolution of complex tax audit matters, our estimates of income tax liabilities may differ from actual payments or assessments.

While we have support for the positions we take on our tax returns, taxing authorities may assert interpretations of laws and facts and may challenge cross jurisdictional transactions. Cross jurisdictional transactions between our subsidiaries involving the transfer price for products, services, and/or intellectual property as well as various U.S. state tax matters comprise our more significant income tax exposures. We recognized a $6.7 million decrease in shareowners’ equity as of October 1, 2008 related to a change in accounting for uncertain tax positions in accordance with changes in U.S. GAAP. The gross liability for unrecognized tax benefits, excluding interest and penalties, was recorded in other liabilities in the Consolidated Balance Sheet in the amount of $116.7 million at September 30, 2009 and $125.8 million at September 30, 2008. The amount of net unrecognized tax benefits that would reduce our effective tax rate for continuing operations if recognized was $40.9 million at September 30, 2009 and $43.2 million at September 30, 2008. In addition, the amount of net unrecognized tax benefits that would be reported in discontinued operations if recognized was $26.7 million at September 30, 2009 and $33.4 million at September 30, 2008. We recognize interest and penalties related to unrecognized tax benefits in tax expense. Total accrued interest and penalties were $27.6 million at September 30, 2009 and $26.0 million at September 30, 2008. We believe it is reasonably possible that the amount of net unrecognized tax benefits could be reduced by up to $26.8 million during the next 12 months as a result of the resolution of worldwide tax matters and the lapses of statutes of limitations.

We recorded a valuation allowance for the majority of our deferred tax assets related to net operating loss and capital loss carryforwards (Carryforwards) and certain temporary differences in the amount of $43.8 million at September 30, 2009 and $45.1 million at September 30, 2008 based on the projected profitability of the entity in the respective tax jurisdiction. The valuation allowance is based on an evaluation of the uncertainty that the Carryforward amount will be realized. Our income would increase if we determine we will be able to use more Carryforwards than currently expected.

At the end of each interim reporting period, we estimate a base effective tax rate that we expect for the full fiscal year based on our most recent forecast of pretax income, permanent book and tax differences and global tax planning strategies. We use this base rate to provide for income taxes on a year-to-date basis, excluding the effect of significant unusual or extraordinary items and items that are reported net of their related tax effects. We record the tax effect of significant unusual or extraordinary items and items that are reported net of their tax effects in the period in which they occur.

More information regarding income taxes is contained in Note 16 in the Financial Statements.

Recent Accounting Pronouncements

See Note 1 in the Financial Statements regarding recent accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk during the normal course of business from changes in foreign currency exchange rates and interest rates. We manage exposure to these risks through a combination of normal operating and financing activities and derivative financial instruments in the form of foreign currency forward exchange contracts. We sometimes use interest rate swap contracts to manage the balance of fixed and floating rate debt.

Foreign Currency Risk

We are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances of foreign subsidiaries, transaction gains and losses associated with intercompany loans with foreign subsidiaries and transactions denominated in currencies other than a location’s functional currency. Our objective is to minimize our exposure to these risks through a combination of normal operating activities and the use of foreign currency forward exchange contracts. Contracts are denominated in currencies of major industrial countries. The fair value of our foreign currency forward exchange contracts is an asset of $36.4 million and a liability of $28.5 million at September 30, 2009. We enter into these contracts with global financial institutions that we believe to be creditworthy.

We do not enter into derivative financial instruments for speculative purposes. We do not hedge our exposure to the translation of reported results of foreign subsidiaries from local currency to U.S. dollars. In 2009, the relative strengthening of the U.S. dollar versus foreign currencies had an unfavorable impact on our revenues and results of operations, while in 2008 the relative weakening of the U.S. dollar had a favorable impact. While future changes in foreign currency exchange rates are difficult to predict, our revenues and profitability may be adversely affected if the U.S. dollar strengthens relative to 2009 levels.

Certain of our locations have assets and liabilities denominated in currencies other than their functional currencies. We enter into foreign currency forward exchange contracts to offset the transaction gains or losses associated with some of these assets and liabilities. For such assets and liabilities without offsetting foreign currency forward exchange contracts, a 10 percent adverse change in the underlying foreign currency exchange rates would reduce our pre-tax income by approximately $15 million.

We record all derivatives on the balance sheet at fair value regardless of the purpose for holding them. The use of these contracts allows us to manage transactional exposure to exchange rate fluctuations as the gains or losses incurred on the foreign currency forward exchange contracts will offset, in whole or in part, losses or gains on the underlying foreign currency exposure. Derivatives that are not designated as hedges for accounting purposes are adjusted to fair value through earnings. For derivatives that are hedges, depending on the nature of the hedge, changes in fair value are either offset by changes in the fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive (loss) income until the hedged item is recognized in earnings. We recognize the ineffective portion of a derivative’s change in fair value in earnings immediately. The ineffective portion was not significant in 2009 and 2008. A hypothetical 10 percent adverse change in underlying foreign currency exchange rates associated with these contracts would not be significant to our financial condition or results of operations.

