UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30,~~December 31, 2016

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from ____________________ to __________________

Commission file number 1-278

EMERSON ELECTRIC CO.

(Exact name of registrant as specified in its charter)



Missouri (State or other jurisdiction of incorporation or organization)		43-0259330 (I.R.S. Employer Identification No.)

8000 W. Florissant Ave. P.O. Box 4100 St. Louis, Missouri (Address of principal executive offices)		63136 (Zip Code)

Registrant's telephone number, including area code: (314) 553-2000

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 ý No ¨

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ý No ¨

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer ý	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company ¨

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common stock of $0.50 par value per share outstanding at ~~July~~January 31, ~~2016:~~2017: ~~643,537,433~~645,064,675 shares.

FORM 10-Q

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EMERSON ELECTRIC CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

THREE ~~AND NINE~~ MONTHS ENDED ~~JUNE 30,~~DECEMBER 31, 2015 AND 2016

(Dollars in millions, except per share amounts; unaudited)


	Three Months Ended June 30,			Nine Months Ended June 30,		Three Months Ended December 31,
	2015		2016	2015	2016	2015		2016
Net sales	$	5,503	5,126	16,490	14,767	$	3,337	3,216

Costs and expenses:
Cost of sales	3,269		3,032	9,810	8,790	1,923		1,851
Selling, general and administrative expenses	1,276		1,203	3,999	3,647	879		822
Gain on sale of business	—		—	932	—
Other deductions, net	122		102	322	338	54		33
Interest expense (net of interest income of $9, $8, $25 and $24, respectively)	40		45	126	137
Interest expense (net of interest income of $6 and $6, respectively)						47		46

Earnings before income taxes	796		744	3,165	1,855
Earnings from continuing operations before income taxes						434		464

Income taxes	222		254	1,083	636	127		94

Earnings from continuing operations						307		370

Discontinued operations, net of tax						46		(55	)

Net earnings	574		490	2,082	1,219	353		315

Less: Noncontrolling interests in earnings of subsidiaries	10		11	20	22	4		6

Net earnings common stockholders	$	564	479	2,062	1,197	$	349	309

Earnings common stockholders:
Earnings from continuing operations						$	303	364
Discontinued operations, net of tax						46		(55	)
Net earnings common stockholders						$	349	309

Basic earnings per share common stockholders	$	0.84	0.74	3.02	1.85
Basic earnings per share common stockholders:
Earnings from continuing operations						$	0.47	0.56
Discontinued operations						0.07		(0.08	)
Basic earnings per common share						$	0.54	0.48

Diluted earnings per share common stockholders	$	0.84	0.74	3.01	1.84
Diluted earnings per share common stockholders:
Earnings from continuing operations						$	0.46	0.56
Discontinued operations						0.07		(0.08	)
Diluted earnings per common share						$	0.53	0.48

Cash dividends per common share	$	0.47	0.475	1.41	1.425	$	0.475	0.48

See accompanying Notes to Consolidated Financial Statements.

FORM 10-Q

EMERSON ELECTRIC CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THREE ~~AND NINE~~ MONTHS ENDED ~~JUNE 30,~~DECEMBER 31, 2015 AND 2016

(Dollars in millions; unaudited)


	Three Months Ended June 30,				Nine Months Ended June 30,				Three Months Ended December 31,
	2015		2016		2015		2016			2015			2016
Net earnings	$	574	490		2,082		1,219			$	353		315

Other comprehensive income (loss), net of tax:
Foreign currency translation	189		(9	)	(543	)	(37	)		(153		)	(103	)
Pension and postretirement	27		25		83		78			26			55
Cash flow hedges	—		3		(23	)	14			6			15
Total other comprehensive income (loss)	216		19		(483	)	55			(121		)	(33	)

Comprehensive income	790		509		1,599		1,274			232			282

Less: Noncontrolling interests in comprehensive income of subsidiaries	9		12		18		24			4			4
Comprehensive income common stockholders	$	781	497		1,581		1,250			$	228		278

See accompanying Notes to Consolidated Financial Statements.

FORM 10-Q

EMERSON ELECTRIC CO. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except per share amounts; unaudited)

Sept. 30, 2015 June 30, 2016
ASSETS
Current assets
Cash and equivalents $ 3,054
3,516
Receivables, less allowances of $128 and $120, respectively 4,319
4,014
Inventories 1,847
1,949
Other current assets 829
741
Total current assets 10,049
10,220

Property, plant and equipment, net 3,585
3,521
Other assets

Goodwill 6,653
6,667
Other intangible assets 1,526
1,411
Other 275
263
Total other assets 8,454
8,341
Total assets $ 22,088
22,082

LIABILITIES AND EQUITY

Current liabilities

Short-term borrowings and current maturities of long-term debt $ 2,553
3,220
Accounts payable 2,358
2,230
Accrued expenses 2,803
2,797
Income taxes 86
79
Total current liabilities 7,800
8,326

Long-term debt 4,289
4,062

Other liabilities 1,871
1,739

Equity

Common stock, $0.50 par value; authorized, 1,200,000,000 shares; issued, 953,354,012 shares; outstanding, 654,608,521 shares and 643,402,613 shares, respectively 477
477
Additional paid-in-capital 170
200
Retained earnings 21,308
21,583
Accumulated other comprehensive income (loss) (1,617 ) (1,564 )
Cost of common stock in treasury, 298,745,491 shares and 309,951,399 shares, respectively (12,257 ) (12,795 )
Common stockholders’ equity 8,081
7,901
Noncontrolling interests in subsidiaries 47
54
Total equity 8,128
7,955
Total liabilities and equity $ 22,088
22,082



	Sept 30, 2016			Dec 31, 2016
ASSETS
Current assets
Cash and equivalents	$	3,182		4,151
Receivables, less allowances of $92 and $94, respectively	2,701			2,426
Inventories	1,208			1,278
Other current assets	669			552
Current assets held-for-sale	2,200			470
Total current assets	9,960			8,877

Property, plant and equipment, net	2,931			2,861
Other assets
Goodwill	3,909			3,861
Other intangible assets	902			879
Other	200			179
Noncurrent assets held-for-sale	3,830			814
Total other assets	8,841			5,733
Total assets	$	21,732		17,471

LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current maturities of long-term debt	$	2,584		254
Accounts payable	1,517			1,335
Accrued expenses	2,126			1,872
Income taxes	180			396
Current liabilities held-for-sale	1,601			289
Total current liabilities	8,008			4,146

Long-term debt	4,051			3,815

Other liabilities	1,729			1,667

Noncurrent liabilities held-for-sale	326			89

Equity
Common stock, $0.50 par value; authorized, 1,200,000,000 shares; issued, 953,354,012 shares; outstanding, 642,796,490 shares and 644,694,794 shares, respectively	477			477
Additional paid-in-capital	205			306
Retained earnings	21,716			21,714
Accumulated other comprehensive income (loss)	(1,999		)	(2,030	)
Cost of common stock in treasury, 310,557,522 shares and 308,659,218 shares, respectively	(12,831		)	(12,754	)
Common stockholders’ equity	7,568			7,713
Noncontrolling interests in subsidiaries	50			41
Total equity	7,618			7,754
Total liabilities and equity	$	21,732		17,471

See accompanying Notes to Consolidated Financial Statements.

FORM 10-Q

EMERSON ELECTRIC CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

~~NINE~~THREE MONTHS ENDED ~~JUNE 30,~~DECEMBER 31, 2015 AND 2016

(Dollars in millions; unaudited)


						Three Months Ended
	Nine Months Ended June 30,					December 31,
	2015			2016		2015			2016
Operating activities
Net earnings	$	2,082		1,219		$	353		315
(Earnings) Loss from discontinued operations, net of tax						(46		)	55
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	613			589		144			143
Changes in operating working capital	(530		)	(35	)	(155		)	(138	)
Pension funding	(21		)	(30	)
Gain on divestiture of business, after tax	(528		)	—
Income taxes paid on divestiture gain	(360		)	—
Other, net	172			181		90			35
Net cash provided by operating activities	1,428			1,924
Cash from continuing operations						386			410
Cash from discontinued operations						101			(172	)
Cash provided by operating activities						487			238

Investing activities
Capital expenditures	(516		)	(354	)	(124		)	(100	)
Purchases of businesses, net of cash and equivalents acquired	(250		)	(62	)	(6		)	(16	)
Divestiture of business	1,399			—
Other, net	(86		)	43		(13		)	(20	)
Net cash provided by (used by) investing activities	547			(373	)
Cash from continuing operations						(143		)	(136	)
Cash from discontinued operations						(20		)	3,894
Cash provided by (used in) investing activities						(163		)	3,758

Financing activities
Net increase in short-term borrowings	1,500			692
Net increase (decrease) in short-term borrowings						34			(2,225	)
Proceeds from short-term borrowings greater than three months	2,515			1,174		827			—
Payments of short-term borrowings greater than three months	(3,070		)	(1,174	)	—			(90	)
Proceeds from long-term debt	1,000			—
Payments of long-term debt	(504		)	(252	)	(251		)	(251	)
Dividends paid	(960		)	(922	)	(310		)	(311	)
Purchases of common stock	(2,041		)	(555	)	(507		)	—
Other, net	(12		)	(13	)	(4		)	(43	)
Net cash used by financing activities	(1,572		)	(1,050	)
Cash used in financing activities						(211		)	(2,920	)

Effect of exchange rate changes on cash and equivalents	(159		)	(39	)	(58		)	(107	)
Increase in cash and equivalents	244			462		55			969
Beginning cash and equivalents	3,149			3,054		3,054			3,182
Ending cash and equivalents	$	3,393		3,516		$	3,109		4,151

Changes in operating working capital
Receivables	$	473		284		$	358		212
Inventories	(265		)	(94	)	(68		)	(103	)
Other current assets	(177		)	(18	)	18			10
Accounts payable	(287		)	(87	)	(200		)	(119	)
Accrued expenses	(130		)	(113	)	(236		)	(162	)
Income taxes	(144		)	(7	)	(27		)	24
Total changes in operating working capital	$	(530	)	(35	)	$	(155	)	(138	)

See accompanying Notes to Consolidated Financial Statements.



