Rockwell Automation Reports Third Quarter Results

MILWAUKEE--(Business Wire)--
Rockwell Automation, Inc. (NYSE: ROK):

-- Revenue growth of 15 percent

-- Diluted EPS of $1.03

-- Company expects fiscal 2008 diluted EPS of $4.00 - $4.10

Rockwell Automation, Inc. (NYSE: ROK) today reported fiscal 2008
third quarter revenue of $1,475.0 million, up 15 percent compared to
$1,280.6 million in 2007. Foreign currency translation contributed 5
percentage points and acquisitions contributed 4 percentage points to
the growth rate. Fiscal 2008 third quarter income from continuing
operations was $152.6 million ($1.03 per share) compared to $167.5
million ($1.07 per share) in 2007. Segment operating earnings were
$258.3 million, down 2 percent compared to $262.3 million in 2007.
Third quarter 2008 free cash flow from continuing operations was
$151.2 million. Return on invested capital expanded 0.8 percentage
points to 24.5 percent.

Free cash flow, organic growth and return on invested capital are
non-GAAP measures that are defined in the attachments to this release
under "Other Supplemental Information".

Commenting on the results, Keith D. Nosbusch, chairman and chief
executive officer, said, "We delivered solid top line results despite
slower than expected growth in Europe and the U.S. Revenue growth was
particularly strong in Asia-Pacific, Latin America and our solutions
businesses, demonstrating strength in the on-going diversification of
our revenue base. Operating margins and EPS grew sequentially but came
in lower than 2007, largely driven by continued slower growth in our
higher margin product businesses. Given the current environment, we
are proactively implementing the appropriate actions to control
costs."

Outlook

Commenting on the outlook, Nosbusch added, "For the remainder of
the fiscal year we expect to see continued strength in Asia-Pacific
and Latin America as well as in resource-based industries. However,
macro-economic conditions in Europe and the U.S. are weakening. We
have begun to see a change in buying behavior by some of our customers
in consumer related industries, including project delays and curtailed
capital spending. In the current environment, we expect fiscal 2008
EPS to be $4.00 - $4.10.

"We continue to monitor market conditions with a view toward
rebalancing spending, as well as positioning ourselves to address a
potential contraction, should it materialize. We remain committed to
executing our growth and performance strategy, including continued
investment in core technologies and the globalization of our
business."

Following is a discussion of third quarter results for each of the
segments.

Architecture & Software

Architecture & Software third quarter sales were $625.7 million,
an increase of 7 percent compared to $582.5 million in the third
quarter of 2007. Acquisitions added 1 percentage point and foreign
currency translation added 5 percentage points to the growth rate.
Segment operating earnings were $154.7 million compared to $164.7
million in the third quarter of 2007. Architecture & Software segment
operating margin was 24.7 percent in the third quarter of 2008
compared to 28.3 percent in 2007.

Control Products & Solutions

Control Products & Solutions third quarter sales were $849.3
million, an increase of 22 percent compared to sales of $698.1 million
in the third quarter of 2007. Acquisitions added 6 percentage points
and foreign currency translation added 5 percentage points to the
growth rate. Segment operating earnings were $103.6 million compared
to $97.6 million in the third quarter of 2007. Control Products &
Solutions segment operating margin was 12.2 percent in the third
quarter of 2008 compared to 14.0 percent in 2007.

General Corporate - Net

Third quarter general corporate net expense was $21.9 million
compared to $17.6 million in the third quarter of 2007. The third
quarter of 2007 benefited from $5.0 million of interest income earned
on proceeds of the Power Systems sale.

Income Taxes

The effective tax rate for the third quarter of 2008 was 28.5
percent compared to 26.2 percent in 2007. The tax rate in the third
quarter of 2007 was lower due primarily to the resolution of certain
federal and state income tax matters. For 2008, the Company expects
the full year tax rate to be in a range of 28 to 29 percent.

Share Repurchase

During the quarter, the Company repurchased 1.2 million shares at
a cost of $57.4 million. The Company had $774.6 million available at
June 30, 2008 under its existing $1.0 billion share repurchase
authorization.

