UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 2004 Commission file number 1-12383

Rockwell Automation, Inc.

Registrant’s telephone number, including area code
(414) 212-5299

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).   Yes   þ   No   o

184,173,792 shares of registrant’s Common Stock, $1.00 par value, were outstanding on December 31, 2004.

ROCKWELL AUTOMATION, INC.

INDEX

PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements

ROCKWELL AUTOMATION, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

See Notes to Condensed Consolidated Financial Statements.

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ROCKWELL AUTOMATION, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

See Notes to Condensed Consolidated Financial Statements.

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ROCKWELL AUTOMATION, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

See Notes to Condensed Consolidated Financial Statements.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	Basis of Presentation and Accounting Policies
	In the opinion of management of Rockwell Automation, Inc. (the Company or Rockwell Automation), the unaudited condensed consolidated financial statements contain all adjustments, consisting solely of adjustments of a normal recurring nature, necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. These statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended September 30, 2004. The results of operations for the three-month period ended December 31, 2004 are not necessarily indicative of the results for the full year. Certain prior year amounts have been reclassified to conform to the current year presentation.
	In September 2004, we sold our FirstPoint Contact business. FirstPoint Contact is classified as a discontinued operation in the condensed consolidated financial statements for all periods presented.
	Cash and Cash Equivalents
	Cash and cash equivalents include time deposits and certificates of deposit with original maturities of three months or less.
	Short-Term Investments
	Instruments with maturities between three months and one year are classified as short-term investments. The balance at December 31, 2004 represents a commercial paper investment. We have the intent and ability to hold to maturity; accordingly, the investment is reported at amortized cost.
	Receivables
	Receivables are stated net of allowances for doubtful accounts of $26.1 million at December 31, 2004 and $25.2 million at September 30, 2004. In addition, receivables are stated net of an allowance for certain customer rebates and incentives of $9.5 million at December 31, 2004 and $7.8 million at September 30, 2004.
	Properties
	Properties are stated net of accumulated depreciation of $1,378.4 million at December 31, 2004 and $1,335.2 million at September 30, 2004.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.	Basis of Presentation and Accounting Policies — (Continued)
	Stock-Based Compensation
	We account for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Stock options are granted at prices equal to the fair market value of our common stock on the grant dates; therefore no compensation expense is generally recognized in connection with stock options granted to employees. Compensation expense resulting from grants of restricted stock is recognized during the period in which the service is performed. The following table illustrates the effect on net income and earnings per share as if the fair value-based method provided by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, had been applied for all outstanding and unvested awards in each period (in millions, expect per share amounts):

	The fair value of each option was estimated using the Black-Scholes pricing model.
	Included in pro forma net income for the three months ended December 31, 2003 is $5.8 million of expense ($3.6 million after tax) related to performance-vesting options that vested in the first quarter of 2004 as a result of the market price of our common stock reaching a specified level for a pre-determined period of time.
	See Note 2 for further discussion of the recent accounting pronouncement regarding stock-based compensation.
	Income Taxes
	At the end of each interim reporting period, we estimate the effective tax rate expected to be applicable for the full fiscal year. The rate determined is used in providing for income taxes on a year-to-date basis, excluding the effect of significant unusual items or items that are reported net of their related tax effects. The tax effect of significant unusual items is reflected in the period in which they occur.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.	Basis of Presentation and Accounting Policies — (Continued)
	Earnings Per Share
	We present basic and diluted earnings per share (EPS) amounts. Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the applicable period. Diluted EPS amounts are based upon the weighted average number of common and common equivalent shares outstanding during the applicable period. The difference between basic and diluted EPS is solely attributable to stock options. We use the treasury stock method to calculate the effect of outstanding stock options. Stock options for which the exercise price exceeds the average market price (out-of-the-money options) over the applicable period have an antidilutive effect on EPS, and accordingly, are excluded from the calculation of diluted EPS. For the quarter ended December 31, 2004, options for 8,300 shares were excluded from the diluted EPS calculation because they were antidilutive. For the quarter ended December 31, 2003, all options outstanding were included in the diluted EPS calculation because none were antidilutive.
2.	Recent Accounting Pronouncements
	In December 2004, the Financial Accounting Standards Board (FASB) issued the revised SFAS No. 123, Share-Based Payment (SFAS 123(R)). SFAS 123(R) requires compensation costs related to share-based payment transactions to be recognized in the financial statements. Generally, compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be remeasured each reporting period. Compensation cost will be recognized over the requisite service period, generally as the award vests. We are required to adopt SFAS 123(R) in the fourth quarter of 2005. SFAS 123(R) applies to all awards granted after June 30, 2005 and to previously-granted awards unvested as of the adoption date. While we continue to evaluate the effect of SFAS 123(R) on our financial statements and related disclosures, we currently expect the effect of compensation expense, net of related tax, to be approximately $3 million in the fourth quarter of 2005.
	In November 2004, the FASB issued SFAS No. 151, Inventory Costs (SFAS 151). SFAS 151 requires that abnormal amounts of idle facility expense, freight, handling costs and spoilage be recognized as current-period charges. Further, SFAS 151 requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. Unallocated overheads must be recognized as an expense in the period in which they are incurred. SFAS 151 is effective for inventory costs incurred beginning in the first quarter of 2006. We are currently evaluating the effect of SFAS 151 on our financial statements and related disclosures.
3.	Inventories
	Inventories are summarized as follows (in millions):