EMERSON ELECTRIC CO. AND SUBSIDIARIES			FORM 10-Q

Notes to Consolidated Financial Statements

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary for a fair presentation of operating results for the interim periods presented. Adjustments consist of normal and recurring accruals. The consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all disclosures required for annual financial statements presented in conformity with U.S. generally accepted accounting principles (GAAP). For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, ~~2015.~~2016. Certain prior year amounts have been reclassified to conform to current year presentation.

In connection with the strategic portfolio repositioning actions undertaken over the last eighteen months to transform the Company into a more focused enterprise, its businesses and organization were realigned. Beginning in fiscal 2017, the Company now reports three segments: Automation Solutions, and Climate Technologies and Tools & Home Products which together comprise the Commercial & Residential Solutions business. The Automation Solutions segment includes the former Process Management segment and the remaining businesses in the former Industrial Automation segment, except for the hermetic motors business, which is now included in the Climate Technologies segment. The new Tools & Home Products segment consists of the businesses previously reported in the Commercial & Residential Solutions segment in fiscal 2016. See Notes 10 and 12.

In ~~February 2016, the FASB amended ASC 842,~~ ~~Leases~~, to require recognition on the balance sheet of assets and liabilities related to the rights and obligations associated with all lease arrangements. Currently, obligations classified as operating leases are not recorded on the balance sheet but must be disclosed. The new standard is effective for the Company in the first quarter of ~~fiscal 2020. The~~2017, the Company ~~is in~~adopted updates to ASC Subtopic 835-30, Interest-Imputation of Interest, which require presentation of debt issuance costs as a deduction from the ~~process of evaluating~~related debt liability rather than within other assets. This update was adopted on a retrospective basis and did not materially impact the ~~impact of the revised standard on its~~Company’s financial statements.


2.	~~Reconciliations of weighted-average shares for basic and diluted earnings per common share follow (in millions). Earnings allocated to participating securities were inconsequential.~~

2. Reconciliations of weighted-average shares for basic and diluted earnings per common share follow (in millions). Earnings allocated to participating securities were inconsequential.


					Three Months Ended December 31,
	Three Months Ended June 30,		Nine Months Ended June 30,		2015	2016
	2015	2016	2015	2016
Basic shares outstanding	665.7	642.2	679.3	644.7	650.0	642.8
Dilutive shares	3.2	3.0	3.3	2.7	2.5	1.5
Diluted shares outstanding	668.9	645.2	682.6	647.4	652.5	644.3

3. Other Financial Information (in millions):


	Sept. 30, 2015		June 30, 2016	Sept 30, 2016			Dec 31, 2016
Inventories
Finished products	$	680	676		$	382		423
Raw materials and work in process	1,167		1,273		826			855
Total	$	1,847	1,949		$	1,208		1,278


Property, plant and equipment, net
Property, plant and equipment, at cost	$	8,931	9,115	$	7,327	7,293
Less: Accumulated depreciation	5,346		5,594	4,396		4,432
Total	$	3,585	3,521	$	2,931	2,861

Goodwill by business segment
Process Management $ 2,790
2,802
Industrial Automation 1,031
1,029
Network Power 2,144
2,132
Climate Technologies 492
506
Commercial & Residential Solutions 196
198
Total $ 6,653
6,667

The gross carrying amount of goodwill for the Company was $7,313 million and $7,299 million as of June 30, 2016 and September 30, 2015, respectively. Accumulated pretax goodwill impairment losses were $646 million at the end of both periods, all in the Network Power segment.



Goodwill by business segment
Automation Solutions	$	3,160	3,119

Climate Technologies	553		549
Tools & Home Products	196		193
Commercial & Residential Solutions	749		742

Total	$	3,909	3,861



EMERSON ELECTRIC CO. AND SUBSIDIARIES			FORM 10-Q


	Sept. 30, 2015		June 30, 2016	Sept 30, 2016			Dec 31, 2016
Accrued expenses include the following
Employee compensation	$	597	598		$	431		323
Customer advanced payments	$	450	514		$	433		459
Product warranty	$	167	169		$	106		96


	Sept. 30, 2015		June 30, 2016	Sept 30, 2016			Dec 31, 2016
Other liabilities
Pension liabilities	$	662	535		$	844		795
Deferred income taxes	408		461		210			213
Postretirement liabilities, excluding current portion	199		196		193			191
Other	602		547		482			468
Total	$	1,871	1,739		$	1,729		1,667


4.	Following is a discussion regarding the Company’s use of financial instruments:

Hedging Activities – As of ~~June 30,~~December 31, 2016, the notional amount of foreign currency hedge positions was approximately $~~1.5~~1.1 billion, and commodity hedge contracts totaled approximately ~~$107~~$85 million (primarily 5044 million pounds of copper and aluminum). All derivatives receiving deferral accounting are cash flow hedges. The majority of hedging gains and losses deferred as of ~~June 30,~~December 31, 2016 are expected to be recognized over the next 12 months as the underlying forecasted transactions occur. Gains and losses on foreign currency derivatives reported in other deductions, net reflect hedges of balance sheet exposures that do not receive deferral accounting. The following gains and losses are included in earnings and other comprehensive income (OCI) for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2016 and 2015 (in millions):


		Into Earnings									Into OCI									Into Earnings					Into OCI
		3rd Quarter					Nine Months				3rd Quarter				Nine Months					1st Quarter					1st Quarter
Gains (Losses)	Location	2015			2016		2015		2016		2015		2016		2015		2016		Location	2015			2016		2015		2016

Commodity	Cost of sales	$	(6	)	(10	)	(16	)	(30	)	(7	)	—		(26	)	(10	)	Cost of sales	$	(8	)	(2	)	(11	)	10
Foreign currency	Sales, cost of sales	(3		)	(12	)	(3	)	(27	)	(2	)	(18	)	(29	)	(25	)	Sales, cost of sales	(6		)	(10	)	6		2
Foreign currency	Other deductions, net	(2		)	(9	)	12		(16	)									Other deductions, net	3			6
Total		$	(11	)	(31	)	(7	)	(73	)	(9	)	(18	)	(55	)	(35	)		$	(11	)	(6	)	(5	)	12

Regardless of whether derivatives receive deferral accounting, the Company expects hedging gains or losses to be essentially offset by losses or gains on the related underlying exposures. The amounts ultimately recognized will differ from those presented above for open positions, which remain subject to ongoing market price fluctuations until settlement. Derivatives receiving deferral accounting are highly effective and no amounts were excluded from the assessment of hedge effectiveness. Hedge ineffectiveness was immaterial for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2016 and 2015.

Fair Value Measurement – Valuations for all derivatives and the Company's long-term debt fall within Level 2 of the GAAP valuation hierarchy. As of ~~June 30,~~December 31, 2016, the fair value of long-term debt was $~~4,826~~4,358 million, which exceeded the carrying value by $~~497~~291 million. At ~~June 30,~~December 31, 2016, the fair values of commodity contracts and foreign currency contracts were reported in other current assets and accrued expenses. Valuations of derivative contract positions are summarized below (in millions):


	September 30, 2015			June 30, 2016		September 30, 2016				December 31, 2016
	Assets		Liabilities	Assets	Liabilities	Assets			Liabilities	Assets	Liabilities
Foreign Currency	$	30	65	8	46		$	7	49	17	40
Commodity	$	—	29	1	10		$	2	4	10	1



EMERSON ELECTRIC CO. AND SUBSIDIARIES			FORM 10-Q

Counterparties to derivatives arrangements are companies with investment-grade credit ratings. The Company has bilateral collateral arrangements with counterparties with credit rating-based posting thresholds that vary depending on the arrangement. If credit ratings on the Company's debt fall below preestablished levels, counterparties can require immediate full collateralization of all derivatives in net liability positions. The maximum amount that could potentially have ~~potentially~~ been required was ~~$49~~$29 million. The Company also can demand full collateralization of derivatives in net asset positions should any counterparty credit ratings fall below certain thresholds. No collateral was posted with counterparties and none was held by the Company as of ~~June 30,~~December 31, 2016.


5.	The change in equity for the first ~~nine~~three months of ~~2016~~2017 is shown below (in millions):


	Common Stockholders' Equity			Noncontrolling Interests in Subsidiaries		Total Equity		Common Stockholders' Equity				Noncontrolling Interests in Subsidiaries			Total Equity
Balance at September 30, 2015	$	8,081		47		8,128
Balance at September 30, 2016									$	7,568			50			7,618
Net earnings	1,197			22		1,219			309				6			315
Other comprehensive income (loss)	53			2		55			(31		)		(2	)		(33	)
Cash dividends	(922		)	(17	)	(939	)		(311		)		(13	)		(324	)
Net purchases of common stock	(508		)	—		(508	)
Balance at June 30, 2016	$	7,901		54		7,955
Stock plans									178				—			178
Balance at December 31, 2016									$	7,713			41			7,754


6.	Activity in accumulated other comprehensive income (loss) for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2016 and 2015 is shown below (in millions):


	Three Months Ended June 30,					Nine Months Ended June 30,				Three Months Ended December 31,
	2015			2016		2015		2016			2015			2016
Foreign currency translation
Beginning balance	$	(560	)	(651	)	171		(622	)		$	(622	)	(812	)
Other comprehensive income (loss)	190			(10	)	(541	)	(39	)
Other comprehensive income (loss) before reclassifications											(153		)	(367	)
Divestiture of business reclassified to gain on sale											—			266
Ending balance	(370		)	(661	)	(370	)	(661	)		(775		)	(913	)

Pension and postretirement
Beginning balance	(690		)	(899	)	(746	)	(952	)		(952		)	(1,162	)
Amortization of deferred actuarial losses into earnings	27			25		83		78			26			35
Divestiture of business reclassified to gain on sale											—			20
Ending balance	(663		)	(874	)	(663	)	(874	)		(926		)	(1,107	)