Conference Call

A conference call to discuss our financial results will take place
at 8:30 A.M. Eastern Time on July 22. The call will be webcast and
accessible via the Rockwell Automation website
(www.rockwellautomation.com).

This news release 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", "expect", "project", "plan",
"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 and political changes in global markets where we
compete, such as currency exchange rates, inflation rates,
interest rates, recession, policies of foreign governments and
other external factors we cannot control, and U.S. and local
laws affecting our activities abroad and compliance therewith;

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

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

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

-- competitive product and pricing pressures;

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

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

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

-- our ability to attract and retain qualified personnel;

-- the uncertainties of litigation;

-- disruption of our North American distribution channel;

-- the availability and price of components and materials;

-- successful execution of our cost productivity and
globalization initiatives;

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

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

These forward-looking statements reflect our beliefs as of the
date of filing this release. We undertake no obligation to update or
revise any forward-looking statement, whether as a result of new
information, future events or otherwise.

Rockwell Automation, Inc. (NYSE: ROK), is a leading global
provider of industrial automation power, control and information
solutions that help manufacturers achieve a competitive advantage for
their businesses. The company brings together leading global brands in
industrial automation that include Allen-Bradley(R) controls and
services and Rockwell Software(R) factory management software.
Headquartered in Milwaukee, Wisc., the company employs about 20,000
people serving customers in more than 80 countries.

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ROCKWELL AUTOMATION, INC.
SALES AND EARNINGS INFORMATION
(in millions, except per share amounts)

Three Months Ended Nine Months Ended
June 30, June 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Sales
Architecture & Software $625.7 $582.5 $1,802.6 $1,651.8
Control Products & Solutions 849.3 698.1 2,410.9 1,981.6
--------- --------- --------- ---------
Total sales $1,475.0 $1,280.6 $4,213.5 $3,633.4
========= ========= ========= =========

Segment Operating Earnings
Architecture & Software $154.7 $164.7 $443.1 $442.4
Control Products & Solutions 103.6 97.6 313.0 267.1
--------- --------- --------- ---------
Total segment operating
earnings 258.3 262.3 756.1 709.5

Purchase accounting
depreciation and amortization (6.3) (3.8) (19.1) (9.5)
General corporate - net (21.9) (17.6) (52.7) (50.6)
Special charges (1) - - - (43.5)
Interest expense (16.6) (13.8) (52.1) (48.5)
--------- --------- --------- ---------
Income from continuing
operations before income taxes 213.5 227.1 632.2 557.4
Income tax provision (60.9) (59.6) (180.2) (151.9)
--------- --------- --------- ---------
Income from continuing
operations 152.6 167.5 452.0 405.5
Income from discontinued
operations - (3.3) - 917.1
--------- --------- --------- ---------

Net income $152.6 $164.2 $452.0 $1,322.6
========= ========= ========= =========

Diluted Earnings Per Share
Continuing operations $1.03 $1.07 $3.03 $2.47
Discontinued operations - (0.02) - 5.60
--------- --------- --------- ---------
Net Income $1.03 $1.05 $3.03 $8.07
========= ========= ========= =========

Average Diluted Shares 148.1 156.5 149.3 163.9
========= ========= ========= =========

(1) In the second quarter of 2007, the Company recorded charges of
$43.5 million ($27.7 million after tax, or $0.17 per diluted share)
related to various restructuring actions designed to execute on its
cost productivity initiatives and to advance its globalization
strategy. Actions include workforce reductions, realignment of
administrative functions, and rationalization and consolidation of
global operations.
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ROCKWELL AUTOMATION, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions)

Three Months Ended Nine Months Ended
June 30, June 30,
------------------- -------------------
2008 2007 2008 2007 (1)
--------- --------- --------- ---------

Sales $1,475.0 $1,280.6 $4,213.5 $3,633.4
Cost of sales (869.4) (729.5) (2,461.1) (2,110.2)
--------- --------- --------- ---------
Gross profit 605.6 551.1 1,752.4 1,523.2

Selling, general and
administrative expenses (377.6) (319.7) (1,084.5) (938.4)
Other income 2.1 9.5 16.4 21.1
Interest expense (16.6) (13.8) (52.1) (48.5)
--------- --------- --------- ---------
Income from continuing
operations before income taxes 213.5 227.1 632.2 557.4
Income tax provision (60.9) (59.6) (180.2) (151.9)
--------- --------- --------- ---------

Income from continuing
operations 152.6 167.5 452.0 405.5
--------- --------- --------- ---------

(Loss) income from discontinued
operations
Income from discontinued
operating activities of
Power Systems - - - 42.3
Gain on sale of Power
Systems - (0.7) - 866.5
Other - (2.6) - 8.3
--------- --------- --------- ---------
(Loss) income from
discontinued operations - (3.3) - 917.1
--------- --------- --------- ---------

Net income $152.6 $164.2 $452.0 $1,322.6
========= ========= ========= =========

(1) In the second quarter of 2007, the Company recorded special
charges of $21.8 million in Cost of sales and $21.7 million in
Selling, general, and administrative expenses.
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ROCKWELL AUTOMATION, INC.
CONDENSED BALANCE SHEET INFORMATION
(in millions)

June 30, September 30,
2008 2007
------------- -------------
Assets
Cash and cash equivalents $805.9 $624.2
Receivables 990.3 927.7
Inventories 602.2 504.7
Property, net 535.6 510.3
Goodwill and intangibles 1,209.8 1,101.9
Other assets 967.5 877.0
------------- -------------

Total $5,111.3 $4,545.8
============= =============

Liabilities and Shareowners' Equity
Short-term debt $334.1 $521.4
Accounts payable 490.7 498.5
Long-term debt 904.2 405.7
Other liabilities 1,485.7 1,377.4
Shareowners' equity 1,896.6 1,742.8
------------- -------------

Total $5,111.3 $4,545.8
============= =============
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ROCKWELL AUTOMATION, INC.
CONDENSED CASH FLOW INFORMATION
(in millions)

Nine Months Ended
June 30,
-------------------
2008 2007
--------- ---------
Continuing Operations:

Operating Activities:
Income from continuing operations $452.0 $405.5
Depreciation and amortization 100.9 86.1
Retirement benefits expense 33.5 44.7
Pension trust contributions (31.6) (26.0)
Receivables/inventories/payables (150.0) (133.1)
Other (52.5) (113.0)
--------- ---------

Cash provided by operating activities 352.3 264.2
--------- ---------

Investing Activities:
Capital expenditures (102.8) (82.1)
Acquisition of businesses, net of cash acquired (112.4) (44.6)
Proceeds from sale of property, securities and
business 43.2 1,744.6
Other investing activities (2.9) (3.2)
--------- ---------

Cash (used for) provided by investing activities (174.9) 1,614.7
--------- ---------

Financing Activities:
Net issuance (repayment) of debt 303.1 (170.0)
Cash dividends (128.4) (140.8)
Purchases of treasury stock (226.9) (1,263.8)
Proceeds from the exercise of stock options 12.2 51.8
Excess income tax benefit from the exercise of
stock options 3.9 21.4
Other financing activities (0.3) (0.4)
--------- ---------

Cash used for financing activities (36.4) (1,501.8)
--------- ---------

Effect of exchange rate changes on cash 46.8 18.3
--------- ---------

Cash provided by continuing operations 187.8 395.4

Discontinued Operations:
Cash used for discontinued operations (6.1) (9.2)
--------- ---------

Increase in cash and cash equivalents $181.7 $386.2
========= =========
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ROCKWELL AUTOMATION, INC.
OTHER SUPPLEMENTAL INFORMATION
(in millions)

Free Cash Flow
----------------------------------------------------------------------

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.
We account for share-based compensation under SFAS 123(R), which
requires that we 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 defined, as one measure to monitor and evaluate
performance. Our definition of free cash flow may be different 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 our former Power
Systems operating segment have been classified within continuing
operations consistent with the cash proceeds. These taxes paid in the
third and fourth quarters of fiscal 2007 and the second and third
quarters of fiscal 2008 have been excluded from free cash flow to
present free cash flow that is representative of the performance of
our continuing businesses.

