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 March 31, 2005 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

183,964,032 shares of registrant’s Common Stock, $1.00 par value, were outstanding on March 31, 2005.

ROCKWELL AUTOMATION, INC.

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

ROCKWELL AUTOMATION, INC.

CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(in millions)

See Notes to Condensed Consolidated Financial Statements.

2

ROCKWELL AUTOMATION, INC.

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

See Notes to Condensed Consolidated Financial Statements.

3

ROCKWELL AUTOMATION, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(in millions)

See Notes to Condensed Consolidated Financial Statements.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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- and six-month periods ended March 31, 2005 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.
	Revenue Recognition
	Sales of products and services, representing approximately 90% of our consolidated sales, are recorded when all of the following have occurred: an agreement of sale exists; product has been delivered according to contract terms and acceptance, as may be required by contract terms, has occurred or services have been rendered; pricing is fixed or determinable; and collection is reasonably assured.
	We recognize substantially all of the remainder of our sales on long-term construction-type contracts using either the percentage-of-completion or completed contract methods of accounting. We record sales using the percentage-of-completion method when we determine that progress towards completion is reasonably and reliably estimable; we use the completed contract method for all others. Under the percentage-of-completion method, we recognize sales and gross profit as work is performed using either (i) the relationship between actual costs incurred and total estimated costs at completion or (ii) units-of-delivery. Under the percentage-of-completion method, we adjust sales and gross profit prospectively for revisions in estimated total contract costs or revenue. We record estimated losses on all contracts when they are identified.
	We use contracts and customer purchase orders to determine the existence of an arrangement. We use shipping documents and customer acceptance, when applicable, to verify delivery. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We assess collectibility based on the creditworthiness of the customer as determined by credit evaluations and analysis, as well as the customer’s payment history.
	Shipping and handling costs billed to customers are included in sales and the related costs are included in cost of sales in the Condensed Consolidated Statement of Operations.
	Returns, Rebates and Incentives
	Our primary incentive program provides distributors with cash rebates or account credits based on agreed amounts that vary depending on the end user or OEM customer to whom our distributor ultimately sells the product. We also offer various other incentive programs that provide distributors and direct sale customers with cash rebates, account credits or additional products and services based on meeting specified program criteria. Certain distributors are offered a right to return product, subject to contractual limitations.
	We record accruals for customer returns, rebates and incentives at the time of revenue recognition based primarily on historical experience. Returns, rebates and incentives are recognized as a reduction of sales if distributed in cash or customer account credits. Rebates and incentives are recognized in cost of sales for additional products and services to be provided. Amounts are accrued at the time of recognition of our sale to a distributor or direct sale customer. Accruals are reported as a current liability in our balance sheet or, where a right of set-off exists, as a reduction of accounts receivable.
	Cash and Cash Equivalents
	Cash and cash equivalents include time deposits and certificates of deposit with original maturities of three months or less.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.	Basis of Presentation and Accounting Policies — (Continued)
	Receivables
	Receivables are stated net of allowances for doubtful accounts of $23.7 million at March 31, 2005 and $25.2 million at September 30, 2004. In addition, receivables are stated net of unissued credits related to customer returns, rebates and incentives of $9.6 million at March 31, 2005 and $7.8 million at September 30, 2004.
	Properties
	Properties are stated net of accumulated depreciation of $1,384.9 million at March 31, 2005 and $1,335.2 million at September 30, 2004.
	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.
	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 three- and six-month periods ended March 31, 2005, options for 18,000 and 13,150 shares, respectively, were excluded from the diluted EPS calculation because they were antidilutive. For the three- and six-month periods ended March 31, 2004, options for 99,500 and 49,750 shares, respectively, were excluded from the diluted EPS calculation because they were antidilutive.

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ROCKWELL AUTOMATION, INC.