Cash flow hedges
Beginning balance	(23		)	(32	)	—		(43	)		(43		)	(25	)
Deferral of gains (losses) arising during the period	(6		)	(11	)	(35	)	(22	)		(3		)	8
Reclassification of realized (gains) losses to sales and cost of sales	6			14		12		36			9			7
Ending balance	(23		)	(29	)	(23	)	(29	)		(37		)	(10	)

Accumulated other comprehensive income (loss)	$	(1,056	)	(1,564	)	(1,056	)	(1,564	)		$	(1,738	)	(2,030	)

Activity above is shown net of income taxes for the three and nine months ended June 30, 2016 and 2015, respectively, as follows: amortization of pension and postretirement deferred actuarial losses: $(15), $(16), $(43) and $(46); deferral of cash flow hedging gains (losses): $7, $3, $13 and $20; reclassification of realized cash flow hedging (gains) losses: $(8), $(3), $(21) and $(7).
Activity above is shown net of income taxes for the three months ended December 31, 2016 and 2015, respectively, as follows: amortization of pension and postretirement deferred actuarial losses: $(18) and $(14); pension and postretirement divestiture: $(7) and $ - ; deferral of cash flow hedging gains (losses): $(4) and $2; reclassification of realized cash flow hedging (gains) losses: $(5) and $(5).										Activity above is shown net of income taxes for the three months ended December 31, 2016 and 2015, respectively, as follows: amortization of pension and postretirement deferred actuarial losses: $(18) and $(14); pension and postretirement divestiture: $(7) and $ - ; deferral of cash flow hedging gains (losses): $(4) and $2; reclassification of realized cash flow hedging (gains) losses: $(5) and $(5).



EMERSON ELECTRIC CO. AND SUBSIDIARIES			FORM 10-Q


7.	Total periodic pension and postretirement expense is summarized below (in millions):

Three Months Ended
June 30, Nine Months Ended
June 30,
2015
2016
2015
2016
Service cost $ 27
22
81
67
Interest cost 60
50
181
149
Expected return on plan assets (92 ) (88 ) (276 ) (264 )
Net amortization 43
40
128
121
Total $ 38
24
114
73

Beginning in 2016, the Company refined the method used to determine the service and interest cost components of pension expense for its U.S. plans. The specific spot rates along the yield curve, rather than the single weighted-average rate previously used, are now applied to the projected cash flows to provide more precise measurement of these costs. This is a change in estimate which has been accounted for prospectively in the 2016 financial statements. The discount rates used to measure service and interest cost were 4.6 percent and 3.5 percent, respectively, compared with the single weighted-average rate of 4.35 percent which would have been used. The change will reduce interest and service cost by a total of $38 million ($0.04 per share) for fiscal 2016 compared with the cost measured using the weighted-average rate.



	Three Months Ended December 31,
		2015			2016
Service cost		$	22		21
Interest cost		50			42
Expected return on plan assets		(88		)	(86	)
Net amortization		40			53
Total		$	24		30


8.	Other deductions, net are summarized below (in millions):


						Three Months Ended December 31,
	Three Months Ended June 30,			Nine Months Ended June 30,		2015			2016
	2015		2016	2015	2016
Amortization of intangibles	$	52	46	160	143		$	22	22
Rationalization of operations	36		15	89	43
Separation costs	—		28	—	83
Restructuring costs							7		11
Other	34		13	73	69		25		—
Total	$	122	102	322	338		$	54	33

~~Separation costs relate to the planned portfolio repositioning actions. See Note 11.~~ The decrease in Other for the ~~third~~first quarter ~~reflects an $18~~is primarily due to a favorable foreign currency transactions impact of $34 million ~~gain on payments received related to dumping duties collected~~reflecting gains of $13 million in the current year compared with losses of $21 million in the prior year, partially offset by ~~U.S. Customs from 2006 through 2010, but not distributed to affected domestic producers until resolution of certain legal challenges to the U.S. Continued Dumping and Subsidy Offset Act.~~higher acquisition-related costs.

~~Rationalization of operations~~Restructuring expense reflects costs associated with the Company’s ongoing efforts to improve operational efficiency and deploy assets globally in order to remain competitive on a worldwide basis. The Company expects full year ~~2016 rationalization~~2017 restructuring expense to be ~~in the range of $90 to $100~~approximately $50 million. This includes ~~$43~~$11 million incurred to date, as well as costs to complete actions initiated before the end of the ~~third~~first quarter and actions anticipated to be approved and initiated during the remainder of the year. Costs for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2016 largely relate to restructuring of the global cost structure consistent with the current level of economic activity, as well as the redeployment of resources for future growth.

Restructuring expense by business segment follows (in millions):



	Three Months Ended December 31,
	2015			2016

Automation Solutions		$	5	6

Climate Technologies		1		4
Tools & Home Products		1		1
Commercial & Residential Solutions		2		5

Total		$	7	11

Details of the change in the liability for restructuring costs during the three months ended December 31, 2016 follow (in millions):



	Sept 30, 2016			Expense		Utilized/Paid		Dec 31, 2016

Severance and benefits		$	44		8		24		28
Lease and other contract terminations		5			—		—		5
Vacant facility and other shutdown costs		3			1		1		3
Start-up and moving costs		2			2		2		2
Total		$	54		11		27		38



EMERSON ELECTRIC CO. AND SUBSIDIARIES			FORM 10-Q

~~Rationalization of operations expense by segment is provided below (in millions):~~

Three Months Ended
June 30, Nine Months Ended
June 30,
2015
2016
2015
2016
Process Management $ 12
7
37
20
Industrial Automation 4
5
8
9
Network Power 17
(1 ) 31
5
Climate Technologies 2
1
8
4
Commercial & Residential Solutions 1
—
5
2
Corporate —
3
—
3
Total $ 36
15
89
43

~~Details of the change in the liability for rationalization during the nine months ended June 30, 2016 follow (in millions):~~

Sept. 30, 2015
Expense
Paid/Utilized
June 30, 2016
Severance and benefits $ 105
23
88
40
Lease and other contract terminations 1
2
2
1
Vacant facility and other shutdown costs 3
6
8
1
Start-up and moving costs 3
12
13
2
Total $ 112
43
111
44


10.	~~Summarized information about~~ Business Segments – The Company designs and manufactures products and delivers services that bring technology and engineering together to provide innovative solutions for customers in a wide range of industrial, commercial and consumer markets around the ~~Company's results of operations by business segment follows (in millions):~~world.

The Automation Solutions segment provides measurement, control, diagnostic capabilities and integrated manufacturing solutions for automated industrial processes, and serves oil and gas, refining, chemical, power generation, pharmaceutical, food and beverage, automotive and other end markets. The segment's major product offerings are described below.

Measurement & Analytical Instrumentation products measure the physical properties of liquid or gases in a process stream and communicate this information to a process control system, and analyze the chemical composition of process fluids and emissions to enhance quality and efficiency, as well as environmental compliance.

Valves, Actuators & Regulators consists of control valves which respond to commands from a control system to continuously and precisely modulate the flow of process fluids, valve actuators and controllers, and industrial and residential regulators that reduce the pressure of fluids moving from high-pressure supply lines into lower pressure systems.

Industrial Solutions provides fluid power and control mechanisms, electrical distribution equipment, and materials joining and precision cleaning products which are used in a variety of manufacturing operations to provide integrated manufacturing solutions to customers.

Process Control Systems & Solutions includes digital plant architecture that controls plant processes by communicating with and adjusting the "intelligent" plant devices described above to provide precision measurement, control, monitoring, asset optimization, and plant safety and reliability for plants that produce power, or process fluids or other items.

The Commercial & Residential Solutions business consists of the Climate Technologies and Tools & Home Products segments. This business provides products and solutions that promote energy efficiency, enhance household and commercial comfort, and protect food quality and sustainability through heating, air conditioning and refrigeration technology, as well as a broad range of tools and appliance solutions.

The Climate Technologies segment provides products and services for all areas of the climate control industry, including residential heating and cooling, commercial air conditioning, and commercial and industrial refrigeration. Products include compressors, temperature sensors and controls, thermostats, flow controls and remote monitoring technology and services that enable homeowners and businesses to better manage their heating, air conditioning and refrigeration systems for improved control and comfort, and lower energy costs.

The Tools & Home Products segment offers tools for professionals and homeowners, residential storage products and appliance solutions. Products include professional pipe-working tools, residential and commercial food waste disposers, wet-dry vacuums, and home shelving and closet organization systems.

Summarized information about the Company's results of operations by business segment follows (in millions):


	Three Months Ended June 30,									Nine Months Ended June 30,								Three Months Ended December 31,
	Sales					Earnings				Sales				Earnings				Sales					Earnings
	2015			2016		2015		2016		2015		2016		2015		2016		2015			2016		2015		2016
Process Management	$	2,084		1,804		373		271		6,225		5,438		1,064		807
Industrial Automation	990			883		156		130		3,176		2,561		464		341
Network Power	1,028			1,111		37		101		3,210		3,180		150		268

Automation Solutions																		$	2,162		1,967		341		326

Climate Technologies	1,125			1,102		222		247		3,007		2,884		518		544		786			859		133		161
Tools & Home Products																		392			393		85		88
Commercial & Residential Solutions	477			400		98		97		1,422		1,186		292		274		1,178			1,252		218		249
	5,704			5,300		886		846		17,040		15,249		2,488		2,234
Differences in accounting methods						54		59						165		172							44		33
Corporate and other						(104	)	(116	)					638		(414	)						(122	)	(98	)
Eliminations/Interest	(201		)	(174	)	(40	)	(45	)	(550	)	(482	)	(126	)	(137	)	(3		)	(3	)	(47	)	(46	)
Total	$	5,503		5,126		796		744		16,490		14,767		3,165		1,855		$	3,337		3,216		434		464

~~Industrial Automation intersegment sales for the quarters ended June 30, 2016 and 2015 were $160 million and $184 million, respectively, and year-to-date $440 million and $496 million.~~The decrease in Corporate and other for the ~~third~~first quarter of ~~2016 includes separation costs of $28 million and an $18 million gain on payments received related~~2017 is attributable to ~~dumping duties. The year-to-date change includes separation costs of $83 million, higher~~lower incentive stock compensation of ~~$68~~$26 million ~~primarily due to an increasing stock price~~which reflects the impact of changes in the ~~current year compared with a decreasing price in the prior year, and overlap of awards, and a $932 million gain on the power transmission solutions divestiture in 2015. See Note 11.~~

Company's stock price.