The following table indicates the U.S. dollar equivalent notional amounts by contractual maturity dates and related weighted average contract exchange rates for our foreign currency forward exchange contracts outstanding at September 30, 2009 (in millions, except for rates):

		Weighted				Notional Amounts
		Average				Maturing in
		Contract Rate				2010				2011
Buy U.S. dollar / Sell euro			1.3632			$	93.5			$	51.0
Buy U.S. dollar/ Sell British pound sterling			1.8318				49.6				61.7
Buy British pound sterling / Sell U.S. dollar			0.5957				43.6				61.7
Buy euro / Sell British pound sterling			1.1252				72.3				24.0
Buy Swiss franc / Sell Canadian dollar			1.0074				87.0				—
Buy Swiss franc / Sell euro			1.5006				70.6				15.4
Buy Swiss franc / Sell U.S. dollar			1.0905				29.4				15.0
Buy Canadian dollar / Sell Swiss franc			0.9606				33.4				—
Buy Swiss franc / Sell British pound sterling			1.7172				30.4				—
Other		Various					163.8				—
Total						$	673.6			$	228.8

All of the contracts included in the table above will have offsetting effects from actual transactions that have occurred or will occur in the future. We designated certain of these contracts related to third-party sales or intercompany transactions forecasted to occur through June 2011 as cash flow hedges under U.S. GAAP. The remaining foreign exchange contracts offset actual underlying receivables and payables in our Consolidated Balance Sheet.

Interest Rate Risk

In addition to existing cash balances and cash provided by normal operating activities, we use a combination of short-term and long-term debt to finance operations. We are exposed to interest rate risk on certain of these debt obligations.

Our short-term debt obligations relate to commercial paper borrowings and bank borrowings. We had no outstanding commercial paper borrowings at September 30, 2009; at September 30, 2008, we had outstanding commercial paper borrowings of $100.0 million with remaining maturities of six days at a weighted average interest rate of 2.2 percent. The weighted average interest rate on our commercial paper borrowings was 0.6 percent during 2009 and 2.9 percent during 2008. As these obligations mature, we issued, and anticipate continuing to issue, additional short-term commercial paper obligations to refinance all or part of these borrowings. Changes in market interest rates on commercial paper borrowings affect our results of operations. In 2009 and 2008, a 100 percent increase in average market interest rates would have increased our interest expense by $0.6 million and $7.9 million, respectively. We use a 100 percent hypothetical fluctuation as our actual commercial paper interest rates fluctuated near that amount during 2008 and 2009.

We had outstanding fixed rate long-term debt obligations with carrying values of $904.7 million at September 30, 2009 and $904.4 million at September 30, 2008. The fair value of this debt was $992.0 million at September 30, 2009 and $883.0 million at September 30, 2008. The potential reduction in fair value on such fixed-rate debt obligations from a hypothetical 10 percent increase in market interest rates would not be material to the overall fair value of the debt. We currently have no plans to repurchase our outstanding fixed-rate instruments before their maturity and, therefore, fluctuations in market interest rates would not have an effect on our results of operations or shareowners’ equity.

Item 8.		Financial Statements and Supplementary Data

CONSOLIDATED BALANCE SHEET
(in millions)

		September 30,
		2009				2008
Assets
Current Assets
Cash and cash equivalents		$	643.8			$	582.2
Receivables			726.3				959.9
Inventories			436.4				575.5
Deferred income taxes			174.4				190.0
Other current assets			153.9				129.0
Total current assets			2,134.8				2,436.6
Property, net			532.5				553.8
Goodwill			913.2				915.0
Other intangible assets, net			230.9				250.8
Deferred income taxes			307.6				120.1
Prepaid pension			30.7				138.4
Other assets			156.0				178.9
Total		$	4,305.7			$	4,593.6
Liabilities and Shareowners’ Equity
Current Liabilities
Short-term debt		$	—			$	100.1
Accounts payable			313.3				437.3
Compensation and benefits			148.9				210.0
Advance payments from customers and deferred revenue			159.1				161.6
Customer returns, rebates and incentives			107.3				124.6
Other current liabilities			218.6				269.5
Total current liabilities			947.2				1,303.1
Long-term debt			904.7				904.4
Retirement benefits			848.9				386.8
Other liabilities			288.5				310.5
Commitments and contingent liabilities (Note 17)
Shareowners’ Equity
Common stock (shares issued: 2009, 181.4; 2008, 216.4)			181.4				216.4
Additional paid-in capital			1,304.8				1,280.9
Retained earnings			2,667.2				4,486.1
Accumulated other comprehensive loss			(727.5	)			(319.0	)
Common stock in treasury, at cost (shares held: 2009, 39.3; 2008, 73.2)			(2,109.5	)			(3,975.6	)
Total shareowners’ equity			1,316.4				1,688.8
Total		$	4,305.7			$	4,593.6

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share amounts)

		Year Ended September 30,
		2009				2008				2007
Sales
Products and solutions		$	3,886.7			$	5,159.8			$	4,543.5
Services			445.8				538.0				460.4
			4,332.5				5,697.8				5,003.9
Cost of sales
Products and solutions			(2,454.5	)			(2,985.1	)			(2,591.1	)
Services			(308.5	)			(372.0	)			(315.5	)
			(2,763.0	)			(3,357.1	)			(2,906.6	)
Gross profit			1,569.5				2,340.7				2,097.3
Selling, general and administrative expenses			(1,228.0	)			(1,482.1	)			(1,278.6	)
Other (expense) income (Note 15)			(6.7	)			18.5				33.3
Interest expense			(60.9	)			(68.2	)			(63.4	)
Income from continuing operations before income taxes			273.9				808.9				788.6
Income tax provision (Note 16)			(56.0	)			(231.3	)			(219.3	)
Income from continuing operations			217.9				577.6				569.3
Income from discontinued operations (Note 13)			2.8				—				918.5
Net income		$	220.7			$	577.6			$	1,487.8
Basic earnings per share:
Continuing operations		$	1.54			$	3.94			$	3.59
Discontinued operations			0.02				—				5.78
Net income		$	1.56			$	3.94			$	9.37
Diluted earnings per share:
Continuing operations		$	1.53			$	3.90			$	3.53
Discontinued operations			0.02				—				5.70
Net income		$	1.55			$	3.90			$	9.23
Weighted average outstanding shares:
Basic			141.6				146.5				158.7
Diluted			142.5				148.2				161.2