Inventories are reported net of the allowance for excess and obsolete inventory of $47.4 million at December 31, 2004 and $46.2 million at September 30, 2004.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

4.	Goodwill and Other Intangible Assets
	Changes in the carrying amount of goodwill for the three months ended December 31, 2004 are as follows (in millions):

Other intangible assets consisted of the following (in millions):

	The Allen-Bradley, Reliance and Dodge trademarks have been determined to have an indefinite life, and therefore are not subject to amortization.
	Estimated amortization expense is $23.2 million in 2005, $20.0 million in 2006, $19.9 million in 2007, $19.3 million in 2008 and $15.6 million in 2009.
	We perform the annual evaluation of our goodwill and indefinite life intangible assets for impairment as required by SFAS 142 during the second quarter of each year.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

5.	Product Warranty Obligations
	We record a liability for product warranty obligations at the time of sale to a customer based upon historical warranty experience. The term of the warranty is generally twelve months. We also record a liability for specific warranty matters when they become known and are reasonably estimable. Our product warranty obligations are included in Other current liabilities in the Condensed Consolidated Balance Sheet.
	Changes in the product warranty obligations for the three-month periods ended December 31, 2004 and 2003 are as follows (in millions):

6.	Long-Term Debt
	Long-term debt consisted of the following (in millions):

	In September 2002, we entered into an interest rate swap contract (the Swap) that effectively converted our $350 million aggregate principal amount of 6.15% notes, payable in 2008, to floating rate debt based on six-month LIBOR. The floating rate was 4.27 percent at December 31, 2004 and September 30, 2004. The fair value of the Swap, based upon quoted market prices for contracts with similar maturities, was $0.3 million at December 31, 2004 and $3.7 million at September 30, 2004. As permitted by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), as amended, we have designated the Swap as a fair value hedge. Accordingly, the fair value of the Swap was recorded in Other assets in the Condensed Consolidated Balance Sheet and the carrying value of the underlying debt was increased to $350.3 million at December 31, 2004 and $353.7 million at September 30, 2004 in accordance with SFAS 133.
	At September 30, 2004, we had $675.0 million of unsecured committed credit facilities, with $337.5 million expiring in October 2004 and $337.5 million expiring in October 2005. On October 26, 2004, we entered into a new five-year $600.0 million unsecured revolving credit facility. It replaced both the facility expiring on that date and the facility expiring in October 2005 (which we cancelled on that date). Borrowings under our new credit facility bear interest based on short-term money market rates in effect during the period such borrowings are outstanding. This facility is available for general corporate purposes, including support for our commercial paper borrowings. The terms of our credit facility contain a covenant under which we would be in default if our debt-to-total capital ratio were to exceed 60 percent. In addition to our $600.0 million credit facility, short-term unsecured credit facilities are available to foreign subsidiaries. There were no borrowings under any existing credit facilities during the quarter ended December 31, 2004.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

7.	Retirement Benefits
	The components of net periodic benefit cost are as follows (in millions):

	In the first three months of 2005, we made a voluntary contribution of $50.0 million to our U.S. qualified pension plan trust compared to no contributions in the first three months of 2004.
8.	Comprehensive Income
	Comprehensive income consisted of the following (in millions):

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ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

9.	Related Party Transactions
	We own 50 percent of Rockwell Scientific Company LLC (RSC). This ownership interest is accounted for using the equity method. Our investment in RSC of $58.4 million at December 31, 2004 and $57.5 million at September 30, 2004 is included in Other assets in the Condensed Consolidated Balance Sheet.
	We have an agreement with RSC pursuant to which RSC performs research and development services for us through 2005. We are obligated to pay RSC a minimum of $2.5 million for such services in 2005. We incurred $0.4 million in the three-month period ended December 31, 2004 and $0.6 million in the three-month period ended December 31, 2003 for research and development services performed by RSC. At December 31, 2004, the amounts due to or from RSC were not significant. At September 30, 2004, the amount due to RSC for research and development services was $0.7 million. At September 30, 2004, the amount due from RSC for cost sharing arrangements was not significant.
	We share equally with Rockwell Collins, Inc. (Rockwell Collins), which owns 50 percent of RSC, in providing a $6.0 million line of credit to RSC which bears interest at the greater of our or Rockwell Collins’ commercial paper borrowing rate. There were no borrowings on the line of credit outstanding at December 31, 2004 or September 30, 2004. In addition, we and Rockwell Collins each guarantee one-half of a lease agreement for one of RSC’s facilities. The total future minimum lease payments under the lease are $5.3 million. The lease agreement has a term that ends in December 2011.
	We own 25 percent of CoLinx, LLC (CoLinx), a company that provides logistics and e-commerce services. This ownership interest is accounted for using the equity method. We paid CoLinx $4.3 million in the three-month period ended December 31, 2004 and $5.4 million in the three-month period ended December 31, 2003 primarily for logistics services. In addition, CoLinx paid us $0.7 million in the three-month period ended December 31, 2004 and $0.9 million in the three-month period ended December 31, 2003 for the use of facilities we own and other services. The amounts due to or from CoLinx at December 31, 2004 and September 30, 2004 were not significant.
10.	Income Taxes
	During the first quarter of 2005, the primary increase in cash flows from income taxes relates to the receipt of $27.5 million of net tax refunds related to the following items:

	•	$20.0 million resulting from the resolution of various ongoing federal and state tax matters. The corresponding income was recognized in prior periods.
	•	$7.5 million resulting from a state tax refund for the period 1989 to 1991. The corresponding income was recognized in the fourth quarter of 2004.

	We recognized in earnings in the first quarter of 2004 a net tax benefit of $4.3 million related to state tax benefits associated with a previously reported U.S. research and experimentation tax credit settlement.
	In connection with the divestiture of certain businesses in prior years, we retained tax liabilities and the rights to tax refunds for periods prior to the respective divestitures. As a result, from time to time, we may receive refunds or may be required to make payments related to tax matters associated with these divested businesses. Amounts recorded for these matters, if any, are based on estimates. We review and revise these estimates as appropriate to take into account all information we have available. Actual amounts received or paid, if any, could differ materially from those estimates and would accordingly result in an adjustment to results of operations in the period the refunds are received or payments are made.
	See Note 12 for a discussion of discontinued operations tax related matters.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