The following table summarizes free cash flow by quarter:
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Quarter Ended
------------------------------------------------
Dec. March June Sept. Dec. March June
31, 31, 30, 30, 31, 31, 30,
2006 2007 2007 2007 2007 2008 2008
------ ------ ------ ------ ------ ------ ------

Cash provided by
continuing operating
activities 98.2 108.2 57.8 180.7 101.5 58.6 192.2
Capital expenditures
of continuing
operations (29.2) (24.0) (28.9) (48.9) (26.3) (33.5) (43.0)
Tax payments related
to the gain on
divestiture of Power
Systems - - 142.2 47.8 - 6.1 1.6
Excess income tax
benefit from the
exercise
of stock options 4.7 4.3 12.4 5.7 2.9 0.6 0.4
------ ------ ------ ------ ------ ------ ------
Free cash flow $73.7 $88.5 $183.5 $185.3 $78.1 $31.8 $151.2
====== ====== ====== ====== ====== ====== ======
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Organic Sales
----------------------------------------------------------------------

Our press release contains information regarding organic sales, which
we define as sales excluding the effects of changes in currency
exchange rates and acquisitions. Management believes this non-GAAP
measure provides useful information to investors because it reflects
regional performance from our activities without the effect of
changes in currency exchange rates or acquisitions. Management uses
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 in the prior year. When we acquire
businesses, we exclude sales in the current year for which there are
no comparable sales in the prior period. Organic sales growth is
calculated by comparing organic sales to reported sales in the prior
year. Sales are attributed to the geographic regions based on the
country of destination.

The following is a reconciliation of reported sales to organic sales
for the three and nine months ended June 30, 2008 compared to sales
for the three and nine months ended June 30, 2007:
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Three Months Ended June 30,
----------------------------------------------------------
2008 2007
------------------------------------------------- --------
Effect Sales
of Excluding
Changes Changes
in in Effect of Organic
Sales Currency Currency Acquisitions Sales Sales
-------- -------- --------- ------------ -------- --------

United
States $731.7 $(1.5) $730.2 $(13.3) $716.9 $691.5
Canada 104.5 (8.7) 95.8 (1.0) 94.8 87.9
Europe,
Middle
East,
Africa 338.4 (40.1) 298.3 (28.1) 270.2 264.7
Asia-Pacific 189.5 (8.0) 181.5 (4.4) 177.1 151.3
Latin
America 110.9 (9.9) 101.0 - 101.0 85.2
-------- -------- --------- ------------ -------- --------
Total $1,475.0 $(68.2) $1,406.8 $(46.8) $1,360.0 $1,280.6
======== ======== ========= ============ ======== ========

Nine Months Ended June 30,
----------------------------------------------------------
2008 2007
------------------------------------------------- --------
Effect Sales
of Excluding
Changes Changes
in in Effect of Organic
Sales Currency Currency Acquisitions Sales Sales
-------- -------- --------- ------------ -------- --------

United
States $2,120.1 $(7.6) $2,112.5 $(38.9) $2,073.6 $1,977.1
Canada 296.6 (35.0) 261.6 (2.9) 258.7 244.7
Europe,
Middle
East,
Africa 980.8 (106.3) 874.5 (84.8) 789.7 762.0
Asia-Pacific 518.4 (30.5) 487.9 (9.4) 478.5 420.7
Latin
America 297.6 (24.3) 273.3 - 273.3 228.9
-------- -------- --------- ------------ -------- --------
Total $4,213.5 $(203.7) $4,009.8 $(136.0) $3,873.8 $3,633.4
======== ======== ========= ============ ======== ========
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The following is a reconciliation of reported sales to organic sales
for our reporting segments for the three and nine months ended June
30, 2008 compared to sales for the three and nine months ended June
30, 2007:
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Three Months Ended June 30,
----------------------------------------------------------
2008 2007
------------------------------------------------- --------
Effect Sales
of Excluding
Changes Changes
in in Effect of Organic
Sales Currency Currency Acquisitions Sales Sales
-------- -------- --------- ------------ -------- --------

Architecture
& Software $625.7 $(30.3) $595.4 $(8.8) $586.6 $582.5
Control
Products &
Solutions 849.3 (37.9) 811.4 (38.0) 773.4 698.1
-------- -------- --------- ------------ -------- --------
Total $1,475.0 $(68.2) $1,406.8 $(46.8) $1,360.0 $1,280.6
======== ======== ========= ============ ======== ========

Nine Months Ended June 30,
----------------------------------------------------------
2008 2007
------------------------------------------------- --------
Effect Sales
of Excluding
Changes Changes
in in Effect of Organic
Sales Currency Currency Acquisitions Sales Sales
-------- -------- --------- ------------ -------- --------

Architecture
& Software $1,802.6 $(91.0) $1,711.6 $(20.1) $1,691.5 $1,651.8
Control
Products &
Solutions 2,410.9 (112.7) 2,298.2 (115.9) 2,182.3 1,981.6
-------- -------- --------- ------------ -------- --------
Total $4,213.5 $(203.7) $4,009.8 $(136.0) $3,873.8 $3,633.4
======== ======== ========= ============ ======== ========
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ROCKWELL AUTOMATION, INC.
OTHER SUPPLEMENTAL INFORMATION
(in millions)

Return On Invested Capital
----------------------------------------------------------------------

Our press release contains information regarding Return On Invested
Capital (ROIC), which is a non-GAAP financial measure. Management
believes that ROIC is useful to investors as a measure of performance
and of the effectiveness of the use of capital in its operations.
Management uses ROIC as one measure to monitor and evaluate the
performance of the company. Our measure of ROIC is likely to differ
from that used by other companies. We define ROIC as the percentage
resulting from the following calculation:
(a) Income from continuing operations before accounting change and
income from Power Systems discontinued operating activities,
before non-operating gains or losses, special charges, interest
expense, income tax provision, and purchase accounting
depreciation and amortization, divided by;
(b) average invested capital for the year, calculated as a five
quarter rolling average using the sum of short-term debt, long-
term debt, shareowners' equity, cumulative impairments of goodwill
and intangibles required under SFAS No. 142, and accumulated
amortization of goodwill and other intangible assets, minus cash
and cash equivalents, multiplied by;
(c) one minus the effective tax rate for the period.

ROIC is calculated as follows:
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Twelve Months Ended
June 30,
-------------------
2008 2007
--------- ---------

(a) Return
Income from continuing operations before
cumulative effect
of accounting change $615.8 $562.3
Income from Power Systems discontinued operating
activities - 68.8
Interest expense (1) 67.0 65.0
Income tax provision (1) 247.6 242.0
Purchase accounting depreciation and amortization
(1) 26.0 12.7
Special charges - 43.5
Gain on sale of investment - (19.9)
--------- ---------
Return 956.4 974.4
--------- ---------

(b) Average Invested Capital
Short-term debt 384.3 330.1
Long-term debt 705.4 612.1
Shareowners' equity 1,853.8 1,938.6
Impairments of goodwill and intangibles - 64.8
Accumulated amortization of goodwill and
intangibles 609.3 650.5
Cash and cash equivalents (770.4) (621.7)
--------- ---------
Average invested capital 2,782.4 2,974.4
--------- ---------

(c) Effective Tax Rate
Income tax provision (1) 247.6 242.0

Income from continuing operations and discontinued
operating
activities before income taxes and cumulative
effect of accounting change $863.4 $873.1
--------- ---------

Effective tax rate 28.7% 27.7%
--------- ---------

(a) / (b) x (1-c) Return On Invested Capital 24.5% 23.7%
========= =========

(1) Includes amounts related to both continuing and discontinued
operations.
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Rockwell Automation
John Bernaden
Media Relations
414.382.2555
or
Rockwell Automation
Rondi Rohr-Dralle
Investor Relations
414.382.8510

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