Rockwell Automation Reports Second Quarter Results

-- Diluted EPS from continuing operations of $0.83

-- Organic revenue growth of 13 percent; 14 percent excluding currency translation

-- Trailing four quarter after-tax ROIC increased 4 percentage points to 20 percent

-- Raising full-year guidance for diluted EPS from continuing operations, revenue growth, and free cash flow

Rockwell Automation, Inc. (NYSE:ROK), a leading global provider ofindustrial automation power, control and information solutions, todayreported fiscal 2006 second quarter income from continuing operationsof $149.5 million ($0.83 per share) compared to $142.5 million ($0.75per share) in fiscal 2005. Results in 2005 included $19.7 million($0.10 per share) from the beneficial resolution of federal taxmatters.

Net income in the quarter, which includes discontinued operations,was $146.5 million ($0.81 per share) including a $3.0 millionafter-tax charge ($0.02 per share) related to pending legal matters.Net income for the second quarter of 2005 was $150.0 million ($0.79per share) including $7.5 million ($0.04 per share) of tax benefits.

Sales for the second quarter were $1,377.9 million, up 13 percentcompared to $1,218.4 million in the second quarter of 2005. Adjustedfor the impact of currency translation, sales increased 14 percent.Segment operating earnings in the second quarter were $258.4 million,up 18 percent compared to $218.7 million in the second quarter of2005.

Keith Nosbusch, chairman and chief executive officer, said; "I amvery pleased with the outstanding results this quarter that againdemonstrate the power of our business model. Revenue growth benefitedfrom the powerful combination of two converging forces. First, we areseeing continued strong demand from our North American installed baseand global power-centric end markets. Second, the impact of ourongoing and accelerated reinvestment in technology leadership anddomain expertise is increasingly visible. Our relentless productivityefforts fuel these investments and allow us to maintain a lean coststructure and high returns."

Nosbusch continued, "While pleased with the results we havegenerated over the last several quarters, we are not complacent.Recognizing that recent results have been enhanced by a favorableeconomic backdrop, we are intensely focused on diligent execution andthe continued reallocation of resources necessary to sustain superiorperformance into 2008 and beyond."

Outlook

The company is adjusting full-year 2006 guidance to reflectperformance during the first half of the year. The company now expectsfull-year revenue growth excluding the impact of currency to beapproximately 10 to 11 percent. The company is also raising guidancefor diluted EPS from continuing operations to approximately $3.25 fromthe previous range of $3.10-$3.20, and adjusting free cash flowguidance upward by $10 million to $310 million to reflect the higherearnings.

Following is a discussion of second quarter results for eachbusiness.

Control Systems

Control Systems second quarter sales were $1,124.3 million, anincrease of 13 percent compared to $998.6 million in 2005. Currencytranslation reduced reported revenue growth by less than 1 percentagepoint. From a regional perspective, sales in the U.S. increased 17percent in the quarter, while non-U.S. sales increased 9 percent,excluding the effect of currency translation. Growth remained strongin Latin America and Asia, and improved results in Europe wereencouraging. Our Logix integrated architecture platform grew by about20 percent. Segment operating earnings were $216.8 million, anincrease of 16 percent compared to $186.8 million in the secondquarter of 2005. Profitability benefited from volume, productivityefforts, and price, which more than offset inflation and thenon-recurrence of the $11.4 million insurance recovery recognized in2005. Control Systems return on sales was 19.3 percent in the secondquarter of 2006 compared to 18.7 percent in 2005.

Power Systems

Power Systems second quarter sales were $253.6 million, anincrease of 15 percent compared to sales of $219.8 million in the 2005second quarter. Segment operating earnings increased 30 percent to$41.6 million, compared to $31.9 million in the second quarter of2005. The increase in segment operating earnings was attributable tohigher volume, net price increases, and productivity improvements,partially offset by inflation. Power Systems return on sales was 16.4percent in the second quarter of 2006 compared to 14.5 percent in2005.

General Corporate - Net

Second quarter general corporate expenses were $24.8 millioncompared to $23.3 million in the 2005 second quarter.

Income Taxes

The effective tax rate for the second quarter of 2006 was 30.4percent and included the beneficial resolution of a federal taxmatter. The effective tax rate for the second quarter of 2005 was 32.0percent, excluding the effect of a $19.7 million ($0.10 per share)benefit from resolution of federal tax matters. For the full year 2006the company still expects an effective tax rate of 33 to 34 percent,which presumes an effective rate of approximately 35.5 percent for thesecond half of 2006.

Free Cash Flow

Free cash flow for the second quarter of 2006 was $150 million,approximately equal to income from continuing operations. Free cashflow in the second quarter of 2005 was $131.7 million. Increasedworking capital needs were offset by the higher earnings and reducedcapital spending.

Free cash flow and ROIC are non-GAAP measures that are defined inthe attachments to this release under "Other SupplementalInformation".

A conference call to discuss financial results will take place at10 a.m. EDT April 27. The call will be webcast and accessible via theRockwell Automation website (www.rockwellautomation.com).

This news release contains statements (including certainprojections and business trends) accompanied by such phrases as"believe", "estimate", "expect", "anticipate", "will", "intend" andother similar expressions, that are "forward-looking statements" asdefined in the Private Securities Litigation Reform Act of 1995.Actual results may differ materially from those projected as a resultof certain risks and uncertainties, many of which are beyond ourcontrol, 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, local laws, regulations and policies of foreign governments and other external factors we cannot control;

-- successful development of advanced technologies, 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;

-- regulatory and legislative changes related to the reporting and funding of pension and health care obligations;

-- 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; 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 thedate of filing this release. We undertake no obligation to update orrevise any forward-looking statement, whether as a result of newinformation, future events or otherwise.

Rockwell Automation, Inc. (NYSE:ROK), is a leading globalprovider of industrial automation power, control and informationsolutions that help customers meet their manufacturing productivityobjectives. The company brings together leading brands in industrialautomation for Complete Automation solutions, includingAllen-Bradley(R) controls and services, Dodge(R) mechanical powertransmission products, Reliance(R) motors and drives, and RockwellSoftware(R) factory management software. Headquartered in Milwaukee,Wisc., the company employs about 21,000 people serving customers inmore than 80 countries.
ROCKWELL AUTOMATION, INC.
SALES AND EARNINGS INFORMATION
(in millions, except per share amounts)


Three Months Ended Six Months Ended
March 31, March 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Sales
Control Systems $1,124.3 $998.6 $2,196.4 $1,984.1
Power Systems 253.6 219.8 482.9 419.2
--------- --------- --------- ---------
Total sales $1,377.9 $1,218.4 $2,679.3 $2,403.3
========= ========= ========= =========

Segment Operating Earnings
Control Systems $216.8 $186.8 $428.2 $376.8
Power Systems 41.6 31.9 78.6 55.5
--------- --------- --------- ---------
Total segment operating
earnings 258.4 218.7 506.8 432.3

Purchase accounting
depreciation and amortization (4.2) (3.3) (7.0) (10.2)
General corporate - net (24.8) (23.3) (47.1) (39.3)
Interest expense (14.5) (11.5) (28.0) (22.6)
--------- --------- --------- ---------

Income from continuing
operations before income taxes 214.9 180.6 424.7 360.2
Income tax provision (65.4) (38.1) (129.5) (95.6)
--------- --------- --------- ---------

Income from continuing
operations 149.5 142.5 295.2 264.6
Income from discontinued
operations (3.0) 7.5 (3.0) 18.8
--------- --------- --------- ---------

Net income $146.5 $150.0 $292.2 $283.4
========= ========= ========= =========

Diluted Earnings Per Share
Continuing operations $0.83 $0.75 $1.63 $1.40
Discontinued operations (0.02) 0.04 (0.02) 0.10
--------- --------- --------- ---------

Net Income $0.81 $0.79 $1.61 $1.50
========= ========= ========= =========

Average Diluted Shares 180.7 189.0 181.5 189.1
========= ========= ========= =========



ROCKWELL AUTOMATION, INC.
CONDENSED BALANCE SHEET
(in millions)


March 31, September 30,
2006 2005
------------- -------------
Assets
Cash and cash equivalents $302.3 $463.6
Receivables 849.5 799.6
Inventories 606.2 569.9
Deferred income taxes 200.3 169.4
Other current assets 139.9 184.0
------------- -------------
Total current assets 2,098.2 2,186.5
Property, net 651.5 774.5
Goodwill 824.4 811.9
Other intangible assets, net 326.1 307.0
Deferred income taxes 58.4 66.3
Prepaid pension 619.9 200.5
Other assets 188.5 178.4
------------- -------------

Total $4,767.0 $4,525.1
============= =============

Liabilities and Shareowners' Equity
Short-term debt $101.5 $1.2
Accounts payable 388.5 388.5
Compensation and benefits 161.2 214.4
Income taxes payable 72.7 5.4
Other current liabilities 381.5 331.3
------------- -------------
Total current liabilities 1,105.4 940.8
Long-term debt 745.8 748.2
Retirement benefits 989.0 977.5
Other liabilities 253.9 209.5
Shareowners' equity 1,672.9 1,649.1
------------- -------------

Total $4,767.0 $4,525.1
============= =============



ROCKWELL AUTOMATION, INC.
CONDENSED CASH FLOW INFORMATION
(in millions)


Six Months Ended
March 31,
-------------------
2006 2005
--------- ---------
Continuing Operations:

Operating Activities:
Net income $292.5 $283.4
Loss (income) from discontinued operations 3.0 (18.8)
--------- ---------
Income from continuing operations 295.2 264.6
--------- ---------
Adjustments to arrive at cash (used for) provided
by operating activities:
Depreciation 67.2 74.7
Amortization of intangible assets 11.8 12.4
Share-based compensation expense 14.4 -
Retirement benefit expense 58.6 44.5
Pension trust contributions (460.9) (58.6)
Net (gain) loss on disposition of property and
business (0.1) 0.5
Income tax benefit from the exercise of stock
options 0.8 57.3
Excess income tax benefit from the exercise of
stock options (38.3) -
Changes in assets and liabilities, excluding
effects of foreign currency adjustments:
Receivables (48.6) (14.8)
Inventories (41.5) (37.4)
Accounts payable 6.1 (11.0)
Compensation and benefits (53.1) (34.5)
Income taxes 125.0 (2.8)
Other assets and liabilities 21.0 (10.4)
--------- ---------

Cash (used for) provided by operating activities (42.4) 284.5
--------- ---------

Investing Activities:
Capital expenditures (59.3) (62.4)
Acquisition of businesses (32.9) -
Proceeds from sale of property and business 164.9 7.1
Other investing activities (6.4) (0.7)
--------- ---------

Cash provided by (used for) investing activities 66.3 (56.0)
--------- ---------

Financing Activities:
Net issuance of short-term debt 100.3 -
Cash dividends (80.2) (61.0)
Purchases of treasury stock (290.5) (262.6)
Proceeds from the exercise of stock options 47.7 85.2
Excess income tax benefit from the exercise of
stock options 38.3 -
Other financing activities 0.3 (1.1)
--------- ---------

Cash used for financing activities (184.1) (239.5)
--------- ---------

Effect of exchange rate changes on cash (1.1) (3.9)
--------- ---------

Cash used for continuing operations (161.3) (14.9)
Cash provided by discontinued operating activities - 25.8
--------- ---------

(Decrease) increase in cash and cash equivalents $(161.3) $10.9
========= =========



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. In
the first quarter of 2006 we adopted SFAS 123(R), which requires that
we report excess tax benefits 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 operating cash flow to present free
cash flow on a basis that is consistent with our historical
presentation.

In our opinion, free cash flow provides useful information to
investors regarding our ability to generate cash from business
operations that is available for acquisitions and other investments,
service of debt principal, dividends and share repurchases. We use
free cash flow as one measure to monitor and evaluate performance. Our
definition of free cash flow may be different from definitions used by
other companies.

The following table summarizes free cash flow by quarter:


Quarter Ended
-------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31,
2005 2005 2005 2005 2006
--------- --------- --------- --------- ---------

Cash provided by
operating activities $182.2 $181.0 $173.4 $(197.5) $155.1
Capital expenditures (50.5) (23.3) (38.4) (27.2) (32.1)
Tax benefit from
stock option
exercises - - - 11.3 27.0
--------- --------- --------- --------- ---------
Free cash flow $131.7 $157.7 $135.0 $(213.4) $150.0
========= ========= ========= ========= =========


Effect of Changes in Currency Exchange Rates on Sales
-----------------------------------------------------

Our press release contains information regarding the effect of changes
in currency exchange rates on sales, which is a non-GAAP measure.
Management believes this provides useful information to investors
because it reflects regional performance from our activities without
the effect of changes in currency rates. Management uses sales
excluding the effect of changes in currency exchange rates as one
measure to monitor and evaluate our regional performance. Sales are
attributed to the geographic regions based on the country of
destination.