11.	Commitments and Contingent Liabilities
	Asbestos
	Like thousands of other companies, we (including our subsidiaries) have been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos that was used in certain components of our products many years ago. We have maintained insurance coverage that we believe covers indemnity costs and defense expenses, over and above self-insured retentions, for many of these claims. We initiated litigation in the Milwaukee County Circuit Court on February 12, 2004 to enforce the insurance policies against Nationwide Indemnity Company and Kemper Insurance, the insurance carriers that provided liability insurance coverage to our former subsidiary Allen-Bradley. Kemper’s status as a financially viable entity is in question. We seek to recover from the carriers the indemnity costs and defense expenses incurred previously and to be incurred in the future in asbestos lawsuits brought by claimants alleging asbestos exposure for which Allen-Bradley is alleged to be responsible. On January 21, 2005, the Milwaukee County Circuit Court issued a preliminary ruling in our favor on several issues in the case in connection with our motion for summary judgment seeking reimbursement of certain past indemnity costs and defense expenses. Although the ruling is not final and may be subject to further proceedings, we expect that as a result of this ruling the carriers will at a minimum be jointly and severally responsible for (a) paying on-going indemnity costs and defense expenses of a substantial majority of the Allen-Bradley asbestos claims, and (b) paying a portion of past defense costs incurred since June 2002 in connection with Allen-Bradley asbestos cases. The specific amounts for which the carriers are responsible will be the subject of further complex proceedings in the case.
	The uncertainties of asbestos claim litigation and resolution of the litigation with our insurance companies make it difficult to predict accurately the ultimate resolution of asbestos claims. That uncertainty is increased by the possibility of adverse rulings or new legislation affecting asbestos claim litigation or the settlement process. Subject to these uncertainties and based on our experience defending asbestos claims, we do not believe these lawsuits or our insurance recoveries will have a material effect on our financial condition.
	Other
	In connection with the divestiture of our former aerospace and defense businesses (the A&D Business) to The Boeing Company (Boeing), we agreed to indemnify Boeing for certain matters related to operations of the A&D Business for periods prior to the divestiture. In connection with the spinoffs of our former automotive component systems business, semiconductor systems business and Rockwell Collins avionics and communications business, the spun-off companies have agreed to indemnify us for substantially all contingent liabilities related to the respective businesses, including environmental and intellectual property matters.
	We have, from time to time, divested certain of our businesses. In connection with such divestitures, there may be lawsuits, claims and proceedings instituted or asserted against us related to the period that we owned the businesses. In addition, we have guaranteed performance and payment under certain contracts of divested businesses, including a $60.0 million lease obligation of our former semiconductor systems business, now Conexant Systems, Inc. (Conexant). The lease obligation of Conexant is secured by real property subject to the lease and is within a range of estimated fair values of the real property. In consideration for this guarantee, we received $250,000 per quarter from Conexant through December 31, 2003 and $500,000 per quarter from Conexant through December 31, 2004. We expect to be released from the guarantee in 2005.
	In many countries we provide a limited intellectual property indemnity as part of our terms and conditions of sale. We also at times provide limited intellectual property indemnities in other contracts with third parties, such as contracts concerning: the development and manufacture of our products; the divestiture of businesses; and the licensing of intellectual property. Due to the number of agreements containing such provisions, we are unable to estimate the maximum potential future payments. However, we believe that future payments, if any, would not be material to our business or financial condition.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

11.	Commitments and Contingent Liabilities – (Continued)
	Various other lawsuits, claims and proceedings have been or may be instituted or asserted against us relating to the conduct of our business, including those pertaining to product liability, intellectual property, environmental, safety and health, employment and contract matters. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims, or proceedings may be disposed of unfavorably to us, we believe the disposition of matters which are pending or asserted will not have a material adverse effect on our business or financial condition.
12.	Discontinued Operations
	The following is a summary of the composition of income from discontinued operations included in the Condensed Consolidated Statement of Operations (in millions):

	State Tax Refunds
	In the first quarter of 2005, we recorded a net tax benefit related to a prior year state tax refund of a divested business. We expect to receive the cash related to this refund during 2005.
	During the first quarter of 2005, we received $18.4 million related to a state tax refund for the period 1989 to 1991. The corresponding income was recognized in the fourth quarter of 2004. This amount is displayed in the Condensed Consolidated Statement of Cash Flows as Cash Provided by Discontinued Operations.
	Rocky Flats
	In the first quarter of 2004, we recorded a benefit of $7.6 million ($4.6 million after tax) as a result of a final judgment in a defense claim legal proceeding related to our former operation of the Rocky Flats facility of the Department of Energy.
	FirstPoint Contact
	In the fourth quarter of 2004, we sold our former FirstPoint Contact business. The results of operations of FirstPoint Contact for 2004 are reflected in Income from Discontinued Operations in the Condensed Consolidated Statement of Operations.   Summarized results of FirstPoint Contact are as follows (in millions):

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

13.	Segment Information
	The following tables reflect the sales and operating results from our reportable segments (in millions):

Among other considerations, we evaluate performance and allocate resources based upon segment operating earnings before income taxes, interest expense, costs related to corporate offices, nonrecurring special charges, gains and losses from the disposition of businesses, earnings and losses from equity affiliates that are not considered part of the operations of a particular segment and incremental acquisition related expenses resulting from purchase accounting adjustments such as intangible asset amortization, depreciation, inventory and purchased research and development charges. Depending on the product, intersegment sales are either at a market price or cost plus a mark-up, which does not necessarily represent a market price.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareowners of
Rockwell Automation, Inc.:

We have reviewed the accompanying condensed consolidated balance sheet of Rockwell Automation, Inc. and subsidiaries (the “Company”) as of December 31, 2004, and the related condensed consolidated statements of operations and cash flows for the three-month periods ended December 31, 2004 and 2003. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of September 30, 2004, and the related consolidated statements of operations, shareowners’ equity, cash flows, and comprehensive income for the year then ended (not presented herein); and in our report dated November 15, 2004, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets.” In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2004 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

 
DELOITTE & TOUCHE LLP

Milwaukee, Wisconsin
January 28, 2005

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Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

Cautionary Statement

     This Quarterly Report contains statements (including certain projections and business trends) accompanied by such phrases as “believe”, “estimate”, “expect”, “anticipate”, “will”, “intend” and other similar expressions, that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to the following:

	•	economic and political changes in international markets where we compete, such as currency exchange rates, inflation rates, recession, foreign ownership restrictions and other external factors we cannot control;
	•	demand for and market acceptance of new and existing products;
	•	levels of capital spending in industrial markets;
	•	the availability and price of components and materials;
	•	successful development of advanced technologies;
	•	the availability and effectiveness of our information technology systems;
	•	competitive product and pricing pressures;
	•	future terrorist attacks;
	•	intellectual property infringement claims by others and the ability to protect our intellectual property;
	•	the uncertainties of litigation; and
	•	other risks and uncertainties, including but not limited to those detailed from time to time in our SEC filings.

     These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Measures

     The following discussion includes sales excluding the effect of changes in currency exchange rates and free cash flow, which are non-GAAP measures. See Supplemental Sales Information for a reconciliation of reported sales to sales excluding the effect of changes in currency exchange rates in addition to a discussion of why we believe this non-GAAP measure is useful to investors. See Financial Condition for a reconciliation of cash flows from operating activities to free cash flow and a discussion of why we believe this non-GAAP measure is useful to investors.

Overview

     We are a leading global provider of industrial automation power, control and information products and services. We have two operating segments: Control Systems and Power Systems. Control Systems supplies industrial automation products, systems, software and services. Power Systems is a supplier of mechanical power transmission products and industrial motors and drives. Both are focused on helping customers improve manufacturing processes.

     Overall demand for our products is driven by:

	•	Investments in capacity, including upgrades, modifications, and expansions of existing manufacturing facilities, and the creation of new manufacturing facilities;
	•	Industry factors that include customers’ new product introductions, trends in the actual and forecasted demand for our customers’ products or services, and the regulatory and competitive environments in which our customers operate;
	•	Levels of global industrial production; and
	•	Regional factors that include local political, social, regulatory and economic circumstances.

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U.S. Industrial Economic Trends

     In the first quarter of 2005, U.S. sales accounted for more than 60 percent of our total sales. The trend of improving conditions experienced in the U.S. manufacturing economy during 2004 continued into the first quarter of 2005, as reflected in the various indicators we use to gauge the direction and momentum of our served markets. These indicators include:

	•	Industrial Equipment Spending, which is an economic statistic compiled by the Bureau of Economic Analysis (BEA). This statistic provides insight into spending trends in the broad U.S. industrial economy, which includes our primary customer base. This measure, over the longer term, has proven to have reasonable predictive value and to be a good directional indicator of our growth trend.
	•	Capacity Utilization, which is an indication of plant operating activity published by the Federal Reserve. Historically, there has been a meaningful correlation between Capacity Utilization and the level of capital investment made by our customers in their manufacturing base.
	•	The Purchasing Managers’ Index (PMI), as published by the Institute for Supply Management (ISM), which is an indication of the level of manufacturing activity in the U.S. According to the ISM, a PMI measure above 50 indicates that the manufacturing economy is generally expanding while a measure below 50 indicates that it is generally contracting.

     The table below depicts the continued gradual improvement in U.S. Industrial Equipment Spending and Capacity Utilization, and the sustained strength in the PMI since September 2003.

Non-U.S. Regional Trends

     Outside the U.S., demand is principally driven by the strength of the industrial economy in each region and by customers’ ability and propensity to invest in their manufacturing assets. These customers may include both multinational companies with expanding global presence and growing indigenous companies. Recent strength in demand has, in part, been driven by investment in both infrastructure and basic materials production capacity.

     During the first quarter, we witnessed exceptionally strong revenue growth in Latin America, especially Mexico, continued strong demand in Asia-Pacific, particularly China and India, and double-digit revenue growth in Europe.

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Industry Views

     We serve a wide range of industries, including consumer products, transportation, basic materials, and oil and gas.

     Our consumer products segment serves a broad array of customers in the food and beverage, brewing, consumer packaged goods and life sciences industries. This group is generally less cyclical than other heavy manufacturing segments.

     Sales to the transportation segment are affected by such factors as customer investment in new model introductions and more flexible manufacturing technologies.

     Basic materials segments, including mining, aggregates and cement, all benefit from higher commodities prices and higher global demand for basic materials that encourage significant investment in capacity and productivity in these industries.

     As energy prices rise, customers in the oil and gas industry increase their investment in production and transmission capacity. In addition, higher energy prices have historically caused customers across all industries to consider new investment in more energy-efficient manufacturing processes and technologies.

Objectives and Outlook for 2005

     The following is a summary of our objectives for 2005:

	•	Expand our integrated architecture platform by accelerating the penetration of the batch/hybrid market and demonstrating the value of real-time information;
	•	Continue our geographic expansion and growth, particularly in emerging economies;
	•	Build additional domain expertise in the industries we serve; and
	•	Drive continued cost productivity.

     We made significant progress towards each of these objectives during the quarter.

     Our revised outlook for 2005 assumes that the economic environment will remain favorable and that a sustainable industrial recovery will result in modest sequential growth during each quarter of 2005. While we expect demand for our products to benefit from this trend, we also assume that our growth will vary, and may exceed or lag trend levels in any given quarter.

     Based upon current economic conditions and business outlook as of the date hereof, we expect revenue to increase sequentially in each of the remaining quarters of 2005 by approximately 1 to 2 percent, resulting in full year 2005 organic revenue growth of approximately 10 percent, excluding the effect of changes in currency exchange rates. As of the date hereof, we expect full-year diluted earnings from continuing operations to be $2.55 to $2.65 per share, with results in each remaining quarter expected to be similar to those experienced in the first. Steadily increasing discretionary spending on our growth initiatives and business systems is expected to offset some of the profit from sequential revenue growth. This incremental spending, beginning in 2005 and continuing into 2006, is expected to improve market access and customer intimacy, and further the proliferation of our integrated control and information architecture, thereby sustaining a high rate of organic revenue growth. We anticipate that these initiatives will require spending equivalent to approximately $0.15 to $0.20 per share during the balance of 2005. We project 2005 free cash flow to be equal to or greater than net income.

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Summary of Results of Operations

     Our sales and operating earnings by segment, excluding intersegment sales, are summarized as follows (in millions):

     See Note 13 in the Condensed Consolidated Financial Statements for the definition of segment operating earnings and reconciliation of segment operating earnings to income from continuing operations.

     In September 2004, we sold our FirstPoint Contact business. FirstPoint Contact is classified as a discontinued operation in the consolidated financial statements for all periods presented.

2005 First Quarter Compared to 2004 First Quarter

     Sales increased 20 percent compared to the first quarter of 2004 driven by growth at both Control Systems and Power Systems. Three percentage points of the growth was due to the effect of changes in currency exchange rates.

     Income from continuing operations increased 114 percent due to volume leverage, favorable product mix, broad-based productivity improvements and cost control. We are beginning to see some modest improvement in Selling, general and administrative expenses as a percentage of our sales. The first quarter of 2004 results included a tax benefit of $4.3 million ($0.02 per diluted share) related to a previously reported U.S. research and experimentation tax credit settlement.

Control Systems

     Control Systems sales increased 19 percent compared to the first quarter of 2004. Three percentage points of the sales increase was due to the effect of changes in currency exchange rates, primarily resulting from the strength of the major European currencies in relation to the U.S. dollar. Sales outside of the U.S. increased 20 percent (13 percent excluding the effect of changes in currency exchange rates), with particularly strong growth in the Latin America and Asia-Pacific regions. U.S. sales increased 18 percent in the first quarter of 2005 compared to the first quarter of 2004.

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ROCKWELL AUTOMATION, INC.

2005 First Quarter Compared to 2004 First Quarter – Continued

Control Systems – (Continued)

     Control Systems growth was experienced across nearly all businesses, regions and industries. The steadily improving industrial economy, particularly in North America, and the continued strength in our Logix integrated architecture platform and related product offerings, contributed to the increase in sales. Logix grew by greater than 30 percent during the first quarter of 2005 compared to the first quarter of 2004.

     Segment operating earnings and margins benefited from volume leverage, favorable product mix, cost control and productivity efforts, and improving price/cost dynamics.

Power Systems

     Power Systems sales increased 23 percent compared to the first quarter of 2004 due to significant growth in both our Mechanical and Electrical businesses. Strong sales volume continued in the first quarter of 2005 from the volume strength experienced in the second half of 2004 as the global market continued to invest in industrial capacity and productivity initiatives.

     Segment operating earnings and margins benefited from the significant cost and productivity initiatives launched in the second quarter of 2004, volume leverage and price increases, the combination of which more than offset higher material costs.

General Corporate-Net

     General corporate expenses were $16.0 million in the first quarter of 2005 compared to $16.9 million in the first quarter of 2004.

Interest Expense

     Interest expense was $11.1 million in the first quarter of 2005 compared to $10.5 million in the first quarter of 2004. The increase was due to higher interest rates associated with our interest rate swap (see Note 6 in the Condensed Consolidated Financial Statements).

Income Taxes

     The effective tax rate for the first quarter of 2005 was 32.0 percent compared to 24.3 percent in the first quarter of 2004. Income taxes for the first quarter of 2004 included a net benefit of $4.3 million related to state tax benefits associated with a previously reported U.S. research and experimentation tax credit settlement (see Note 10 in the Condensed Consolidated Financial Statements). We expect that the effective income tax rate for the remainder of 2005 will be approximately 32 percent, excluding the income tax expense or benefit related to discrete items, if any, that will be separately reported or reported net of their related tax effects.

     During the first quarter of 2005, the President of the United States signed into law both the American Jobs Creation Act of 2004 and the Working Families Tax Relief Act of 2004. This legislation contains numerous corporate tax changes, including eliminating a tax benefit relating to U.S. product exports, a new deduction relating to U.S. manufacturing, a lower U.S. tax rate on non-U.S. dividends and an extension of the research and experimentation credit. We do not expect this new legislation to materially affect our financial condition or results of operations.

Discontinued Operations

     See Note 12 in the Condensed Consolidated Financial Statements regarding discontinued operations.

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ROCKWELL AUTOMATION, INC.

Financial Condition

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

     Our definition of free cash flow takes into consideration capital investment required to maintain the operations of our businesses and execute our strategy. 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.

     Free cash flow was $90.4 million for the three months ended December 31, 2004 compared to $126.0 million for the three months ended December 31, 2003. The decrease in free cash flow was largely the result of the $50 million voluntary pension contribution to our U.S. qualified pension plan trust in the first quarter of 2005, compared to no contributions in the first quarter of 2004. In addition, contributing to the decrease in free cash flow were increased working capital needs partially offset by increased pretax earnings and the receipt of federal and state tax refunds recognized in prior periods.

     We generally expect that over time, cash payments for income taxes will approach our income tax expense.

     When necessary, we utilize commercial paper as our principal source of short-term financing. At December 31, 2004 and September 30, 2004, we had no commercial paper borrowings outstanding. During the first quarter of 2005 and 2004, we did not have significant commercial paper borrowings due to our cash position.

     We repurchased approximately 2.6 million shares of our common stock at a cost of $116.4 million in the first quarter of 2005. At December 31, 2004, we had approximately 7.9 million shares remaining for stock repurchases under existing board authorizations. We repurchased approximately 1.3 million shares of our common stock at a cost of $40.7 million in the first quarter of 2004. We anticipate continuing to repurchase stock in 2005, the amount of which will depend ultimately on business conditions, stock price and other cash requirements. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, for additional information regarding share repurchases.

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ROCKWELL AUTOMATION, INC.

Financial Condition – (Continued)

     Future significant uses of cash are expected to include capital expenditures, dividends to shareowners, acquisitions of businesses and repurchases of common stock and may include contributions to our pension plans. We expect capital expenditures in 2005 to be about $125 million. We expect that each of these future uses of cash will be funded by existing cash balances, cash generated by operating activities, commercial paper borrowings, a new issue of debt or issuance of other securities.

     In addition to cash generated by operating activities, we have access to existing financing sources, including the public debt markets and unsecured credit facilities with various banks. Our debt-to-total-capital ratio was 27.8 percent at December 31, 2004 and 28.9 percent at September 30, 2004.

     In October 2004, we entered into a new five-year $600.0 million unsecured revolving credit facility that replaced our then existing $675.0 million credit facilities. Borrowings under our credit facility bear interest based on short-term money market rates in effect during the period such borrowings are outstanding. The terms of our credit facility contain a covenant under which we would be in default if our debt-to-total-capital ratio were to exceed 60 percent. In addition to our $600.0 million credit facility, short-term unsecured credit facilities are available to foreign subsidiaries.

     The following is a summary of our credit ratings as of December 31, 2004:

     Among other things, our credit facility is a standby liquidity facility that can be drawn, if needed, to repay our outstanding commercial paper as it matures. This access to funds to repay maturing commercial paper is an important factor in maintaining the ratings set forth in the table above that have been given to our commercial paper. While we are not required to do so, under our current policy with respect to these ratings, we expect to limit our other borrowings under the credit facility, if any, to amounts that would leave enough credit available under the facility so that we could borrow, if needed, to repay all of our then outstanding commercial paper as it matures.

     Should our access to the commercial paper market be adversely affected due to a change in market conditions or otherwise, we would expect to rely on a combination of available cash and the unsecured committed credit facilities to provide short-term funding. In such event, the cost of borrowings under the unsecured committed credit facilities could be higher than the cost of commercial paper borrowings.

Environmental

     Information with respect to the effect on us and our manufacturing operations of compliance with environmental protection requirements and resolution of environmental claims is contained in Note 17 of the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-K for the fiscal year ended September 30, 2004. We believe that at December 31, 2004, there has been no material change to this information.

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Supplemental Sales Information

     We translate sales of subsidiaries operating outside of the United States using exchange rates in effect during the respective period. Therefore, reported sales are affected by changes in currency exchange rates, which are outside our control. We believe that sales excluding the effect of changes in currency exchange rates, which is a non-GAAP financial measure, provides useful information to investors since it reflects regional performance from our activities without the effect of changes in currency rates. We use sales excluding the effect of changes in currency exchange rates 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 same exchange rates as were in effect the preceding year.

     The following is a reconciliation of our reported sales to sales excluding the effect of changes in currency exchange rates (in millions):

     The following is a reconciliation of our reported sales of our Control Systems segment to sales excluding the effect of changes in currency exchange rates (in millions):

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ROCKWELL AUTOMATION, INC.

Critical Accounting Policies and Estimates

     We have prepared the condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Information with respect to our critical accounting policies that we believe could have the most significant effect on our reported results or require subjective or complex judgments by management is contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended September 30, 2004. We believe that at December 31, 2004, there has been no material change to this information.

Recent Accounting Pronouncements

     See Note 2 in the Condensed Consolidated Financial Statements regarding recent accounting pronouncements.

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SIGNATURES

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.

	ROCKWELL AUTOMATION, INC.                     (Registrant)
Date:          January 28, 2005	By	/s/     J. V. Gelly
		J. V. Gelly
		Senior Vice President and Chief Financial Officer (Principal Financial Officer)
Date:          January 28, 2005	By	/s/     D. M. Dorgan
		D. M. Dorgan
		Vice President and Controller (Principal Accounting Officer)