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 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.
	Pro forma net income for the three- and six-month periods ended March 31, 2005 includes $4.9 million after tax of compensation expense for retirement eligible stock option plan participants. Previously we reported compensation expense for these participants over the vesting period. Stock options granted to retirement eligible plan participants who retire under our retirement plans on or after the first anniversary of the grant date continue to vest post-retirement in accordance with plan provisions and agreements related thereto. If the plan participant retires less than twelve months from the grant date, the options under that grant are forfeited. Stock compensation expense on grants to plan participants who are retirement eligible on the grant date or who will be retirement eligible in less than twelve months from the grant date is now reported in pro forma net income over the twelve month period from the grant date. Stock compensation expense on grants to plan participants who become retirement eligible twelve or more months after the grant date is reported in pro forma net income over the period from grant date to the retirement eligibility date.
	Included in pro forma net income for the six months ended March 31, 2004 is $3.6 million after tax of expense 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.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2.	Recent Accounting Pronouncements
	In March 2005, the Financial Accounting Standards Board (FASB) issued Interpretation No. 47 (FIN 47) to clarify the guidance included in SFAS No. 143, Accounting for Asset Retirement Obligations. FIN 47 requires companies to recognize a liability for the fair value of a legal obligation to perform asset retirement activities that are conditional on a future event if the amount can be reasonably estimated. If amounts cannot be reasonably estimated, certain disclosures will be required about the unrecognized asset retirement obligations. The interpretation is required to be adopted in the first quarter of 2006. We are currently evaluating the interpretation to determine the effect on our financial statements and related disclosures.
	On January 28, 2005, the guidelines related to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 were finalized. We are currently evaluating the final guidelines but do not currently expect these guidelines to have a significant effect on our financial statements.
	In December 2004, the 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, including stock options and restricted stock, to be recognized in the financial statements. Compensation cost will be measured based on the grant-date fair value of the instruments issued using an option pricing model and will be recognized over the requisite service period. The FASB’s transition provisions require implementation of SFAS 123 (R) for quarters beginning after June 15, 2005. However, in April 2005, the Securities and Exchange Commission announced a deferral of the required implementation date to fiscal years beginning after June 15, 2005, or, in our case, our 2006 fiscal year. SFAS 123 (R) will apply to all awards granted after the implementation date and to previously-granted awards unvested as of the implementation date. We continue to evaluate the effect of SFAS 123 (R) on our financial statements and related disclosures. Our actual share-based compensation expense in 2006 will be dependent on a number of factors, including the amount of awards granted and the fair value of those awards at the time of grant.
	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 do not believe the adoption of SFAS 151 will have a material effect 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 $46.7 million at March 31, 2005 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 six months ended March 31, 2005 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 performed the annual evaluation of our goodwill and indefinite life intangible assets for impairment as required by SFAS 142 during the second quarter of 2005 and concluded that no impairments existed.

9

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. Most of our products are covered under a warranty period that is twelve months from either the date of sale or from installation to an end-user or OEM customer. 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 six-month periods ended March 31, 2005 and 2004 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 5.30 percent at March 31, 2005 and 4.27 percent at September 30, 2004. The fair value of the Swap, based upon quoted market prices for contracts with similar maturities, was a liability of $5.6 million at March 31, 2005 and an asset of $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 liabilities in the Condensed Consolidated Balance Sheet at March 31, 2005 and in Other assets at September 30, 2004, and the carrying value of the underlying debt was decreased to $344.4 million at March 31, 2005 and increased to $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 six months ended March 31, 2005.

10

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):

	We made a voluntary contribution of $50.0 million to our U.S. qualified pension plan trust in each of the six-month periods ended March 31, 2005 and 2004. The 2005 contribution was made in the first quarter while the 2004 contribution was made in the second quarter.
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 $58.2 million at March 31, 2005 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 $1.0 million in the three-month period ended March 31, 2005 and $1.4 million in the six-month period ended March 31, 2005, and $0.7 million in the three-month period ended March 31, 2004 and $1.3 million in the six-month period ended March 31, 2004 for research and development services performed by RSC. At March 31, 2005, 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 March 31, 2005 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 $5.1 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 $4.2 million in the three-month period ended March 31, 2005 and $8.5 million in the six-month period ended March 31, 2005 and $2.9 million in the three-month period ended March 31, 2004 and $8.3 million in the six-month period ended March 31, 2004 primarily for logistics services. In addition, CoLinx paid us $0.7 million in the three-month period ended March 31, 2005 and $1.4 million in the six-month period ended March 31, 2005 and $0.4 million in the three-month period ended March 31, 2004 and $1.3 million in the six-month period ended March 31, 2004 for the use of facilities we own and other services. The amounts due to or from CoLinx at March 31, 2005 and September 30, 2004 were not significant.
10.	Income Taxes
	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.
	In the second quarter of 2005, we recognized a net tax benefit of $19.7 million in income from continuing operations ($0.10 per share) and $7.5 million in income from discontinued operations ($0.04 per share) related to current and former businesses. The net tax benefits are primarily 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. We will be making a cash payment of $37.6 million in the third quarter of 2005 and expect to receive cash of $9.7 million in the fourth quarter of 2005 in connection with closure of the audit cycle.
	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.