EMERSON ELECTRIC CO. AND SUBSIDIARIES			FORM 10-Q

Automation Solutions sales by major product offering are summarized below (in millions):



	Three Months Ended December 31,
		2015		2016

Measurement & Analytical Instrumentation		$	757	682
Valves, Actuators & Regulators		498		449
Industrial Solutions		385		367
Process Control Systems & Solutions		522		469
Total		$	2,162	1,967

11.

The Company previously announced plans to divest its network power systems business through a spinoff to shareholders or sale, and that it was exploring strategic alternatives, including potential sale,In the fourth quarter of ~~its power generation, motors and drives businesses. The~~2016, the Company entered into an agreement asto purchase Pentair's Valves & Controls business for $3.15 billion, subject to certain post-closing adjustments. This business, with sales of ~~July 29,~~approximately $1.6 billion, is a manufacturer of control, isolation and pressure relief valves and actuators, and complements the Valves, Actuators & Regulators product offering within Automation Solutions. The transaction is expected to close by March 31, 2017, subject to conclusion of ongoing regulatory reviews.

12.

Discontinued Operations – The Company previously announced strategic actions to streamline its portfolio, drive growth and accelerate value creation for shareholders. On November 30, 2016, ~~to sell~~the Company completed the sale of its network power systems business for ~~$4.0~~$4 billion in cash, subject to certain post-closing adjustments, and ~~will retain~~retained a subordinated interest in distributions, contingent upon the equity holders first receiving a threshold return on their initial investment. This business ~~had 2015 sales of $4.4 billion and pretax earnings of $255 million, and comprises~~comprised the former Network Power segment. The network power systems business provides mission-critical infrastructure products and solutions and life cycle management services for vital applications in data centers, communication networks, and commercial/industrial environments. Also,Additionally, on ~~July 30, 2016,~~January 31, 2017, the Company ~~entered into an agreement to sell~~completed the sale of its power generation, motors and drives ~~businesses~~business for a value of $1.2 billion, representing cash plus assumption of certain postretirement liabilities by the buyer, subject to ~~certain~~ post-closing adjustments. ~~These businesses, which are~~This business was previously reported in the former Industrial ~~Automation segment, had 2015 sales~~Automations segment. The results of ~~$1.7 billion~~operations for these businesses have been reclassified into discontinued operations, and ~~pretax earnings of $105 million,~~the assets and ~~provide low, medium and high voltage alternators and other power generation equipment and commercial and industrial motors and drives, which~~liabilities are used in a wide variety of manufacturing and industrial applications. The transactions are expected to close by the end of calendar year 2016 subject to customary regulatory approvals. These businesses will be reflected as held-for-sale in the full-year fiscal 2016 financial statements, and sales and earnings will be reported in discontinued operations. Combined, the Company preliminarily expects to recognize a pretax gain of $450 million to $550 million and an after-tax loss of $50 to $150 million ($0.08 to $0.23 per share). Approximately $100 million ($0.15 per share) of the combined loss is expected to be recognized in the fourth quarter of fiscal 2016 related to the sale of the power generation, motors and drives businesses. In addition, the Company may incur U.S. tax costs of approximately $200 million ($0.30 per share) for repatriation of approximately $1.5 billion of proceeds expected to be received offshore in connection with the sale transactions. The Company will make a decision regarding repatriation when the transactions are completed.held-for-sale.

The ~~Company currently estimates it will incur total separation costs in~~financial results of the network power systems and power generation, motors and drives businesses reported as discontinued operations for the quarters ended December 31, 2016 ~~related to these transactions of approximately $200 to $250 million ($0.30 to $0.38 per share) for income taxes related to reorganizing the ownership structures of these businesses,~~ and legal, consulting, investment banking and other costs. In the third quarter of 2016, the Company incurred separation costs of $37 million, or $0.06 per share, which consists of income tax expense of $13 million and other costs of $28 million ($24 million after-tax). Year-to-date separation costs2015 were ~~$115 million, or $0.18 per share, comprised of income tax expense of $41 million and other costs of $83 million ($74 million after-tax).~~as follows:

During 2016, the Company completed four acquisitions, three in Process Management's final control and measurement devices businesses and one in Climate Technologies, which had combined annualized sales of approximately $28 million. Total cash paid for all businesses was $62 million, net of cash acquired. The Company recognized goodwill of $30 million ($26 million of which is expected to be tax deductible) and other intangible assets of $23 million, primarily customer relationships and intellectual property with a weighted-average life of approximately 10 years.



	Network Power Systems				Power Generation, Motors and Drives				Total
	Dec 31, 2015		Dec 31, 2016		Dec 31, 2015		Dec 31, 2016		Dec 31, 2015	Dec 31, 2016

Net sales	$	1,048	630		338		310		1,386	940
Cost of sales	650		394		261		232		911	626
SG&A	279		180		66		62		345	242
Other (income) deductions, net	48		(461	)	12		40		60	(421	)
Earnings (Loss) before income taxes	71		517		(1	)	(24	)	70	493
Income taxes	24		554		—		(6	)	24	548
Earnings (Loss), net of tax	$	47	(37	)	(1	)	(18	)	46	(55	)

In the ~~second~~first quarter of ~~2015,~~2017, discontinued operations consists of net earnings from operations of $14 million, an after-tax gain on divestiture of the ~~Company sold its~~network power ~~transmission solutions~~systems business of $86 million ($465 million pretax), income tax expense of $144 million for repatriation of sales proceeds, a loss of $38 million to write down the power generation, motors and drives business to ~~Regal Beloit Corporation~~the sales price less cost to sell, and lower expense of $27 million due to ceasing depreciation and amortization for ~~$1.4 billion~~the discontinued businesses held-for-sale. Results of discontinued operations for the first quarter of 2016 includes net earnings from operations of $68 million and ~~recognized a pretax gain~~separation costs related to the divestitures of ~~$932~~$22 million.

The Company expects to recognize approximately $100 million ~~($528 million after-tax, $0.77 per share).~~of income tax expense on completion of the sale of the power generation, motors and drives business, which closed on January 31, 2017, subject to finalization of several matters and post-closing adjustments.



EMERSON ELECTRIC CO. AND SUBSIDIARIES			FORM 10-Q

In fiscal 2017, the Company expects to pay income taxes of approximately $600 million as a result of completing the sales of the network power systems and power generation, motors and drives businesses.

The aggregate carrying amounts of the major classes of assets and liabilities classified as held-for-sale as of December 31, 2016 and September 30, 2016 are summarized as follows:



	Network Power Systems			Power Generation, Motors and Drives		Total
		Sept 30, 2016		Sept 30, 2016	Dec 31, 2016	Sept 30, 2016	Dec 31, 2016
Assets
Receivables		$	1,202	290	259	1,492	259
Inventories		381		197	185	578	185
Other current assets		108		22	26	130	26
Property plant & equipment, net		352		259	237	611	237
Goodwill		2,111		580	528	2,691	528
Other noncurrent assets		473		55	49	528	49
Total assets held-for-sale		$	4,627	1,403	1,284	6,030	1,284

Liabilities
Accounts payable		$	664	176	155	840	155
Other current liabilities		620		141	134	761	134
Deferred taxes and other noncurrent liabilities		227		99	89	326	89
Total liabilities held-for-sale		$	1,511	416	378	1,927	378

Net cash from operating and investing activities for the network power systems and power generation, motors and drives businesses for the quarters ended December 31, 2016 and 2015 were as follows:



	Network Power Systems					Power Generation, Motors and Drives				Total
	Dec 31, 2015			Dec 31, 2016		Dec 31, 2015		Dec 31, 2016		Dec 31, 2015		Dec 31, 2016

Cash from operating activities	$	83		(173	)	18		1		101		(172	)
Cash from investing activities	$	(8	)	3,903		(12	)	(9	)	(20	)	3,894

Cash from operating activities was reduced by $139 million and $24 million for the quarters ending December 31, 2016 and 2015, respectively, due to income taxes and fees paid related to the transactions.



EMERSON ELECTRIC CO. AND SUBSIDIARIES			FORM 10-Q

Items 2 and 3.

Management's Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

~~Third~~The Company previously announced strategic actions to streamline its portfolio, drive growth and accelerate value creation for shareholders. These portfolio repositioning actions resulted in the sale of the network power systems business which closed in the first quarter of 2017, and the sale of the power generation, motors and drives business which closed in the second quarter of 2017. These businesses have been reported within discontinued operations for all periods presented.

First quarter sales from continuing operations were ~~$5,126~~$3,216 million, down 74 percent. Underlying sales ~~decreased 5~~were down 3 percent reflecting ~~the continuation of challenging~~stabilizing conditions in ~~key served~~energy related markets and ~~global economic uncertainty. Depressed spending by global oil~~improvement in HVAC, refrigeration and ~~gas customers~~U.S. construction markets.

Earnings from continuing operations common stockholders were $364 million, up 20 percent, and ~~weakness in industrial capital spending continued, while emerging market demand remained under pressure.~~diluted earnings per share from continuing operations were $0.56, up 22 percent, including an income tax benefit of $47 million ($0.07 per share). Net earnings common stockholders were ~~$479~~$309 million, down 1512 percent, and diluted earnings per share were ~~$0.74,~~$0.48, down ~~12 percent. Adjusted earnings per share were $0.80, down 5~~9 percent, ~~excluding separation costs related to~~reflecting the ~~planned portfolio repositioning actions~~impact of ~~$0.06 per share.~~

As part of its strategic repositioning actions, the Company entered into an agreement as of July 29, 2016 to sell its network power systems business, and on July 30, 2016, entered into an agreement to sell its power generation, motors and drives businesses. See Note 11.discontinued operations.