The following is a reconciliation of reported sales to sales excluding
the effect of changes in currency exchange rates for the three and six
months ended March 31, 2006 compared to sales for the three and six
months ended March 31, 2005:


Three Months Ended March 31,
-------------------------------------------
2006 2005
-------------------------------- ----------
Sales
Excluding
Effect of Effect of
Changes in Changes in
Sales Currency Currency Sales
---------- ---------- ---------- ----------

United States and Canada $969.9 $(7.3) $962.6 $835.7
Europe, Middle East, Africa 204.5 17.5 222.0 207.6
Asia-Pacific 134.9 1.1 136.0 122.9
Latin America 68.6 (4.8) 63.8 52.2
---------- ---------- ---------- ----------
Total $1,377.9 $6.5 $1,384.4 $1,218.4
========== ========== ========== ==========


Six Months Ended March 31,
-------------------------------------------
2006 2005
-------------------------------- ----------
Sales
Excluding
Effect of Effect of
Changes in Changes in
Sales Currency Currency Sales
---------- ---------- ---------- ----------

United States and Canada $1,877.0 $(10.9) $1,866.1 $1,632.5
Europe, Middle East, Africa 395.7 33.7 429.4 413.7
Asia-Pacific 267.3 1.4 268.7 247.7
Latin America 139.3 (10.4) 128.9 109.4
---------- ---------- ---------- ----------
Total $2,679.3 $13.8 $2,693.1 $2,403.3
========== ========== ========== ==========


The following is a reconciliation for the Control Systems segment of
reported sales to sales excluding the effect of changes in currency
exchange rates for the three and six months ended March 31, 2006
compared to sales for the three and six months ended March 31, 2005:


Three Months Ended March 31,
-------------------------------------------
2006 2005
-------------------------------- ----------
Sales
Excluding
Effect of Effect of
Changes in Changes in
Sales Currency Currency Sales
---------- ---------- ---------- ----------

United States and Canada $737.6 $(6.5) $731.1 $631.6
Europe, Middle East, Africa 199.3 17.3 216.6 204.4
Asia-Pacific 126.2 1.3 127.5 115.8
Latin America 61.2 (4.6) 56.6 46.8
---------- ---------- ---------- ----------
Total $1,124.3 $7.5 $1,131.8 $998.6
========== ========== ========== ==========


Six Months Ended March 31,
-------------------------------------------
2006 2005
-------------------------------- ----------
Sales
Excluding
Effect of Effect of
Changes in Changes in
Sales Currency Currency Sales
---------- ---------- ---------- ----------

United States and Canada $1,437.2 $(9.6) $1,427.6 $1,246.4
Europe, Middle East, Africa 386.6 33.4 420.0 407.2
Asia-Pacific 250.3 1.7 252.0 231.9
Latin America 122.3 (10.0) 112.3 98.6
---------- ---------- ---------- ----------
Total $2,196.4 $15.5 $2,211.9 $1,984.1
========== ========== ========== ==========



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, if
any, and before 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 adjusted effective tax rate for the period, the
adjusted effective tax rate is calculated by excluding the effect
of extraordinary separately reported tax items in continuing
operations.

ROIC is calculated as follows:


Twelve Months Ended
March 31,
--------------------
2006 2005
---------- ---------

(a) Return
Income from continuing operations $549.0 $489.3
Interest expense 51.2 43.7
Income tax provision 252.5 127.4
Purchase accounting depreciation and amortization 11.5 23.8
---------- ---------
Return 864.2 684.2
---------- ---------

(b) Average Invested Capital
Short-term debt 41.3 0.2
Long-term debt 748.3 755.9
Shareowners' equity 1,757.1 1,830.6
Impairments of goodwill and intangibles 108.0 108.0
Accumulated amortization of goodwill and
intangibles 669.9 653.6
Cash and cash equivalents (393.2) (421.9)
---------- ---------
Average invested capital 2,931.4 2,926.4
---------- ---------

(c) Adjusted Effective Tax Rate
Income tax provision 252.5 127.4
Separately reported tax items in continuing
operations - 54.2
---------- ---------
Income tax provision before separately
reported tax items in continuing operations 252.5 181.6
---------- ---------

Income from continuing operations before income
taxes $801.5 $616.7
---------- ---------

Adjusted effective tax rate 31.5% 29.4%
---------- ---------

(a) / (b) x (1-c) Return On Invested Capital 20.2% 16.5%
========== =========


Effective Tax Rate Excluding Income Tax Benefits
------------------------------------------------

Our press release contains information regarding our effective tax
rate excluding income tax benefits in 2005, which is a non-GAAP
financial measure. Our effective tax rate for the three months ended
March 31, 2005 was 21 percent and included a net tax benefit of $19.7
million related to the resolution of claims and other tax matters in
connection with the closure of the federal audit cycle for the years
1998 through 2002. Excluding the $19.7 million tax benefit, our
effective tax rate for the three months ended March 31, 2005 was 32
percent. Management believes that the Effective Tax Rate Excluding
Income Tax Benefits is useful to investors as a measure of performance
because the benefits are not indicative of the benefits we may
recognize in the future. Management uses effective tax rates excluding
these benefits to monitor our performance.