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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 from January 21, 2005 forward for a substantial majority of the Allen-Bradley asbestos claims and (b) paying a portion of past defense costs incurred from June 2002 through the present in connection with Allen-Bradley asbestos cases. The specific amounts for which the carriers are responsible will be the subject of further proceedings in the case. However, both carriers have acknowledged their obligation to reimburse us for reasonable costs incurred in defending these matters and for past indemnity payments since June 2002. The carriers have also acknowledged their duty to pay 100 percent of defense costs going forward. During the second quarter of 2005, we recorded $11.4 million in earnings (pre-tax) related to the expected recovery from the carriers for previously-incurred costs.
	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
	We have, from time to time, divested certain of our businesses. 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 spin-offs 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.
	In connection with the divestitures of certain of our businesses, 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). Conexant paid off the lease obligation in March 2005 in connection with its purchase of the related leased property. Our remaining obligations under the lease guarantee are not significant.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

11.	Commitments and Contingent Liabilities — (Continued)
	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.
	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):

	Income Tax Matters
	During the quarter ended March 31, 2005, we recognized a net tax benefit related to resolution of certain prior year tax matters. See Note 10 for additional information. The six months ended March 31, 2005 also included a net tax benefit related to a prior year state tax refund of a divested business recognized during the first quarter of 2005.
	During the six months ended March 31, 2005, we received $25.8 million of cash related to state tax refunds for prior periods. The corresponding income was recognized in the fourth quarter of 2004 and the first quarter of 2005. This amount is included 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. This amount is in addition to income of $7.3 million ($4.4 million after tax) recognized in the fourth quarter of 2003 related to the Rocky Flats defense claim legal proceeding. In March 2004, we received $15.1 million related to this matter. This amount is included, net of the related tax, in the Condensed Consolidated Statement of Cash Flows as Cash Provided by Discontinued Operations.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

12.	Discontinued Operations – (Continued)
	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):

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 March 31, 2005, and the related condensed consolidated statements of operations for the three- and six-month periods ended March 31, 2005 and 2004, and of cash flows for the six-month periods ended March 31, 2005 and 2004. 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 March 31, 2005 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
April 28, 2005

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ROCKWELL AUTOMATION, INC.

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, income excluding the effect of certain tax and insurance recovery benefits and free cash flow, which are non-GAAP measures. See Supplemental 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 management believes this non-GAAP measure is useful to investors. See Objectives and Outlook for 2005 for a reconciliation of income excluding the effect of certain tax and insurance recovery benefits in addition to a discussion of why management believes this non-GAAP measure is useful to investors. See Liquidity and Financial Condition for a reconciliation of cash flows from operating activities to free cash flow and a discussion of why management believes 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 second 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 second 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.

^A Advance estimate
Note: Economic indicators are subject to revisions by the issuing organizations.

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 in developing economies and in basic materials production capacity in response to higher end product pricing.

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

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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 second quarter.

     Our 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 3 to 4 percent each quarter, 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, excluding the $0.10 income tax benefit and the $0.04 insurance recovery benefit, separately reported in the second quarter of 2005.

     The forward looking statements regarding our projected earnings per share from continuing operations for fiscal 2005 exclude $19.7 million ($0.10 per diluted share) related to tax benefits described in Income Taxes and $7.8 million after-tax ($0.04 per diluted share) related to an insurance recovery described in 2005 Second Quarter Compared to 2004 Second Quarter. Management believes that income excluding such income tax and insurance recovery benefits, which is a non-GAAP financial measure, is useful to investors because the benefits are not indicative of the magnitude of benefits we may recognize in the future. Management uses income excluding such benefits to monitor our performance.

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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 condensed consolidated financial statements for all periods presented.

2005 Second Quarter Compared to 2004 Second Quarter

     Sales increased 13 percent compared to the second quarter of 2004. Two percentage points of the growth 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. Strong sales growth was experienced in nearly all of our businesses and in most geographic regions.

     Income from continuing operations in the second quarter of 2005 increased 90 percent compared to the second quarter of 2004. Results for the second quarter of 2005 include $19.7 million ($0.10 per share) of net tax benefits primarily 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. The second quarter of 2005 benefited from cost control, volume leverage and broad-based productivity improvements realized across most of our businesses and geographic regions. We continue to see improvement in Selling, general and administrative expenses as a percentage of our sales.

Control Systems

     Control Systems sales increased 11 percent compared to the second quarter of 2004. Two percentage points of the sales increase was due to the effect of changes in currency exchange rates. U.S. sales increased 9 percent in the second quarter of 2005 compared to the second quarter of 2004. Sales outside of the U.S. increased 14 percent, 8 percent excluding the effect of changes in currency exchange rates. Strong growth was reported in the Latin America, Canada and Asia-Pacific regions.

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2005 Second Quarter Compared to 2004 Second Quarter — (Continued)

Control Systems — (Continued)

     Control Systems benefited from continued strength in our customers’ investment in automation and productivity in the second quarter of 2005. Continued investment in our integrated architecture platform and in our portfolio of automation products, value-added services and solutions has allowed us to leverage this industrial spending. Our Logix integrated architecture platform and related product offerings grew by approximately 25 percent during the second quarter of 2005 compared to the second quarter of 2004.

     Segment operating earnings and margins benefited from volume leverage, productivity efforts and improved price/cost dynamics. Second quarter of 2005 results also include $11.4 million of our insurance claim for the recovery of previously-incurred legal costs.