RESULTS OF OPERATIONS

Following is an analysis of the Company’s operating results for the ~~third~~first quarter ended ~~June 30,~~December 31, 2016, compared with the ~~third~~first quarter ended ~~June 30,~~December 31, 2015.


Three Months Ended June 30	2015			2016		Change
Three Months Ended Dec 31								2015			2016		Change
(dollars in millions, except per share amounts)

Net sales	$	5,503		5,126		(7	)%	$	3,337		3,216		(4	)%
Gross profit	$	2,234		2,094		(6	)%	$	1,414		1,365		(3	)%
Percent of sales	40.6		%	40.8	%			42.4		%	42.4	%

SG&A	$	1,276		1,203				$	879		822
Percent of sales	23.2		%	23.4	%			26.4		%	25.5	%
Other deductions, net	$	122		102				$	54		33
Interest expense, net	$	40		45				$	47		46

Earnings before income taxes	$	796		744		(7	)%
Earnings from continuing operations before income taxes								$	434		464		7	%
Percent of sales	14.5		%	14.5	%			13.0		%	14.4	%
Earnings from continuing operations common stockholders								$	303		364		20	%
Net earnings common stockholders	$	564		479		(15	)%	$	349		309		(12	)%
Percent of sales	10.3		%	9.3	%			10.5		%	9.6	%

Diluted earnings per share	$	0.84		0.74		(12	)%
Adjusted earnings per share	$	0.84		0.80		(5	)%
Diluted EPS - Earnings from continuing operations								$	0.46		0.56		22	%
Diluted EPS - Net earnings								$	0.53		0.48		(9	)%

Net sales for the ~~third~~first quarter of ~~2016~~2017 were ~~$5,126~~$3,216 million, a decrease of ~~$377~~$121 million, or 74 percent compared with ~~$5,503~~$3,337 million in ~~2015.~~2016. Underlying sales decreased 53 percent ($~~253~~88 million) on 42 percent lower volume and 1 percent lower price. Foreign currency translation subtracted 1 percent ($6640 million) and ~~a divestiture, net of~~ acquisitions ~~subtracted 1 percent ($58 million).~~added $7 million. Underlying sales decreased 23 percent in the U.S. and 2 percent internationally. Asia was up 7 percent ~~internationally.~~(China up 17 percent), while Europe ~~was flat, Asia was down 8~~decreased 2 percent, ~~(China down 6 percent),~~ Latin America was down 619 percent, Canada ~~was down~~decreased 20 percent and Middle East/Africa was down 175 percent. Sales decreased ~~$280~~$195 million in ~~Process Management and $107 million in Industrial~~ Automation ~~reflecting reduced levels of operational and~~Solutions due to lower capital spending ~~by global~~in energy related and general industrial markets, primarily reflecting the impact of low oil ~~and gas customers, and persistently lower industrial capital spending.~~prices. Commercial & Residential Solutions sales ~~decreased $77~~increased $74 million ~~due to a prior year divestiture. Sales~~reflecting favorable conditions in ~~Climate Technologies decreased $23 million, while Network Power sales increased $83 million.~~HVAC, refrigeration and U.S. and Asian construction markets.

Cost of sales for the third quarter of 2016 were $3,032 million, a decrease of $237 million compared with $3,269 million in 2015 primarily due to reduced sales volume, foreign currency translation and a prior year divestiture. Gross profit margin of 40.8 percent increased 0.2 percentage points compared with 40.6 percent in 2015 due to savings from cost reduction and containment actions. Volume deleverage and unfavorable mix partially offset the increase.



~~EMERSON ELECTRIC CO. AND SUBSIDIARIES~~			~~FORM 10-Q~~

Selling, general and administrative (SG&A) expenses of $1,203 million decreased $73 million compared with the prior year primarily due to savings from cost reduction actions and a prior year divestiture. SG&A as a percent of sales of 23.4 percent in 2016 increased 0.2 percentage points reflecting deleverage on the lower volume.

Other deductions, net were $102 million in 2016, a decrease of $20 million primarily due to reduced rationalization expense of $21 million and an $18 million gain on payments received related to dumping duties. Separation costs of $28 million partially offset the decrease. See Note 8.

Pretax earnings of $744 million decreased $52 million, or 7 percent. The separation costs related to the planned portfolio repositioning reduced pretax earnings comparisons by 4 percentage points. Earnings decreased $102 million in Process Management and $26 million in Industrial Automation, and increased $64 million in Network Power and $25 million in Climate Technologies. See the following Business Segments discussion.

Income taxes were $254 million for 2016 and $222 million for 2015, resulting in effective tax rates of 34 percent and 28 percent, respectively. Separation costs related to the planned portfolio repositioning actions had a 2 percentage point unfavorable impact on the 2016 effective rate. The effective tax rate for full year 2016 is estimated at 31 percent before these costs, which are expected to increase the estimated rate to 35 to 36 percent, or 4 to 5 percentage points.

Net earnings common stockholders in 2016 were $479 million, down 15 percent, compared with $564 million in the prior year, and earnings per share were $0.74, down 12 percent compared with $0.84 in 2015. Net earnings were $516 million, down 8 percent and earnings per share were $0.80, down 5 percent, excluding $37 million ($0.06 per share) of separation costs related to the planned portfolio repositioning actions. The separation costs reduced both net earnings and earnings per share comparisons by 7 percentage points.

~~BUSINESS SEGMENTS~~

Following is an analysis of operating results for the Company’s business segments for the third quarter ended June 30, 2016, compared with the third quarter ended June 30, 2015. The Company defines segment earnings as earnings before interest and taxes.

~~Process Management~~

Three Months Ended June 30 2015 2016 Change
(dollars in millions)

Sales $ 2,084
1,804
(13 )%
Earnings $ 373
271
(27 )%
Margin 17.9 % 15.0 %

Process Management sales were $1.8 billion in the third quarter, a decrease of $280 million, or 13 percent. Underlying sales decreased 13 percent ($260 million) on 12 percent lower volume and 1 percent lower price, as spending in the energy sector remains depressed as customers evaluate the stability of oil and gas prices. Foreign currency translation had a 1 percent ($34 million) unfavorable impact while acquisitions added 1 percent ($14 million). The measurement devices, final control and systems and solutions businesses were all down. Underlying sales decreased 10 percent in the U.S., were flat in Europe and decreased 16 percent in Asia (China down 22 percent). Sales were down 14 percent in Latin America, 35 percent in Canada and 21 percent in Middle East/Africa. Earnings decreased $102 million and margin declined 2.9 percentage points due to a sharp volume reduction, deleverage and unfavorable mix, partially offset by savings from cost reduction actions. Materials cost containment offset lower pricing. Fourth quarter sales growth is expected to be negative, in line with third quarter results, as oil and gas markets, particularly North America, are expected to remain challenging into fiscal 2017.

~~Industrial Automation~~

Three Months Ended June 30 2015 2016 Change
(dollars in millions)

Sales $ 990
883
(11 )%
Earnings $ 156
130
(17 )%
Margin 15.8 % 14.7 %



EMERSON ELECTRIC CO. AND SUBSIDIARIES			FORM 10-Q

~~Industrial Automation~~Cost of sales for the first quarter of 2017 were ~~$883~~$1,851 million, ~~in the third quarter,~~ a decrease of ~~$107~~$72 million ~~or 11 percent. Underlying~~compared with $1,923 million in 2016 primarily due to reduced sales ~~were down 11 percent ($105 million) on 9 percent lower~~ volume and 2the impact of foreign currency translation. Gross profit margin of 42.4 percent was flat compared with 2016, as savings from cost reduction and containment actions offset deleverage on the reduced sales volume, lower price ~~reflecting continued weakness in industrial spending~~ and ~~upstream oil~~unfavorable mix.

Selling, general and ~~gas markets. Foreign currency translation deducted $2 million. Sales~~administrative (SG&A) expenses of $822 million decreased in$57 million compared with the ~~power generation~~prior year and motors and electrical distribution businesses from exposure to oil and gas markets. The drives business increased modestly, while the hermetic motors and fluid automation businesses declined. UnderlyingSG&A as a percent of sales ~~were down 13~~of 25.5 percent in the U.S., up 1 percent in Europe and down 14 percent in Asia. Sales decreased 20 percent in Latin America, 5 percent in Canada and 38 percent in Middle East/Africa. Earnings decreased $26 million and margin decreased 1.1improved 0.9 percentage points, primarily due to lower volume and resulting deleverage, partially offset by cost reduction savings. Materials cost containment offset lower pricing. Fourth quarter results are expected to improve on forecasts for mixed demand among the businesses. On July 30, 2016, the Company entered into an agreement to sell its power generation, motors and drives businesses. See Note 11.

~~Network Power~~

Three Months Ended June 30 2015 2016 Change
(dollars in millions)

Sales $ 1,028
1,111
8 %
Earnings $ 37
101
173 %
Margin 3.6 % 9.1 %

Network Power sales were $1.1 billion in the third quarter, an increase of $83 million, or 8 percent. Underlying sales were up 10 percent ($104 million) on 11 percent higher volume, slightly offset by 1 percent lower price, while foreign currency translation deducted 2 percent ($21 million). Global telecommunications power products had robust growth on strength in North America and China, partially offset by a decrease in Europe. Data center products were up moderately on strong growth in uninterruptible power supplies, thermal management and power switching, partially offset by a decline in infrastructure management due to a large project in the prior year. Underlying sales were up 16 percent in the U.S., down 6 percent in Europe and up 13 percent in Asia (China up 26 percent). Sales increased 12 percent in Latin America and 9 percent in both Canada and Middle East/Africa. Earnings increased $64 million and margin improved 5.5 percentage points reflecting higher volume and resulting leverage, savings from cost reduction actions and lower ~~rationalization expense~~incentive stock compensation of ~~$18 million. Materials cost containment~~$26 million which reflects the impact of changes in the Company's stock price, partially offset by deleverage on lower ~~pricing. Benefits~~volume.

Other deductions, net were $33 million in 2017, a decrease of $21 million due to favorable foreign currency transactions of $13 million in the current year compared with a loss of $21 million in the prior year, partially offset by higher acquisition-related costs. See Note 8.

Pretax earnings from continuing operations of $464 million increased $30 million, or 7 percent. Earnings increased $31 million in Commercial & Residential Solutions and decreased $15 million in Automation Solutions. See Note 10 and the following Business Segments discussion.

Income taxes were $94 million for 2017 and $127 million for 2016, resulting in effective tax rates of 20 percentand 29 percent, respectively. The 9 percentage point decrease versus the prior year is largely due to a $47 million tax benefit generated from restructuring ~~actions~~a foreign subsidiary. The tax rate for full year 2017 is estimated at 29 percent including the tax benefit.

Earnings from continuing operations attributable to common stockholders were $364 million, up 20 percent, and ~~new product programs support the expectation of continued margin improvement~~diluted earnings per share were $0.56, up 22 percent.

Net earnings common stockholders in the ~~fourth quarter. The Company entered into~~first quarter of 2017 were $309 million, down 12 percent, compared with $349 million in the prior year, and earnings per share were $0.48, down 9 percent compared with $0.53in 2016. Combined, the gain on the network power divestiture and the other items included in discontinued operations described below negatively impacted both net earnings and earnings per share comparisons 14 percentage points.

Discontinued Operations

Discontinued operations includes a net loss of $(55) million ($0.08 per share) in the first quarter of 2017 and net earnings of $46 million ($0.07 per share) in 2016. In the first quarter of 2017, discontinued operations consists of net earnings from operations of $14 million, an ~~agreement as~~after-tax gain on divestiture of ~~July 29, 2016 to sell its~~the network power systems ~~business.~~business of $86 million ($465 million pretax), income tax expense of $144 million for repatriation of sales proceeds, a loss of $38 million to write down the power generation, motors and drives business to the sales price less cost to sell, and lower expense of $27 million due to ceasing depreciation and amortization for the discontinued businesses held-for-sale. Earnings for the first quarter of 2016 include net earnings from operations of $68 million and separation costs related to the divestitures of $22 million. See Note ~~11.~~12.

~~Climate Technologies~~

Three Months Ended June 30 2015 2016 Change
(dollars in millions)

Sales $ 1,125
1,102
(2 )%
Earnings $ 222
247
11 %
Margin 19.7 % 22.4 %
The Company expects to recognize approximately $100 million of income tax expense on completion of the sale of the power generation, motors and drives business, which closed on January 31, 2017, subject to finalization of several matters and post-closing adjustments.

~~Climate Technologies~~In fiscal 2017, the Company expects to pay income taxes of approximately $600 million as a result of completing the sales ~~were $1.1 billion in~~of the third quarter, a decrease of $23 million, or 2 percent. Underlying sales were down 1 percent ($15 million) on lower price. Foreign currency translation deducted 1 percent ($8 million). Global air conditioning sales were down modestly reflecting decreases in Asia, partially offset by growth in the U.S.network power systems and ~~Europe. Global refrigeration decreased slightly on softness in Asia, while the U.S. was up slightly. Sales of temperature sensors~~power generation, motors and solutions decreased. Overall, underlying sales increased 2 percent in the U.S. and 4 percent in Europe, and were down 11 percent in Asia. Sales increased 2 percent in Latin America, and decreased 1 percent in Canada and 6 percent in Middle East/Africa. Earnings increased $25 million and margin increased 2.7 percentage points due to cost reduction and material containment actions, partially offset by lower pricing. The near-term outlook for global demand in air conditioning and refrigeration supports the expectation for modest sales growth in the fourth quarter and establishes a solid pace of business for the start of fiscal 2017.drives businesses.



EMERSON ELECTRIC CO. AND SUBSIDIARIES			FORM 10-Q

~~Commercial & Residential Solutions~~

Three Months Ended June 30 2015 2016 Change
(dollars in millions)

Sales $ 477
400
(16 )%
Earnings $ 98
97
(1 )%
Margin 20.6 % 24.4 %

~~Commercial & Residential Solutions sales were $400 million in the third quarter, a decrease of $77 million, or 16 percent as the commercial storage divestiture deducted 15 percent~~($72 million). Underlying sales decreased 1 percent ($4 million) on lower volume and foreign currency translation deducted $1 million. Strong sales growth in food waste disposers was driven by favorable conditions in U.S. construction markets, while professional tools declined modestly, reflecting reduced oil and gas related spending. The wet/dry vacuums and residential storage businesses declined moderately. Underlying sales decreased 1 percent in the U.S. and increased 2 percent internationally. Earnings decreased $1 million due to the divestiture which negatively impacted comparisons by $9 million, nearly offset by materials cost containment and savings from cost reduction actions. The margin comparison benefited 1.5 percentage points due to the divestiture. Favorable conditions in U.S. construction markets are expected to support the outlook for modest levels of underlying growth in the fourth quarter and a better start to fiscal 2017.

~~RESULTS OF OPERATIONS~~

BUSINESS SEGMENTS

Following is an analysis of ~~the Company’s~~ operating results for the ~~nine months~~Company’s business segments for the first quarter ended ~~June 30,~~December 31, 2016, compared with the ~~nine months~~first quarter ended ~~June 30,~~December 31, 2015. The Company defines segment earnings as earnings before interest and taxes. See Notes 1 and 10 for a discussion of the Company's business segments.

Automation Solutions

Nine Months Ended June 30 2015 2016 Change
(dollars in millions, except per share amounts)

Net sales $ 16,490
14,767
(10 )%
Gross profit $ 6,680
5,977
(11 )%
Percent of sales 40.5 % 40.5 %

SG&A $ 3,999
3,647

Percent of sales 24.2 % 24.7 %
Gain on sale of business $ 932
—

Other deductions, net $ 322
338

Interest expense, net $ 126
137

Earnings before income taxes $ 3,165
1,855
(41 )%
Percent of sales 19.2 % 12.6 %
Net earnings common stockholders $ 2,062
1,197
(42 )%
Percent of sales 12.5 % 8.1 %

Diluted earnings per share $ 3.01
1.84
(39 )%
Adjusted earnings per share $ 2.24
2.02
(10 )%



Three Months Ended Dec 31	2015			2016		Change
(dollars in millions)

Sales	$	2,162		1,967		(9	)%
Earnings	$	341		326		(4	)%
Margin	15.8		%	16.6	%



Sales by Major Product Offering
Measurement & Analytical Instrumentation	$	757	682	(10	)%
Valves, Actuators & Regulators	498		449	(10	)%
Industrial Solutions	385		367	(5	)%
Process Control Systems & Solutions	522		469	(10	)%
Total	$	2,162	1,967	(9	)%

~~Net~~Automation Solutions sales ~~for~~were $2.0 billion in the first ~~nine months of 2016 were $14,767 million,~~quarter, a decrease of ~~$1,723~~$195 million, or ~~10 percent compared with $16,490 million in 2015.~~9 percent. Underlying sales ~~were down 6~~decreased 8 percent ($~~963~~167 million) on 57 percent lower volume and 1 percent lower price. Foreign currency translation ~~deducted 2~~had a 1 percent ($~~407~~28 million) unfavorable impact. Sales for Measurement & Analytical Instrumentation, Valves, Actuators & Regulators, and ~~divestitures, net~~Process Control Systems & Solutions decreased $177 million, or 10 percent compared with the prior year on lower capital and operational spending by global oil and gas customers, particularly in upstream markets, reflecting the impact of ~~acquisitions subtracted 2~~low oil prices and excess supply. Industrial Solutions sales decreased $18 million, or 5 percent ~~($353 million).~~on weakness in industrial spending and upstream oil and gas markets. Chemical, power and life sciences markets remained favorable. Underlying sales decreased 59 percent in the U.S. and 75 percent ~~internationally, as Europe was flat,~~in Europe. Sales decreased 2 percent in Asia ~~decreased 8~~(China up 4 percent), 29 percent ~~(China down 11 percent) and~~in Latin America ~~was down 10 percent. Canada decreased 19~~and 26 percent ~~and~~in Canada. Sales in Middle East/Africa increased 3 percent. Earnings were $326 million, a decrease of $15 million on the decline in volume, while margin improved 0.8 percentage points reflecting savings from cost reduction actions and favorable foreign currency transactions of $18 million in the current year versus a loss of $16 million in the prior year, partially offset by deleverage on the lower volume. Lower price was ~~down 13 percent. Process Management sales were down $787 million reflecting spending reductions from oil and gas customers. Sales for Industrial Automation were down $615 million ($189 million~~substantially offset by materials cost containment. Results will remain under pressure during the second quarter due to continued low levels of customer spending, with market conditions expected to improve during the ~~power transmission solutions divestiture) and Climate Technologies decreased $123 million.~~ fiscal year.

Commercial & Residential Solutions



Three Months Ended Dec 31	2015			2016		Change
(dollars in millions)

Sales:
Climate Technologies	$	786		859		9	%
Tools & Home Products	392			393		—	%
Total	$	1,178		1,252		6	%

Earnings:
Climate Technologies	$	133		161		21	%
Tools & Home Products	85			88		3	%
Total	$	218		249		14	%
Margin	18.5		%	19.9	%

Commercial & Residential Solutions sales ~~decreased $236~~were $1.3 billion in the first quarter, an increase of $74 million, ~~largely due to a prior year divestiture, while~~or 6 percent. Underlying sales ~~for Network Power~~ were ~~down $30~~up 7 percent ($79 million) on 8 percent higher volume, partially offset by 1 percent lower price. Foreign currency translation deducted $12 million (1 percent) and acquisitions added $7 million.



EMERSON ELECTRIC CO. AND SUBSIDIARIES			FORM 10-Q

Cost of sales for 2016 were $8,790 million, a decrease of $1,020 million versus $9,810 million in 2015, primarily due to reduced sales volume, the impact of foreign currency translation and prior year divestitures. Gross profit margin was 40.5 percent in both 2016 and 2015, as savings from cost reduction and containment actions were offset by deleverage on lower volume and unfavorable mix.

SG&A expenses of $3,647 million decreased $352 million compared with the prior year primarily due to savings from cost reduction actions, the impact of foreign currency translation and prior year divestitures. SG&A as a percent of sales of 24.7 percent increased 0.5 percent, reflecting deleverage on lower sales volume and higher incentive compensation of $68 million, primarily due to changes in the stock price and overlap of awards.

~~In the second quarter of 2015, the Company sold its power transmission solutions business and recorded a pretax gain of $932 million ($528 million after-tax, $0.77 per share).~~

Other deductions, net were $338 million in 2016, an increase of $16 million primarily due to separation costs of $83 million, partially offset by lower rationalization expense of $46 million and the $18 million dumping duties gain. See Note 8.

Pretax earnings of $1,855 million decreased $1,310 million, or 41 percent largely due to the divestiture gain in 2015 and separation costs related to the planned portfolio repositioning in 2016. Combined, these items reduced pretax earnings comparisons by 28 percentage points. Earnings decreased $257 million in Process Management and $123 million in Industrial Automation. Earnings increased $118 million in Network Power and $26 million in Climate Technologies. See the Business Segments discussion that follows.

Income taxes were $636 million for 2016 and $1,083 million for 2015, resulting in an effective tax rate of 34 percent for both periods. Separation costs related to the planned portfolio repositioning actions had a 3 percentage point unfavorable impact on the 2016 effective rate. The 2015 effective tax rate included a 4 percentage point unfavorable impact from the power transmission solutions divestiture.

Net earnings common stockholders for 2016 were $1,197 million, down 42 percent, compared with $2,062 million in the prior year, and earnings per share were $1.84, down 39 percent, compared with $3.01 in 2015. Net earnings were $1,312 million, down 14 percent, compared with $1,534 million in the prior year, and earnings per share were $2.02, down 10 percent, compared with $2.24 per share in 2015, excluding $115 million ($0.18 per share) of separation costs related to the planned portfolio repositioning actions in 2016 and the divestiture gain of $528 million ($0.77 per share) in 2015. Combined, these items reduced net earnings and earnings per share comparisons by 28 and 29 percentage points, respectively.

~~BUSINESS SEGMENTS~~

Following is an analysis of operating results for the Company’s business segments for the nine months ended June 30, 2016, compared with the nine months ended June 30, 2015. The Company defines segment earnings as earnings before interest and taxes.

~~Process Management~~

Nine Months Ended June 30 2015 2016 Change
(dollars in millions)

Sales $ 6,225
5,438
(13 )%
Earnings $ 1,064
807
(24 )%
Margin 17.1 % 14.8 %

Process Management sales were $5.4 billion for the first nine months of 2016, a decrease of $787 million, or 13 percent. Underlying sales decreased 11 percent ($662 million) on 10 percent lower volume and 1 percent lower price, as global oil and gas customers curtailed spending levels in a difficult environment. Foreign currency translation deducted 3 percent ($171 million) and acquisitions added 1 percent ($46 million). The final control, measurement devices and systems and solutions businesses were all down. Underlying sales decreased 9 percent in the U.S., were up 1 percent in Europe and decreased 14 percent in Asia (China down 20 percent). Sales were down 15 percent in Latin America, 29 percent in Canada and 18 percent in Middle East/Africa. Earnings decreased $257 million and margin decreased 2.3 percentage points due to lower volume, deleverage and unfavorable mix,



~~EMERSON ELECTRIC CO. AND SUBSIDIARIES~~			~~FORM 10-Q~~

partially offset by savings from cost reduction actions and lower rationalization expense of $17 million. Results also reflect unfavorable foreign currency transactions of $53 million, partially offset by a favorable comparison from litigation costs of $20 million in 2015.

~~Industrial Automation~~

Nine Months Ended June 30 2015 2016 Change
(dollars in millions)

Sales $ 3,176
2,561
(19 )%
Earnings $ 464
341
(27 )%
Margin 14.6 % 13.3 %

Industrial Automation sales were $2.6 billion for the first nine months of 2016, a decrease of $615 million, or 19 percent. Underlying sales decreased 12 percent ($350 million) on 10 percent lower volume and 2 percent lower price, due to weakness in industrial spending and upstream oil and gas markets. The power transmission solutions divestiture deducted 5 percent ($189 million) and foreign currency translation deducted 2 percent ($76 million). Sales decreased in all businesses led by power generation and motors, electrical distribution and fluid automation. Underlying sales decreased 17 percent in the U.S., 2 percent in Europe and 12 percent in Asia. Sales were down 16 percent in Latin America, 14 percent in Canada and 21 percent in Middle East/Africa. Earnings decreased $123 million and margin declined 1.3 percentage points due to lower volume, deleverage and unfavorable mix. Materials cost containment more than offset lower pricing. The divestiture negatively impacted earnings comparisons by $19 million.

~~Network Power~~

Nine Months Ended June 30 2015 2016 Change
(dollars in millions)

Sales $ 3,210
3,180
(1 )%
Earnings $ 150
268
79 %
Margin 4.7 % 8.4 %

Network Power sales were $3.2 billion for the first nine months of 2016, a decrease of $30 million, or 1 percent. Underlying sales increased 2 percent ($77 million) on 3 percent higher volume, partially offset by 1 percent lower price, while foreign currency translation deducted 3 percent ($107 million). Global telecommunications power product sales were up moderately on growth in North America and Europe, partially offset by a decrease in Asia. Data center products decreased, particularly in infrastructure management and thermal management, partially offset by an increase in uninterruptible power supplies. The decreases largely reflect the stronger U.S. dollar. Underlying sales were up 4 percent in the U.S., down 2 percent in Europe, and up 4 percent Asia. Sales decreased 1 percent in Latin America and 4 percent in Middle East/Africa, and increased 1 percent in Canada. Earnings increased $118 million and margin improved 3.7 percentage points reflecting savings from cost reduction actions and lower rationalization expense of $26 million. Materials cost containment offset lower pricing. Results also include favorable foreign currency transactions of $8 million compared with 2015.

~~Climate Technologies~~

Nine Months Ended June 30 2015 2016 Change
(dollars in millions)

Sales $ 3,007
2,884
(4 )%
Earnings $ 518
544
5 %
Margin 17.2 % 18.9 %

Climate Technologies sales were ~~$2.9 billion for~~$859 million in the first ~~nine months~~quarter, an increase of ~~2016, a decrease of $123~~$73 million, or 49 percent. ~~Underlying sales decreased 3 percent ($80 million) on lower volume and price, while foreign currency translation deducted 1 percent ($43 million).~~ Global air conditioning sales were ~~down~~strong, led by strength in the U.S. and Asia, robust growth in China partially due to ~~decreases~~easier comparisons, and solid growth in ~~the U.S., Europe and Asia.~~Europe. Global refrigeration sales were ~~flat as~~solid due to robust growth in China on increased adoption of energy-efficient solutions, while sales decreased slightly in the U.S. and ~~Europe was offset by softness~~moderately in



~~EMERSON ELECTRIC CO. AND SUBSIDIARIES~~			~~FORM 10-Q~~

~~Asia.~~ Europe. Sales of temperature controls, sensors and solutions also ~~decreased.~~increased. Tools & Home Products sales of $393 million in the first quarter were flat (up $1 million). Professional tools sales were up moderately and wet/dry vacuums had solid growth as favorable conditions continued in U.S. construction markets. Sales were flat for food waste disposers while the storage business declined moderately. Overall, underlying sales ~~were down 1~~increased 4 percent in the U.S., ~~up 3~~7 percent in Europe and ~~down 10~~26 percent in Asia (China ~~down 14~~up 40 percent). Sales ~~decreased 5~~increased 3 percent in Latin America, were flat in Canada and ~~increased 4~~decreased 29 percent in Middle East/~~Africa and 3 percent~~Africa. Earnings were $249 million, an increase of $31 million including $28 million in ~~Canada. Earnings increased $26 million~~Climate Technologies, and margin ~~increased 1.7~~improved 1.4 percentage ~~point~~points due to ~~materials cost containment~~increased volume and resulting leverage, savings from cost reduction actions and lower customer accommodation costs of $6 million. Lower price and unfavorable mix partially offset ~~by higher warranty costs~~the increase. The outlook for global demand in air conditioning, refrigeration and ~~lower price.~~

~~Commercial & Residential Solutions~~

Nine Months Ended June 30 2015 2016 Change
(dollars in millions)

Sales $ 1,422
1,186
(17 )%
Earnings $ 292
274
(6 )%
Margin 20.5 % 23.1 %

~~Commercial & Residential Solutions sales were $1.2 billion~~U.S. construction markets is favorable, supporting the expectation for ~~the first nine months of 2016, a decrease of $236 million, or 17 percent. Underlying sales were flat (down $5 million), while foreign currency translation deducted 1 percent~~ (~~$10 million) and the commercial storage divestiture deducted 16 percent~~ (~~$221 million). Food waste disposers had solid~~low to mid-single digit growth ~~and wet/dry vacuums were up slightly. The professional tools and storage businesses declined moderately. Underlying sales were flat~~ in the U.S. and internationally. Earnings decreased $18 million, which reflects the impact of the divestiture, partially offset by cost reduction and material containment actions. The margin comparison benefited 1.4 percentage points due to the divestiture.fiscal 2017.

FINANCIAL CONDITION

Key elements of the Company's financial condition for the ~~nine~~three months ended ~~June 30,~~December 31, 2016 as compared to the year ended September 30, ~~2015~~2016 follow.


	Sept. 30, 2015			June 30, 2016		Sept 30, 2016			Dec 31, 2016
Working capital (in millions)	$	2,249		1,894		$	1,353		4,550
Current ratio	1.3			1.2		1.2			2.2
Total debt-to-total capital	45.8		%	48.0	%	46.7		%	34.5	%
Net debt-to-net capital	31.3		%	32.3	%	31.3		%	(1.1	)%
Interest coverage ratio	21.8		X	12.5X		11.8		X	9.9X

The Company's working capital, current ratio, and debt-to-capital improved due to $4 billion of proceeds received from the sale of the network power systems business. These funds will be used to complete the previously announced Valves & Controls acquisition. See Note 11. The interest coverage ratio (earnings before income taxes plus interest expense, divided by interest expense) of ~~12.5X~~9.9X for the first ~~nine~~three months of ~~2016~~2017 compares to ~~22.0X~~9.1X for the first ~~nine~~three months of ~~2015. The decrease reflects lower pretax earnings due to~~2016.

Operating cash flow from continuing operations for the ~~divestiture gain~~first quarter of 2017 was $410 million, an increase of $24 million compared with $386 million in the prior year ~~and lower operational~~reflecting higher earnings ~~in the current year.~~

~~Cash provided by operating activities of~~ ~~$1,924 million~~ ~~increased~~ ~~$496 million~~ ~~compared with~~ ~~$1,428 million~~ ~~in the prior year as~~and lower working capital investment more than offset lower earnings, while comparisons also benefited from income taxes of $360 million paid in the prior year on the divestiture gain. In addition, cash flow was reduced by payments of $113 million in 2016 for separation costs related to the portfolio repositioning actions. Operating cash flow funded capital expenditures of $354 million, dividends of $922 million and payments on long-term debt of $252 million. Common stock purchases of $555 million were supported by short-term borrowings.investment. Free cash flow from continuing operations of ~~$1,570~~$310 million (operating cash flow of ~~$1,924~~$410 million less capital expenditures of ~~$354~~$100 million) increased $48 million,~~) increased~~ ~~$658 million, due to higher~~ reflecting the increase in operating cash flow and lower capital expenditures in ~~2016.~~2017. Operating cash flow funded dividends of $311 million and capital expenditures. Free cash flow from continuing operations was ~~$912~~$262 million in ~~2015~~2016 (operating cash flow of ~~$1,428~~$386 million less capital expenditures of ~~$516~~$124 million).

Total cash provided by operating activities was $238 million). including the impact of discontinued operations, and decreased $249 million compared with $487 million in the prior year. Total operating cash flow was reduced by $139 million and $24 million in the first quarter of 2017 and 2016, respectively, due to income taxes and fees paid related to the portfolio repositioning actions.

Emerson's financial structure provides the flexibility necessary to achieve its strategic objectives. The Company has been ~~able~~successful in efficiently deploying cash where needed worldwide to ~~readily meet all its funding requirements~~fund operations, complete acquisitions and sustain long-term growth. The Company believes that sufficient funds will be available to meet the Company’s needs in the foreseeable future through ~~ongoing operations,~~operating cash flow, existing resources, short- and long-term debt capacity or backup credit lines. These resources enable Emerson to reinvest for growth in existing businesses, pursue strategic acquisitions and manage its liquidity and capital structure on a short- and long-term basis. The agreements to sell the network power systems business, and the power generation, motors and drives businesses are expected to strengthen the Company’s balance sheet and provide increased financial flexibility, but will eliminate the cash flows of these businesses. See Note 11.

1816



EMERSON ELECTRIC CO. AND SUBSIDIARIES			FORM 10-Q

FISCAL ~~2016~~2017 OUTLOOK

~~The third~~Although significant challenges are expected to persist throughout 2017, the Company’s first quarter results ~~continued to~~and recent order trends reflect ~~the low-growth~~positive momentum within its two business platforms. Improving market conditions and a broad-based increase in demand within many global ~~environment facing the Company’s businesses. Oil and gas~~ served markets are expected to benefit the Company in ~~particular have remained at significantly depressed spending levels with no expectation for recovery until~~ the second half of ~~2017. The second and third quarter improvement in order rates that~~the year. Considering these factors, the Company had expected at our February investor conference did not materialize. Based on recent trends, it appears that underlying orders and sales have bottomed in a range of negative 4.5 to 5 percent. Considering these tough market conditions, the Company now expects full-year fiscal ~~year 2016 underlying~~2017 net sales to be down 51 to 63 percent, with underlying sales flat to down 2 percent excluding ~~negative~~unfavorable currency translation ~~and an impact from completed divestitures~~ of approximately ~~2 percent each. Reported~~1 percent. Earnings per share from continuing operations are expected to be $2.47 to $2.62 including a $0.07 income tax benefit in the first quarter. Automation Solutions net sales are expected to be down 95 to 107 percent, with underlying sales down 3 to 5 percent excluding unfavorable currency translation of approximately 2 percent. ~~Adjusted earnings per share~~Commercial & Residential Solutions net and underlying sales are expected to be ~~$2.90~~up 3 to $3.00, which excludes estimated separation costs of $200 to $250 million ($0.30 to $0.38 per share), and also a loss of approximately $100 million ($0.15 per share) related to the sale of the power generation, motors and drives businesses. Reported earnings per share are expected to be $2.37 to $2.55 including these costs.

5 percent. The outlook contained herein reflects the Company’s expectations for its consolidated results ~~including the full year results for the businesses that are the subject of the portfolio repositioning actions,~~from continuing operations, and ~~does not include~~excludes any ~~gains or losses~~impact related to the ~~ultimate disposition~~pending acquisition of ~~these businesses, except as otherwise set forth herein. See Note 11.~~Pentair's Valves & Controls business.

Statements in this report that are not strictly historical may be "forward-looking" statements, which involve risks and uncertainties, and Emerson undertakes no obligation to update any such statements to reflect later developments. These risks and uncertainties include ~~Emerson's ability to successfully complete on the terms and conditions anticipated, and the financial impact of, its strategic portfolio repositioning actions, as well as~~ economic and currency conditions, market demand, pricing, protection of intellectual property, and competitive and technological factors, among others, which are set forth in the “Risk Factors” of Part I, Item 1, and the "Safe Harbor Statement" of ~~Exhibit 13,~~Part II, Item 7, to the Company's Annual Report on Form 10-K for the year ended September 30, ~~2015~~2016 and in subsequent reports filed with the SEC, which are hereby incorporated by reference.

Item 4. Controls and Procedures

The Company maintains a system of disclosure controls and procedures designed to ensure that information required to be disclosed in its reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported in a timely manner. This system also is designed to ensure information is accumulated and communicated to management, including the Company's certifying officers, to allow timely decisions regarding required disclosure. Based on an evaluation performed, the certifying officers have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.

Notwithstanding the foregoing, there can be no assurance that the Company's disclosure controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiaries to report material information otherwise required to be set forth in the Company's reports.

There was no change in the Company's internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

1917



EMERSON ELECTRIC CO. AND SUBSIDIARIES			FORM 10-Q

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In November 2015, the Board of Directors authorized the purchase of up to 70 million shares, and ~~64.4~~63.5 million shares remain available. No shares were purchased in the ~~third~~first quarter of ~~2016.~~2017.

Item 6. Exhibits

(a) Exhibits (Listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K).



3.1		Bylaws of Emerson Electric Co., as amended through October 4, 2016, incorporated by reference to Emerson Electric Co. Form 8-K filed October 6, 2016, Exhibit 3.1.

10.1		Description of Non-Management Director Compensation.

12		Ratio of Earnings to Fixed Charges.

31		Certifications pursuant to Exchange Act Rule 13a-14(a).

32		Certifications pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350.

101		Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Earnings for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2016 and 2015, ~~and 2016,~~ (ii) Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2016 and 2015, ~~and 2016,~~ (iii) Consolidated Balance Sheets as of September 30, ~~2015~~2016 and ~~June 30,~~December 31, 2016, (iv) Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~June 30,~~December 31, 2016 and 2015, ~~and 2016,~~ and (v) Notes to Consolidated Financial Statements for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2016.

2018



EMERSON ELECTRIC CO. AND SUBSIDIARIES			FORM 10-Q

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		EMERSON ELECTRIC CO.


		By	/s/ Frank J. Dellaquila
			Frank J. Dellaquila
			Senior Executive Vice President and Chief Financial Officer
			(on behalf of the registrant and as Chief Financial Officer)
			~~August 3, 2016~~February 8, 2017

INDEX TO EXHIBITS



Exhibit No.			Exhibit

10.1			Description of Non-Management Director Compensation.

12			Ratio of Earnings to Fixed Charges.

31			Certifications pursuant to Exchange Act Rule 13a-14(a).

32			Certifications pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350.

101			Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Earnings for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2016 and 2015, ~~and 2016,~~ (ii) Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2016 and 2015, ~~and 2016,~~ (iii) Consolidated Balance Sheets as of September 30, ~~2015~~2016 and ~~June 30,~~December 31, 2016, (iv) Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~June 30,~~December 31, 2016 and 2015, ~~and 2016,~~ and (v) Notes to Consolidated Financial Statements for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2016.

2119



Goodwill by business segment
Process Management	$	2,790	2,802
Industrial Automation	1,031		1,029
Network Power	2,144		2,132
Climate Technologies	492		506
Commercial & Residential Solutions	196		198
Total	$	6,653	6,667



	Sept. 30, 2015		Expense	Paid/Utilized	June 30, 2016
Severance and benefits	$	105	23	88	40
Lease and other contract terminations	1		2	2	1
Vacant facility and other shutdown costs	3		6	8	1
Start-up and moving costs	3		12	13	2
Total	$	112	43	111	44



Nine Months Ended June 30	2015			2016		Change
(dollars in millions, except per share amounts)

Net sales	$	16,490		14,767		(10	)%
Gross profit	$	6,680		5,977		(11	)%
Percent of sales	40.5		%	40.5	%

SG&A	$	3,999		3,647
Percent of sales	24.2		%	24.7	%
Gain on sale of business	$	932		—
Other deductions, net	$	322		338
Interest expense, net	$	126		137

Earnings before income taxes	$	3,165		1,855		(41	)%
Percent of sales	19.2		%	12.6	%
Net earnings common stockholders	$	2,062		1,197		(42	)%
Percent of sales	12.5		%	8.1	%

Diluted earnings per share	$	3.01		1.84		(39	)%
Adjusted earnings per share	$	2.24		2.02		(10	)%