Power Systems

     Power Systems sales increased 20 percent compared to the second quarter of 2004 due to significant growth in both our Mechanical and Electrical businesses. Strong sales volume continued in the second 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 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. Segment operating earnings in the second quarter of 2004 and the first quarter of 2005 included approximately $4.0 million of restructuring charges associated with cost and productivity initiatives.

General Corporate-Net

     General corporate expenses were $23.3 million in the second quarter of 2005 compared to $22.5 million in the second quarter of 2004.

Interest Expense

     Interest expense was $11.5 million in the second quarter of 2005 compared to $10.2 million in the second 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).

Six Months Ended March 31, 2005 Compared to Six Months Ended March 31, 2004

     Sales increased 16 percent in the first six months of 2005 compared to the first six months of 2004. Two percentage points of the growth 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. Strong sales growth was experienced in nearly all of our businesses and in most geographic regions.

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Six Months Ended March 31, 2005 Compared to Six Months Ended March 31, 2004 — (Continued)

     Income from continuing operations in the first six months of 2005 increased 100 percent from the first six months of 2004. Results for the first six months of 2005 include $19.7 million ($0.10 per share) of net tax benefits primarily 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. The first six months of 2004 include $4.3 million ($0.02 per share) related to additional state tax benefits associated with a tax credit refund claim. The first six months of 2005 benefited from cost control, volume leverage and broad-based productivity improvements realized across most of our businesses and geographic regions. We continue to see improvement in Selling, general and administrative expenses as a percentage of our sales.

Control Systems

     Control Systems sales increased 15 percent compared to the first six months 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. U.S. sales increased 14 percent in the first six months of 2005 compared to the first six months of 2004. Sales outside of the U.S. increased 17 percent, 10 percent excluding the effect of changes in currency exchange rates. Particularly strong growth was reported in the Latin America, Canada and Asia-Pacific regions.

     Control Systems benefited from continued strength in our customers’ investment in automation and productivity in the first six months of 2005. Continued investment in our integrated architecture platform and in our portfolio of automation products, value-added services and solutions has allowed us to leverage this industrial spending. Our Logix integrated architecture platform and related product offerings grew by approximately 30 percent during the first six months of 2005 compared to the first six months of 2004.

     Segment operating earnings and margins benefited from volume leverage, productivity efforts and improved price/cost dynamics. Second quarter of 2005 results also include $11.4 million of our insurance claim for the recovery of previously-incurred legal costs.

Power Systems

     Power Systems sales increased 22 percent compared to the first six months of 2004 due to growth in both our Mechanical and Electrical businesses. Strong sales volume continued in the first half of 2005 consistent with the volume strength experienced in the second half of 2004 as the market continued to invest in industrial capacity and productivity initiatives.

     Segment operating earnings and margins benefited from the 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. Segment operating earnings in the second quarter of 2004 included approximately $4.0 million of restructuring charges associated with cost and productivity initiatives.

General Corporate-Net

     General corporate expenses were $39.3 million in the first six months of 2005 compared to $39.4 million in the first six months of 2004.

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Six Months Ended March 31, 2005 Compared to Six Months Ended March 31, 2004 — (Continued)

Interest Expense

     Interest expense was $22.6 million in the first six months of 2005 compared to $20.7 million in the first six months 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 six months of 2005 was 26.5 percent compared to 27.3 percent in the first six months of 2004. Income taxes for the second quarter of 2005 included a net 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. 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 for additional information. 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. However, current and projected growth in higher tax jurisdictions may result in an increasing effective tax rate over time.

     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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Liquidity and 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, which is a non-GAAP financial measure, 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 $222.1 million for the six months ended March 31, 2005 compared to $232.5 million for the six months ended March 31, 2004. Largely contributing to the decrease in free cash flow were increased working capital needs and cash payments for income taxes partially offset by increased pretax earnings.

     Capital expenditures for the first half of the year include investments in information technology and certain long-lived asset replacements.

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

     We repurchased approximately 5.2 million shares of our common stock at a cost of $262.6 million in the first six months of 2005. At March 31, 2005, we had approximately 5.3 million shares remaining for stock repurchases under existing board authorizations. We repurchased approximately 3.1 million shares of our common stock at a cost of $99.9 million in the first six months 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.

     Future significant uses of cash are expected to include dividends to shareowners, capital expenditures, repurchases of common stock and acquisitions of businesses and may include contributions to our pension plans. We increased our quarterly cash dividend by 36% from $0.165 to $0.225 per share beginning effective with our dividend declared on April 6, 2005. 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, calculated as short-term debt and long-term debt as a percentage of short-term debt, long-term debt and shareowners’ equity, was 27.4 percent at March 31, 2005 and 28.9 percent at September 30, 2004.

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Liquidity and Financial Condition — (Continued)

     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 March 31, 2005: