Roc k w e l l Au t o m a t i o n
2oo3 annual re port
and form 1o-k
f i n a n c i a l h i g h l i g h t s
c o n t i n u i n g o p e ra t i o n s
(dollars in millions, except per share amounts)
2oo11
2oo22
2oo33
Sales
Segment operating earnings
Income from continuing operations
before accounting change
Diluted earnings per share from continuing operations
before accounting change
Sales by segment:
Control Systems
Power Systems
FirstPoint Contact
Other 4
Total
$4,285
474
125
.68
$3,327
748
15o
6o
$4,285
$3,9o9
381
226
1.2o
$3,o6o
716
133
—
$3,909
$4,1o4
453
282
1.49
$3,287
7o5
112
—
$4,104
1Includes charges of $91 million ($60 million after tax, or 32 cents per share) for costs associated with realignment actions which were partially
offset by income of $18 million ($12 million after tax, or six cents per share) resulting from the favorable settlement of an intellectual property
matter and a reduction of the income tax provision of $22 million, or 12 cents per share, from the resolution of certain tax matters.
2Includes a reduction of the income tax provision of $48 million, or 26 cents per share, from the resolution of certain tax matters.
3Includes a reduction of the income tax provision of $69 million, or 37 cents per share, related to the settlement of a U.S. federal research and
experimentation credit refund claim.
4Represents the sales of Rockwell Science Center through the third quarter of 2001. Beginning with the fourth quarter of 2001, the
Company's 50 percent ownership interest in RSC is accounted for using the equity method.
See financial statements for additional information.
$4,285
$4,1o4
$3,9o9
5ooo
$189
2oo
$173
$174
4ooo
3ooo
2ooo
1ooo
o
15o
1oo
5o
o
o1
o2
o3
o1
o2
o3
s a l e s b y s e g m e n t
continuing operations in millions
s a l e s p e r e m p l oy e e
continuing operations in thousands
c o n t r o l s y s t e m s
p ow e r s y s t e m s
f i r s t p o i n t c o n tac t
o t h e r
D u r i n g 2 0 0 3
we saw clear validation
of our balance d strategy
o f
inve sting in sustainable g rowth
while taking actions
t o
maintain a globally
competitive co st structure.
o2
d e a r s h a r e ow n e r s
During fiscal 2003, we saw clear validation of our balanced strategy of investing
in sustainable growth while taking actions to maintain a globally competitive cost
structure. Your Company’s strengthened global market positions have resulted in
financial performance of which our entire team is proud. Highlights include:
• Sales growth (excluding the benefit of currency translation)
of 2 percent in relatively stagnant markets.
• Margin improvement of 1.3 points, with Control Systems,
in particular, driving a 1.5 point margin increase.
• Segment operating earnings increase of 19 percent.
• Free cash flow of $327 million (8 percent of sales and 114 percent
of net income), reflecting high quality earnings and continued focus
on asset utilization.
These results are a reflection of a leaner, more efficient global enterprise poised to
expand in existing markets — and enter new ones.
l o g i x : f o u n dat i o n f o r g r ow t h
The Logix integrated control and information architecture remains the foundation
of our strategy. It facilitates the integration of multiple control disciplines such as
discrete, motion, process, drives and safety on a single platform. Logix thus helps our
customers reduce costs, speed development and improve flexibility. In essence,
Logix helps manufacturers be more competitive. And, in increasing numbers, our
customers are realizing the benefits. Our Logix business grew 30 percent in fiscal
2003 to over $200 million.
o3
log ix he lps
o u r
custome r s re duce co sts,
spe e d deve lopme nt
a n d
improve f lexibility.
it g rew 3o pe rce nt
in fiscal 2oo3
t o
ove r $2oo million.
o4
We have led the market in the integration of motion control into the control
architecture. This capability allows Original Equipment Manufacturers (OEMs) to
achieve machinery improvements that provide a measurable value to their customers.
We are winning new business from packaging, converting and material handling
OEMs, particularly in Europe, with this capability. Revenues from OEM customers
have grown to over 20 percent of our business.
The Logix architecture has enabled us to expand our discrete automation installed
base by offering customers integrated solutions for batch manufacturing, process
optimization and regulatory compliance. For the first time, manufacturers can adopt
a single integrated control and information architecture for an entire plant. We
generated revenue of nearly $90 million in these hybrid batch markets in fiscal 2003,
with major wins in the pharmaceutical, food and beverage industries.
The Logix architecture is also the key enabler for our growth in the evolving
manufacturing information solutions market. Logix allows our customers to
integrate plant - floor data with their business systems and supply chains to
increase productivity and make more effective real-time business decisions.
Our manufacturing information business grew over 30 percent in fiscal 2003. This
emerging market holds great promise for us.
g l o b a l ma n u f ac t u r i n g s o lu t i o n s : o p t i m i z i n g o p e rat i o n s
Global Manufacturing Solutions remains another pillar of our strategy. This business
provides customers with a portfolio of software and services which help them
optimize manufacturing, improve plant uptime and reduce time to market. In a difficult
o5
manufacturing environment, GMS sales grew 5 percent compared to a year ago.
We formed two important types of strategic relationships in 2003. The first, with
IBM, provides the global automotive manufacturing industry with collaborative
technologies and services to allow seamless information flow through manufacturers’
enterprises. In the second, we are partnering with global brewing companies to
supply a standardized set of solutions to improve their automation systems and
decrease time to market.
p ow e r s y s t e m s a n d f i r s t p o i n t c o n tac t
Rockwell Automation Power Systems performed well, with profits up slightly despite
difficult market conditions and lower sales. We have continued to drive our
PowerLean program throughout the organization, resulting in productivity and cost
improvements. Power Systems also continues to introduce new products to key
markets. In addition, we are expanding assembly and repair operations in China and
Mexico. These actions, combined with a robust service business, are positioning
Power Systems for profitable growth.
Rockwell FirstPoint Contact maintained profitability in an extremely difficult telecom-
munications market. This business continues to invest in its solutions portfolio, which
includes intelligent routing, queue optimization and web powered tools for contact
center agents. It also continues to improve the effectiveness of its channel model in
delivering a wider range of solutions for its enterprise customers.
o6
O u r
global manufacturing
solutions busine ss
p r o v i d e s
custome r s with a portfolio
o f
software and se rvice s
w h i c h
he lp them
optimiz e manufacturing,
improve plant uptime
a n d
re duce time to market.
o7
the rockwe ll lean
e nte rprise prog ram
t a r g e t s
agg re ssive long te rm goals
i n
co st re duction, proce ss
time improveme nt
a n d
highe r inve ntory
utilization.
o8
s t rat e g i c b u s i n e s s a l l i a n c e s a n d n e w i n i t i at i v e s
We worked hard to consummate several targeted business alliances and new
initiatives to support our growth strategies. Examples include:
• We acquired Interwave Technology, Inc.,
expanding our Manufacturing Information Solutions capability.
• We opened a center of excellence in Shenzhen,
China to support OEM conversion applications.
• We formed a strategic alliance with Weidmüller Holding AG that
enhances our position as a leader in providing IEC connection products.
• We enhanced our capabilities in the automotive powertrain
market with the acquisition of software-based CNC technology
from Power Automation GmbH in Germany.
c o n t i n u e d p r o d u c t i v i t y a n d l e a n c o s t s t r u c t u r e
We continue to drive significant operating leverage through implementation of the
Rockwell Lean Enterprise. This program targets aggressive long term goals in cost
reduction, process time improvement and higher inventory utilization. In addition, we
have established a major effort in component sourcing, product development and
production capabilities in the Asia Pacific region to take advantage of cost reduction
opportunities and the local expertise in electronics and software development. We
have also expanded our low-cost production base in Mexico, the Dominican Republic
and Eastern Europe.
o9
l o o k i n g f o rwa r d
Rockwell Automation’s growth prospects have never been better. With Logix as the
foundation, we hold a powerful market position and are extremely well situated
to benefit from a cyclical capital spending rebound and, more importantly, long-term
factors driving global manufacturing. And we enjoy great financial strength, with
significant operating leverage, outstanding cash flow and a strong balance sheet.
It is in this context of strength that the Board of Directors has initiated an orderly
transition of leadership. Effective February 4, 2004 (the date of our annual meeting of
shareowners), Keith D. Nosbusch, currently corporate Senior Vice President and
President of Rockwell Automation Control Systems, will become the corporation's
President and Chief Executive Officer. I will remain Chairman of the Board. Keith is a
29-year veteran of our company, and has an in-depth understanding of the global
automation business. He is a strong leader who shares my priority of creating value
for our customers and shareowners. We are fortunate to have such a talented
executive to lead the next stage of the company's growth. I look forward to working
closely with Keith as we move ahead.
I am extraordinarily proud of the hard work and accomplishments of our strong and
dedicated team of people. We have weathered some tough times together; main-
tained our integrity and our ethical foundation; and kept our sights trained solidly on
our customers and our shareowners. We have adapted, innovated, re-engineered and
re-focused. And we have emerged as an energized company, with a customer-driven
focus and a bias for action.
To our fellow shareowners, we appreciate your ongoing support and will continue to
focus our efforts on increasing the long-term value of your investment.
s i n c e r e ly,
d o n h . dav i s
c h a i r ma n a n d c e o
1o
i am extraordinarily
proud of the hard work
a n d
accomplishme nts
o f
our strong and
de dicate d team of people.
we have adapte d,
innovate d, re-e ng ine e re d
a n d
re-focuse d.
and we have eme rge d
as an e ne rg iz e d company,
with a custome r-drive n focus
a n d
a bias for action.
11
r o c k w e l l au t o mat i o n c o r p o rat e o f f i c e r s
Don H. Davis, Jr.
chairman o f t h e board
a n d chie f executive office r
Michael A. Bless
se nior vice pre side nt
a n d chie f financial office r
William J. Calise, Jr.
se nior vice pre side nt,
ge ne ral counse l a n d secretary
John D. Cohn
se nior vice pre side nt
strateg ic deve lopme nt a n d communications
Kent G. Coppins
vice pre side nt
a n d ge ne ral tax counse l
David M. Dorgan
vice pre side nt a n d controlle r
Mary Jane Hall
vice pre side nt
human re source s
Thomas J. Mullany
vice pre side nt a n d treasure r
Terry P. Murphy
vice pre side nt a n d pre side nt
rockwe ll fir stpoint contact
Keith D. Nosbusch
se nior vice pre side nt a n d pre side nt
rockwe ll automation control systems
James P. O’Shaughnessy
vice pre side nt a n d chie f
inte llectual prope rty counse l
Rondi Rohr-Dralle
vice pre side nt
corporate deve lopme nt
A. Lawrence Stuever
vice pre side nt a n d ge ne ral auditor
Joseph D. Swann
se nior vice pre side nt a n d pre side nt
rockwe ll automation powe r systems
12
r o c k w e l l au t o mat i o n b oa r d o f d i r e c t o r s
Don H. Davis, Jr.
chairman o f t h e board
a n d chie f executive office r
Betty C. Alewine
retire d pre side nt
a n d chie f executive office r
comsat corporation
J. Michael Cook
retire d chairman
a n d chie f executive office r
de loitte a n d touche llp
William H. Gray, III
pre side nt
a n d chie f executive office r
the college fund/uncf
Verne G. Istock
retire d chairman
a n d pre side nt
bank one corporation
William T. McCormick, Jr.
retire d chairman
a n d chie f executive office r
cms e ne rgy corporation
Bruce M. Rockwell
retire d executive vice pre side nt
fahne stock & co. inc.
David B. Speer
executive vice pre side nt
illinois tool works inc.
Joseph F. Toot, Jr.
retire d pre side nt
a n d chie f executive office r
the timke n company
Kenneth F. Yontz
chairman o f t h e board
apoge nt technolog ie s inc. a n d
sybron de ntal specialtie s inc.
13
g e n e ra l i n f o r mat i o n
Rockwell Automation
Shareowner Services
world headquarte r s
777 e. wisconsin ave nue, suite 14oo
milwauke e, wi 532o2
414.212.52oo
www.rockwellautomation.com
Investor Relations
Securities analysts should call:
thomas j. mullany
vice pre side nt a n d treasure r
414.212.521o
Corporate Public Relations
Members of the news media should call:
matthew p. gonring
vice pre side nt
global marketing a n d communications
414.382.5575
Correspondence about share ownership, dividend
payments, transfer requirements, changes of address,
lost stock certificates, and account status may be
directed to:
me llon inve stor se rvice s llc
po box 3316
south hacke nsack, nj o76o6-1916
8oo.2o4.78oo o r 2o1.329.86 6o
www.melloninvestor.com
Shareowners wishing to transfer stock should send
their written request, stock certificate(s) and other
required documents to:
me llon inve stor se rvice s llc
po box 3312
south hacke nsack, nj o76o6-1912
Shareowners needing further assistance should call
Rockwell Automation Shareowner Relations:
Annual Meeting
414.212.53oo
The company’s annual meeting of shareowners will
be held near its World Headquarters at The Pfister
Hotel, 424 E. Wisconsin Avenue, Milwaukee,
Wisconsin, at 10 a.m.,Wednesday, February 4, 2004.
A notice of the meeting and proxy materials will be
mailed to shareowners in late December 2003.
For additional copies of the annual report (including
Form 10-K) and Forms 10-Q, please call Rockwell
Shareholder Direct:
888.765.3228 o r
visit our inte rnet site at
www.rockwellautomation.com
14
g e n e ra l i n f o r mat i o n c o n t i n u e d
Investor Services Program
Independent Auditors
Under the Mellon Investor Services Program for
Shareowners of Rockwell Automation, shareowners
of record may select to reinvest all or a part of
their dividends,
to have cash dividends directly
deposited in their bank accounts and to deposit
share certificates with the agent for safekeeping.
These services are all provided without charge to the
participating shareowner.
the program allows participating
In addition,
shareowners at their own cost to make optional cash
investments in any amount from $100 to $100,000
per year or to sell all or any part of the shares held in
their accounts.
Participation in the program is voluntary, and
shareowners of record may participate or terminate
their participation at any time. For a brochure and
full details of the program, please direct inquiries to:
me llon bank, n.a.
c/o me llon inve stor se rvice s llc
po box 3338
south hacke nsack, nj o76o6-1938
8oo.2o4.78oo o r 2o1.329.86 6o
de loitte a n d touche llp
411 e. wisconsin ave nue, suite 23oo
milwauke e, wi 532o2
414.271.3ooo
Transfer Agent and Registrar
me llon inve stor se rvice s llc
po box 3316
south hacke nsack, nj o76o6-1916
8oo.2o4.78oo o r 2o1.329.86 6o
12o broadway, 33rd f loor
new york, ny 1o271
8oo.2o4.78oo o r 2o1.329.86 6o
Stock Exchanges
Common Stock (Symbol: ROK)
United States: New York and Pacific
United Kingdom: London
15
rockwe ll automation
form 1o-k
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Ñscal year ended September 30, 2003. Commission Ñle number 1-12383
Rockwell Automation, Inc.
(Exact name of registrant as speciÑed in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
777 East Wisconsin Avenue
Suite 1400
Milwaukee, Wisconsin
(Address of principal executive oÇces)
25-1797617
(I.R.S. Employer
IdentiÑcation No.)
53202
(Zip Code)
Registrant's telephone number, including area code:
(414) 212-5299 (OÇce of the Secretary)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, $1 Par Value (including the
associated Preferred Share Purchase Rights)
New York, PaciÑc and London Stock Exchanges
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has Ñled all reports required to be Ñled 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 Ñle such reports), and (2) has been subject to such Ñling requirements for
the past 90 days. Yes ¥
No n
Indicate by check mark if disclosure of delinquent Ñlers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrant's knowledge, in deÑnitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ¥
Indicate by check mark whether the registrant is an accelerated Ñler (as deÑned in Rule 12b-2 of the
Act). Yes ¥
No n
The aggregate market value of registrant's voting stock held by non-aÇliates of registrant on March 31,
2003 was approximately $3.8 billion.
186,430,888 shares of registrant's Common Stock, par value $1 per share, were outstanding on
November 30, 2003.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Proxy Statement for the Annual Meeting of Shareowners of
registrant to be held on February 4, 2004 is incorporated by reference into Part III hereof.
Item 1. Business.
PART I
Rockwell Automation, Inc. (the Company or Rockwell Automation), a Delaware corporation, is a
leading global provider of industrial automation power, control and information products and services. The
Company was incorporated in 1996 and is the successor to the former Rockwell International Corporation as
the result of a tax-free reorganization completed on December 6, 1996, pursuant to which the Company
divested its former aerospace and defense businesses (the A&D Business) to The Boeing Company (Boeing).
The predecessor corporation was incorporated in 1928. On September 30, 1997, the Company completed the
spinoÅ of its automotive component systems business into an independent, separately traded, publicly held
company named Meritor Automotive, Inc. (Meritor). On July 7, 2000, Meritor and Arvin Industries, Inc.
merged to form ArvinMeritor, Inc. (ArvinMeritor). On December 31, 1998, the Company completed the
spinoÅ of its semiconductor systems business (Semiconductor Systems) into an independent, separately
traded, publicly held company named Conexant Systems, Inc. (Conexant). On June 29, 2001, the Company
completed the spinoÅ of its Rockwell Collins avionics and communications business into an independent,
separately traded, publicly held company named Rockwell Collins, Inc. (Rockwell Collins). As used herein,
the terms the ""Company'' or ""Rockwell Automation'' include subsidiaries and predecessors unless the context
indicates otherwise. Information included in this Annual Report on Form 10-K refers to the Company's
continuing businesses unless otherwise indicated.
Where reference is made in any Item of this Annual Report on Form 10-K to information under speciÑc
captions in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations
(MD&A), or in Item 8, Consolidated Financial Statements and Supplementary Data (the Financial
Statements), or to information in the Proxy Statement for the Annual Meeting of Shareowners of the
Company to be held on February 4, 2004 (the 2004 Proxy Statement), such information shall be deemed to
be incorporated therein by such reference.
The Company is organized based upon products and services and has three operating segments: Control
Systems, Power Systems and FirstPoint Contact. Total Company sales in 2003 were $4.1 billion. Financial
information with respect to the Company's business segments, including their contributions to sales and
operating earnings for each of the three years in the period ended September 30, 2003, is contained under the
caption Results of Operations in MD&A on page 18 hereof, and in Note 20 of the Notes to Consolidated
Financial Statements in the Financial Statements.
Control Systems
Control Systems is Rockwell Automation's largest operating segment with 2003 sales of $3.3 billion
(80 percent of total Company sales) and approximately 17,000 employees at September 30, 2003. Control
Systems is a supplier of industrial automation products, systems, software and services focused on helping
customers control and improve manufacturing processes and is divided into three units: the Components and
Packaged Applications Group (CPAG), the Automation Control and Information Group (ACIG) and
Global Manufacturing Solutions (GMS).
CPAG produces industrial components, power control and motor management products and packaged
and engineered products. It supplies both electro-mechanical and solid-state products, including motor starters
and contactors, push buttons and signaling devices, termination and protection devices, relays and timers,
discrete and condition sensors and variable speed drives. CPAG's sales account for approximately 40 percent
of Control Systems' sales.
ACIG's products include programmable logic controllers (PLCs). PLCs are used to automate the
control and monitoring of industrial plants and processes and typically consist of a computer processor and
input/output (I/O) devices. The Company's Logix integrated architecture integrates multiple types of control
disciplines, including discrete, process, drive, motion and safety control across various factory Öoor operating
systems. ACIG also produces distributed I/O platforms, high performance rotary and linear motion control
1
systems, electronic operator interface devices, plant Öoor industrial computers and machine safety compo-
nents. ACIG's sales account for approximately 40 percent of Control Systems' sales.
GMS provides multi-vendor automation and information systems and solutions which help customers
improve their manufacturing operations. Solutions include multi-vendor customer support, training, software,
consulting and implementation, asset management, and manufacturing information solutions for discrete and
targeted batch process industries. GMS's sales account for approximately 20 percent of Control Systems'
sales.
Control Systems has competitors which, depending on the product or service involved, range from large
diversiÑed businesses that sell products outside of automation, to smaller companies specializing in niche
products and services. Major competitors include ABB, Ltd., Emerson Electric Co., General Electric
Company, Schneider Electric SA and Siemens AG. Factors that aÅect Control Systems' competitive posture
are its broad product portfolio and scope of solutions, technology leadership, knowledge of customer
applications, large installed base, established distribution network, quality of products and services and global
presence.
Control Systems' products are marketed primarily under the Allen-Bradley, Rockwell Automation and
Rockwell Software brand names. Major markets served include consumer products, transportation, pe-
trochemical and mining, metals and forest products.
In North America, Control Systems' products are sold primarily through independent distributors that
generally do not carry products that compete with Allen-Bradley products. Large systems and service oÅerings
are sold principally through a direct sales force, though opportunities are sometimes sourced through
distributors. Product sales outside the United States occur through a combination of direct sales forces and
distributors.
In 2003, sales in the United States accounted for 58 percent of Control Systems' sales. Outside the U.S.,
Control Systems' primary markets were Canada, the United Kingdom, Italy, Germany, China and Korea.
Power Systems
Power Systems recorded 2003 sales of $705 million (17 percent of total Company sales) and had
approximately 4,000 employees at September 30, 2003. Power Systems is divided into two units: the
Mechanical Power Transmission Business (Mechanical) and the Industrial Motor and Drive Business
(Electrical).
Mechanical's products include mounted bearings, gear reducers, standard mechanical drives, conveyor
pulleys, couplings, bushings, clutches and motor brakes. Electrical's products include industrial and engi-
neered motors and standard AC and DC drives. In addition, Electrical provides product repair, motor and
mechanical maintenance solutions, plant maintenance, training and consulting services to OEMs, end users
and distributors.
Mechanical's products are marketed primarily under the Dodge brand name while Electrical's products
are marketed primarily under the Reliance Electric brand name. Major markets served include mining, air
handling, aggregates, environmental, forestry, food/beverage, petrochemicals, metals and unit handling.
Power Systems has competitors which, depending on the product involved, range from large diversiÑed
businesses that sell products outside of automation, to smaller companies specializing in niche products and
services. Major competitors include ABB Ltd., A. O. Smith Corporation, Baldor Electric Company, Emerson
Electric Co., General Electric Company, Regal-Beloit Corporation, Rexnord Corporation and Siemens AG.
Factors that aÅect Power Systems' competitive posture are product quality, installed base and its established
distributor network. However, Power Systems' competitive posture is limited somewhat by its relatively small
international presence.
Mechanical's products are sold primarily through distributors while Electrical's products are sold
primarily through a direct sales force.
2
In 2003, sales in the United States accounted for 89 percent of Power Systems' sales. Outside the U.S.,
Power Systems' primary markets were Canada, Mexico and China.
FirstPoint Contact
FirstPoint Contact recorded 2003 sales of $112 million (3 percent of total Company sales) and had
approximately 500 employees at September 30, 2003. FirstPoint Contact provides customer contact center
solutions that support multiple channels (voice, e-mail, web, wireless) through open interaction infrastructure.
Products include automatic call distributors, computer telephony integration software, information collection,
reporting, queuing and management systems, call center systems and consulting services.
Major markets served include telecommunications, Ñnancial, transportation and retail. FirstPoint Contact
sells through a direct sales force and increasingly through distribution channels.
FirstPoint Contact faces competition from other companies selling both hardware and software in the
customer contact market ranging from major multinationals to small companies specializing in niche products
and services. Major competitors include Apropos Technology, Inc., Aspect Communications Corporation,
Avaya, Inc., Cisco Systems, Inc. and Nortel Networks Corporation. Factors that aÅect FirstPoint Contact's
competitive position include product quality and reliability, and reputation. However, FirstPoint Contact's
competitive position is somewhat inhibited by its limited available resources to devote to research and
development activities relative to certain competitors.
In 2003, sales in the United States accounted for 72 percent of FirstPoint Contact's sales. Outside the
U.S., FirstPoint Contact's primary markets were the United Kingdom, South Africa and Canada.
Acquisitions and Divestitures
The Company regularly considers the acquisition or development of new businesses and reviews the
prospects of its existing businesses to determine whether any should be modiÑed, sold or otherwise
discontinued.
Acquisitions
During 2003, Control Systems acquired substantially all of the assets and assumed certain liabilities of
Interwave Technology, Inc. (Interwave), a consulting integrator focusing on manufacturing solutions, and
acquired certain assets and assumed certain liabilities of Weidm uller Holding AG's (Weidm uller) North
American business. In addition, the Company entered into a master brand label agreement, a technology/
design exchange and joint product development eÅorts with Weidm uller. The total cost of these acquisitions
was approximately $26 million. The acquisition of Interwave expands the Company's Manufacturing
Information Solutions capability and accelerates its ability to integrate real-time information between
customers' manufacturing plant Öoors and business systems. The Weidm uller transaction enhances the
Company's position in providing IEC (an international standard for electrical technologies) connection
products which are used to connect factory automation systems to basic electrical switches.
During 2002, Control Systems acquired all of the stock of Tesch GmbH (Tesch), an electronic products
and safety relay manufacturer; all of the stock of Propack Data GmbH (Propack), a provider of manufactur-
ing information systems for the pharmaceutical and other regulated industries; the assets and certain liabilities
of the controller division of Samsung Electronics Company Limited's Mechatronics business (the Controller
Division); and the engineering services and system integration assets of SPEL, spol. s.r.o. (SPEL). The total
cost of these acquisitions was approximately $71 million. The acquisition of Tesch expanded the Company's
machine safety product and research and development capabilities. The acquisition of Propack broadened the
Company's position in the pharmaceuticals market, enhanced the Company's Process Solutions business, and
enabled the Company to expand its reach into the manufacturing information markets. The acquisition of the
Controller Division expanded the Company's existing operations in Korea, furthered the Company's design
and product development capabilities and supported future commercial and operational expansion in the
Asia-PaciÑc region. The acquisition of SPEL accelerated the establishment of the Company as a complete
3
solution provider in Central Europe; it also strategically located the Company in a region with future growth
opportunities.
In connection with the Interwave, Weidm uller, and Controller Division transactions, the Company would
be required to make additional cash payments if certain future operating performance criteria are met by the
acquired businesses. Management believes that these additional cash payments, if any, would not have a
material eÅect on the Company's Ñnancial position, results of operations or shareowners' equity.
Divestitures
In the second quarter of 2003, the Company sold a majority of its ownership interest in Reliance Electric
Limited Japan (REJ), resulting in a loss of approximately $8 million ($3 million after tax, or 1 cent per
diluted share). The after-tax loss on the sale included a $2 million beneÑt resulting from the Company's
ability to utilize capital loss carryforwards for which a valuation allowance had been previously provided. The
cash proceeds from the transaction totaled approximately $10 million.
On June 29, 2001, the Company completed the spinoÅ of its Rockwell Collins avionics and communica-
tions business into an independent, separately traded, publicly held company by distributing all of the
outstanding shares of common stock of Rockwell Collins to the Company's shareowners on the basis of one
Rockwell Collins share for each outstanding Rockwell Automation share. At the time of the spinoÅ, Rockwell
Collins made a special payment to the Company of $300 million. Following the spinoÅ, the Company and
Rockwell Collins each have owned 50 percent of Rockwell ScientiÑc Company LLC (RSC) (formerly a
wholly-owned subsidiary of the Company known as Rockwell Science Center). The results of operations for
Rockwell Collins for 2001 have been presented in the Company's Consolidated Statement of Operations
included in the Financial Statements as income from discontinued operations.
Additional information relating to acquisitions and divestitures is contained in Notes 2 and 15 of the
Notes to Consolidated Financial Statements in the Financial Statements.
Geographic Information
The Company's principal markets outside the United States are in Canada, the United Kingdom,
Germany, Italy, China, Mexico, and Korea. In addition to normal business risks, operations outside the United
States are subject to other risks including, among other factors, political, economic and social environments,
governmental laws and regulations and currency revaluations and Öuctuations.
Selected Ñnancial information by major geographic area for each of the three years in the period ended
September 30, 2003 is contained in Note 20 of the Notes to Consolidated Financial Statements in the
Financial Statements.
Research and Development
The Company's research and development spending is summarized as follows:
Control Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Power Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
FirstPoint Contact ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Science Center ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Year Ended September 30,
2001
2002
2003
$112
10
8
Ì
$130
$114
10
7
Ì
$131
$130
9
10
9
$158
Customer-sponsored research and development was $61 million in 2001 and related primarily to the
Company's formerly wholly-owned (now 50 percent owned) subsidiary, Rockwell Science Center. Customer-
sponsored research and development was not material in 2003 and 2002.
4
Employees
At September 30, 2003, the Company had approximately 21,500 employees. Approximately 14,500 were
employed in the United States, and, of these employees, about 8 percent were represented by various local or
national unions.
Raw Materials and Supplies
Raw materials essential to the conduct of each of the Company's business segments generally are
available at competitive prices. Many items of equipment and components used in the production of the
Company's products are purchased from others. Although the Company has a broad base of suppliers and
subcontractors, it is dependent upon the ability of its suppliers and subcontractors to meet performance and
quality speciÑcations and delivery schedules.
Backlog
The Company's total order backlog was approximately $500 million at September 30, 2003 and 2002.
Backlog is not necessarily indicative of results of operations for future periods due to the short-cycle nature of
most of the Company's products.
Environmental Protection Requirements
Information with respect to the eÅect on the Company and its manufacturing operations of compliance
with environmental protection requirements and resolution of environmental claims is contained in Note 19 of
the Notes to Consolidated Financial Statements in the Financial Statements. See also Item 3. Legal
Proceedings, on page 6 hereof.
Patents, Licenses and Trademarks
Numerous patents and patent applications are owned or licensed by the Company and utilized in its
activities and manufacturing operations. Various claims of patent infringement and requests for patent
indemniÑcation have been made to the Company. Management believes that none of these claims will have a
material adverse eÅect on the Ñnancial condition of the Company. See Item 3. Legal Proceedings, on page 6
hereof. While in the aggregate the Company's patents and licenses are considered important in the operation
of its business, management does not consider them of such importance that loss or termination of any one of
them would materially aÅect the Company's business or Ñnancial condition.
The Company's name and its registered trademark ""Rockwell Automation'' is important to each of its
business segments. In addition, the Company owns other important trademarks applicable to only certain of its
products, such as ""Allen-Bradley'' and ""A-B'' for electronic controls and systems for industrial automation,
""Reliance'' and ""Reliance Electric'' for electric motors and drives and ""Dodge'' for mechanical power
transmission products.
Seasonality
None of the Company's business segments is seasonal.
Available Information
The Company maintains an Internet site at http://www.rockwellautomation.com. The Company's annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such
reports Ñled or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well
as the annual report to shareowners and Section 16 reports on Forms 3, 4 and 5, are available free of charge on
this site as soon as reasonably practicable after the Company Ñles or furnishes these reports with the Securities
and Exchange Commission (SEC). The Company's Guidelines on Corporate Governance and charters for its
Board Committees are also available at the Company's Internet site. The Guidelines and charters are also
available in print to any shareowner upon request. The Company's Internet site and the information contained
therein or connected thereto are not incorporated by reference into this Form 10-K.
5
Item 2. Properties.
At September 30, 2003, the Company operated 69 plants and research and development facilities,
principally in North America. The Company also had approximately 350 sales oÇces, warehouses and service
centers. The aggregate Öoor space of the Company's facilities was approximately 15 million square feet. Of
this Öoor space, approximately 65 percent was owned by the Company and approximately 35 percent was
leased. Manufacturing space occupied approximately 8 million square feet, with the Control Systems segment
occupying approximately 5 million square feet and Power Systems occupying the remaining approximately
3 million square feet. At September 30, 2003, approximately 1 million square feet of Öoor space was not in use,
approximately 68 percent of which was in owned facilities.
There are no major encumbrances (other than Ñnancing arrangements which in the aggregate are not
material) on any of the Company's plants or equipment. In the opinion of management, the Company's
properties have been well maintained, are in sound operating condition and contain all equipment and facilities
necessary to operate at present levels.
Item 3. Legal Proceedings.
Rocky Flats Plant. On January 30, 1990, a civil action was brought in the United States District Court
for the District of Colorado against the Company and another former operator of the Rocky Flats Plant (the
Plant), Golden, Colorado, operated from 1975 through December 31, l989 by the Company for the
Department of Energy (DOE). The action alleges the improper production, handling and disposal of
radioactive and other hazardous substances, constituting, among other things, violations of various environ-
mental, health and safety laws and regulations, and misrepresentation and concealment of the facts relating
thereto. The plaintiÅs, who purportedly represent two classes, sought compensatory damages of $250 million
for diminution in value of real estate and other economic loss; the creation of a fund of $150 million to Ñnance
medical monitoring and surveillance services; exemplary damages of $300 million; CERCLA response costs in
an undetermined amount; attorneys' fees; an injunction; and other proper relief. On February 13, 1991, the
court granted certain of the motions of the defendants to dismiss the case. The plaintiÅs subsequently Ñled a
new complaint, and on November 26, 1991, the court granted in part a renewed motion to dismiss. The
remaining portion of the case is pending before the court. On October 8, 1993, the court certiÑed separate
medical monitoring and property value classes. EÅective August 1, 1996, the DOE assumed control of the
defense of the contractor defendants, including the Company, in the action. Beginning on that date, the costs
of the Company's defense, which had previously been reimbursed to the Company by the DOE, have been and
are being paid directly by the DOE. The Company believes that it is entitled under applicable law and its
contract with the DOE to be indemniÑed for all costs and any liability associated with this action.
On November 13, 1990, the Company was served with a summons and complaint in another civil action
brought against the Company in the same court by James Stone, claiming to act in the name of the United
States, alleging violations of the U.S. False Claims Act in connection with the Company's operation of the
Plant (and seeking treble damages and forfeitures) as well as a personal cause of action for alleged wrongful
termination of employment. On August 8, 1991, the court dismissed the personal cause of action. On
December 6, 1995, the DOE notiÑed the Company that it would no longer reimburse costs incurred by the
Company in defense of the action. On November 19, 1996, the court granted the Department of Justice leave
to intervene in the case on the government's behalf. On April 1, 1999 a jury awarded the plaintiÅs
approximately $1.4 million in damages. On May 18, 1999, the court entered judgment against the Company
for approximately $4.2 million, trebling the jury's award as required by the False Claims Act, and imposing a
civil penalty of $15,000. If the judgment is aÇrmed on appeal, Mr. Stone may also be entitled to an award of
attorney's fees but the court refused to consider the matter until appeals from the judgment have been
exhausted. On September 24, 2001, a panel of the 10th Circuit Court of Appeals aÇrmed the judgment. On
November 2, 2001, the Company Ñled a petition for rehearing with the Court of Appeals seeking
reconsideration of that portion of the decision holding that the relator, Mr. Stone, is entitled to an award of
attorneys' fees, and on March 4, 2002, the Court of Appeals remanded the case to the trial court for the
limited purpose of making Ñndings of fact and conclusions of law pertaining to Mr. Stone's relator status.
Management believes that an outcome adverse to the Company will not have a material eÅect on the
6
Company's business or Ñnancial condition. The Company believes that it is entitled under applicable law and
its contract with the DOE to be indemniÑed for all costs and any liability associated with this action, and
intends to Ñle a claim with the DOE seeking reimbursement thereof at the conclusion of the litigation.
On January 8, 1991, the Company Ñled suit in the United States Claims Court against the DOE, seeking
recovery of $6.5 million of award fees to which the Company alleges it is entitled under the terms of its
contract with the DOE for management and operation of the Plant during the period October 1, 1988 through
September 30, 1989. On July 17, 1996, the government Ñled an amended answer and counterclaim against the
Company alleging violations of the U.S. False Claims Act previously asserted in the civil action described in
the preceding paragraph. On March 20, 1997, the court stayed the case pending disposition of the civil action
described in the preceding paragraph. On August 30, 1999, the court continued the stay pending appeal in that
civil action. The Company believes the government's counterclaim is without merit, and believes it is entitled
under applicable law and its contract with the DOE to be indemniÑed for any liability associated with the
counterclaim.
On September 28, 1995, the Company Ñled an appeal with the Department of Energy Board of Contract
Appeals (""EBCA'') from DOE's denial of claims totaling $10 million for costs incurred in relation to a 1989
federal grand jury investigation of possible environmental crimes at the DOE's Rocky Flats plant. During pre-
trial proceedings, the EBCA bifurcated proceedings so as to consider the Company's entitlement to
reimbursement of costs of the sort claimed before determining the amount of any award. On October 31, 2001,
the EBCA ruled that the Company was entitled to reimbursement of the types of costs claimed. On April 16,
2003, the United States Court of Appeals for the Federal Circuit aÇrmed the EBCA decision. The period
during which the government could have appealed this decision has lapsed. The Court of Appeals remanded
the case to the EBCA for such further action as may be appropriate in light of its decision.
Russellville. On June 24, 1996, judgment was entered against the Company in a civil action in the
Circuit Court of Logan County, Kentucky on a jury verdict awarding $8 million in compensatory and
$210 million in punitive damages for property damage. The action had been brought August 12, 1993 by
owners of Öood plain real property near Russellville, Kentucky allegedly damaged by polychlorinated
biphenyls (PCBs) discharged from a plant owned and operated by the Company's Measurement & Flow
Control Division prior to its divestiture in March 1989. On January 14, 2000, the Kentucky Court of Appeals
reversed the lower court's judgment and directed entry of judgment in the Company's favor on all claims as a
matter of law. On May 16, 2002, the Kentucky Supreme Court aÇrmed the Court of Appeals' exclusion of
certain of the plaintiÅs' evidence but reversed the judgment of dismissal on the ground that the proper remedy
is a new trial on plaintiÅs' claims, but only after and to the extent required following disposition of numerous
other issues that were before the Court of Appeals but not resolved in its original decision. The case was
remanded to the Court of Appeals for further proceedings, and on August 8, 2003, the Court of Appeals issued
a second decision holding that the amounts of PCBs alleged by plaintiÅs to have contaminated their properties
were insuÇcient to constitute an actionable injury under Kentucky law, thus requiring dismissal of plaintiÅs'
suit with prejudice. On September 8, 2003, plaintiÅs Ñled a petition for discretionary review with the Kentucky
Supreme Court.
On March 24, 1997, the Circuit Court of Franklin County, Kentucky in Commonwealth of Kentucky,
Natural Resources and Environmental Protection Cabinet vs. Rockwell, an action Ñled in 1986 seeking
remediation of PCB contamination resulting from unpermitted discharges of PCBs from the Company's
former Russellville, Kentucky plant, entered judgment establishing PCB cleanup levels for the former plant
site and certain oÅsite property and ordering additional characterization of possible contamination in the Mud
River and its Öood plain. The Court deferred any decision on the imposition of Ñnes and penalties pending
implementation of an appropriate remediation program. On August 13, 1999, the Court of Appeals aÇrmed
the trial court's judgment, a ruling that the Supreme Court of the State of Kentucky has let stand. The
Company has been proceeding with remediation and characterization eÅorts consistent with the trial Court's
ruling.
Solaia Technology LLC. The Company is a party in several suits in which Solaia Technology LLC is
adverse. Solaia is a single-purpose entity formed to license US Patent No. 5,038,318 (the '318 patent). Solaia
7
acquired the '318 patent from Schneider Automation, Inc., a competitor of the Company in the Ñeld of factory
automation. Schneider has retained certain interests in the '318 patent, including a share in Solaia's licensing
income. Solaia has asserted that the '318 patent covers communication systems used throughout most modern
factories in the United States.
Solaia has issued several hundred demand letters to a wide range of factory owners and operators, and has
Ñled a series of lawsuits against about 30 companies. A signiÑcant number of the companies sued by Solaia
have chosen to settle the claims for amounts that the Company believes are notably smaller than the likely
legal costs of successfully defending Solaia's claims in court.
The Company has sought to protect its customers from Solaia's claims, which the Company believes to
be altogether without merit and baseless. The Company brought an action in Milwaukee on December 10,
2002 against Solaia and others, Rockwell Automation, Inc., et al. v. Schneider Automation, Inc., et al.
(02-CV-1195, E.D. Wis.), asserting the objective baselessness of the claims Solaia has made against
Rockwell's customers and seeking monetary damages and other relief under state and federal laws.
In January 2003, Solaia and its law Ñrm, Niro, Scavone, Haller & Niro, Ñled a lawsuit in Chicago against
the Company and several others, Solaia Technology LLC v. Rockwell Automation, Inc., et al.,
Case No. 03-CV-566, alleging federal antitrust and unfair competition violations, defamation and other
claims. The Company denies any liability under that claim.
In a suit Ñled by Solaia in Chicago, Illinois, Solaia Technology LLC v. ArvinMeritor, Inc., et al.
(02C-4704, N.D. Ill.), the Company sought to intervene on behalf of its customers wrongly accused of
infringement. On April 23, 2003, the Company made arrangements with ArvinMeritor, which now owns and
operates the Company's former automotive business, to undertake its defense of Solaia's patent claims to
ensure that Solaia's infringement claim against ArvinMeritor could be Ñnally and actually adjudicated in the
Chicago patent suit and thereby remove the continuing threat of additional lawsuits from Solaia against
American manufacturers. In that case, Solaia responded on May 12, 2003 by suing the Company for direct
patent infringement, demanding material monetary damages. As with the claims made against its customers,
the Company believes that Solaia's claim against it is wholly without merit and baseless.
The Court in Milwaukee has recently denied all of the defendants' (Solaia) motions to dismiss the
Company's claims against them. The Chicago Court has transferred Solaia's antitrust case against the
Company to Milwaukee where it is expected to be consolidated with the Company's pending suit against
Solaia and others. It is unclear whether the Milwaukee cases will go forward, be stayed pending the outcome
of the Chicago patent case, or be transferred to Chicago.
Other. Like thousands of other companies, the Company (including certain of its subsidiaries) has been
named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos that was used in
certain components of the Company's products many years ago. Currently there are thousands of claimants in
lawsuits that name the Company together with hundreds of other companies as defendants. Most of the
complaints, however, do not identify any of the Company's products or specify which of the claimants, if any,
were exposed to asbestos attributable to the Company's products; and past experience has shown that the vast
majority of the claimants will never identify any of the Company's products. In addition, when products of the
Company appear to be identiÑed, they are frequently from divested businesses, and the Company is
indemniÑed for most of the costs. For those claimants who do show that they worked with the Company's
products, we nevertheless believe we have meritorious defenses, in substantial part due to the integrity of the
Company's products, the encapsulated nature of any asbestos-containing components, and the lack of any
impairing medical condition on the part of many claimants. The Company defends those cases vigorously.
Historically, the Company has been dismissed from most (approximately 95%) of these claims with no
payment to claimants. The Company has maintained insurance coverage that it believes covers indemnity and
defense costs, over and above self-insurance retentions, for most of the claims where there is any exposure to
the Company's products. The Company does not believe these lawsuits will have a material adverse eÅect on
its Ñnancial condition.
8
Various other lawsuits, claims and proceedings have been or may be instituted or asserted against the
Company relating to the conduct of its business, including those pertaining to product liability, environmental,
safety and health, intellectual property, 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
the Company, management believes the disposition of matters which are pending or asserted will not have a
material adverse eÅect on the Company's business or Ñnancial condition.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth quarter of 2003.
Item 4a. Executive OÇcers of the Company.
The name, age, oÇce and position held with the Company and principal occupations and employment
during the past Ñve years of each of the executive oÇcers of the Company as of October 31, 2003 are as
follows:
Name, OÇce and Position, and Principal Occupations and Employment
Age
Don H. Davis, Jr. Ì Chairman of the Board and Chief Executive OÇcer of Rockwell Automation ÏÏ
63
Michael A. Bless Ì Senior Vice President and Chief Financial OÇcer of Rockwell Automation since
June 2001; Vice President of Rockwell Automation from February 2001 to June 2001; Vice
President, Finance of Rockwell Automation Control Systems from June 1999 to June 2001; Vice
President, Corporate Development and Planning of Rockwell Automation prior theretoÏÏÏÏÏÏÏÏÏÏÏ
38
William J. Calise, Jr. Ì Senior Vice President, General Counsel and Secretary of Rockwell
Automation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
65
John D. Cohn Ì Senior Vice President, Strategic Development and Communications of Rockwell
Automation since July 1999; Vice President-Global Strategy Development of the avionics and
communications business of Rockwell Automation prior thereto ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Kent G. Coppins Ì Vice President and General Tax Counsel of Rockwell Automation since June
2001; Associate General Tax Counsel of Rockwell Automation from November 1998 to June 2001;
Senior Tax Counsel of Rockwell Automation prior theretoÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
David M. Dorgan Ì Vice President and Controller of Rockwell Automation since June 2001;
Director, Headquarters Finance of Rockwell Automation Control Systems from April 2000 to June
2001; Director, Financial Reports of Rockwell Automation from June 1999 to April 2000;
Manager, Financial Reports of Rockwell Automation prior thereto ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Mary Jane Hall Ì Vice President of Rockwell Automation since June 2001 and Senior Vice
President, Human Resources of Rockwell Automation Control Systems since January 2001; Vice
President, Human Resources of Rockwell Automation Control Systems prior thereto ÏÏÏÏÏÏÏÏÏÏÏÏ
49
50
39
60
Thomas J. Mullany Ì Vice President and Treasurer of Rockwell Automation since June 2001; Vice
President, Investor Relations of Rockwell Automation prior thereto ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
54
Terry P. Murphy Ì Vice President, Rockwell Automation since February 2002 and President,
Rockwell FirstPoint Contact since September 2000; Vice President Sales & Marketing, Rockwell
FirstPoint Contact from June 2000 to September 2000; Management Consultant, Worldwide
Sales & Marketing, Adaptive Broadband Corporation and IT-Shortlist.com (broadband
communications transmission equipment) from January 1999 to June 2000; Management
Consultant (self-employed) prior thereto ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
51
Keith D. Nosbusch Ì Senior Vice President of Rockwell Automation and President, Rockwell
Automation Control Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
52
James P. O'Shaughnessy Ì Vice President and Chief Intellectual Property Counsel of Rockwell
Automation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
56
9
Name, OÇce and Position, and Principal Occupations and Employment
Rondi Rohr-Dralle Ì Vice President, Corporate Development of Rockwell Automation since June
2001; Vice President, Finance of Rockwell Automation Control Systems, Global Manufacturing
Solutions business from September 1999 to June 2001; Treasurer and Investment Controller of
Applied Power, Inc. (renamed Actuant Corporation) (manufacturer of tools, equipment systems
and supply items) prior theretoÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
A. Lawrence Stuever Ì Vice President and General Auditor of Rockwell Automation since June
2003; Vice President, Compensation of Rockwell Automation from July 1999 to June 2003;
Director, Financial Planning and Analysis of Rockwell Automation prior thereto ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Age
47
51
Joseph D. Swann Ì Senior Vice President of Rockwell Automation since June 2001 and President,
Rockwell Automation Power Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
62
There are no family relationships, as deÑned by applicable SEC rules, between any of the above executive
oÇcers. No oÇcer of the Company was selected pursuant to any arrangement or understanding between the
oÇcer and any person other than the Company. All executive oÇcers are elected annually.
10
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters.
The principal market on which the Company's common stock is traded is the New York Stock Exchange.
The Company's common stock is also traded on the PaciÑc Exchange and The London Stock Exchange. On
November 30, 2003, there were 39,021 shareowners of record of the Company's common stock.
The following table sets forth the high and low sales price of the Company's common stock on the New
York Stock Exchange Ì Composite Transactions reporting system during each quarter of the Company's
Ñscal years ended September 30, 2003 and 2002:
Fiscal Quarters
2003
2002
High
Low
High
Low
First ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
SecondÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Third ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Fourth ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$22.30
23.87
25.85
28.69
$14.71
18.75
20.52
23.33
$18.70
21.45
22.79
20.26
$13.10
17.26
18.70
15.70
The declaration and payment of dividends by the Company is at the sole discretion of the Company's
board of directors. The following table sets forth the aggregate cash dividends per common share (paid
quarterly) during each of the Company's last three Ñscal years:
Fiscal Year
Cash Dividends per
Common Share(1)
2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$0.66
0.66
0.93
(1) Prior to the spinoÅ of Rockwell Collins, the Company paid quarterly cash dividends, which, on an annual
basis, equaled $1.02 per share. Since the spinoÅ of Rockwell Collins, the Company has paid quarterly
cash dividends which, on an annual basis, equal $0.66 per share. Per share dividend amounts indicated
above do not include dividends paid on the shares of Rockwell Collins received on June 29, 2001 by
Rockwell Automation shareowners.
11
Item 6. Selected Financial Data.
The following table sets forth selected consolidated Ñnancial data of the Company's continuing
operations. The data should be read in conjunction with MD&A and the Financial Statements. The
consolidated statement of operations data for each of the Ñve years in the period ended September 30, 2003,
the related consolidated balance sheet data and other data have been derived from the audited consolidated
Ñnancial statements of the Company.
2003(a)
Year Ended September 30,
2001(c)
(in millions, except per share data)
2000(d)
2002(b)
1999(e)
Consolidated Statement of Operations Data:
Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income from continuing operations before accounting
$4,104
52
$3,909
66
$4,285
83
$4,661
73
$4,670
84
change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
282
226
125
344
283
Earnings per share from continuing operations before
accounting change:
Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
DilutedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cumulative eÅect of accounting change(f)ÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cumulative eÅect of accounting change per diluted
share(f) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cash dividends per shareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Consolidated Balance Sheet Data: (at end of period)
Total assets Ì continuing operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Short-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Long-term debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Shareowners' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other Data:
Capital expendituresÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Goodwill and trademark amortization(f) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other intangible asset amortization(f) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
1.52
1.49
Ì
Ì
0.66
$3,986
3,986
9
764
1,587
$ 109
172
Ì
26
1.22
1.20
(108)
(0.58)
0.66
$4,006
4,006
162
767
1,609
$ 104
184
Ì
22
0.69
0.68
Ì
Ì
0.93
$4,098
4,098
10
909
1,600
$ 157
196
56
20
1.83
1.81
Ì
Ì
1.02
$4,428
5,320
16
911
2,669
$ 217
193
53
24
1.49
1.47
Ì
Ì
1.02
$4,655
5,320
189
911
2,540
$ 250
184
46
21
12
(a) Includes a reduction in the income tax provision of $69 million, or 37 cents per diluted share, related to
the settlement of a U.S. federal research and experimentation credit refund claim.
(b) Includes a reduction in the income tax provision of $48 million, or 26 cents per diluted share, from the
resolution of certain tax matters and income of $9 million ($7 million after tax, or 4 cents per diluted
share) from the favorable settlement of intellectual property matters.
(c) Includes special items of $73 million ($48 million after tax, or 26 cents per diluted share) and a reduction
in the income tax provision of $22 million, or 12 cents per diluted share, from the resolution of certain tax
matters. Special items include charges of $91 million ($60 million after tax, or 32 cents per diluted share)
for a comprehensive restructuring program which included costs associated with the consolidation and
closing of facilities, the realignment of administrative functions, the reduction in workforce and asset
impairments which were partially oÅset by income of $18 million ($12 million after tax, or 6 cents per
diluted share) resulting from the favorable settlement of an intellectual property matter.
(d) Includes a gain of $32 million ($22 million after tax, or 12 cents per diluted share) resulting from the sale
of real estate, a loss of $14 million ($10 million after tax, or 6 cents per diluted share) on the sale of a
Power Systems business, and income of $28 million ($19 million after tax, or 10 cents per diluted share)
resulting from the demutualization of Metropolitan Life Insurance Company.
(e) Includes a gain of $32 million ($21 million after tax, or 11 cents per diluted share) on the sale of the
Company's North American Transformer business and a loss of $29 million ($19 million after tax, or
10 cents per diluted share) associated with the write-oÅ of the Company's investment in Goss Graphic
Systems, Inc. preferred stock.
(f) EÅective October 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets (SFAS 142). As a result of adopting SFAS 142, the Company no
longer amortizes goodwill and certain trademarks that have been deemed to have an indeÑnite useful life,
resulting in a decrease in amortization expense beginning in 2002. In addition, in 2002 the Company
recorded pre-tax charges of $56 million related to a trademark impairment and $73 million related to
goodwill impairment in connection with the adoption of SFAS 142. These charges have been recorded as
the cumulative eÅect of accounting change in the amount of $129 million ($108 million after tax, or
58 cents per diluted share).
13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Critical Accounting Policies and Estimates
The consolidated Ñnancial statements have been prepared in accordance with accounting principles
generally accepted in the United States which require the Company to make estimates and assumptions that
aÅect the reported amounts of assets and liabilities at the date of the consolidated Ñnancial statements and
revenues and expenses during the periods reported. Actual results could diÅer from those estimates. The
Company believes the following are the critical accounting policies which could have the most signiÑcant
eÅect on the Company's reported results and require subjective or complex judgments by management.
Revenue Recognition
Sales are generally recorded when all of the following have occurred: an agreement of sale exists, product
delivery and acceptance has occurred or services have been rendered, pricing is Ñxed or determinable, and
collection is reasonably assured.
Contracts and customer purchase orders are generally used to determine the existence of an arrangement.
Shipping documents and customer acceptance, when applicable, are used to verify delivery. The Company
assesses whether the fee is Ñxed or determinable based on the payment terms associated with the transaction
and whether the sales price is subject to refund or adjustment. The Company assesses collectibility based
primarily on the creditworthiness of the customer as determined by credit checks and analysis, as well as the
customer's payment history.
The Company records accruals for customer returns, rebates and incentives at the time of sale to a
customer based upon historical experience. Additional accruals may be required if actual returns, rebates and
incentives diÅer from historical experience. The accrual for rebates and incentives to customers was
$75 million at September 30, 2003 and $74 million at September 30, 2002, of which $5 million at
September 30, 2003 and $6 million at September 30, 2002 was included as an oÅset to accounts receivable.
Allowance for Doubtful Accounts
The Company records allowances for doubtful accounts based on customer-speciÑc analysis and general
matters such as current assessments of past due balances and economic conditions. Additional allowances for
doubtful accounts may be required if there is deterioration in past due balances, if economic conditions are less
favorable than the Company has anticipated or for customer-speciÑc circumstances, such as Ñnancial
diÇculty. During 2002, the Company recorded an allowance of approximately $9 million to fully reserve a
receivable due to the deterioration in the Ñnancial condition of one of its independent distributors. The
allowance for doubtful accounts was $28 million at September 30, 2003 and $45 million at September 30,
2002. The decrease in the allowance balance primarily relates to the writeoÅ of the $9 million distributor
receivable and $3 million of account collections for which an allowance had previously been provided. The
remainder of the decrease resulted from the Company's regular review of the allowance, considering such
factors as historical experience, credit quality and age of the accounts receivable balances.
Excess and Obsolete Inventory
The Company records allowances for excess and obsolete inventory based on historical and estimated
future demand and market conditions. Additional inventory allowances may be required if future demand or
market conditions are less favorable than the Company has estimated. The allowance for excess and obsolete
inventory was $56 million at September 30, 2003 and $53 million at September 30, 2002.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of the carrying amount of long-lived assets whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The
Company evaluates the recoverability of goodwill and other intangible assets with indeÑnite useful lives
annually or more frequently if events or circumstances indicate that an asset might be impaired. The Company
14
uses judgment when applying the impairment rules to determine when an impairment test is necessary.
Factors the Company considers which could trigger an impairment review include signiÑcant un-
derperformance relative to historical or forecasted operating results, a signiÑcant decrease in the market value
of an asset, a signiÑcant change in the extent or manner in which an asset is used and signiÑcant negative
industry or economic trends.
Impairment losses are measured as the amount by which the carrying value of an asset exceeds its
estimated fair value. To determine fair value, the Company is required to make estimates of its future cash
Öows related to the asset subject to review. These estimates require assumptions about demand for the
Company's products and services, future market conditions and technological developments. Other assump-
tions include determining the discount rate and future growth rates. During 2002, the Company recorded pre-
tax impairment charges of $129 million ($108 million after tax) in connection with the adoption of SFAS 142.
Additional information regarding the impairment charges is contained in Note 3 of the Notes to Consolidated
Financial Statements in the Financial Statements.
Product Warranty Obligations
The Company records a liability for product warranty obligations at the time of sale to a customer based
upon historical warranty experience. The Company also records a liability for speciÑc warranty matters when
they become known and are reasonably estimable. An additional provision for product warranty obligations
may be required if actual product performance is less favorable than anticipated. The liability for product
warranty obligations was $29 million at September 30, 2003 and $31 million at September 30, 2002.
Retirement BeneÑts
Pension BeneÑts
Pension costs and obligations are actuarially determined and are aÅected by annually reviewed
assumptions including discount rate, the expected rate of return on plan assets and assumed annual rate of
compensation increase for plan employees, among other factors. Changes in the discount rate and diÅerences
between the assumptions made and actual experience will aÅect the amount of pension expense recognized in
future periods.
Pension expense in Ñscal 2003 was $42 million compared to $25 million in Ñscal 2002. Fiscal 2003
pension expense was determined using the following actuarial assumptions: discount rate of 7.0 percent
(compared to 7.5 percent for Ñscal 2002); expected rate of return on plan assets of 8.5 percent (compared to
9.0 percent for Ñscal 2002); and an assumed rate of compensation increase of 4.5 percent (compared to
4.5 percent for Ñscal 2002). All other factors being equal, these changes were the primary cause of the
incremental pension expense in 2003 over 2002 of approximately $17 million. For Ñscal year 2004, the
Company is assuming an expected rate of return on plan assets of 8.5 percent and a discount rate of
6.0 percent for determining net periodic beneÑt cost. All other factors being equal, and assuming actual
experience is consistent with the actuarial assumptions, the Company expects Ñscal year 2004 pension expense
to increase by approximately $24 million compared to Ñscal 2003. This increase is primarily attributable to the
change in the discount rate and includes the recognition of actuarial losses related primarily to the
accumulated diÅerence between actual and expected returns on pension plan assets.
In June 2003, the Company made a $50 million voluntary contribution to the Company's primary U.S.
qualiÑed pension plan trust compared to a 2002 contribution of $24 million which was related to the spinoÅ of
Rockwell Collins. In addition, while not required to contribute any amount to the Company's primary U.S.
qualiÑed pension plan trust in Ñscal 2004, the Company may choose to contribute up to the maximum
allowable tax deductible contribution of approximately $200 million. The Company currently anticipates
making a contribution during Ñscal 2004 to the primary U.S. qualiÑed pension plan trust in an amount that
approximates the 2003 contribution.
15
Additional information regarding pension beneÑts, including the Company's pension obligation and
minimum pension liability adjustment, is contained in Note 13 of the Notes to Consolidated Financial
Statements in the Financial Statements.
Other Postretirement BeneÑts
The costs and obligations for postretirement beneÑts other than pension are also actuarially determined
and are aÅected by assumptions, including the discount rate. Changes in the discount rate may aÅect the
recorded amount of the expense in future periods. EÅective October 1, 2002, the Company amended its
primary U.S. postretirement health care beneÑt program in order to mitigate the Company's share of the
increasing cost of postretirement health care services. This change reduced the beneÑt obligation by
$86 million. Net periodic beneÑt cost in 2003 was approximately $29 million compared to $28 million in 2002.
Net periodic beneÑt cost in 2004 is expected to be $23 million, which reÖects the full year eÅect on expense of
the October 1, 2002 plan amendment. Additional information regarding postretirement beneÑts is contained in
Note 13 of the Notes to Consolidated Financial Statements in the Financial Statements.
Self-Insurance Liabilities
The Company's self-insurance programs include primarily product liability and workers' compensation.
For product liability and workers' compensation, the Company self-insures from the Ñrst dollar of loss up to
speciÑed retention levels. Eligible losses in excess of self-insurance retention levels and up to stated limits of
liability are covered by policies purchased from third-party insurers. The aggregate self-insurance liability is
estimated using the Company's claims experience and risk exposure levels for the periods being valued.
Adjustments to the self-insured liabilities may be required to reÖect emerging claims experience and other
factors such as inÖationary trends or jury awards. The liability for these self-insurance programs was
$51 million at September 30, 2003 and $48 million at September 30, 2002.
Litigation, Claims and Contingencies
The Company records liabilities for litigation, claims and contingencies when an obligation is probable
and when the Company has a basis to reasonably estimate the value of an obligation. The Company also
records environmental liabilities based on estimates for known environmental remediation exposures utilizing
information received from independent environmental consultants. The liabilities include accruals for sites
owned by the Company and third-party sites where the Company was determined to be a potentially
responsible party. At third-party sites where more than one potentially responsible party has been identiÑed,
the Company records a liability for its estimated allocable share of costs related to its involvement with the site
as well as an estimated allocable share of costs related to the involvement of insolvent or unidentiÑed parties.
At environmental sites in which the Company is the only responsible party, a liability is recorded for the total
estimated costs of remediation. Future expenditures for environmental remediation obligations are not
discounted to their present value. Environmental liability estimates may be aÅected by changing determina-
tions of what constitutes an environmental exposure or an acceptable level of cleanup. To the extent that
remediation procedures change, additional contamination is identiÑed, or the Ñnancial condition of other
potentially responsible parties is adversely aÅected, the estimate of the Company's environmental liabilities
may change.
The liability for environmental matters, net of related receivables, was $29 million at September 30, 2003
and $28 million at September 30, 2002. This includes an adjustment made during the fourth quarter of 2003 to
increase the environmental reserve by approximately $5 million due to higher estimated future costs for
environmental remediation near the Russellville, Kentucky facility of the Company's former Measurement
and Flow Control business.
Also during the fourth quarter of 2003, the Company recognized income, reÖected in discontinued
operations, of approximately $7 million ($4 million after tax) from a favorable determination in a legal
proceeding related to the Company's former operation of the Rocky Flats facility of the Department of
Energy.
16
Additional information regarding litigation, claims and contingencies is contained in Note 19 of the Notes
to Consolidated Financial Statements in the Financial Statements. See also Item 3. Legal Proceedings, on
page 6 hereof.
Income Taxes
The Company records a liability for potential tax assessments based on its estimate of the potential
exposure. The liability for potential tax assessments may be aÅected by new laws and new interpretations of
laws and rulings by tax authorities, among other reasons. Due to the subjectivity and complex nature of the
underlying issues, actual payments or assessments may diÅer from estimates. To the extent the Company's
estimates diÅer from actual payments or assessments, income tax expense is adjusted. During 2002, the
Company resolved certain matters from previous years resulting in a $48 million reduction of its income tax
provision. Additional information regarding income taxes is contained in Note 18 of the Notes to Consoli-
dated Financial Statements in the Financial Statements.
The Company has recorded a valuation allowance of $47 million at September 30, 2003 for the majority
of its deferred tax assets related to net operating loss carryforwards, capital loss carryforwards and state tax
credit carryforwards (Carryforwards). The valuation allowance is based on an evaluation of the uncertainty of
the amounts of the Carryforwards that are expected to be realized. An increase to income would result if the
Company determines it could utilize more Carryforwards than originally expected.
At the end of each interim reporting period, the Company estimates the eÅective tax rate expected to be
applicable for the full Ñscal year. The estimated eÅective tax rate contemplates the expected jurisdiction
where income is earned (e.g., United States compared to non-United States) as well as tax planning
strategies. If the actual results are diÅerent from the Company's estimates, adjustments to the eÅective tax
rate may be required in the period such determination is made.
17
Results of Operations
Summary of Results of Operations
2003
Year Ended September 30,
2002
(in millions)
2001
Sales:
Control Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Power Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
FirstPoint ContactÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other(a) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$3,287
705
112
Ì
$3,060
716
133
Ì
$3,327
748
150
60
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$4,104
$3,909
$4,285
Segment operating earnings(b):
Control Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Power Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
FirstPoint ContactÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other(a) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 398
54
1
Ì
$ 324
53
4
Ì
$ 425
39
7
3
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Goodwill and purchase accounting items(c) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
General corporate Ì net(a)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Loss on disposition of a businessÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Special charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income from continuing operations before income taxes and accounting
change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Provision for income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income from continuing operations before accounting change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income from discontinued operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cumulative eÅect of accounting change(c)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
453
(27)
(67)
(8)
(52)
Ì
299
(17)
282
4
Ì
381
(25)
(57)
Ì
(66)
Ì
233
(7)
226
3
(108)
474
(79)
(53)
Ì
(83)
(91)
168
(43)
125
180
Ì
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 286
$ 121
$ 305
(a) Other represents the sales and segment operating earnings of Rockwell Science Center through the third
quarter of 2001. Beginning with the fourth quarter of 2001, the Company's 50 percent ownership interest
in RSC is accounted for using the equity method, and the Company's proportional share of RSC's
earnings or losses are included in general corporate-net.
(b) Information with respect to the composition of segment operating earnings is contained in Note 20 of the
Notes to Consolidated Financial Statements in the Financial Statements.
(c) EÅective October 1, 2001, the Company adopted SFAS 142. As a result of adopting SFAS 142, the
Company no longer amortizes goodwill and certain trademarks that have been deemed to have an
indeÑnite useful life, resulting in a decrease in amortization expense in 2002. The 2001 amortization of
goodwill and indeÑnite life trademarks was $56 million. In addition, in 2002 the Company recorded pre-
tax charges of $56 million related to a trademark impairment and $73 million related to goodwill
impairment in connection with the adoption of SFAS 142. These charges have been recorded as the
cumulative eÅect of accounting change in the amount of $129 million ($108 million after tax, or 58 cents
per diluted share). The amount included in goodwill and purchase accounting items in 2003 and 2002
includes amortization expense for acquired intangible assets that have a Ñnite life and depreciation
expense for purchase accounting adjustments.
18
Demand for the Company's products is largely driven by trends in industrial spending. Sales are aÅected
by the level of industrial production activity, customers' new product introductions, upgrades and expansions
of existing manufacturing facilities and the creation of new manufacturing facilities. Due to weak business
conditions in recent years, especially in the manufacturing economy, manufacturers have been operating at
historically low levels of plant capacity utilization. This condition results in the tendency to defer signiÑcant
amounts of capital investment until the environment improves. The table below depicts the trend since
December 2000 in capacity utilization in the United States, as published by the Federal Reserve, and in
manufacturing activity in the United States, as reÖected by the purchasing managers' index (PMI), published
by the Institute for Supply Management (ISM). 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.
Fiscal 2003
September 2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
June 2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
March 2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
December 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Fiscal 2002
September 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
June 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
March 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
December 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Fiscal 2001
September 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
June 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
March 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
December 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Capacity
Utilization
(Percent)
74.8
74.1
74.8
74.9
76.0
75.9
75.3
74.6
76.0
77.2
79.0
81.1
PMI
53.7
49.8
46.2
55.2
50.7
55.2
54.7
48.5
47.2
43.5
42.5
44.6
2003 Compared to 2002
Sales were $4,104 million in 2003, an increase of 5 percent compared to $3,909 million in 2002. Three
percentage points of the growth was due to the eÅect of currency translation. Segment operating earnings for
2003 were $453 million, an increase of 19 percent compared to $381 million in 2002. Income from continuing
operations before accounting change in 2003 was $282 million, or $1.49 per diluted share, compared to
$226 million, or $1.20 per diluted share, in 2002. Net income in 2003 was $286 million, or $1.51 per diluted
share, compared to $121 million, or 64 cents per diluted share, in 2002. The 2003 results included a tax beneÑt
of $69 million, or 37 cents per diluted share, related to the settlement of a U.S. federal research and
experimentation credit refund claim. The 2002 results included a tax beneÑt of $48 million, or 26 cents per
diluted share, from the resolution of certain tax matters for the period 1995-1999 and a charge of $129 million
($108 million after tax, or 58 cents per diluted share) related to the adoption of SFAS 142.
Control Systems
Control Systems' sales in 2003 were $3,287 million, an increase of 7 percent compared to $3,060 million
in 2002. More than 3 percentage points of the sales increase was due to the favorable impact of currency
translation, primarily resulting from the relative strength of the euro to the U.S. dollar. Sales outside of the
U.S. increased 18 percent (9 percent excluding currency translation) (see Supplemental Sales Information
on page 27) and U.S. sales increased 1 percent. The Company's Logix and Process Solutions businesses each
19
grew approximately 30 percent over 2002. The Company's Global Manufacturing Solutions business grew
approximately 5 percent over 2002.
Segment operating earnings were $398 million in 2003, an increase of 23 percent compared to
$324 million in 2002. The increase was due to higher volume and the continuing beneÑts of cost reduction
actions. Control Systems' return on sales in 2003 was 12.1 percent compared to 10.6 percent in 2002.
Power Systems
Power Systems' sales in 2003 were $705 million compared to $716 million in 2002. Mechanical sales
increased 3 percent while Electrical sales decreased 5 percent. Segment operating earnings were $54 million in
2003 compared to $53 million in 2002. Segment operating earnings remained relatively stable despite the
decrease in sales due to savings from cost reduction eÅorts. Power Systems' return on sales was 7.7 percent in
2003 compared to 7.4 percent in 2002.
FirstPoint Contact
FirstPoint Contact's sales in 2003 were $112 million compared to $133 million in 2002. The decrease was
primarily due to lower customer capital spending for telecommunications products. Segment operating
earnings were $1 million in 2003 compared to $4 million in 2002. Included in 2003 results is a charge of
$2 million related to a workforce reduction. Included in 2002 results were charges of $4 million related to
severance and an asset impairment.
General Corporate Ì Net
General corporate expenses were $67 million in 2003 compared to $57 million in 2002. Expense in 2003
included a charge of $5 million due to higher estimated future costs for environmental remediation near the
Russellville, Kentucky facility of the Company's former Measurement and Flow Control business. 2002
included $9 million of income related to the settlement of intellectual property matters. Excluding these
amounts, corporate expenses decreased in 2003 as a result of lower corporate staÅ costs and an increase of
approximately $2 million in earnings from the Company's investment in RSC.
Loss on Disposition of a Business
In the second quarter of 2003, the Company sold a majority of its ownership interest in REJ resulting in a
loss of approximately $8 million ($3 million after tax, or 1 cent per diluted share). The after-tax loss on the
sale included a $2 million beneÑt resulting from the Company's ability to utilize capital loss carryforwards for
which a valuation allowance had been previously provided. The cash proceeds from the transaction totaled
approximately $10 million.
Interest Expense
Interest expense was $52 million in 2003 compared to $66 million in 2002. The decrease was the result of
the retirement at maturity of the $150 million principal amount of 6.80% notes in April 2003, the beneÑt of an
interest rate swap (see Note 9 in the Notes to Consolidated Financial Statements) and lower average short-
term borrowings.
2002 Compared to 2001
Sales were $3,909 million in 2002 compared to $4,285 million in 2001. Income from continuing
operations before accounting change in 2002 was $226 million, or $1.20 per diluted share, compared to
$125 million, or 68 cents per diluted share, in 2001. The 2002 results from continuing operations include a
reduction in the income tax provision of $48 million, or 26 cents per diluted share, from the favorable
resolution of certain tax matters. In 2001, income from continuing operations before accounting change
included amortization of goodwill and certain other intangible assets of $56 million ($47 million after tax, or
25 cents per diluted share), as well as special charges of $91 million ($60 million after tax, or 32 cents per
20
diluted share) for costs associated with realignment actions and income of $18 million ($12 million after tax,
or 6 cents per diluted share) resulting from the favorable settlement of an intellectual property matter and a
reduction in the income tax provision of $22 million, or 12 cents per diluted share, from the favorable
resolution of certain tax matters. Goodwill and certain trademarks deemed to have an indeÑnite life are no
longer amortized under SFAS 142.
Control Systems
Control Systems' sales in 2002 were $3,060 million compared to $3,327 million in 2001. The decrease was
primarily the result of continued depressed market conditions for automation products. Sales in the U.S
declined 9 percent in 2002, while sales outside of the U.S. declined 6 percent (4 percent excluding currency
translation), primarily as a result of a 7 percent decline in Europe (9 percent excluding currency translation).
Despite the overall sales decline, sales of Logix integrated architecture products increased 31 percent. Sales in
the Global Manufacturing Solutions business increased 6 percent over 2001 driven by increases in process and
engineering solutions sales and the acquisition of Propack.
Segment operating earnings were $324 million in 2002 compared to $425 million in 2001. The decrease
was primarily due to lower volume, especially in higher margin CPAG and ACIG products. In addition,
Control Systems continued to invest in the growth of its Global Manufacturing Solutions business. Control
Systems' return on sales in 2002 was 10.6 percent compared to 12.8 percent in 2001.
Power Systems
Power Systems' sales in 2002 were $716 million compared to $748 million in 2001. The decline was the
result of lower demand due to depressed market conditions. Segment operating earnings increased to
$53 million in 2002 from $39 million in 2001. The improvement was the result of cost savings from actions
taken in the fourth quarter of 2001 and ongoing initiatives to improve productivity. Power Systems' return on
sales was 7.4 percent in 2002 compared to 5.2 percent in 2001.
FirstPoint Contact
FirstPoint Contact's sales in 2002 were $133 million compared to $150 million in 2001. The decline was
primarily due to decreased customer capital spending for telecommunications products. Segment operating
earnings were $4 million in 2002 compared to $7 million in 2001. Included in the 2002 results are charges of
$4 million related to severance and an asset impairment.
General Corporate Ì Net
General corporate expenses were $57 million in 2002 compared to $53 million in 2001. General corporate
expenses included income from the settlement of intellectual property matters of $9 million in 2002 and
$18 million in 2001 and a gain on the sale of real estate of $5 million in 2001. Also in 2001, general corporate
expenses included $3 million of costs associated with the spinoÅ of Rockwell Collins. Excluding these items,
general corporate expenses decreased from $73 million in 2001 to $66 million in 2002, primarily as a result of
lower corporate spending.
Interest Expense
Interest expense decreased to $66 million in 2002 from $83 million in 2001. The decrease was due to
lower weighted-average short-term borrowings and lower commercial paper borrowing rates in 2002. The
Company used commercial paper in the second quarter of 2001 to fund an acquisition by Rockwell Collins. In
the third quarter of 2001, the Company received a special payment of $300 million from Rockwell Collins
which was used to repay commercial paper borrowings.
21
Special Charges
In 2001, the Company recorded charges of $91 million ($60 million after tax, or 32 cents per diluted
share) for costs associated with a realignment of its operations to reduce costs in response to the continued
decline in demand in industrial markets. Total cash expenditures related to the realignment actions will
approximate $50 million, of which substantially all had been spent as of September 30, 2003. The special
charges were related to the business segments as follows: Control Systems, $76 million; Power Systems,
$5 million; and Corporate, $10 million. See Note 14 in the Notes to Consolidated Financial Statements in the
Financial Statements.
Discontinued Operations
Discontinued operations in 2003 are a beneÑt of $7 million ($4 million after tax, or 2 cents per diluted
share) from a favorable determination in a legal proceeding related to the Company's former operation of the
Rocky Flats facility of the Department of Energy.
Discontinued operations in 2002 related to a net beneÑt of $3 million for the resolution of certain
obligations related to two discontinued businesses.
On June 29, 2001, the Company completed the spinoff of its Rockwell Collins avionics and communica-
tions business into an independent, separately traded, publicly held company. In connection with the spinoff, all
outstanding shares of common stock of Rockwell Collins were distributed to Rockwell Automation shareowners
on the basis of one Rockwell Collins share for each outstanding Rockwell Automation share. At the time of the
spinoff, Rockwell Collins made a special payment to the Company of $300 million. The Company recorded a
decrease to shareowner's equity for the net assets of Rockwell Collins as of June 29, 2001 of approximately
$1.2 billion (including $300 million of debt incurred to make the special payment to the Company). Included in
2001 income from discontinued operations was $21 million of costs related to the spinoff.
Rockwell ScientiÑc Company LLC
Since June 29, 2001, the Company and Rockwell Collins each have owned 50 percent of RSC. Results of
Rockwell Science Center are included in continuing operations through the third quarter of 2001. Sales of
Rockwell Science Center for the Ñrst nine months of 2001 were $60 million. Segment operating earnings were
$3 million for the Ñrst nine months of 2001. Beginning with the fourth quarter of 2001, the Company's
50 percent ownership interest in RSC is accounted for using the equity method, and the Company's
proportional share of RSC's earnings or losses are included in general corporate-net.
Acquisitions
See Note 2 in the Notes to Consolidated Financial Statements for information regarding acquisitions.
Income Taxes
During 2003, the Company recognized in earnings a net tax beneÑt of $69 million related to a
U.S. federal research and experimentation credit refund claim and a tax beneÑt of approximately $2 million as
a result of the Company's ability to utilize certain capital loss carryforwards for which a valuation allowance
had been previously provided. The ability to utilize the capital loss carryforwards was the result of the sale of a
majority of the Company's ownership in REJ which took place in 2003. The full year eÅective tax rate for
2003 was approximately 6 percent, including the eÅect of the research and experimentation settlement
(23 percent beneÑt) and the REJ transaction (1 percent beneÑt). See Note 18 in the Notes to Consolidated
Financial Statements in the Financial Statements. Management believes that the eÅective income tax rate in
2004 will be approximately 30 percent, excluding the income tax expense or beneÑt related to discrete items, if
any, that will be separately reported or reported net of their related tax eÅects.
During 2002, the Company resolved certain tax matters for the period of 1995-1999, resulting in a
$48 million reduction in its income tax provision. Including the eÅect of this reduction, the eÅective income
tax rate for 2002 was 3 percent.
22
Outlook for 2004
Customer demand has strengthened since early September 2003 and management has begun to see a
broad improvement across the Company's markets. Management is conÑdent that these early signs are
indicative of an emerging upward trend and is optimistic that this trend will be sustainable. Until further
evidence emerges, management is planning for revenue growth in 2004 in the mid-single digits and expects
diluted earnings per share in 2004 in the range of $1.35 to $1.45.
Financial Condition
The Company's cash Öows from operating, investing and Ñnancing activities, as reÖected in the
Consolidated Statement of Cash Flows, are summarized in the following table (in millions):
Year Ended September 30,
2001
2002
2003
Cash provided by (used for):
Operating activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Investing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Financing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
EÅect of exchange rate changes on cashÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 436
(133)
(335)
(31)
$ 476
(175)
(97)
Ì
$ 335
153
(197)
9
Cash (used for) provided by continuing operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ (63)
$ 204
$ 300
The following table summarizes free cash Öow (in millions):
Cash provided by operating activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Capital expenditures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 436
(109)
$ 476
(104)
$ 335
(157)
Free cash Öow ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 327
$ 372
$ 178
The Company's definition of free cash flow takes into consideration capital investment required to maintain
the operations of the Company and execute its strategy. Management believes that free cash flow provides useful
information to investors regarding the Company's ability to generate cash from business operations that is
available for acquisitions and other investments, service of debt principal, dividends and share repurchases.
Management uses free cash flow as one measure to monitor and evaluate the performance of the Company. The
Company's definition of free cash flow may be different from definitions used by other companies.
Free cash Öow was $327 million for the year ended September 30, 2003 compared to $372 million for the
year ended September 30, 2002. The decrease in free cash Öow was in part the result of a $50 million voluntary
contribution made to the Company's primary U.S. qualiÑed pension plan trust in June 2003 compared to the
$24 million contribution made in 2002 related to the spinoÅ of Rockwell Collins. Capital expenditures in 2003
were $109 million compared to $104 million in 2002. Capital expenditures in 2004 are expected to be
$125 million to $135 million, but will depend ultimately on business conditions.
The Company acquired Weidm uller Holding AG's North American business and Interwave Technology,
Inc. during 2003 for approximately $26 million (see Note 2 in the Notes to Consolidated Financial
Statements for a discussion of the businesses). During 2002, the Company acquired four businesses for
approximately $71 million.
The Company elects to utilize commercial paper as its principal source of short-term Ñnancing. At
September 30, 2003 and 2002, the Company had no commercial paper borrowings outstanding. During the
year ended September 30, 2003, the Company had weighted average borrowings of $27 million under its
commercial paper program at interest rates ranging from 1.1 percent to 1.4 percent. During the year ended
September 30, 2002, the Company had weighted average borrowings of $68 million under its commercial
paper program at interest rates ranging from 1.8 percent to 2.7 percent.
23
In April 2003, the Company's $150 million principal amount of 6.80% notes were retired at maturity
using a combination of cash on hand and commercial paper borrowings.
The Company repurchased approximately 5.6 million shares of its common stock at a cost of
approximately $128 million in 2003, which included repurchases of approximately 70,000 shares at a cost of
approximately $1.6 million under a voluntary program that provided shareowners owning fewer than
100 shares of common stock the opportunity to sell all of their shares of common stock to the Company
without paying a commission. At September 30, 2003, the Company had approximately $177 million
remaining for stock repurchases under existing board authorizations. The Company did not repurchase any
shares in 2002. The Company anticipates repurchasing stock in 2004, the amount of which will depend
ultimately on business conditions and other cash requirements.
Future signiÑcant uses of cash are expected to include capital expenditures, dividends to shareowners,
acquisitions, repurchases of common stock in connection with the Company's stock repurchase program and
may include contributions to the Company's pension plans. Additional information regarding pension
contributions is contained in MD&A on page 15 hereof. It is expected that each of these future uses of cash
will be funded by cash generated by operating activities and commercial paper borrowings, a new issue of debt
or issuance of other securities.
In addition to cash generated by operating activities, the Company has access to existing Ñnancing
sources, including the public debt markets and unsecured credit facilities with various banks. The Company's
debt-to-total-capital ratio was 32.7 percent at September 30, 2003 and 36.6 percent at September 30, 2002.
As of September 30, 2003, the Company had $675 million of unsecured committed credit facilities
available to support its commercial paper borrowings, with $337.5 million expiring in October 2003 and
$337.5 million expiring in October 2005. During October 2003, the Company entered into a new $337.5 mil-
lion credit facility expiring in October 2004. Outstanding commercial paper balances, if any, reduce the
amount of available borrowings under the unsecured committed credit facilities. The terms of the credit
facilities contain a covenant under which the Company would be in default if the Company's debt to capital
ratio were to exceed 60 percent. In addition to the $675 million credit facilities, short-term unsecured credit
facilities available to foreign subsidiaries amounted to $121 million at September 30, 2003.
The following is a summary of the Company's credit ratings as of September 30, 2003:
Credit Rating Agency
Short-Term
Long-Term
Rating
Outlook
Rating
Outlook
Standard & Poor's ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A-1
P-2
Moody's ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
F1
Fitch Ratings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Negative*
Stable
Stable
A
A3
A
Negative*
Negative
Stable
* Standard & Poor's changed its outlook to ""Negative'' in April 2003 due to its concerns about the
Company's exposure to unfunded postretirement beneÑt liabilities, including deÑned beneÑt pension and
retiree medical liabilities.
Should the Company's access to the commercial paper market be adversely aÅected due to a change in
market conditions or otherwise, the Company 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.
Cash dividends to shareowners were $122 million, or $0.66 per share, in 2003 and 2002. Prior to the
spinoÅ of Rockwell Collins, the Company paid quarterly cash dividends, which, on an annual basis, equaled
$1.02 per share. Since the spinoÅ of Rockwell Collins, the Company has paid quarterly cash dividends which,
on an annual basis, equal $0.66 per share. Although declaration and payment of dividends by the Company are
at the sole discretion of the Company's board of directors, the Company expects to pay quarterly dividends in
2004 which, on an annual basis, are expected to equal $0.66 per share.
24
Certain of the Company's contractual cash obligations at September 30, 2003 are summarized as follows:
Total
2004
2005
Payments by Period
2007
2006
2008
Thereafter
Short-term debt(a) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Long-term debt(b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Minimum operating lease payments ÏÏÏÏÏÏÏÏÏÏÏ
Purchase commitment(c) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$
9
800
214
47
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$1,070
$ 9
Ì
48
21
$78
$Ì $Ì $Ì $ Ì
350
Ì
17
38
Ì
21
Ì
29
5
Ì
25
Ì
$59
$34
$25
$367
$ Ì
450
57
Ì
$507
(a) Short-term debt includes $8 million of industrial development revenue bonds which the Company
expects to repay in January 2004 (prior to maturity).
(b) Long-term debt excludes the unamortized discount of $46 million and the $10 million fair value
adjustment recorded for an interest rate swap as permitted by SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities.
(c) In connection with the sale of a Power Systems business in 2000, the Company entered into a supply
agreement with the buyer of the business. The agreement requires minimum purchases by the Company
of approximately $21 million per year through December 31, 2005. In the event that purchases are less
than $21 million in a given year, the Company may incur penalties which are 25 percent of the amount by
which the actual purchases were less than the contractual minimum for the period. Based upon current
estimates of future purchases, management does not believe that any penalties payable under the terms of
the agreement would be material to the Company's business or Ñnancial condition. For additional
information on the supply agreement, see Note 19 of the Notes to Consolidated Financial Statements in
the Financial Statements.
At September 30, 2003, the Company guaranteed the performance of Conexant related to a $60 million
lease obligation. The lease obligation is secured by the real property subject to the lease and is within a range
of estimated fair values of the real property. In consideration for this guarantee, the Company receives
$250,000 per quarter from Conexant through December 31, 2003. The guarantee expires in 2005.
At September 30, 2003, the Company and Rockwell Collins each guarantee one-half of a lease
agreement for one of RSC's facilities. The total future minimum payments under the lease are approximately
$6 million. The lease agreement has a term which ends in December 2011. In addition, the Company shares
equally with Rockwell Collins in providing a $4 million line of credit to RSC, which bears interest at the
greater of the Company's or Rockwell Collins' commercial paper borrowing rate. At September 30, 2003 and
2002, there were no outstanding borrowings under this line of credit.
Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risk during the normal course of business from changes in interest
rates and foreign currency exchange rates. The exposure to these risks is managed through a combination of
normal operating and Ñnancing activities and derivative Ñnancial instruments in the form of interest rate swap
contracts and foreign currency forward exchange contracts.
Interest Rate Risk
In addition to cash provided by normal operating activities, the Company utilizes a combination of short-
term and long-term debt to Ñnance operations. The Company is exposed to interest rate risk on certain of
these debt obligations.
The Company's short-term debt obligations relate to commercial paper borrowings and bank borrowings.
At September 30, 2003 and 2002, the Company had no commercial paper borrowings outstanding. During
2003, the weighted average commercial paper borrowings were $27 million compared to $68 million in 2002.
There were no bank borrowings outstanding at September 30, 2003. At September 30, 2002, the carrying value
of bank borrowings was $10 million. The Company's results of operations are aÅected by changes in market
25
interest rates on commercial paper borrowings. If market interest rates would have averaged 10 percent higher
than actual levels in either 2003 or 2002, the eÅect on the Company's results of operations would not have
been material. The fair values of these obligations approximated their carrying values at September 30, 2002,
and would not have been materially aÅected by changes in market interest rates.
The Company had outstanding Ñxed rate long-term debt obligations with carrying values of $773 million
at September 30, 2003 and $919 million at September 30, 2002. The fair value of this debt was $844 million at
September 30, 2003 and $976 million at September 30, 2002. The potential loss in fair value on such Ñxed-rate
debt obligations from a hypothetical 10 percent increase in market interest rates would not be material to the
overall fair value of the debt. The Company currently has no plans to repurchase its outstanding Ñxed-rate
instruments other than $8 million of industrial development revenue bonds which the Company expects to
repay in January 2004 (prior to maturity) and, therefore, Öuctuations in market interest rates would not have
an eÅect on the Company's results of operations or shareowners' equity.
In September 2002, the Company entered into an interest rate swap contract which eÅectively converted
its $350 million aggregate principal amount of 6.15% notes, payable in 2008, to Öoating rate debt based on six-
month LIBOR. The Öoating rate was 3.52 percent at September 30, 2003. A hypothetical 10 percent change
in market interest rates would not be material to the overall fair value of the swap or the Company's results of
operations.
Foreign Currency Risk
The Company is exposed to foreign currency risks that arise from normal business operations. These risks
include the translation of local currency balances of foreign subsidiaries, intercompany loans with foreign
subsidiaries and transactions denominated in foreign currencies. The Company's objective is to minimize its
exposure to these risks through a combination of normal operating activities and the utilization of foreign
currency forward exchange contracts to manage its exposure on transactions denominated in currencies other
than the applicable functional currency. In addition, the Company enters into contracts to hedge certain
forecasted intercompany transactions. Contracts are executed with creditworthy banks and are denominated in
currencies of major industrial countries. It is the policy of the Company not to enter into derivative Ñnancial
instruments for speculative purposes. The Company does not hedge its exposure to the translation of reported
results of foreign subsidiaries from local currency to United States dollars. A 10 percent adverse change in the
underlying foreign currency exchange rates would not be signiÑcant to the Company's Ñnancial condition or
results of operations.
The Company records all derivatives on the balance sheet at fair value regardless of the purpose or intent
for holding them. Derivatives that are not designated as hedges for accounting purposes are adjusted to fair
value through earnings. For derivatives that are hedges, depending on the nature of the hedge, changes in fair
value are either oÅset by changes in the fair value of the hedged assets, liabilities or Ñrm commitments
through earnings or recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineÅective portion of a derivative's change in fair value is immediately recognized in earnings.
At September 30, 2003 and 2002, the Company had outstanding foreign currency forward exchange
contracts primarily consisting of contracts to exchange the euro, pound sterling, Canadian dollar and Swiss
franc. The use of these contracts allows the Company to manage transactional exposure to exchange rate
Öuctuations as the gains or losses incurred on the foreign currency forward exchange contracts will oÅset, in
whole or in part, losses or gains on the underlying foreign currency exposure. A hypothetical 10 percent
adverse change in underlying foreign currency exchange rates associated with these contracts would not be
material to the Ñnancial condition, results of operations or shareowners' equity of the Company.
Recently Adopted Accounting Standards
See Note 1 in the Notes to Consolidated Financial Statements regarding recently adopted accounting
standards.
26
Supplemental Sales Information
The following is a reconciliation for the Control Systems segment of reported sales to sales excluding
currency translation (which is a non-GAAP measure):
Year Ended September 30, 2003
Sales
Excluding
Currency
Translation
Currency
Translation
Sales
Year Ended September 30, 2002
Sales
Excluding
Currency
Translation
Currency
Translation
Sales
US ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Canada ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Europe, Middle East, Africa ÏÏÏÏÏÏÏ
Asia-PaciÑc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Latin America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$1,893
268
669
326
131
$ Ì
(20)
(99)
(17)
34
Total Control Systems Sales ÏÏÏÏÏÏÏ
$3,287
$(102)
$1,893
248
570
309
165
$3,185
$1,875
227
552
273
133
$3,060
$Ì
6
(9)
2
27
$26
$1,875
233
543
275
160
$3,086
The following is a reconciliation for the Company of reported sales to sales excluding currency translation
(which is a non-GAAP measure):
Year Ended September 30, 2003
Sales
Excluding
Currency
Translation
Currency
Translation
Sales
Year Ended September 30, 2002
Sales
Excluding
Currency
Translation
Currency
Translation
Sales
US ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Canada ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Europe, Middle East, Africa ÏÏÏÏÏÏÏ
Asia-PaciÑc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Latin America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$2,613
305
711
333
142
$ Ì
(22)
(104)
(18)
35
Total SalesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$4,104
$(109)
$2,613
283
607
315
177
$3,995
$2,629
265
591
279
145
$3,909
$ Ì
7
(10)
2
28
$ 27
$2,629
272
581
281
173
$3,936
The eÅect of currency translation is determined by translating the respective period sales data using the
same exchange rates as the preceding year. Management believes sales excluding currency translation provides
useful information to investors since it reÖects regional performance from the Company's activities without the
eÅect of changes in currency rates, which is outside the control of management. Management uses sales
excluding currency translation to monitor and evaluate the Company's regional performance.
Cautionary Statement
This Annual Report contains statements (including certain projections and business trends) accompanied
by such phrases as ""believes'', ""estimates'', ""expect(s)'', ""anticipates'', ""will'', ""intends'' and other similar
expressions, that are ""forward-looking statements'' as deÑned in the Private Securities Litigation Reform Act
of 1995. Actual results may diÅer materially from those projected as a result of certain risks and uncertainties,
including but not limited to economic and political changes in international markets where the Company
competes, such as currency exchange rates, inÖation rates, recession, foreign ownership restrictions and other
external factors over which the Company has no control; demand for and market acceptance of new and
existing products, including levels of capital spending in industrial markets; successful development of
advanced technologies; competitive product and pricing pressures; future terrorist attacks; epidemics; and the
uncertainties of litigation, as well as other risks and uncertainties, including but not limited to those detailed
from time to time in the Company's Securities and Exchange Commission Ñlings. These forward-looking
statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise
the forward-looking statements, whether as a result of new information, future events or otherwise.
27
Item 7a. Quantitative and Qualitative Disclosures About Market Risk.
The information with respect to the Company's market risk is contained under the caption Quantitative
and Qualitative Disclosures About Market Risk in MD&A on page 25 hereof.
28
Item 8. Consolidated Financial Statements and Supplementary Data.
CONSOLIDATED BALANCE SHEET
(in millions)
September 30,
2003
2002
Assets
Current Assets
Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Inventories ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Deferred income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other current assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$
226
684
542
164
120
$
289
645
557
157
109
Total current assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
1,736
1,757
PropertyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Goodwill ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other intangible assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
925
798
344
183
988
778
346
137
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 3,986
$ 4,006
Liabilities and Shareowners' Equity
Current Liabilities
Short-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Accounts payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Compensation and beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income taxes payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other current liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$
Total current liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Retirement beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Deferred income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
9
327
171
15
298
820
764
657
37
121
$
162
325
161
44
274
966
767
381
140
143
Commitments and contingent liabilities (Note 19)
Shareowners' Equity
Common stock (shares issued: 216.4)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Additional paid-in capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Retained earningsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Accumulated other comprehensive lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Common stock in treasury, at cost (shares held: 2003, 30.8; 2002, 30.6)ÏÏÏÏÏÏÏÏÏÏÏÏ
216
1,008
2,143
(344)
(1,436)
216
987
2,165
(194)
(1,565)
Total shareowners' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
1,587
1,609
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 3,986
$ 4,006
See Notes to Consolidated Financial Statements.
29
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share amounts)
Year Ended September 30,
2002
2003
2001
Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cost of sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 4,104
(2,752)
$ 3,909
(2,674)
$ 4,285
(3,037)
Gross proÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
1,352
1,235
1,248
Selling, general and administrative expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other income (expense) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(1,007)
6
(52)
(953)
17
(66)
(1,041)
44
(83)
Income from continuing operations before income taxes and cumulative
eÅect of accounting change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income tax provision (Note 18) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income from continuing operations before cumulative eÅect of
accounting change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income from discontinued operations (Note 15) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cumulative eÅect of accounting change (Note 3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$
299
(17)
282
4
Ì
286
Basic earnings per share:
Continuing operations before accounting change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Discontinued operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cumulative eÅect of accounting changeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$
1.52
0.02
Ì
233
(7)
226
3
(108)
121
1.22
0.02
(0.58)
$
$
168
(43)
125
180
Ì
305
0.69
0.98
Ì
$
$
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$
1.54
$
0.66
$
1.67
Diluted earnings per share:
Continuing operations before accounting change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Discontinued operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cumulative eÅect of accounting changeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$
1.49
0.02
Ì
$
1.20
0.02
(0.58)
$
0.68
0.97
Ì
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$
1.51
$
0.64
$
1.65
Average outstanding shares:
Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
185.4
Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
190.1
184.9
188.8
182.9
185.3
See Notes to Consolidated Financial Statements.
30
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Year Ended September 30,
2001
2002
2003
Continuing Operations:
Operating Activities:
Income from continuing operations before accounting change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Adjustments to arrive at cash provided by operating activities:
$ 282
$ 226
$ 125
Depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Amortization of intangible assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Tax beneÑt from research and experimentation credit refund claim ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Retirement beneÑt expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Pension trust contributions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Deferred income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net loss (gain) on dispositions of property and businesses (Note 17) ÏÏÏÏÏÏÏÏÏÏÏÏÏ
Special charges (Note 14) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income tax beneÑt from the exercise of stock optionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Changes in assets and liabilities, excluding eÅects of acquisitions, divestitures, and
foreign currency adjustments:
Receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
InventoriesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Accounts payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Compensation and beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other assets and liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
172
26
(69)
71
(66)
27
12
Ì
21
(9)
26
7
6
(33)
(37)
Cash Provided by Operating Activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
436
Investing Activities:
Capital expendituresÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Acquisitions of businesses, net of cash acquiredÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Special payment from Rockwell Collins (Note 1)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other investing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(109)
(26)
Ì
2
Cash (Used for) Provided by Investing Activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(133)
Financing Activities:
Repayments of debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cash dividends ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Purchases of treasury stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Proceeds from the exercise of stock options ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other Ñnancing activitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(153)
(122)
(128)
70
(2)
Cash Used for Financing Activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(335)
EÅect of exchange rate changes on cashÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cash (Used for) Provided by Continuing Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cash Used for Discontinued Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(Decrease) Increase in Cash ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cash and Cash Equivalents at Beginning of Year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(31)
(63)
Ì
(63)
289
184
22
Ì
53
(36)
(14)
3
Ì
6
70
53
(26)
(30)
14
(49)
476
(104)
(71)
Ì
Ì
(175)
Ì
(122)
Ì
25
Ì
(97)
Ì
204
(36)
168
121
196
76
Ì
32
(5)
2
(6)
91
14
33
(3)
(86)
(52)
(37)
(45)
335
(157)
(6)
300
16
153
(8)
(170)
(63)
44
Ì
(197)
9
300
(349)
(49)
170
Cash and Cash Equivalents at End of YearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 226
$ 289
$ 121
See Notes to Consolidated Financial Statements.
31
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
(in millions, except per share amounts)
Year Ended September 30,
2002
2003
2001
Common Stock (no shares issued during years) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$
216
$
216
$
216
Additional Paid-In Capital
Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Shares delivered under incentive plans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
987
21
Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
1,008
Retained Earnings
Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cash dividends (per share: 2003 and 2002, $0.66; 2001, $0.93) ÏÏÏÏÏÏÏÏÏÏ
Shares delivered under incentive plans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
SpinoÅ of Rockwell Collins (Note 1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2,165
286
(122)
(186)
Ì
Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2,143
Accumulated Other Comprehensive Loss
Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other comprehensive lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
SpinoÅ of Rockwell Collins (Note 1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Restricted Stock Compensation
Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Compensation expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Treasury Stock
Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Purchases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Shares delivered under incentive plans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(194)
(150)
Ì
(344)
Ì
Ì
Ì
981
6
987
2,242
121
(122)
(85)
9
2,165
(162)
(32)
Ì
(194)
(1)
1
Ì
967
14
981
3,363
305
(170)
(53)
(1,203)
2,242
(166)
(26)
30
(162)
(2)
1
(1)
(1,565)
(128)
257
(1,676)
Ì
111
(1,709)
(63)
96
Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(1,436)
(1,565)
(1,676)
Total Shareowners' Equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 1,587
$ 1,609
$ 1,600
See Notes to Consolidated Financial Statements.
32
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other comprehensive loss:
Minimum pension liability adjustments (net of tax beneÑt of $(108), $(15)
Year Ended September 30,
2002
2003
2001
$ 286
121
$305
and $(2)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(170)
(29)
(4)
Currency translation adjustments (net of tax expense (beneÑt) of $25, $4,
and $(2)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
35
6
(15)
Net unrealized losses on cash Öow hedges (net of tax beneÑt of $(9), $(4)
and $(4)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Unrealized losses on investment securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(15)
Ì
(8)
(1)
(7)
Ì
Other comprehensive loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(150)
(32)
(26)
Comprehensive income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 136
$ 89
$279
See Notes to Consolidated Financial Statements.
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Accounting Policies
Basis of Presentation
Except as indicated, amounts reÖected in the consolidated Ñnancial statements or the notes thereto relate
to the continuing operations of Rockwell Automation, Inc. (the Company or Rockwell Automation). Certain
prior year amounts have been reclassiÑed to conform to the current year presentation.
On June 29, 2001, the Company completed the spinoÅ of its Rockwell Collins avionics and communica-
tions business and certain other assets and liabilities into an independent, separately traded, publicly held
company (the SpinoÅ). In connection with the SpinoÅ, all outstanding shares of common stock of Rockwell
Collins, Inc. (Rockwell Collins) were distributed to Rockwell Automation shareowners on the basis of one
Rockwell Collins share for each outstanding Rockwell Automation share. At the time of the SpinoÅ, Rockwell
Collins made a special payment to the Company of $300 million. The net assets of Rockwell Collins as of
June 29, 2001 of approximately $1.2 billion (including $300 million of debt incurred to make the special
payment to the Company) were recorded as a decrease to shareowners' equity.
Consolidation
The consolidated Ñnancial statements of the Company include the accounts of the Company and all
subsidiaries over which the Company has a controlling Ñnancial interest. All signiÑcant intercompany
accounts and transactions are eliminated in consolidation.
Use of Estimates
The consolidated Ñnancial statements have been prepared in accordance with accounting principles
generally accepted in the United States which require management to make estimates and assumptions that
aÅect the reported amounts of assets and liabilities at the date of the consolidated Ñnancial statements and
revenues and expenses during the periods reported. Actual results could diÅer from those estimates. Estimates
are used in accounting for, among other items, customer returns, rebates and incentives; allowance for
doubtful accounts; excess and obsolete inventory; impairment of long-lived assets; product warranty obliga-
tions; retirement beneÑts; self-insurance liabilities; litigation, claims and contingencies, including environmen-
tal matters; and income taxes.
Revenue Recognition
Sales are generally recorded when all of the following have occurred: an agreement of sale exists, product
delivery and acceptance has occurred or services have been rendered, pricing is Ñxed or determinable, and
collection is reasonably assured.
Contracts and customer purchase orders are generally used to determine the existence of an arrangement.
Shipping documents and customer acceptance, when applicable, are used to verify delivery. The Company
assesses whether the fee is Ñxed or determinable based on the payment terms associated with the transaction
and whether the sales price is subject to refund or adjustment. The Company assesses collectibility based
primarily on the creditworthiness of the customer as determined by credit checks and analysis, as well as the
customer's payment history.
The Company records accruals for customer returns, rebates and incentives at the time of shipment based
upon historical experience. Changes in such accruals may be required if future returns, rebates and incentives
diÅer from historical experience. Rebates and incentives are recognized as a reduction of sales if distributed in
cash or customer account credits. Rebates and incentives are recognized as cost of sales for products or
services to be provided.
Shipping and handling costs billed to customers are included in sales and the related costs are included in
cost of sales in the Consolidated Statement of Operations.
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
1. Basis of Presentation and Accounting Policies Ì (Continued)
Cash and Cash Equivalents
Cash and cash equivalents includes time deposits and certiÑcates of deposit with original maturities of
three months or less.
Receivables
Receivables are stated net of allowances for doubtful accounts of $28 million at September 30, 2003 and
$45 million at September 30, 2002. The decrease in the allowance balance primarily relates to the writeoÅ of a
$9 million distributor receivable and $3 million of account collections for which an allowance had previously
been provided. The remainder of the decrease resulted from the Company's regular review of the allowance,
considering such factors as historical experience, credit quality, and age of the accounts receivable balances. In
addition, receivables are stated net of an allowance for certain customer rebates and incentives of $5 million at
September 30, 2003 and $6 million at September 30, 2002.
Inventories
Inventories are stated at the lower of cost or market using Ñrst-in, Ñrst-out (FIFO) or average methods.
Market is determined on the basis of estimated realizable values.
Property
Property is stated at cost. Depreciation of property is provided generally using straight-line and
accelerated methods over 15 to 40 years for buildings and improvements and 3 to 14 years for machinery and
equipment. SigniÑcant renewals and enhancements are capitalized and replaced units are written oÅ.
Maintenance and repairs, as well as renewals of minor amounts, are charged to expense.
Intangible Assets
Goodwill and other intangible assets generally result from business acquisitions. The Company accounts
for business acquisitions by assigning the purchase price to tangible and intangible assets and liabilities. Assets
acquired and liabilities assumed are recorded at their fair values, and the excess of the purchase price over the
amounts assigned is recorded as goodwill.
Since October 1, 2001 upon adoption of Statement of Financial Accounting Standard (SFAS) No. 142,
Goodwill and Other Intangible Assets (SFAS 142), goodwill and other intangible assets with indeÑnite useful
lives are no longer systematically amortized but instead are reviewed for impairment and any excess in
carrying value over the estimated fair value is charged to results of operations. Distributor networks, computer
software products, patents, and other intangible assets with Ñnite useful lives are amortized on a straight-line
basis over their estimated useful lives, generally ranging from 3 to 40 years.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of the carrying amount of long-lived assets whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The
Company evaluates the recoverability of goodwill and other intangible assets with indeÑnite useful lives
annually or more frequently if events or circumstances indicate that an asset might be impaired. If an asset is
considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying
amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less cost to sell. Management determines fair value using discounted future cash Öow
analysis or other accepted valuation techniques.
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
1. Basis of Presentation and Accounting Policies Ì (Continued)
The Company performed its annual evaluation of goodwill and indeÑnite life intangible assets for
impairment during the second quarter of 2003 and concluded that no impairments existed other than as a
result of the sale of a majority of the Company's ownership interest in Reliance Electric Limited Japan (REJ)
(see Note 17).
Investments
Investments in aÇliates over which the Company has the ability to exert signiÑcant inÖuence but does
not control, including Rockwell ScientiÑc Company LLC (RSC), are accounted for using the equity method
of accounting. Accordingly, the Company's proportional share of the respective aÇliate's earnings or losses are
included in other income (expense) in the Consolidated Statement of Operations. Investments in aÇliates
over which the Company does not have the ability to exert signiÑcant inÖuence are accounted for using the
cost method of accounting. These aÇliated companies are not material individually or in the aggregate to
Rockwell Automation's Ñnancial position, results of operations or cash Öows.
Derivative Financial Instruments
The Company uses derivative Ñnancial instruments in the form of foreign currency forward exchange
contracts and interest rate swap contracts to manage foreign currency and interest rate risks. Foreign currency
forward exchange contracts are used to oÅset changes in the amount of future cash Öows associated with
intercompany transactions generally forecasted to occur within one year (cash Öow hedges) and changes in
the fair value of certain assets and liabilities resulting from intercompany loans and other transactions with
third parties denominated in foreign currencies. Interest rate swap contracts are periodically used to manage
the balance of Ñxed and Öoating rate debt. The Company's accounting method for derivative Ñnancial
instruments is based upon the designation of such instruments as hedges under accounting principles generally
accepted in the United States. It is the policy of the Company to execute such instruments with creditworthy
banks and not to enter into derivative Ñnancial instruments for speculative purposes. All foreign currency
forward exchange contracts are denominated in currencies of major industrial countries.
Foreign Currency Translation
Assets and liabilities of subsidiaries operating outside of the United States with a functional currency
other than the U.S. dollar are translated into U.S. dollars using exchange rates at the end of the respective
period. Sales, costs and expenses are translated at average exchange rates eÅective during the respective
period. Foreign currency translation adjustments are included as a component of accumulated other
comprehensive loss. Currency transaction gains and losses are included in the results of operations in the
period incurred.
Research and Development Expenses
Research and development (R&D) costs are expensed as incurred and were $130 million in 2003,
$131 million in 2002 and $158 million in 2001. R&D expenses are included in cost of sales in the Consolidated
Statement of Operations.
Customer-funded R&D was $61 million in 2001 and related primarily to the Company's formerly wholly-
owned (now 50 percent owned) subsidiary, Rockwell Science Center. Customer-funded R&D was not
material in 2003 and 2002.
Earnings Per Share
The Company presents two earnings per share (EPS) amounts, basic and diluted. Basic EPS is
calculated by dividing net income by the weighted average number of common shares outstanding during the
year. Diluted EPS amounts are based upon the weighted average number of common and common equivalent
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
1. Basis of Presentation and Accounting Policies Ì (Continued)
shares outstanding during the year. The diÅerence between basic and diluted EPS is solely attributable to
stock options. The Company uses the treasury stock method to calculate the eÅect of outstanding stock
options. Stock options for which the exercise price exceeds the average market price over the period have an
antidilutive eÅect on EPS, and accordingly, are excluded from the calculation. There were no shares excluded
from the diluted EPS calculation for the year ended September 30, 2003. For the years ended September 30,
2002 and 2001, options for 4.0 million and 5.9 million shares, respectively, were excluded from the diluted
EPS calculation because they were antidilutive.
Stock-Based Compensation
The Company accounts 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 the Company's 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 eÅect on net income and earnings per share as if the fair value-based method provided by
SFAS No. 123, Accounting for Stock-Based Compensation, had been applied for all outstanding and unvested
awards in each year:
2003
2002
2001
Net income, as reportedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Pro forma compensation expense, net of tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 286
(5)
$ 121
(6)
$ 305
(34)
Pro forma net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 281
$ 115
$ 271
Earnings per share:
Basic Ì as reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$1.54
$0.66
$1.67
Basic Ì pro forma ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$1.52
$0.63
$1.48
Diluted Ì as reportedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$1.51
$0.64
$1.65
Diluted Ì pro formaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$1.48
$0.61
$1.46
The 2001 pro forma net income includes $6 million ($4 million after tax, or 2 cents per diluted share) of
pro forma compensation expense related to the spinoÅ of Rockwell Collins. The pro forma eÅect of stock
options on net income for 2003 may not be indicative of the pro forma eÅect on net income in future years.
The per share weighted average fair value of options granted was $2.98 in 2003, $2.99 in 2002 and $8.79
in 2001. The per share weighted average fair value of options granted in 2001 has not been restated to reÖect
the SpinoÅ.
The fair value of each option was estimated on the date of grant or subsequent date of option adjustment
using the Black-Scholes pricing model and the following assumptions:
2003
2002
2001
Average risk-free interest rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Expected dividend yield ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Expected volatility ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Expected life (years) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2.59% 4.01% 5.76%
4.22% 3.76% 2.29%
0.30
0.30
5
5
0.33
5
Grants
Grants
Grants
Collins
SpinoÅ
Adjustment
4.73%
1.77%
0.35
5
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
1. Basis of Presentation and Accounting Policies Ì (Continued)
Environmental Matters
The Company records accruals for environmental matters in the period in which its responsibility is
probable and the cost can be reasonably estimated. Revisions to the accruals are made in the periods in which
the estimated costs of remediation change. At environmental sites in which more than one potentially
responsible party has been identiÑed, the Company records a liability for its estimated allocable share of costs
related to its involvement with the site as well as an estimated allocable share of costs related to the
involvement of insolvent or unidentiÑed parties. At environmental sites in which the Company is the only
responsible party, the Company records a liability for the total estimated costs of remediation. Future
expenditures for environmental remediation obligations are not discounted to their present value. If recovery
from insurers or other third parties is determined to be probable, the Company records a receivable for the
estimated recovery.
Recently Adopted Accounting Standards
In July 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, Accounting for
Costs Associated with Exit or Disposal Activities (SFAS 146), which addresses Ñnancial accounting and
reporting associated with exit or disposal activities. Under SFAS 146, the Company will measure costs
associated with an exit or disposal activity at fair value and recognize the costs in the period in which the
liability is incurred rather than at the date of a commitment to an exit or disposal plan. The Company adopted
SFAS 146 on January 1, 2003.
In November 2002, the FASB issued FASB Interpretation No. 45, Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45).
FIN 45 provides guidance on the disclosures to be made by a guarantor in its interim and annual Ñnancial
statements about its obligations under certain guarantees that it has issued and also clariÑes that a guarantor is
required to recognize, at the inception of certain guarantees, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The Company adopted FIN 45 in 2003.
In November 2002, the EITF reached a consensus on Issue No. 00-21, Accounting for Revenue
Arrangements with Multiple Deliverables (EITF 00-21). EITF 00-21 establishes criteria to determine
whether an arrangement that contains multiple deliverables should be divided into separate units of accounting
and how the arrangement consideration should be allocated among the separate units. EITF 00-21 was
eÅective for arrangements entered into after June 30, 2003.
In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest
Entities (FIN 46). FIN 46 requires a company to consolidate any variable interest entities for which the
company has a controlling Ñnancial interest. FIN 46 also requires disclosures about the variable interest
entities that the Company is not required to consolidate, but in which it has a signiÑcant variable interest. The
Company adopted the consolidation requirements of FIN 46 on February 1, 2003.
The adoption of SFAS 146, FIN 45, EITF 00-21 and FIN 46 had no eÅect on the Company's Ñnancial
position, results of operations or shareowners' equity.
2. Acquisitions of Businesses
In March 2003, the Company's Control Systems segment acquired certain assets and assumed certain
liabilities of Weidm uller Holding AG's (Weidm uller) North American business. In addition, the Company
entered into a master brand label agreement, a technology/design exchange and joint product development
eÅorts with Weidm uller. The acquisition enhances the Company's position in providing IEC (an international
standard for electrical technologies) connection products which are used to connect factory automation
systems to basic electrical switches.
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
2. Acquisitions of Businesses Ì (Continued)
In February 2003, the Company's Control Systems segment acquired substantially all of the assets and
assumed certain liabilities of Interwave Technology, Inc., a consulting integrator focusing on manufacturing
solutions. The acquisition expands the Company's Manufacturing Information Solutions capability and
accelerates its ability to integrate real-time information between customers' manufacturing plant Öoors and
business systems.
The aggregate cash purchase price of the businesses acquired in 2003 was approximately $26 million. The
Company would be required to make additional cash payments if certain future operating performance criteria
are met by the acquired businesses. Management believes that these additional cash payments, if any, would
be recorded as goodwill and would not have a material eÅect on the Company's Ñnancial position, results of
operations or shareowners' equity. Assets acquired and liabilities assumed have been recorded at estimated fair
values. The excess of the purchase price over the estimated fair value of the acquired tangible and intangible
assets was recorded as goodwill. See Note 3 for goodwill and intangible assets acquired in connection with
these acquisitions.
In September 2002, the Company's Control Systems segment acquired the engineering services and
system integration assets of SPEL, spol. s.r.o. The acquisition accelerated the establishment of the Company
as a complete solution provider in Central Europe and it also strategically located the Company in a region
with future growth opportunities.
In May 2002, the Company's Control Systems segment acquired the assets and assumed certain liabilities
of the controller division of Samsung Electronics Company Limited's Mechatronics business (the Controller
Division). The Company combined its existing Korean business with the Controller Division to form a new
business that operates under the name Rockwell Samsung Automation and creates technologies for the design
and development of automation products. The acquisition expanded the Company's existing operations in
Korea, furthered the Company's design and product development capabilities and supported future commer-
cial and operational expansion in the Asia PaciÑc region.
In March 2002, the Company's Control Systems segment acquired all of the stock of Propack Data
GmbH (Propack), a provider of manufacturing information systems for the pharmaceutical and other
regulated industries. The acquisition broadened the Company's position in the pharmaceuticals market,
enhanced the Company's Process Solutions business and enabled the Company to expand its reach into the
manufacturing information markets.
In January 2002, the Company's Control Systems segment acquired all of the stock of Tesch GmbH, an
electronic products and safety relay manufacturer, expanding the Company's machine safety product and
research and development capabilities.
The aggregate cash purchase price of the businesses acquired in 2002, of which the majority related to the
acquisition of Propack, was approximately $71 million. In connection with the Controller Division transaction,
the Company would be required to make additional cash payments if certain future operating performance
criteria are met by the acquired business. Management believes that these additional cash payments, if any,
would be recorded as goodwill and would not have a material eÅect on the Company's Ñnancial position,
results of operations or shareowners' equity. Assets acquired and liabilities assumed have been recorded at fair
values. The excess of the purchase price over the estimated fair value of the acquired tangible and intangible
assets was recorded as goodwill. See Note 3 for goodwill and intangible assets acquired in connection with
these acquisitions.
Amounts recorded for liabilities assumed in connection with these acquisitions were $1 million in 2003
and $6 million in 2002.
These acquisitions were accounted for as purchases and, accordingly, the results of operations of these
businesses have been included in the Consolidated Statement of Operations since their respective dates of
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
2. Acquisitions of Businesses Ì (Continued)
acquisition. Pro forma Ñnancial information and allocation of the purchase price is not presented as the
combined eÅect of these acquisitions was not material to the Company's results of operations or Ñnancial
position.
3. Goodwill and Other Intangible Assets
In connection with the adoption of SFAS 142 in 2002, management determined that the Company's
Allen-Bradley, Reliance and Dodge trademarks have indeÑnite useful lives. Accordingly, management
performed a transitional intangible asset impairment test which resulted in an impairment charge of
$56 million ($35 million after tax, or 19 cents per diluted share) related to the Reliance trademark used
primarily by Power Systems. The impairment charge represents the excess of the carrying amount of the
trademark over its estimated fair value as determined by management, with the assistance of independent
valuation experts, utilizing the relief from royalty valuation method. This method estimates the beneÑt to the
Company resulting from owning rather than licensing the trademark.
Also in connection with the adoption of SFAS 142, the Company completed a transitional goodwill
impairment test during 2002. As a result, an impairment charge of $73 million (before and after tax, or
39 cents per diluted share) was recorded related to goodwill at a Power Systems reporting unit. The fair value
of the reporting unit was estimated using a combination of valuation techniques, including the present value of
expected future cash Öows and historical valuations of comparable businesses.
The previous method for determining impairment prescribed by SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of, utilized an undiscounted cash Öow
approach for the initial impairment assessment, while SFAS 142 utilizes a fair value approach. The trademark
impairment charge and the goodwill impairment charge discussed above are the result of the change in the
accounting method for determining the impairment of goodwill and certain intangible assets. These charges
have been recorded as the cumulative eÅect of accounting change in the amount of $129 million ($108 million
after tax, or 58 cents per diluted share) as of October 1, 2001 in the accompanying Consolidated Statement of
Operations.
The changes in the carrying amount of goodwill for the years ended September 30, 2002 and 2003 are as
follows (in millions):
Control
Systems
Power
Systems
Balance as of September 30, 2001ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Goodwill acquired (Note 2)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Impairment charge ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Translation and other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$582
49
Ì
Ì
Balance as of September 30, 2002ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
631
Goodwill acquired (Note 2)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Translation and other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
11
11
$226
Ì
(73)
(6)
147
Ì
(2)
Total
$808
49
(73)
(6)
778
11
9
Balance as of September 30, 2003ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$653
$145
$798
Other includes adjustments to goodwill for the resolution of tax matters relating to tax returns Ñled by
Reliance Electric Company (Reliance) prior to its acquisition by Rockwell Automation in 1995.
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
3. Goodwill and Other Intangible Assets Ì (Continued)
The results for periods prior to adoption of SFAS 142 have not been restated. The following table
reconciles the reported income from continuing operations before accounting change, net income and earnings
per share to that which would have resulted for the year ended September 30, 2001 if SFAS 142 had been
adopted eÅective October 1, 2000 (in millions, except per share amounts):
Income from continuing operations before accounting change, as reported ÏÏÏÏÏÏÏÏÏÏÏÏÏ
Goodwill amortization, net of tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Trademark amortization, net of tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 125
41
6
Pro forma income from continuing operations before accounting change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 172
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Goodwill amortization, net of tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Trademark amortization, net of tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
305
51
6
Pro forma net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 362
Basic earnings per share:
Income from continuing operations before accounting change:
As reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$0.69
Pro formaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$0.95
Net income:
As reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$1.67
Pro formaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$1.99
Diluted earnings per share:
Income from continuing operations before accounting change:
As reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$0.68
Pro formaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$0.93
Net income:
As reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$1.65
Pro formaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$1.95
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
3. Goodwill and Other Intangible Assets Ì (Continued)
Other intangible assets at September 30, 2003 and September 30, 2002 consisted of the following (in
millions):
September 30, 2003
Carrying
Amount
Accumulated
Amortization
Net
Amortized intangible assets:
Distributor networksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Computer software products ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
PatentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total amortized intangible assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Unamortized intangible assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$118
121
40
92
371
293
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$664
$ 80
54
35
69
238
82
$320
$ 38
67
5
23
133
211
$344
September 30, 2002
Carrying
Amount
Accumulated
Amortization
Net
Amortized intangible assets:
Distributor networksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Computer software products ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
PatentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total amortized intangible assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Unamortized intangible assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$115
100
40
83
338
302
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$640
$ 75
38
34
65
212
82
$294
$ 40
62
6
18
126
220
$346
Computer software products amortization expense was approximately $17 million in 2003, approximately
$14 million in 2002 and approximately $11 million in 2001.
Unamortized intangible assets consist of trademarks which have been determined to have an indeÑnite
life. The change in the carrying amount of unamortized intangible assets for the year ended September 30,
2003 relates to an impairment resulting from the sale of a majority of the Company's ownership interest in
REJ (see Note 17).
Estimated amortization expense is $26 million in 2004, $22 million in 2005, $19 million in 2006,
$19 million in 2007 and $18 million in 2008.
In connection with the acquisitions in 2003 (see Note 2), the Company acquired $4 million of intangible
assets, of which $3 million was assigned to distributor networks. The weighted-average amortization period for
the intangible assets acquired in 2003 is approximately 5 years.
In connection with the acquisitions in 2002 (see Note 2), the Company acquired $12 million of
intangible assets, of which $9 million was assigned to computer software products. The weighted-average
amortization period for the intangible assets acquired in 2002 is approximately 5 years and the amortization
period for computer software products acquired in 2002 is 6 years.
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
4.
Inventories
Inventories are summarized as follows (in millions):
Finished goods ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Work in process ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Raw materials, parts, and supplies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Inventories ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
September 30,
2002
2003
$206
138
198
$542
$209
142
206
$557
Inventories are reported net of the allowance for excess and obsolete inventory of $56 million at
September 30, 2003 and $53 million at September 30, 2002.
5. Property
Property is summarized as follows (in millions):
Land ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Buildings and improvements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Machinery and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Construction in progress ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Less accumulated depreciationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
September 30,
2003
2002
$
36
507
1,611
48
2,202
1,277
$
40
505
1,596
40
2,181
1,193
PropertyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 925
$ 988
6. Short-Term Debt
Short-term debt consists of the following (in millions):
September 30,
2002
2003
Short-term bank borrowings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Current portion of long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$Ì $ 10
152
9
Short-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 9
$162
Included in the current portion of long-term debt at September 30, 2003 was $8 million of industrial
development revenue bonds which the Company expects to repay in January 2004 (prior to maturity).
Included in the current portion of long-term debt at September 30, 2002 was $150 million principal amount of
6.80% notes which were retired at maturity in April 2003. The weighted average interest rate on short-term
bank borrowings was 2.8 percent at September 30, 2002.
At September 30, 2003, the Company had $675 million of unsecured committed credit facilities available
to support its commercial paper borrowings, with $337.5 million expiring in October 2003 and $337.5 million
expiring in October 2005. During October 2003, the Company entered into a new $337.5 million credit facility
expiring in October 2004. Outstanding commercial paper balances, if any, reduce the amount of available
borrowings under the unsecured committed credit facilities. The terms of the credit facilities contain a
covenant under which the Company would be in default if the Company's debt to capital ratio were to exceed
60 percent. In addition to the $675 million credit facilities, short-term unsecured credit facilities available to
foreign subsidiaries amounted to $121 million at September 30, 2003. There were no signiÑcant commitment
fees or compensating balance requirements under any of the Company's credit facilities.
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
7. Other Current Liabilities
Other current liabilities are summarized as follows (in millions):
September 30,
2002
2003
Advance payments from customers and deferred revenueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Customer rebates and incentives ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Unrealized losses on foreign exchange contracts (Note 10)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Product warranty costs (Note 8) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Taxes other than income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 79
70
47
29
25
48
Other current liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$298
$ 73
68
21
31
28
53
$274
8. Product Warranty Obligations
The Company records 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. The Company also
records a liability for speciÑc warranty matters when they become known and are reasonably estimable. The
Company's product warranty obligations are included in other current liabilities in the Consolidated Balance
Sheet.
Changes in the product warranty obligations are as follows (in millions):
Balance at beginning of period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Warranties recorded at time of saleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Adjustments to pre-existing warranties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
PaymentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 31
28
(1)
(29)
$ 34
30
(2)
(31)
Balance at end of period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 29
$ 31
September 30,
2002
2003
9. Long-Term Debt
Long-term debt consists of the following (in millions):
6.80% notes, payable in 2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
6.15% notes, payable in 2008 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
6.70% debentures, payable in 2028 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
5.20% debentures, payable in 2098 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other borrowings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Unamortized discount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
September 30,
2002
2003
$ Ì $150
356
360
250
250
200
200
11
9
(48)
(46)
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Less current portionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
773
9
919
152
Long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$764
$767
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
9. Long-Term Debt Ì (Continued)
In September 2002, the Company entered into an interest rate swap contract (the Swap) which
eÅectively converted its $350 million aggregate principal amount of 6.15% notes, payable in 2008, to Öoating
rate debt based on six-month LIBOR. The Öoating rate was 3.52 percent at September 30, 2003 and
4.21 percent at September 30, 2002. The fair value of the Swap, based upon quoted market prices for contracts
with similar maturities, was approximately $10 million at September 30, 2003 and $6 million at September 30,
2002. As permitted by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS
133) as amended, the Company has designated the Swap as a fair value hedge. Accordingly, the fair value of
the Swap was recorded in other assets on the Consolidated Balance Sheet and the carrying value of the
underlying debt was increased to $360 million at September 30, 2003 and $356 million at September 30, 2002
in accordance with SFAS 133.
Interest payments were $55 million during 2003, $63 million during 2002 and $79 million during 2001.
Interest payments related to discontinued operations for 2001 were not signiÑcant.
10. Financial Instruments
The Company's Ñnancial instruments include short- and long-term debt, foreign currency forward
exchange contracts and an interest rate swap. It is the policy of the Company not to enter into derivative
Ñnancial instruments for speculative purposes. The fair value of short-term debt approximates the carrying
value due to its short-term nature. The carrying value of long-term debt was $773 million at September 30,
2003 and $919 million at September 30, 2002. The fair value of long-term debt, based upon quoted market
prices for the same or similar issues, was $844 million at September 30, 2003 and $976 million at
September 30, 2002.
Foreign currency forward exchange contracts provide for the purchase or sale of foreign currencies at
speciÑed future dates at speciÑed exchange rates. At September 30, 2003 and 2002, the Company had
outstanding foreign currency forward exchange contracts primarily consisting of contracts for the euro, pound
sterling, Canadian dollar and Swiss franc. The net carrying value of foreign currency forward exchange
contracts of $42 million at September 30, 2003 and $15 million at September 30, 2002 represented the
approximate fair value based upon quoted market prices for contracts with similar maturities. The foreign
currency forward exchange contracts are recorded in other current assets in the amounts of $5 million as of
September 30, 2003 and $6 million as of September 30, 2002 and other current liabilities in the amounts of
$47 million as of September 30, 2003 and $21 million as of September 30, 2002. The Company does not
anticipate any material adverse eÅect on its results of operations or Ñnancial position relating to these foreign
currency forward exchange contracts. The Company has designated certain foreign currency forward exchange
contracts related to forecasted intercompany transactions as cash Öow hedges. The amount recognized in
earnings as a result of the ineÅectiveness of cash Öow hedges was not material.
11. Shareowners' Equity
Common Stock
At September 30, 2003, the authorized stock of the Company consisted of one billion shares of common
stock, par value $1 per share, and 25 million shares of preferred stock, without par value. At September 30,
2003, 22.3 million shares of common stock were reserved for various incentive plans.
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
11. Shareowners' Equity Ì (Continued)
Changes in outstanding common shares are summarized as follows (in millions):
Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Treasury stock purchases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Shares delivered under incentive plans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
185.8
(5.6)
5.4
183.7
Ì
2.1
183.5
(1.7)
1.9
Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
185.6
185.8
183.7
2003
2002
2001
Preferred Share Purchase Rights
Each outstanding share of common stock provides the holder with one Preferred Share Purchase Right
(Right). The Rights will become exercisable only if a person or group, without the approval of the board of
directors, acquires, or oÅers to acquire, 20% or more of the common stock, although the board of directors is
authorized to reduce the 20% threshold for triggering the Rights to not less than 10%. Upon exercise, each
Right entitles the holder to 1/100th of a share of Series A Junior Participating Preferred Stock of the
Company (Junior Preferred Stock) at a price of $250, subject to adjustment.
Upon an acquisition of the Company, each Right (other than Rights held by the acquirer) will generally
be exercisable for $500 worth of either common stock of the Company or common stock of the acquirer for
$250. In certain circumstances, each Right may be exchanged by the Company for one share of common stock
or 1/100th of a share of Junior Preferred Stock. The Rights will expire on December 6, 2006, unless earlier
exchanged or redeemed at $0.01 per Right.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss consisted of the following (in millions):
September 30,
2002
2003
Minimum pension liability adjustment (Note 13) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Currency translation adjustments (Note 18) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net unrealized losses on cash Öow hedges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Unrealized losses on investment securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$(200)
(125)
(18)
(1)
$ (30)
(160)
(3)
(1)
Accumulated other comprehensive lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$(344)
$(194)
In 2003, the Company adjusted its currency translation and deferred income taxes by approximately
$25 million resulting from a decision made by the Company to permanently reinvest the earnings of certain of
its foreign subsidiaries.
Unrealized losses on cash Öow hedges of $24 million ($15 million after tax) were reclassiÑed into
earnings in 2003 and oÅset gains on the hedged items. Unrealized gains on cash Öow hedges of $7 million
($4 million after tax) in 2002 and $22 million ($15 million after tax) in 2001 were reclassiÑed into earnings
and oÅset losses on the hedged items. Approximately $28 million ($18 million after tax) of the net unrealized
losses on cash Öow hedges as of September 30, 2003 will be reclassiÑed into earnings during 2004.
Management expects that these unrealized losses will be oÅset when the hedged items are recognized in
earnings.
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
12. Stock Options
Options to purchase common stock of the Company have been granted under various incentive plans and
by board action to directors, oÇcers and other key employees at prices equal to the fair market value of the
stock on the dates the options were granted. The plans provide that the option price for certain options granted
under the plans may be paid in cash, shares of common stock or a combination thereof.
Under the 2000 Long-Term Incentives Plan, the Company may grant up to 16 million shares of Company
common stock as non-qualiÑed options, incentive stock options, stock appreciation rights and restricted stock.
Shares available for future grant or payment under various incentive plans were approximately 5.4 million at
September 30, 2003. None of the employee incentive plans presently permits options to be granted after
November 30, 2009. Stock options generally expire ten years from the date they are granted and vest over
three years (time-vesting options) with the exception of performance-vesting options. Performance-vesting
options expire ten years from the date they are granted and vest at the earlier of (a) the date the market price
of the Company's common stock reaches a speciÑed level for a pre-determined period of time or certain other
Ñnancial performance criteria are met or (b) a period of six or seven years from the date they are granted.
Information relative to stock options is as follows (shares in thousands):
Number of shares under option:
Outstanding at beginning of year ÏÏÏÏÏÏÏ
Granted:
2003
2002
2001
Wtd. Avg.
Exercise
Price
Shares
Wtd. Avg.
Exercise
Price
Shares
Wtd. Avg.
Exercise
Price
Shares
19,775
$14.27
19,696
$14.15
13,998
$36.04
Time-vestingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Performance-vesting ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2,883
Ì
Adjustments:
Collins adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Conversion to Collins options ÏÏÏÏÏÏÏÏ
Exercised ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Canceled or expiredÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Ì
Ì
(5,416)
(382)
Outstanding at end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
16,860
15.69
Ì
Ì
Ì
13.03
15.57
14.88
2,720
Ì
13.48
Ì
3,309
941
Ì
Ì
(2,123)
(518)
6,379
Ì
Ì (2,486)
(1,884)
(561)
11.63
16.81
19,775
14.27
19,696
Exercisable at end of yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
9,980
14.67
12,133
13.88
9,863
28.23
29.94
Ì
37.32
23.17
29.99
14.15
13.48
Approximately 1 million performance-vesting options were not exercisable at September 30, 2003.
In connection with the SpinoÅ, the number and exercise prices of certain options were adjusted in order
to preserve the intrinsic value of the options that were outstanding immediately before and after the SpinoÅ.
For certain other options, option holders received a combination of Rockwell Automation and Rockwell
Collins options with adjustments made to the number and exercise prices of those options to preserve the
intrinsic value of the Rockwell Automation and Rockwell Collins options that were outstanding immediately
before and after the SpinoÅ. Outstanding Rockwell Automation options held by Rockwell Collins employees
generally were converted into Rockwell Collins options. Grants for 2001 have not been restated to reÖect
adjustments made in connection with the SpinoÅ.
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
12. Stock Options Ì (Continued)
The following table summarizes information about stock options outstanding at September 30, 2003
(shares in thousands; remaining life in years):
Range of Exercise Prices
$7.47 to $11.49ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$11.50 to $12.49ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$12.50 to $14.99ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$15.00 to $17.49ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$17.50 to $24.91ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Options Outstanding
Options Exercisable
Weighted Average
Remaining
Life
Exercise
Price
3.6
6.5
6.7
7.1
5.7
$10.29
11.68
13.50
15.85
20.41
Wtd. Avg.
Exercise
Price
$10.29
11.72
13.62
16.33
20.45
Shares
1,775
2,552
1,398
1,900
2,355
9,980
Shares
1,775
3,672
3,087
4,810
3,516
16,860
The closing price of the Company's common stock on the New York Stock Exchange-Composite
Transactions reporting system on September 30, 2003 was $26.25.
13. Retirement BeneÑts
The Company sponsors pension and other postretirement beneÑt plans for its employees. The pension
plans cover most of the Company's employees and provide for monthly pension payments to eligible
employees upon retirement. Pension beneÑts for salaried employees generally are based on years of credited
service and average earnings. Pension beneÑts for hourly employees are primarily based on speciÑed beneÑt
amounts and years of service. The Company's policy with respect to funding its pension obligation is to fund
the minimum amount required by applicable laws and governmental regulations. The Company may, at its
discretion, fund amounts in excess of the minimum amount required by laws and regulations. Other
postretirement beneÑts are primarily in the form of retirement medical plans and cover most of the Company's
United States employees and provide for the payment of certain medical costs of eligible employees and
dependents upon retirement.
In connection with the SpinoÅ, Rockwell Collins assumed the former Rockwell International Corporation
domestic qualiÑed pension plan (Rockwell Retirement Plan). Pension plan obligations attributable to all of
Rockwell Automation's domestic active employees and former employees of the Control Systems, Power
Systems and FirstPoint Contact businesses were retained by Rockwell Automation and a proportionate share
of pension plan assets were transferred from the former Rockwell International Corporation domestic qualiÑed
plan (Rockwell Retirement Plan) to a new pension plan established by Rockwell Automation. The Company
also retained liabilities for other postretirement beneÑts for active and former employees. The tables below
reÖect the continuing Rockwell Automation plans.
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
13. Retirement BeneÑts Ì (Continued)
The components of net periodic beneÑt cost are as follows (in millions):
Pension BeneÑts
2002
2003
2001
Other Postretirement
BeneÑts
2002
2003
2001
Service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Interest cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Expected return on plan assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Amortization:
$
50
102
(116)
$
45
92
(117)
$
44
87
(126)
$
6
23
Ì
$ 8
21
Ì
$ 7
18
Ì
Prior service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net transition asset ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net actuarial loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2
(2)
6
5
(3)
3
5
(4)
4
(12)
Ì
12
(6)
Ì
5
(6)
Ì
3
Net periodic beneÑt cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$
42
$
25
$
10
$ 29
$28
$22
The Company recognized special termination beneÑt charges of $3 million in 2001.
BeneÑt obligation, plan assets, funded status, and net liability information is summarized as follows (in
millions):
BeneÑt obligation at beginning of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Service costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Interest cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Discount rate change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Actuarial (gains) lossesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Plan amendmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
BeneÑts paid ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other (including currency translation) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Pension BeneÑts
2002
2003
$1,564
50
102
228
(11)
2
(65)
49
$1,375
45
92
90
(1)
Ì
(60)
23
BeneÑt obligation at end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
1,919
1,564
Plan assets at beginning of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Actual return on plan assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Company contributions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Plan participant contributions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
BeneÑts paid ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other (including currency translation) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
1,192
12
69
4
(65)
36
1,284
(83)
33
1
(60)
17
Plan assets at end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
1,248
1,192
Other
Postretirement
BeneÑts
2003
2002
$ 409
6
23
31
(13)
(86)
(28)
3
$ 294
8
21
32
99
(16)
(29)
Ì
345
Ì
Ì
28
6
(34)
Ì
Ì
409
Ì
Ì
29
4
(33)
Ì
Ì
Funded status of plansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Unamortized amounts:
(671)
(372)
(345)
(409)
Prior service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net transition asset ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net actuarial losses (gains) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
12
(3)
574
11
(6)
255
(121)
Ì
235
(49)
Ì
229
Net amount on balance sheetÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ (88)
$ (112)
$(231)
$(229)
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
13. Retirement BeneÑts Ì (Continued)
Pension BeneÑts
2002
2003
Other
Postretirement
BeneÑts
2003
2002
Net amount on balance sheet consists of:
Prepaid beneÑt cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total retirement beneÑt liabilityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Deferred tax asset ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Intangible assetÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Accumulated other comprehensive lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$
24
(447)
123
12
200
$
16
(184)
15
11
30
$ Ì $ Ì
(229)
(231)
Ì
Ì
Ì
Ì
Ì
Ì
Net amount on balance sheetÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ (88)
$ (112)
$(231)
$(229)
During 2003, the Company recorded an increase to its minimum pension liability of $280 million
resulting primarily from unfavorable actual returns on plan assets relative to the expected return on plan assets
and a decline in the discount rates used to calculate beneÑt obligations. After recognition of a deferred tax
asset of $108 million, the net reduction to shareowners equity resulting from this adjustment was $170 million.
In June 2003, the Company made a $50 million voluntary contribution to the Company's primary U.S.
qualiÑed pension plan trust compared to a 2002 contribution of $24 million which was related to the spinoÅ of
Rockwell Collins.
The Company uses an actuarial measurement date of June 30 to measure its beneÑt obligations for
pension and other postretirement beneÑts.
Net Periodic BeneÑt Cost Assumptions
SigniÑcant assumptions used in determining net periodic beneÑt cost for the Ñscal years ended
September 30, 2003, 2002 and 2001 are as follows:
Pension BeneÑts
2002
2001
2003
Other Postretirement
BeneÑts
2002
2003(1)
2001
Discount rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Expected return on plan assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Compensation increase rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
7.0% 7.5% 8.0%
8.5% 9.0% 9.75% Ì
4.5% 4.5% 4.5% Ì
6.6%
7.5% 8.0%
Ì
Ì
Ì
Ì
Net BeneÑt Obligation Assumptions
SigniÑcant assumptions used in determining the beneÑt obligations as of September 30 are summarized
as follows (in weighted averages):
Pension BeneÑts
2002
2003
2001
Other Postretirement
BeneÑts
2002
2003
2001
Discount rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Compensation increase rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Healthcare cost trend rate(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì
6.0% 7.0% 7.5% 6.0% 7.0% 7.5%
4.5% 4.5% 4.5% Ì Ì
Ì
Ì
Ì 11.0% 8.5% 8.0%
(1) As a result of the plan amendment adopted eÅective October 1, 2002, as more fully described below, and in accordance with SFAS
No. 106, Employers' Accounting for Postretirement BeneÑt Other Than Pensions, the Company's postretirement healthcare liabilities
were recalculated as of the date of the amendment using a 6.5 percent discount rate, the discount rate applicable at the date of the
plan amendment. The Company's related net periodic beneÑt cost in 2003 of $29 million consists of expense at a 7 percent discount
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
13. Retirement BeneÑts Ì (Continued)
rate for the period July 1, 2002 through September 30, 2002 and expense at a 6.5 percent discount rate for the period October 1, 2002
through June 30, 2003.
(2) The healthcare cost trend rate reÖects the estimated increase in gross medical claims costs as required to be disclosed by SFAS
No. 132, Employers' Disclosures about Pensions and Other Postretirement BeneÑts. The gross healthcare cost trend rate will decrease
to 5.5% in 2009. As a result of the plan amendment adopted eÅective October 1, 2002, as more fully described below, the eÅective
retiree medical cost increase to the Company will approach zero percent in 2005.
EÅective October 1, 2002, the Company amended its United States postretirement healthcare beneÑt
program in order to mitigate the increasing cost of postretirement healthcare services. This change will be
phased in as follows: eÅective January 1, 2004, the Company, per an amendment to this program implemented
in 1992, will contribute 50 percent of the amount in excess of the 2003 per capita amount. However, the
Company's calendar 2004 contribution shall be limited to a 7.5 percent increase from the 2003 per capita
amount. EÅective January 1, 2005, the Company will limit its future per capita maximum contribution to its
calendar 2004 per capita contribution.
Other Postretirement BeneÑts
Including the eÅect of the October 1, 2002 plan amendment, a one-percentage point change in assumed
health care cost trend rates would have the following eÅect (in millions):
One-Percentage
Point Increase
2002
2003
One-Percentage
Point Decrease
2002
2003
Increase (decrease) to total of service and interest cost
components ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Increase (decrease) to postretirement beneÑt obligation ÏÏÏÏÏÏÏÏ
$ 1
11
$ 4
32
$(1)
(9)
$ (3)
(26)
Pension BeneÑts
The projected beneÑt obligation, accumulated beneÑt obligation and fair value of plan assets for the
pension plans with accumulated beneÑt obligations in excess of the fair value of plan assets (underfunded
plans) were $1,734 million, $1,486 million and $1,063 million, respectively, as of the 2003 measurement date
(June 30) and $1,325 million, $1,137 million and $961 million, respectively, as of the 2002 measurement date.
DeÑned Contribution Savings Plans
The Company also sponsors certain deÑned contribution savings plans for eligible employees. Expense
related to these plans was $25 million for 2003, 2002 and 2001.
14. Special Charges
In 2001, the Company recorded special charges of $91 million ($60 million after tax, or 32 cents per
diluted share) for costs associated with the consolidation and closing of facilities, the realignment of
administrative functions, the reduction of workforce, primarily in North America, by approximately 2,000
employees and asset impairments. The Company had completed these actions at September 30, 2002.
Total cash expenditures in connection with these actions will approximate $50 million, and primarily
relate to employee severance and separation costs. Substantially all had been spent as of September 30, 2003.
In connection with the SpinoÅ, Rockwell Collins assumed a liability for employee severance and separation
costs resulting from these actions of approximately $7 million.
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
14. Special Charges Ì (Continued)
The special charges included write-downs to the carrying amount of goodwill, certain facilities and
machinery and equipment totaling approximately $27 million resulting from the decision to shut down certain
facilities and exit non-strategic operations. The charges represented the diÅerence between the fair values of
the assets and their carrying values. Fair value was determined by management on the basis of various
customary valuation techniques.
The special charges are reÖected in the Consolidated Statement of Operations for the year ended
September 30, 2001 in cost of sales in the amount of $50 million and selling, general and administrative
expenses in the amount of $41 million.
15. Discontinued Operations
The beneÑt of $7 million ($4 million after tax) in discontinued operations in 2003 reÖects income from a
favorable determination in a legal proceeding related to the Company's former operation of the Rocky Flats
facility of the Department of Energy.
The net beneÑt of $3 million in discontinued operations in 2002 reÖects the resolution of certain
obligations related to two discontinued businesses. Related payments of approximately $36 million were made
in 2002, which have been reÖected as cash used by discontinued operations in the accompanying Consolidated
Statement of Cash Flows.
Summarized results of the Company's Rockwell Collins avionics and communications business for the
year ended September 30, 2001 are as follows (in millions):
Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income before income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$2,002
$ 268
$ 180
The results of operations of the Company's Rockwell Collins avionics and communications business in
2001 include $21 million of costs directly related to the SpinoÅ.
16. Related Party Transactions
The Company owns 50 percent of RSC. This ownership interest is accounted for using the equity method.
The Company's investment in RSC of $54 million at September 30, 2003 and $50 million at September 30,
2002 is included in other assets in the Consolidated Balance Sheet.
The Company has an agreement with RSC pursuant to which RSC performs research and development
services for the Company through 2004. The Company is obligated to pay RSC a minimum of $3 million for
such services in 2004. The Company incurred approximately $3 million for research and development services
performed by RSC in 2003 and 2002. At September 30, 2003 and 2002, the amounts due to RSC for research
and development services and from RSC for cost sharing arrangements were not signiÑcant.
The Company shares equally with Rockwell Collins, which owns 50 percent of RSC, in providing a
$4 million line of credit to RSC which bears interest at the greater of the Company's or Rockwell Collins'
commercial paper borrowing rate. At September 30, 2003 and 2002, there were no outstanding borrowings on
the line of credit. In addition, the Company and Rockwell Collins each guarantees one-half of a lease
agreement for one of RSC's facilities. The total future minimum lease payments under the lease are
approximately $6 million. The lease agreement has a term which ends in December 2011.
The Company owns 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. The Company paid
CoLinx approximately $15 million in 2003 and 2002, and $6 million in 2001, primarily for logistics services. In
addition, CoLinx paid the Company approximately $2 million in 2003, $3 million in 2002, and $2 million in
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
16. Related Party Transactions Ì (Continued)
2001 for the use of facilities owned by the Company and other services. The amounts due to and from CoLinx
at September 30, 2003 and 2002 were not signiÑcant.
17. Other Income (Expense)
The components of other income (expense) are as follows (in millions):
Net (loss) gain on dispositions of property and businesses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Intellectual property settlements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Royalty income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$(12)
1
6
2
9
$(3)
9
5
4
2
Other income (expense) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$
6
$17
$ 6
18
6
3
11
$44
2003
2002
2001
During 2003, the Company sold a majority of its ownership interest in REJ resulting in a loss of
approximately $8 million ($3 million after tax, or 1 cent per diluted share). The loss includes a $9 million non-
cash charge related to the impairment of the Reliance trademark. The after-tax loss on the sale includes a
$2 million beneÑt resulting from the Company's ability to utilize capital loss carryforwards for which a
valuation allowance had been previously provided. The proceeds of the transaction totaled approximately
$10 million.
18.
Income Taxes
The components of the income tax provision are as follows (in millions):
2003
2002
2001
Current:
United States ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Tax refund claims ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Research and experimentation refund claim ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Non-United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
State and local ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 30
(4)
(65)
29
Ì
$ (3)
(14)
Ì
30
8
$ 13
(22)
Ì
44
6
Total currentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Deferred:
(10)
21
41
United States ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Research and experimentation refund claim ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Non-United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
State and local ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total deferred ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
28
(4)
Ì
3
27
(10)
Ì
(1)
(3)
(14)
(2)
Ì
2
2
2
Income tax provision ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 17
$
7
$ 43
During 2003, the Company recognized in earnings a tax beneÑt of $69 million related to a federal
research and experimentation credit refund claim (Claim) for the years 1997 through 2001. The federal
portion of the Claim is subject to the approval of the Joint Committee on Taxation of the United States
Congress and the related state tax beneÑts are subject to approval by the various state tax authorities. The
majority of the proceeds from the Claim are expected to be received, or netted against any liability arising
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
18.
Income Taxes Ì (Continued)
from the audit, upon the conclusion of the current federal audit cycle which is expected in 2005. The future
annual income tax beneÑt related to research and experimentation expenditures is not expected to be
signiÑcant.
During 2002, the Company resolved certain tax matters for the period of 1995-1999. The resolution
resulted in a $48 million reduction of the Company's income tax provision, of which $11 million is reÖected in
tax refund claims in the current income tax provision and $37 million is reÖected in the United States deferred
income tax provision.
During 2001, the Company reached agreement with various taxing authorities on refund claims related to
certain prior years and recorded $22 million as a reduction of its income tax provision.
Net current deferred income tax assets at September 30, 2003 and 2002 consist of the tax eÅects of
temporary diÅerences related to the following (in millions):
2003
2002
Compensation and beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Product warranty costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Inventory ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Allowance for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 42
11
29
13
69
Current deferred income tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$164
$ 35
12
30
20
60
$157
Net long-term deferred income tax liabilities at September 30, 2003 and 2002 consist of the tax eÅects of
temporary diÅerences related to the following (in millions):
Retirement beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
PropertyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Intangible assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net operating loss carryforwards ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Capital loss carryforwards ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
State tax credit carryforwardsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
SubtotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Valuation allowance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2003
2002
$ 228
(139)
(45)
22
31
4
(91)
10
(47)
$ 135
(136)
(42)
18
38
4
(105)
(88)
(52)
Long-term deferred income tax liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ (37)
$(140)
Total deferred tax assets were $511 million at September 30, 2003 and $447 million at September 30,
2002. Total deferred tax liabilities were $337 million at September 30, 2003 and $378 million at September 30,
2002.
Management believes it is more likely than not that current and long-term deferred tax assets will be
realized through the reduction of future taxable income. SigniÑcant factors considered by management in its
determination of the probability of the realization of the deferred tax assets include: (a) the historical
operating results of the Company ($404 million of United States taxable income over the past three years),
(b) expectations of future earnings, and (c) the extended period of time over which the retiree medical
liability will be paid.
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
18.
Income Taxes Ì (Continued)
Net operating loss, capital loss and tax credit carryforwards, and related carryforward periods at
September 30, 2003 are summarized as follows (in millions):
Carryforward
Non-United States net operating loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Non-United States net operating loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Non-United States capital loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
United States net operating loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
United States capital loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
State and local net operating lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
State tax credit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Carryforward
Period Ends
2007 Ó 2008
IndeÑnite
IndeÑnite
2019 Ó 2022
2007
2005 Ó 2023
2004 Ó 2012
Amount
$ 2
10
29
1
2
9
4
$57
A valuation allowance of $47 million was established at September 30, 2003 for certain of these
carryforwards for which utilization is uncertain.
The eÅective income tax rate diÅered from the United States statutory tax rate for the reasons set forth
below:
Statutory tax rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
State and local income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Non-United States taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Foreign tax credit utilization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Non-deductible goodwill ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Employee stock ownership plan beneÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Tax refund claims ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Utilization of foreign loss carryforwards ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Utilization of capital loss carryforwards ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Tax beneÑts on export salesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Research and experimentation refund claim ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Resolution of prior period tax matters ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2003
2002
2001
35.0% 35.0% 35.0%
1.4
1.3
0.6
7.0
(11.1)
(0.8)
Ì
Ì
(1.8)
(1.4)
(5.9)
(2.4)
(1.8)
(1.0)
(1.7)
Ì
(3.2)
(0.8)
(23.2)
Ì
(16.0)
0.6
(0.6)
(0.6)
3.6
5.3
(8.4)
8.3
(4.2)
(13.1)
(0.6)
Ì
(0.8)
Ì
Ì
0.5
EÅective income tax rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
5.6%
3.0% 25.6%
In the second quarter of 2003, a tax beneÑt of approximately $2 million was recognized as a result of the
Company's ability to utilize certain capital loss carryforwards for which a valuation allowance had been
previously provided. The ability to utilize the capital loss carryforwards was the result of the sale of a majority
of the Company's ownership interest in REJ which took place in the second quarter of 2003.
The $48 million reduction of the 2002 income tax provision resulting from the resolution of certain tax
matters for the period of 1995-1999 is reÖected in the eÅective income tax rate in tax refund claims (4.7%)
and resolution of prior period tax matters (16.0%).
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
18.
Income Taxes Ì (Continued)
The income tax provisions were calculated based upon the following components of income from
continuing operations before income taxes and cumulative eÅect of accounting change (in millions):
2003
2002
2001
United States income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Non-United States income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$204
95
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$299
$184
49
$233
$ 87
81
$168
No provision has been made for United States, state, or additional non-United States income taxes
related to approximately $200 million of undistributed earnings of foreign subsidiaries which have been or are
intended to be permanently reinvested. In 2003, the Company adjusted its currency translation and deferred
income taxes by approximately $25 million resulting from a decision made by the Company to permanently
reinvest the earnings of certain of its foreign subsidiaries. It is not practical to determine the United States
federal income tax liability, if any, which would be payable if such earnings were not permanently reinvested.
Income taxes paid were $85 million during 2003, $37 million during 2002 and $213 million during 2001.
Income taxes paid related to discontinued operations for 2001 were not signiÑcant.
19. Commitments and Contingent Liabilities
Environmental Matters
Federal, state and local requirements relating to the discharge of substances into the environment, the
disposal of hazardous wastes and other activities aÅecting the environment have and will continue to have an
eÅect on the manufacturing operations of the Company. Thus far, compliance with environmental require-
ments and resolution of environmental claims has been accomplished without material eÅect on the
Company's liquidity and capital resources, competitive position or Ñnancial condition.
The Company has been designated as a potentially responsible party at 14 Superfund sites, excluding sites
as to which the Company's records disclose no involvement or as to which the Company's potential liability
has been Ñnally determined and assumed by third parties. Management estimates the total reasonably possible
costs the Company could incur for the remediation of Superfund sites at September 30, 2003 to be about
$17 million, of which $7 million has been accrued.
Various other lawsuits, claims and proceedings have been asserted against the Company alleging
violations of federal, state and local environmental protection requirements, or seeking remediation of alleged
environmental impairments, principally at previously owned properties. As of September 30, 2003, manage-
ment has estimated the total reasonably possible costs the Company could incur from these matters to be
about $52 million. The Company has recorded environmental accruals for these matters of $21 million. In
addition to the above matters, the Company assumed certain other environmental liabilities in connection with
the 1995 acquisition of Reliance. The Company is indemniÑed by ExxonMobil Corporation (Exxon) for
substantially all costs associated with these Reliance matters. At September 30, 2003, the Company has
recorded a liability of approximately $26 million and a receivable of approximately $25 million for these
Reliance matters. Management estimates the total reasonably possible costs for these matters to be
approximately $37 million for which the Company is substantially indemniÑed by Exxon.
Based on its assessment, management believes that the Company's expenditures for environmental
capital investment and remediation necessary to comply with present regulations governing environmental
protection and other expenditures for the resolution of environmental claims will not have a material adverse
eÅect on the Company's liquidity and capital resources, competitive position or Ñnancial condition. Manage-
ment cannot assess the possible eÅect of compliance with future requirements.
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
19. Commitments and Contingent Liabilities Ì (Continued)
Purchase Commitments
In connection with the sale of a Power Systems business in 2000, the Company entered into a supply
agreement with the buyer of the business. The agreement requires minimum purchases by the Company of
approximately $21 million per year through December 31, 2005 at prices which management believes are
higher than those available from other vendors. In the event that purchases are less than $21 million in a given
year, the Company may incur penalties which are 25 percent of the amount by which the actual purchases
were less than the contractual minimum for the period. Penalties paid by the Company under the terms of the
supply agreement were approximately $2 million in 2003 and approximately $1 million in 2002. The liability
recorded in connection with the supply agreement was approximately $3 million at September 30, 2003 and
approximately $6 million at September 30, 2002.
See Note 16 for a discussion on the Company's commitments to related parties.
Lease Commitments
Minimum future rental commitments under operating leases having noncancelable lease terms in excess
of one year aggregated $214 million as of September 30, 2003 and are payable as follows (in millions): 2004,
$48; 2005, $38; 2006, $29; 2007, $25; 2008, $17; and after 2008, $57. Commitments from third parties under
sublease agreements having noncancelable lease terms in excess of one year aggregated $22 million as of
September 30, 2003 and are receivable through 2009 at approximately $4 million per year. Most leases contain
renewal options for varying periods, and certain leases include options to purchase the leased property during
or at the end of the lease term.
Rental expense was $83 million in 2003, $84 million in 2002, and $86 million in 2001.
Other Matters
Various lawsuits, claims and proceedings have been or may be instituted or asserted against the Company
relating to the conduct of its business, including those pertaining to product liability, intellectual property,
safety and health, employment and contract matters. In connection with the divestiture of its former aerospace
and defense businesses (the A&D Business) to The Boeing Company (Boeing), Rockwell Automation 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 spinoÅs of the Company's former automotive component systems business,
semiconductor systems business and Rockwell Collins avionics and communications business, the spun-oÅ
companies have agreed to indemnify Rockwell Automation for substantially all contingent liabilities related to
the respective businesses, including environmental and intellectual property matters. Although the outcome of
litigation cannot be predicted with certainty and some lawsuits, claims, or proceedings may be disposed of
unfavorably to the Company, management believes the disposition of matters which are pending or asserted
will not have a material adverse eÅect on the Company's business or Ñnancial condition.
The Company has, from time to time, divested certain of its businesses. In connection with such
divestitures, there may be lawsuits, claims and proceedings instituted or asserted against the Company related
to the period that the businesses were owned by the Company. In addition, the Company has guaranteed
performance and payment under certain contracts of divested businesses, including a $60 million lease
obligation of the Company's former semiconductor systems business, now Conexant Systems, Inc. (Conex-
ant). 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, the Company receives $250,000
per quarter from Conexant through December 31, 2003. The guarantee expires in 2005. Management believes
that any judgments against the Company related to such matters or claims pursuant to the guarantees would
not have a material adverse eÅect on the Company's business or Ñnancial condition.
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
20. Business Segment Information
Rockwell Automation is a provider of industrial automation power, control and information products and
services. The Company is organized based upon products and services and has three operating segments
consisting of Control Systems, Power Systems and FirstPoint Contact. The Company has a 50 percent
ownership interest in RSC and accounts for its interest in RSC using the equity method.
Control Systems
The Control Systems operating segment is a supplier of industrial automation products, systems, software
and services focused on helping customers control and improve manufacturing processes and is divided into
three units: the Components and Packaged Applications Group (CPAG), the Automation Control and
Information Group (ACIG) and Global Manufacturing Solutions (GMS).
CPAG produces industrial components, power control and motor management products, and packaged
and engineered products. It supplies both electro-mechanical and solid-state products, including motor starters
and contactors, push buttons and signaling devices, termination and protection devices, relays and timers,
discrete and condition sensors and variable speed drives. CPAG's sales account for approximately 40 percent
of Control Systems' sales.
ACIG's products include programmable logic controllers (PLCs). PLCs are used to automate the
control and monitoring of industrial plants and processes and typically consist of a computer processor and
input/output devices. The Company's Logix integrated architecture integrates multiple types of controls
disciplines including discrete, process, drive, motion and safety control across various factory Öoor operating
systems. ACIG also produces distributed I/O (input/output) platforms, high performance rotary and linear
motion control systems, electronic operator interface devices, plant Öoor industrial computers and machine
safety components. ACIG's sales account for approximately 40 percent of Control Systems' sales.
GMS provides multi-vendor automation and information systems and solutions which help customers
improve their manufacturing operations. Solutions include multi-vendor customer support, training, software,
consulting and implementation, asset management, and manufacturing information solutions for discrete and
targeted batch process industries. GMS's sales account for approximately 20 percent of Control Systems'
sales.
Power Systems
The Power Systems operating segment is divided into two units: the Mechanical Power Transmission
Business (Mechanical) and the Industrial Motor and Drive Business (Electrical).
Mechanical's products include mounted bearings, gear reducers, standard mechanical drives, conveyor
pulleys, couplings, bushings, clutches and motor brakes. Electrical's products include industrial and engi-
neered motors and standard AC and DC drives. In addition, Power Systems provides product repair, motor
and mechanical maintenance solutions, plant maintenance, training and consulting services to OEM's, end
users and distributors.
FirstPoint Contact
The FirstPoint Contact operating segment provides customer contact center solutions that support
multiple channels (voice, e-mail, web, wireless) through open interaction infrastructure. Products include
automatic call distributors, computer telephony integration software, information collection, reporting,
queuing and management systems, call center systems and consulting services.
58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
20. Business Segment Information Ì (Continued)
The following tables reÖect the sales and operating results of the Company's reportable segments for the
years ended September 30 (in millions):
2003
2002
2001
Sales:
Control Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Power Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
FirstPoint ContactÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Intersegment salesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$3,314
724
112
Ì
(46)
$3,084
736
134
Ì
(45)
$3,353
777
151
73
(69)
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$4,104
$3,909
$4,285
Segment operating earnings:
Control Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Power Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
FirstPoint ContactÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 398
54
1
Ì
$ 324
53
4
Ì
$ 425
39
7
3
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Goodwill and purchase accounting items ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
General corporate Ì net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Loss on disposition of a business (Note 17) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Special charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
453
(27)
(67)
(8)
(52)
Ì
381
(25)
(57)
Ì
(66)
Ì
474
(79)
(53)
Ì
(83)
(91)
Income from continuing operations before income taxes and
accounting changeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 299
$ 233
$ 168
Other represents the sales and segment operating earnings of Rockwell Science Center through the third
quarter of 2001. Beginning with the fourth quarter of 2001, the Company's 50 percent ownership interest in
RSC is accounted for using the equity method, and the Company's proportional share of RSC's earnings or
losses are included in general corporate Ì net.
EÅective October 1, 2001, the Company adopted SFAS 142. As a result of adopting SFAS 142, the
Company no longer amortizes goodwill and certain other intangible assets that have been deemed to have an
indeÑnite useful life. The amortization of goodwill and the intangible assets that have been deemed to have an
indeÑnite useful life was $56 million in 2001.
Among other considerations, the Company evaluates performance and allocates resources based upon
segment operating earnings before income taxes, interest expense, costs related to corporate oÇces,
nonrecurring special charges, gains and losses from the disposition of businesses, earnings and losses from
equity aÇliates which are not considered part of the operations of a particular segment and incremental
acquisition related expenses resulting from purchase accounting adjustments such as goodwill and other
intangible asset amortization, depreciation, inventory and purchased research and development charges.
Intersegment sales are made at market prices. The accounting policies used in preparing the segment
information are consistent with those described in Note 1. Special charges are discussed in Note 14.
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
20. Business Segment Information Ì (Continued)
The following tables summarize the identiÑable assets at September 30, the provision for depreciation
and amortization and the amount of capital expenditures for property for the years ended September 30 for
each of the reportable segments and Corporate (in millions):
2003
2002
2001
IdentiÑable assets:
Control Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Power Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
FirstPoint ContactÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Corporate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$2,424
855
62
645
$2,403
885
77
641
$2,483
1,033
86
496
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$3,986
$4,006
$4,098
Depreciation and amortization:
Control Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Power Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
FirstPoint ContactÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Corporate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Purchase accounting depreciation and amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 122
38
8
Ì
3
171
27
$ 125
43
9
Ì
4
181
25
$ 132
41
10
4
6
193
79
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 198
$ 206
$ 272
Capital expenditures for property:
Control Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Power Systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
FirstPoint ContactÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Corporate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$
78
29
1
Ì
1
$
77
21
5
Ì
1
$
99
43
1
13
1
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 109
$ 104
$ 157
IdentiÑable assets at Corporate consist principally of cash, net deferred income tax assets, property and
the 50 percent ownership interest in RSC.
The Company conducts a signiÑcant portion of its business activities outside the United States. The
following tables reÖect geographic sales and property by geographic region (in millions):
United States ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Canada ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Europe, Middle East, AfricaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Asia-PaciÑcÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Latin America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2003
$2,613
305
711
333
142
Sales
2002
$2,629
265
591
279
145
2001
$2,830
304
671
286
194
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$4,104
$3,909
$4,285
Sales are attributed to the geographic regions based on the country of origin.
2003
$800
22
77
17
9
$925
Property
2002
$861
19
75
25
8
$988
2001
$ 945
20
75
24
11
$1,075
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
21. Quarterly Financial Information (Unaudited)
Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Gross proÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income from continuing operations before income
taxes and accounting change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income from continuing operations before accounting
change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Basic earnings per share:
First
$984
321
60
42
42
Continuing operations before accounting change ÏÏÏ
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
0.22
0.22
Diluted earnings per share:
Continuing operations before accounting change ÏÏÏ
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
0.22
0.22
Net income for 2003 includes:
2003 Quarters
Third(a)
Fourth(b)(c)
Second
(in millions, except per share amounts)
$1,029
336
$1,058
351
$1,033
344
65
49
49
0.26
0.26
0.26
0.26
84
128
128
0.69
0.69
0.67
0.67
90
63
67
0.35
0.37
0.33
0.35
2003
$4,104
1,352
299
282
286
1.52
1.54
1.49
1.51
(a) a tax beneÑt of $69 million, or 37 cents per diluted share, related to the settlement of a
U.S. federal research and experimentation refund claim;
(b) income of $7 million ($4 million after tax, or 2 cents per diluted share), reÖected in
discontinued operations, from a favorable determination in a legal proceeding related to the Company's
former operation of the Rocky Flats facility of the Department of Energy;
(c) a charge of $5 million ($3 million after tax, or 2 cents per diluted share), due to higher
estimated future costs for environmental remediation near the Russellville, Kentucky facility of the
Company's former Measurement and Flow Control business.
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
21. Quarterly Financial Information (Unaudited) Ì (Continued)
First(a)
Second(b)
Third(c)(d)
Fourth(e)(f)
2002
2002 Quarters
(in millions, except per share amounts)
$1,017
$995
$958
319
325
299
$3,909
1,235
Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Gross proÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income from continuing operations before
$ 939
292
income taxes and accounting changeÏÏÏÏÏÏÏÏ
40
Income from continuing operations before
accounting change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net (loss) income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Basic earnings (loss) per share:
Continuing operations before accounting
29
(79)
54
58
61
change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net (loss) income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
0.16
(0.43)
0.31
0.33
Diluted earnings (loss) per share:
Continuing operations before accounting
change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net (loss) income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
0.16
(0.42)
0.31
0.33
Net income for 2002 includes:
75
90
90
0.48
0.48
0.47
0.47
64
49
49
0.27
0.27
0.26
0.26
233
226
121
1.22
0.66
1.20
0.64
(a) a charge of $129 million ($108 million after tax, or 58 cents per diluted share) for the
impairment of goodwill and a trademark in connection with the adoption of SFAS 142;
(b) a reduction in the income tax provision of $18 million, or 10 cents per diluted share, from the
resolution of certain tax matters;
(c) a reduction in the income tax provision of $30 million, or 16 cents per diluted share, from the
favorable resolution of certain tax matters;
(d) income of $5 million ($4 million after tax, or 2 cents per diluted share) from the favorable
settlement of intellectual property matters;
(e) income of $4 million ($3 million after tax, or 2 cents per diluted share) from the favorable
settlement of intellectual property matters;
(f) a charge of $4 million ($3 million after tax, or 2 cents per diluted share) related to an asset
impairment and severance at FirstPoint Contact.
62
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareowners of
Rockwell Automation, Inc.:
We have audited the accompanying consolidated balance sheet of Rockwell Automation, Inc. and
subsidiaries as of September 30, 2003 and 2002, and the related consolidated statements of operations,
shareowners' equity, cash Öows, and comprehensive income for each of the three years in the period ended
September 30, 2003. Our audits also included the Ñnancial statement schedule listed in the Index at
Item 15(a)(2). These Ñnancial statements and Ñnancial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these Ñnancial statements and
Ñnancial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States
of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the Ñnancial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the Ñnancial statements. An audit also includes
assessing the accounting principles used and signiÑcant estimates made by management, as well as evaluating
the overall Ñnancial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated Ñnancial statements present fairly, in all material respects, the Ñnancial
position of Rockwell Automation, Inc. and subsidiaries at September 30, 2003 and 2002, and the results of
their operations and their cash Öows for each of the three years in the period ended September 30, 2003, in
conformity with accounting principles generally accepted in the United States of America. Also, in our
opinion, such Ñnancial statement schedule, when considered in relation to the basic consolidated Ñnancial
statements taken as a whole, presents fairly in all material respects the information set forth therein.
As described in Note 3 to the Consolidated Financial Statements, on October 1, 2001, the Company
adopted Statement of Financial Accounting Standards No. 142, ""Goodwill and Other Intangible Assets.''
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
November 5, 2003
63
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
The Company carried out an evaluation, under the supervision and with the participation of the
Company's management, including its Chief Executive OÇcer and Chief Financial OÇcer, of the eÅective-
ness, as of September 30, 2003, of the design and operation of the Company's disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive OÇcer
and Chief Financial OÇcer concluded that the Company's disclosure controls and procedures are eÅective as
of the end of the year ended September 30, 2003 to timely alert them to material information relating to the
Company (including its consolidated subsidiaries) required to be included in the Company's Exchange Act
Ñlings.
There have been no changes in the Company's internal control over Ñnancial reporting during the Ñscal
quarter ended September 30, 2003 that have materially aÅected, or are reasonably likely to materially aÅect,
the Company's internal control over Ñnancial reporting.
Item 10. Directors and Executive OÇcers of the Company.
PART III
See the information under the captions Election of Directors, Information as to Nominees for Directors
and Continuing Directors and Board of Directors and Committees in the 2004 Proxy Statement.
No nominee for director was selected pursuant to any arrangement or understanding between the
nominee and any person other than the Company pursuant to which such person is or was to be selected as a
director or nominee. See also the information with respect to executive oÇcers of the Company under Item 4a
of Part I hereof.
The Company has adopted a code of ethics that applies to its executive oÇcers, including its principal
executive oÇcer, principal Ñnancial oÇcer and principal accounting oÇcer. A copy of the Company's code of
ethics is posted on its Internet site at http://www.rockwellautomation.com. In the event that the Company
makes any amendment to, or grants any waiver from, a provision of the code of ethics that applies to the
principal executive oÇcer, principal Ñnancial oÇcer or principal accounting oÇcer and that requires disclosure
under applicable SEC rules, the Company intends to disclose such amendment or waiver and the reasons
therefor on its Internet site.
Item 11. Executive Compensation.
See the information under the captions Executive Compensation, Option Grants and Aggregated Option
Exercises and Fiscal Year-End Values and Retirement Plans in the 2004 Proxy Statement.
Item 12. Security Ownership of Certain BeneÑcial Owners and Management and Related Stockholder
Matters.
See the information under the captions Voting Securities, Ownership by Management of Equity
Securities and Equity Compensation Plan Information in the 2004 Proxy Statement.
64
Item 13. Certain Relationships and Related Transactions.
See the information under the caption Board of Directors and Committees in the 2004 Proxy Statement.
Item 14. Principal Accountant Fees and Services.
See the information under the caption Proposal to Approve the Selection of Auditors in the 2004 Proxy
Statement.
65
PART IV
Item 15. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(a) Financial Statements, Financial Statement Schedule and Exhibits.
(1) Financial Statements (all Ñnancial statements listed below are those of the Company and its
consolidated subsidiaries).
Consolidated Balance Sheet, September 30, 2003 and 2002.
Consolidated Statement of Operations, years ended September 30, 2003, 2002 and 2001.
Consolidated Statement of Cash Flows, years ended September 30, 2003, 2002 and 2001.
Consolidated Statement of Shareowners' Equity, years ended September 30, 2003, 2002 and
2001.
Consolidated Statement of Comprehensive Income, years ended September 30, 2003, 2002 and
2001.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
(2) Financial Statement Schedule for the years ended September 30, 2003, 2002 and 2001.
Schedule II Ì Valuation and Qualifying Accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Page
S-1
Schedules not Ñled herewith are omitted because of the absence of conditions under which they
are required or because the information called for is shown in the consolidated Ñnancial
statements or notes thereto.
(3) Exhibits.
3-a-1
3-b-l
4-a-1
4-b-1
4-b-2
4-b-3
Restated CertiÑcate of Incorporation of the Company, Ñled as Exhibit 3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
2002, is hereby incorporated by reference.
By-Laws of the Company, Ñled as Exhibit 3-b-2 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1998, are hereby
incorporated by reference.
Rights Agreement, dated as of November 30, 1996, between the Company and
Mellon Investor Services LLC (formerly named ChaseMellon Shareholder
Services, L.L.C.), as rights agent, Ñled as Exhibit 4-c to Registration Statement
No. 333-17031, is hereby incorporated by reference.
Indenture dated as of December 1, 1996 between the Company and JPMorgan
Chase (formerly The Chase Manhattan Bank, successor to Mellon Bank, N.A.),
as Trustee, Ñled as Exhibit 4-a to Registration Statement No. 333-43071, is
hereby incorporated by reference.
Form of certiÑcate for the Company's 6.15% Notes due January 15, 2008, Ñled as
Exhibit 4-a to the Company's Current Report on Form 8-K dated January 26,
1998, is hereby incorporated by reference.
Form of certiÑcate for the Company's 6.70% Debentures due January 15, 2028,
Ñled as Exhibit 4-b to the Company's Current Report on Form 8-K dated
January 26, 1998, is hereby incorporated by reference.
* Management contract or compensatory plan or arrangement.
66
4-b-4
*10-a-l
*10-a-2
*10-a-3
*10-a-4
*10-a-5
*10-a-6
*l0-b-1
*10-b-2
*10-b-3
*10-b-4
*10-b-5
Form of certiÑcate for the Company's 5.20% Debentures due January 15, 2098,
Ñled as Exhibit 4-c to the Company's Current Report on Form 8-K dated
January 26, 1998, is hereby incorporated by reference.
Copy of the Company's 1988 Long-Term Incentives Plan, as amended through
November 30, 1994, Ñled as Exhibit 10-d-l to the Company's Annual Report on
Form 10-K for the year ended September 30, 1994 (File No. 1-1035), is hereby
incorporated by reference.
Copy of resolution of the Board of Directors of the Company, adopted Novem-
ber 6, 1996, amending the Company's 1988 Long-Term Incentives Plan, Ñled as
Exhibit 4-g-1 to Registration Statement No. 333-17055, is hereby incorporated
by reference.
Copy of resolution of the Board of Directors of the Company, adopted Novem-
ber 5, 1997, increasing the number of shares authorized for issuance under the
Company's 1988 Long-Term Incentives Plan, Ñled as Exhibit 10-b-2 to the
Company's Annual Report on Form 10-K for the year ended September 30,
1997, is hereby incorporated by reference.
Forms of Stock Option Agreements under the Company's 1988 Long-Term
Incentives Plan for options granted after November 1, 1993 and prior to
December 1, 1994, Ñled as Exhibit 10-d-6 to the Company's Annual Report on
Form 10-K for the year ended September 30, 1993 (File No. 1-1035), are
hereby incorporated by reference.
Forms of Stock Option Agreements under the Company's 1988 Long-Term
Incentives Plan for options granted after December 1, 1994, Ñled as Ex-
hibit 10-d-7 to the Company's Annual Report on Form 10-K for the year ended
September 30, 1994 (File No. 1-1035), are hereby incorporated by reference.
Memorandum of Proposed Amendments to the Rockwell International Corpora-
tion 1988 Long-Term Incentives Plan approved and adopted by the Board of
Directors of the Company on June 6, 2001 in connection with the spin-oÅ of
Rockwell Collins, Ñled as Exhibit 10-a-8 to the Company's Annual Report on
Form 10-K for the year ended September 30, 2001, is hereby incorporated by
reference.
Copy of the Company's 1995 Long-Term Incentives Plan, as amended, Ñled as
Exhibit l0-b-1 to the Company's Annual Report on Form 10-K for the year
ended September 30, 1998, is hereby incorporated by reference.
Forms of Stock Option Agreements under the Company's 1995 Long-Term
Incentives Plan for options granted prior to December 3, 1997, Ñled as Ex-
hibit 10-e-2 to the Company's Annual Report on Form 10-K for the year ended
September 30, 1994 (File No. 1-1035), are hereby incorporated by reference.
Forms of Stock Option Agreements under the Company's 1995 Long-Term
Incentives Plan for options granted between December 3, 1997 and August 31,
1998, Ñled as Exhibit 10-b-3 to the Company's Annual Report on Form 10-K for
the year ended September 30, 1998, are hereby incorporated by reference.
Form of Stock Option Agreement under the Company's 1995 Long-Term
Incentives Plan for options granted on April 23, 1998, Ñled as Exhibit 10-b-4 to
the Company's Annual Report on Form 10-K for the year ended September 30,
1998, is hereby incorporated by reference.
Form of Stock Option Agreement under the Company's 1995 Long-Term
Incentives Plan for options granted after August 31, 1998, Ñled as Exhibit 10-b-5
to the Company's Annual Report on Form 10-K for the year ended Septem-
ber 30, 1998, is hereby incorporated by reference.
* Management contract or compensatory plan or arrangement.
67
*10-b-6
*10-b-7
*10-b-8
*10-b-9
*10-b-10
*10-b-11
*10-c-l
*10-c-2
*10-c-3
*10-c-4
*10-c-5
*10-c-6
Form of Restricted Stock Agreement under the Company's 1995 Long-Term
Incentives Plan, Ñled as Exhibit 10-e to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1996, is hereby incorporated by
reference.
Copy of Restricted Stock Agreement dated December 3, 1997 between the
Company and Don H. Davis, Jr., Ñled as Exhibit 10-c-5 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1997, is hereby
incorporated by reference.
Copy of resolutions of the Board of Directors of the Company, adopted
December 1, 1999, amending the Company's 1995 Long-Term Incentives Plan,
Ñled as Exhibit 10-b-8 to the Company's Annual Report on Form 10-K for the
year ended September 30, 2002, is hereby incorporated by reference.
Memorandum of Proposed Amendments to the Rockwell International Corpora-
tion 1995 Long-Term Incentives Plan approved and adopted by the Board of
Directors of the Company on June 6, 2001 in connection with the spin-oÅ of
Rockwell Collins, Ñled as Exhibit 10-b-8 to the Company's Annual Report on
Form 10-K for the year ended September 30, 2001, is hereby incorporated by
reference.
Copy of resolutions of the Board of Directors of the Company, adopted
November 6, 2002, amending the Company's 1995 Long-Term Incentives Plan,
Ñled as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 2002, is hereby incorporated by reference.
Copy of resolutions of the Compensation and Management Development Com-
mittee of the Board of Directors of the Company, adopted June 4, 2003,
amending the restricted stock agreements of Don H. Davis, Jr., Ñled as
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2003, is hereby incorporated by reference.
Copy of the Company's Directors Stock Plan, as amended February 2, 2000, Ñled
as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000, is hereby incorporated by reference.
Form of Stock Option Agreement under the Company's Directors Stock Plan for
options granted prior to February 2, 2000, Ñled as Exhibit 10-d to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 (File
No. 1-1035), is hereby incorporated by reference.
Forms of Restricted Stock Agreements under the Company's Directors Stock
Plan between the Company and each of William H. Gray, III, William T.
McCormick, Jr., John D. Nichols and Joseph F. Toot, Jr., Ñled as Exhibit 10-f to
the Company's Quarterly Report on Form 10-Q for the quarter ended Decem-
ber 31, 1996, are hereby incorporated by reference.
Form of Stock Option Agreement under the Directors Stock Plan for options
granted between February 2, 2000 and July 30, 2001, Ñled as Exhibit 10-c-4 to
the Company's Annual Report on Form 10-K for the year ended September 30,
2000, is hereby incorporated by reference.
Form of Restricted Stock Agreement under the Directors Stock Plan for
restricted stock granted between February 2, 2000 and February 6, 2002, Ñled as
Exhibit 10-c-5 to the Company's Annual Report on Form 10-K for the year
ended September 30, 2000, is hereby incorporated by reference.
Form of Restricted Stock Agreement for payment of portion of annual retainer
for Board service by issuance of shares of restricted stock, Ñled as Exhibit 10-c-6
to the Company's Annual Report on Form 10-K for the year ended Septem-
ber 30, 2000, is hereby incorporated by reference.
* Management contract or compensatory plan or arrangement.
68
*10-c-7
*10-c-8
*10-c-9
*10-c-10
*10-c-11
*10-c-12
*10-c-13
*10-c-14
*10-d-1
*10-d-2
*10-d-3
*10-e-1
Form of Stock Option Agreement for options granted on July 31, 2001 and
February 6, 2002 for service on the Board between the Company and each of the
Company's Non-Employee Directors, Ñled as Exhibit 10-c-7 to the Company's
Annual Report on Form 10-K for the year ended September 30, 2001, is hereby
incorporated by reference.
Copy of resolution of the Board of Directors of the Company, adopted on
December 4, 2002, amending the Company's Directors Stock Plan, Ñled as
Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2003, is hereby incorporated by reference.
Copy of the Company's 2003 Directors Stock Plan, Ñled as Exhibit 4-d to the
Company's Registration Statement on Form S-8 (No. 333-101780), is hereby
incorporated by reference.
Form of Restricted Stock Agreement under Section 6 of the 2003 Directors
Stock Plan for restricted stock granted on February 5, 2003, Ñled as Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2003, is hereby incorporated by reference.
Form of Restricted Stock Agreement under Section 8(a)(i) of the 2003
Directors Stock Plan for restricted stock granted on February 5, 2003, Ñled as
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2003, is hereby incorporated by reference.
Form of Stock Option Agreement under Sections 7(a)(i) and 7(a)(ii) of the
2003 Directors Stock Plan for options granted on February 5, 2003, Ñled as
Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2003, is hereby incorporated by reference.
Memorandum of Amendments to the Company's 2003 Directors Stock Plan
approved and adopted by the Board of Directors of the Company on April 25,
2003, Ñled as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2003, is hereby incorporated by reference.
Form of Restricted Stock Agreement under Section 8(a)(i) of the 2003
Directors Stock Plan for restricted stock granted on October 1, 2003.
Copy of resolution of the Board of Directors of the Company, adopted Novem-
ber 6, 1996, adjusting outstanding awards under the Company's (i) 1988 Long-
Term Incentives Plan, (ii) 1995 Long-Term Incentives Plan and (iii) Directors
Stock Plan, Ñled as Exhibit 4-g-2 to Registration Statement No. 333-17055, is
hereby incorporated by reference.
Copy of resolution of the Board of Directors of the Company, adopted Septem-
ber 3, 1997, adjusting outstanding awards under the Company's (i) 1988 Long-
Term Incentives Plan, (ii) 1995 Long-Term Incentives Plan and (iii) Directors
Stock Plan, Ñled as Exhibit 10-e-3 to the Company's Annual Report on
Form 10-K for the year ended September 30, 1997, is hereby incorporated by
reference.
Memorandum of Adjustments to Outstanding Options Under Rockwell Interna-
tional Corporation's 1988 Long-Term Incentives Plan, 1995 Long-Term Incen-
tives Plan and Directors Stock Plan approved and adopted by the Board of
Directors of the Company in connection with the spin-oÅ of Conexant, Ñled as
Exhibit 10-d-3 to the Company's Annual Report on Form 10-K for the year
ended September 30, 1999, is hereby incorporated by reference.
Copy of the Company's 2000 Long-Term Incentives Plan, Ñled as Exhibit A to
the Proxy Statement for the Company's 2000 Annual Meeting, is hereby
incorporated by reference.
* Management contract or compensatory plan or arrangement.
69
*10-e-2
*10-e-3
*10-e-4
*10-e-5
*10-e-6
*10-e-7
*10-e-8
*10-e-9
*10-e-10
*10-f-1
Forms of Stock Option Agreements under the Company's 2000 Long-Term
Incentives Plan for options granted prior to July 31, 2001, Ñled as Exhibit 10-e-2
to the Company's Annual Report on Form 10-K for the year ended Septem-
ber 30, 2000, are hereby incorporated by reference.
Form of Restricted Stock Agreement under the Company's 2000 Long-Term
Incentives Plan, Ñled as Exhibit 4-d-3 to Registration Statement No. 333-38444,
is hereby incorporated by reference.
Memorandum of Proposed Amendments to the Rockwell International Corpora-
tion 2000 Long-Term Incentives Plan approved and adopted by the Board of
Directors of the Company on June 6, 2001, in connection with the spin-oÅ of
Rockwell Collins, Ñled as Exhibit 10-e-4 to the Company's Annual Report on
Form 10-K for the year ended September 30, 2001, is hereby incorporated by
reference.
Forms of Stock Option Agreements under the Company's 2000 Long-Term
Incentives Plan for options granted on October 1, 2001, Ñled as Exhibit 10-e-5 to
the Company's Annual Report on Form 10-K for the year ended September 30,
2001, is hereby incorporated by reference.
Forms of Stock Option Agreements under the Company's 2000 Long-Term
Incentives Plan for options granted on and after October 7, 2002, Ñled as
Exhibit 10-e-6 to the Company's Annual Report on Form 10-K for the year
ended September 30, 2002, is hereby incorporated by reference.
Memorandum of Adjustments to Outstanding Options under Rockwell Interna-
tional Corporation's 1988 Long-Term Incentives Plan, 1995 Long-Term Incen-
tives Plan, 2000 Long-Term Incentives Plan and Directors Stock Plan approved
and adopted by the Board of Directors of the Company on June 6, 2001, in
connection with the spin-oÅ of Rockwell Collins, Ñled as Exhibit 10-e-6 to the
Company's Annual Report on Form 10-K for the year ended September 30,
2001, is hereby incorporated by reference.
Copy of resolutions of the Compensation and Management Development Com-
mittee of the Board of Directors of the Company adopted December 5, 2001,
amending certain outstanding awards under the Company's 1995 Long-Term
Incentives Plan and 2000 Long-Term Incentives Plan, Ñled as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December 31,
2001, is hereby incorporated by reference.
Memorandum of Amendments to Outstanding Restricted Stock Agreements
under the Company's 1995 Long-Term Incentives Plan and 2000 Long-Term
Incentives Plan, approved and adopted by the Compensation and Management
Development Committee of the Board of Directors of the Company on Novem-
ber 7, 2001, Ñled as Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 2001, is hereby incorporated by
reference.
Form of Restricted Stock Agreement under the Company's 2000 Long-Term
Incentives Plan for awards made on November 7, 2001, Ñled as Exhibit 10.3 to
the Company's Quarterly Report on Form 10-Q for the quarter ended Decem-
ber 31, 2001, is hereby incorporated by reference.
Copy of resolutions of the Compensation and Management Development Com-
mittee of the Board of Directors of the Company, adopted February 5, 2003,
regarding the Corporate OÇce vacation plan, Ñled as Exhibit 10.5 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
2003, is hereby incorporated by reference.
* Management contract or compensatory plan or arrangement.
70
*10-g-1
*10-h-1
*10-h-2
*10-h-3
*l0-i-1
*10-j-1
*10-k-1
*10-k-2
10-l-1
10-l-2
Copy of the Company's Deferred Compensation Plan, amended and restated as
of June 1, 2000, Ñled as Exhibit 4-d to Registration Statement No. 333-34826, is
hereby incorporated by reference.
Copy of resolutions of the Board of Directors of the Company, adopted
November 3, 1993, providing for the Company's Deferred Compensation Policy
for Non-Employee Directors, Ñled as Exhibit 10-h-l to the Company's Annual
Report on Form 10-K for the year ended September 30, 1994 (File No. 1-1035),
is hereby incorporated by reference.
Copy of resolutions of the Compensation Committee of the Board of Directors of
the Company, adopted July 6, 1994, modifying the Company's Deferred Com-
pensation Policy for Non-Employee Directors, Ñled as Exhibit 10-h-2 to the
Company's Annual Report on Form 10-K for the year ended September 30, 1994
(File No. 1-1035), is hereby incorporated by reference.
Copy of resolutions of the Board of Directors of New Rockwell International
Corporation, adopted December 4, 1996, providing for its Deferred Compensa-
tion Policy for Non-Employee Directors, Ñled as Exhibit 10-i-3 to the Com-
pany's Annual Report on Form 10-K for the year ended September 30, 1996, is
hereby incorporated by reference.
Copy of the Company's Annual Incentive Compensation Plan for Senior Execu-
tive OÇcers, Ñled as Exhibit A to the Company's Proxy Statement for its 1996
Annual Meeting of Shareowners (File No. 1-1035), is hereby incorporated by
reference.
Restricted Stock Agreement dated December 6, 1995 between the Company and
Don H. Davis, Jr., Ñled as Exhibit 10-1-1 to the Company's Annual Report on
Form 10-K for the year ended September 30, 1995 (File No. 1-1035), is hereby
incorporated by reference.
Form of Change of Control Agreement between the Company and each of
D. H. Davis, Jr., M. A. Bless, W. J. Calise, Jr., J. D. Cohn, K. D. Nosbusch, and
J. D. Swann, Ñled as Exhibit 10.4 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2001, is hereby incorporated by
reference.
Form of Change of Control Agreement between the Company and certain other
oÇcers of the Company, Ñled as Exhibit 10.5 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2001, is hereby incorporated by
reference.
Agreement and Plan of Distribution dated as of December 6, 1996, among
Rockwell International Corporation (renamed Boeing North American, Inc.),
the Company (formerly named New Rockwell International Corporation),
Allen-Bradley Company, Inc., Rockwell Collins, Inc., Rockwell Semiconductor
Systems, Inc., Rockwell Light Vehicle Systems, Inc. and Rockwell Heavy
Vehicle Systems, Inc., Ñled as Exhibit l0-b to the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1996, is hereby incorporated
by reference.
Post-Closing Covenants Agreement dated as of December 6, 1996, among
Rockwell International Corporation (renamed Boeing North American, Inc.),
The Boeing Company, Boeing NA, Inc. and the Company (formerly named
New Rockwell International Corporation), Ñled as Exhibit 10-c to the Com-
pany's Quarterly Report on Form 10-Q for the quarter ended December 31,
1996, is hereby incorporated by reference.
* Management contract or compensatory plan or arrangement.
71
10-l-3
10-m-l
10-m-2
10-m-3
10-n-1
10-n-2
10-n-3
10-o-1
10-o-2
10-o-3
10-p-1
10-p-2
Tax Allocation Agreement dated as of December 6, 1996, among Rockwell
International Corporation (renamed Boeing North American, Inc.), the Com-
pany (formerly named New Rockwell International Corporation) and The
Boeing Company, Ñled as Exhibit 10-d to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1996, is hereby incorporated by
reference.
Distribution Agreement dated as of September 30, 1997 by and between the
Company and Meritor Automotive, Inc., Ñled as Exhibit 2.1 to the Company's
Current Report on Form 8-K dated October 10, 1997, is hereby incorporated by
reference.
Employee Matters Agreement dated as of September 30, 1997 by and between
the Company and Meritor Automotive, Inc., Ñled as Exhibit 2.2 to the Com-
pany's Current Report on Form 8-K dated October 10, 1997, is hereby incorpo-
rated by reference.
Tax Allocation Agreement dated as of September 30, 1997 by and between the
Company and Meritor Automotive, Inc., Ñled as Exhibit 2.3 to the Company's
Current Report on Form 8-K dated October 10, 1997, is hereby incorporated by
reference.
Distribution Agreement dated as of December 31, 1998 by and between the
Company and Conexant Systems, Inc., Ñled as Exhibit 2.1 to the Company's
Current Report on Form 8-K dated January 12, 1999, is hereby incorporated by
reference.
Amended and Restated Employee Matters Agreement dated as of December 31,
1998 by and between the Company and Conexant Systems, Inc., Ñled as
Exhibit 2.2 to the Company's Current Report on Form 8-K dated January 12,
1999, is hereby incorporated by reference.
Tax Allocation Agreement dated as of December 31, 1998 by and between the
Company and Conexant Systems, Inc., Ñled as Exhibit 2.3 to the Company's
Current Report on Form 8-K dated January 12, 1999, is hereby incorporated by
reference.
Distribution Agreement dated as of June 29, 2001 by and among the Company,
Rockwell Collins, Inc. and Rockwell ScientiÑc Company LLC, Ñled as Ex-
hibit 2.1 to the Company's Current Report on Form 8-K dated July 11, 2001, is
hereby incorporated by reference.
Employee Matters Agreement dated as of June 29, 2001 by and among the
Company, Rockwell Collins, Inc. and Rockwell ScientiÑc Company LLC, Ñled
as Exhibit 2.2 to the Company's Current Report on Form 8-K dated July 11,
2001, is hereby incorporated by reference.
Tax Allocation Agreement dated as of June 29, 2001 by and between the
Company and Rockwell Collins, Inc., Ñled as Exhibit 2.3 to the Company's
Current Report on Form 8-K dated July 11, 2001, is hereby incorporated by
reference.
364-Day Credit Agreement dated as of October 29, 2002 among the Company,
the Banks listed therein and JPMorgan Chase Bank, as Administrative Agent,
Ñled as Exhibit 10-p-1 to the Company's Annual Report on Form 10-K for the
year ended September 30, 2002, is hereby incorporated by reference.
Three-Year Credit Agreement dated as of October 29, 2002 among the Com-
pany, the Banks listed therein and JPMorgan Chase Bank, as Administrative
Agent, Ñled as Exhibit 10-p-2 to the Company's Annual Report on Form 10-K
for the year ended September 30, 2002, is hereby incorporated by reference.
* Management contract or compensatory plan or arrangement.
72
10-p-3
12
21
23
24
31.1
31.2
32.1
32.2
Amended and Restated 364-Day Credit Agreement dated as of October 28, 2003
among the Company, the Banks listed therein and JPMorgan Chase Bank, as
Administrative Agent.
Computation of Ratio of Earnings to Fixed Charges for the Five Years Ended
September 30, 2003.
List of Subsidiaries of the Company.
Independent Auditors' Consent.
Powers of Attorney authorizing certain persons to sign this Annual Report on
Form 10-K on behalf of certain directors and oÇcers of the Company.
CertiÑcation of Periodic Report by the Chief Executive OÇcer pursuant to
Rule 13a-14(a) of the Securities Exchange Act of 1934.
CertiÑcation of Periodic Report by the Chief Financial OÇcer pursuant to
Rule 13a-14(a) of the Securities Exchange Act of 1934.
CertiÑcation of Periodic Report by the Chief Executive OÇcer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
CertiÑcation of Periodic Report by the Chief Financial OÇcer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
The Company Ñled a current report on Form 8-K dated July 22, 2003 with respect to announcing
Ñnancial results for the quarter ended June 30, 2003 (Items 7 and 12).
73
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
ROCKWELL AUTOMATION, INC.
By
/s/ MICHAEL A. BLESS
Michael A. Bless
Senior Vice President and
Chief Financial OÇcer
(principal Ñnancial oÇcer)
By
/s/ WILLIAM J. CALISE, JR.
William J. Calise, Jr.
Senior Vice President,
General Counsel and Secretary
By
/s/ DAVID M. DORGAN
David M. Dorgan
Vice President and Controller
(principal accounting oÇcer)
Dated: December 3, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on the
3rd day of December 2003 by the following persons on behalf of the registrant and in the capacities indicated.
DON H. DAVIS, JR.*
Chairman of the Board and
Chief Executive OÇcer
(principal executive oÇcer)
BETTY C. ALEWINE*
Director
J. MICHAEL COOK*
Director
WILLIAM H. GRAY, III*
Director
VERNE G. ISTOCK*
Director
WILLIAM T. MCCORMICK, JR.*
Director
BRUCE M. ROCKWELL*
Director
DAVID B. SPEER*
Director
JOSEPH F. TOOT, JR.*
Director
KENNETH F. YONTZ*
Director
*By
/s/ WILLIAM J. CALISE, JR.
William J. Calise, Jr., Attorney-in-fact**
**By authority of powers of attorney Ñled herewith
74
ROCKWELL AUTOMATION, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended September 30, 2003, 2002 and 2001
SCHEDULE II
Additions
Balance at
Beginning
of Year
Charged to
Costs and
Expenses
Charged to
Other
Accounts
(in millions)
Deductions(b)
Balance at
End of
Year
Description
Year ended September 30, 2003
Allowance for doubtful accounts (a) ÏÏÏÏ
Allowance for excess and obsolete
inventory ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Valuation allowance for deferred tax
assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Year ended September 30, 2002
Allowance for doubtful accounts (a) ÏÏÏÏ
Allowance for excess and obsolete
inventory ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Valuation allowance for deferred tax
assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Year ended September 30, 2001
Allowance for doubtful accounts (a) ÏÏÏÏ
Allowance for excess and obsolete
inventory ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Valuation allowance for deferred tax
assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
113
$ 47
$ 2
$ 2
53
52
16
4
2
Ì
$ 46
$16
$Ì
50
80
14
21
Ì
Ì
$ 42
$14
$Ì
47
15
2
Ì
Ì
$20
15
9
$15
11
49
$10
12
35
$31
56
47
$47
53
52
$46
50
80
(a) Includes allowances for current and other long-term receivables.
(b) Consists principally of amounts written oÅ for the allowance for doubtful accounts and excess and
obsolete inventory and adjustments resulting from the Company's ability to utilize foreign tax credit,
capital loss, or net operating loss carryforwards for which a valuation allowance had previously been
recorded.
S-1
Exhibit
No.
Exhibit
INDEX TO EXHIBITS*
10-c-14 Form of Restricted Stock Agreement under Section 8(a)(i) of the 2003 Directors Stock Plan for
restricted stock granted on October 1, 2003.
12
21
23
24
10-p-3 Amended and Restated 364-Day Credit Agreement dated as of October 28, 2003 among the
Company, the Banks listed therein and JPMorgan Chase Bank, as Administrative Agent.
Computation of Ratio of Earnings to Fixed Charges for the Five Years Ended September 30, 2003.
List of Subsidiaries of the Company.
Independent Auditors' Consent.
Powers of Attorney authorizing certain persons to sign this Annual Report on Form 10-K on behalf
of certain directors and oÇcers of the Company.
CertiÑcation of Periodic Report by the Chief Executive OÇcer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.
CertiÑcation of Periodic Report by the Chief Financial OÇcer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.
CertiÑcation of Periodic Report by the Chief Executive OÇcer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
CertiÑcation of Periodic Report by the Chief Financial OÇcer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2
32.1
31.1
31.2
* See Part IV, Item 15(a)(3) for exhibits incorporated by reference.
Exhibit 10-c-14
To:
ROCKWELL AUTOMATION, INC.
RESTRICTED STOCK AGREEMENT
In accordance with Section 8(a)(i) of the 2003 Directors Stock Plan (the ""Plan''), Rockwell
shares of
Automation, Inc. (the ""Corporation'') has transferred to you as of October 1, 2003,
Common Stock of the Corporation (the ""Restricted Shares'') representing $27,000 of the annual retainer as
compensation for your service on the Board for the period from October 1, 2003 through September 30, 2004,
with the number of Restricted Shares determined by dividing $27,000 by the closing price on the New York
Stock Exchange Ì Composite Transactions on that date and rounding up to the next higher whole number,
on and subject to the following terms and conditions:
1. Earning of Restricted Shares
(a) If (i) you shall continue as a director of the Corporation until you retire from the Board under the
Board's retirement policy; or (ii) you shall resign from the Board or cease to be a director of the Corporation
by reason of the antitrust laws, compliance with the Corporation's conÖict of interest policies, death or
disability, or (iii) a Change of Control as deÑned in Article III, Section 13 (I)(1) of the Corporation's By-
Laws (or any successor provision) shall occur, then you shall be deemed to have fully earned all the Restricted
Shares subject to this Restricted Stock Agreement.
(b) If you resign from the Board or cease to be a director of the Corporation for any other reason, you
shall be deemed not to have earned any of the Restricted Shares and shall have no further rights with respect
to them unless the Board of Directors shall determine, in its sole discretion, that you have resigned from the
Board or ceased to be a director by reason of circumstances that the Board determines not to be adverse to the
best interests of the Corporation.
2. Retention of CertiÑcates for Restricted Shares
CertiÑcates for the Restricted Shares and any dividends or distributions thereon or in respect thereof that
may be paid in additional shares of Common Stock, other securities of the Corporation or securities of another
entity (""Stock Dividends'') shall be delivered to and held by the Corporation, or shall be registered in book
entry form subject to the Corporation's instructions, until you shall have earned the Restricted Shares in
accordance with the provisions of paragraph 1. To facilitate implementation of the provisions of this Restricted
Stock Agreement, you undertake to sign and deposit with the Corporation's OÇce of the Secretary such
documents appropriate to eÅectuate the purpose and intent of this Restricted Stock Agreement as the
Corporation may reasonably request from time to time.
3. Dividends and Voting Rights
Notwithstanding the retention by the Corporation of certiÑcates (or the right to give instructions with
respect to shares held in book entry form) for the Restricted Shares and any Stock Dividends, you shall be
entitled to receive any dividends that may be paid in cash on, and to vote, the Restricted Shares and any Stock
Dividends held by the Corporation (or subject to its instructions) in accordance with paragraph 2, unless and
until such shares have been forfeited in accordance with paragraph 5.
4. Delivery of Earned Restricted Shares
As promptly as practicable after you shall have been deemed to have earned the Restricted Shares in
accordance with paragraph 1, the Corporation shall deliver to you (or in the event of your death, to your estate
or any person who acquires your interest in the Restricted Shares by bequest or inheritance) the Restricted
Shares, together with any Stock Dividends then held by the Corporation (or subject to its instructions).
5. Forfeiture of Unearned Restricted Shares
Notwithstanding any other provision of this Restricted Stock Agreement, if at any time it shall become
impossible for you to earn any of the Restricted Shares in accordance with this Restricted Stock Agreement,
all the Restricted Shares, together with any Stock Dividends, then being held by the Corporation (or subject
to its instructions) in accordance with paragraph 2, shall be forfeited, and you shall have no further rights of
any kind or nature with respect thereto. Upon any such forfeiture, the Restricted Shares, together with any
Stock Dividends, shall be transferred to the Corporation.
6. Transferability
The Restricted Shares and any Stock Dividends are not transferable by you otherwise than by will or by
the laws of descent and distribution and shall be deliverable, during your lifetime, only to you.
7. Withholding
The Corporation shall have the right, in connection with the delivery of the Restricted Shares and any
Stock Dividends subject to this Restricted Stock Agreement, (i) to deduct from any payment otherwise due
by the Corporation to you or any other person receiving delivery of the Restricted Shares and any Stock
Dividends an amount equal to any taxes required to be withheld by law with respect to such delivery, (ii) to
require you or any other person receiving such delivery to pay to it an amount suÇcient to provide for any such
taxes so required to be withheld, or (iii) to sell such number of the Restricted Shares and any Stock Dividends
as may be necessary so that the net proceeds of such sale shall be an amount suÇcient to provide for any such
taxes so required to be withheld.
8. Applicable Law
This Restricted Stock Agreement and the Corporation's obligation to deliver Restricted Shares and any
Stock Dividends hereunder shall be governed by and construed and enforced in accordance with the laws of
Delaware and the Federal law of the United States.
ROCKWELL AUTOMATION, INC.
Senior Vice President,
General Counsel and Secretary
Dated: October 1, 2003
Agreed to as of the 1st day of October, 2003
Signature
Address:
2
Exhibit 10-p-3
AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 28, 2003 among
Rockwell Automation, Inc. (the ""Borrower''), the Banks listed on the signature pages hereof (the ""Banks'')
and JPMorgan Chase Bank, as Administrative Agent (the ""Agent'').
W I T N E S S E T H:
WHEREAS, the parties hereto have heretofore entered into a 364-Day Credit Agreement dated as of
October 29, 2002 (the ""Credit Agreement''); and
WHEREAS, the parties hereto desire to amend the Credit Agreement as set forth herein and to restate
the Credit Agreement in its entirety to read as set forth in the Credit Agreement with the amendments
speciÑed below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DeÑned Terms; References. Unless otherwise speciÑcally deÑned herein, each term used
herein which is deÑned in the Credit Agreement has the meaning assigned to such term in the Credit
Agreement. Each reference to ""hereof'', ""hereunder'', ""herein'' and ""hereby'' and each other similar reference
and each reference to ""this Agreement'' and each other similar reference contained in the Credit Agreement
shall, after the Restatement EÅective Date (as deÑned below), refer to the Credit Agreement as amended and
restated hereby.
SECTION 2. Amendments. EÅective as of the Restatement EÅective Date:
(a) The deÑnition of ""Termination Date'' in Section 1.01 of the Credit Agreement is amended by
changing the date speciÑed therein from ""October 28, 2003'' to ""October 26, 2004''.
(b) Section 4.04(a) of the Credit Agreement is amended by changing each instance of the date
speciÑed therein from September 30, 2001 to ""September 30, 2002''.
(c) Section 4.04(b) of the Credit Agreement is amended by changing each instance of the date
speciÑed therein from ""June 30, 2002'' to ""June 30, 2003''.
(d) Section 4.04(c) of the Credit Agreement is amended by changing the dates speciÑed therein as
follows: (i) ""September 30, 2001'' becomes ""September 30, 2002''; (ii) ""December 31, 2001'' becomes
""December 31, 2002''; (iii) ""March 31, 2002'' becomes ""March 31, 2003''; and (iv) ""June 30, 2002''
becomes ""June 30, 2003''.
(e) Section 4.05 of the Credit Agreement is amended by changing the dates speciÑed therein as
follows: (i) ""September 30, 2001'' becomes ""September 30, 2002''; (ii) ""December 31, 2001'' becomes
""December 31, 2002''; (iii) ""March 31, 2002'' becomes ""March 31, 2003''; and (iv) ""June 30, 2002''
becomes ""June 30, 2003''.
SECTION 3. Changes In Commitments. With eÅect from and including the Restatement EÅective
Date, (i) each Person listed on the signature pages hereof which is not a party to the Credit Agreement (each,
a ""New Bank'') shall become a Bank party to the Credit Agreement and (ii) the Commitment of each Bank
shall be the amount set forth opposite the name of such Bank on the signature pages hereof. On the
Restatement EÅective Date, any Bank whose Commitment is changed to zero (each, an ""Exiting Bank'')
shall cease to be a Bank party to the Credit Agreement, and all accrued fees and other amounts payable under
the Credit Agreement for the account of each Exiting Bank shall be due and payable on such date; provided
that the provisions of Sections 8.03, 8.04 and 9.03 of the Credit Agreement shall continue to inure to the
beneÑt of each Exiting Bank after the Restatement EÅective Date.
SECTION 4. Representations Of Borrower. The Borrower represents and warrants that (i) the
representations and warranties of the Borrower set forth in Article 4 of the Credit Agreement will be true on
and as of the Restatement EÅective Date and (ii) no Default will have occurred and be continuing on such
date.
SECTION 5. Governing Law. This Amendment and Restatement shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 6. EÅect of Amendments. Except as expressly set forth herein, the amendments contained
herein shall not constitute a waiver or amendment of any term or condition of the Credit Agreement, and all
such terms and conditions shall remain in full force and eÅect and are hereby ratiÑed and conÑrmed in all
respects.
SECTION 7. Counterparts. This Amendment and Restatement may be signed in any number of
counterparts, each of which shall be an original, with the same eÅect as if the signatures thereto and hereto
were upon the same instrument.
SECTION 8. EÅectiveness. This Amendment and Restatement shall become eÅective as of the date
hereof subject to satisfaction of the following conditions (the ""Restatement EÅective Date''):
(a) the Agent shall have received from each of the Borrower and the Banks a counterpart hereof
signed by such party or facsimile or other written conÑrmation (in form satisfactory to the Agent) that
such party has signed a counterpart hereof;
(b) the Agent shall have received an opinion of counsel for the Borrower (which may be in-house
counsel), substantially in the form of Exhibit D to the Credit Agreement with reference to this
Amendment and Restatement and the Credit Agreement as amended and restated hereby;
(c) the Agent shall have received all documents it may reasonably request relating to the existence
of the Borrower, the corporate authority for and the validity of this Amendment, and any other matters
relevant hereto, all in form and substance satisfactory to the Agent; and
(d) the Agent shall have received payment by the Borrower (i) for the account of each Bank, of a
participation fee in the amount heretofore mutually agreed upon and (ii) to the Agent, of any other
amount due and payable.
2
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Restatement to be
duly executed as of the date Ñrst above written.
ROCKWELL AUTOMATION, INC.
By:
/s/ THOMAS J. MULLANY
Name: Thomas J. Mullany
Title: Vice President & Treasurer
Address:
777 East Wisconsin Avenue
Suite 1400
Milwaukee, WI 53202
Attention: William J. Calise
Telecopy:
(414) 212-5357
Internet Address: www.rockwellautomation.com
JPMORGAN CHASE BANK,
as Administrative Agent and as a Bank
By:
/s/ KAREN M. SHARF
Name: Karen M. Sharf
Title: Vice President
Address:
1111 Fannin Street, 10th Flr.
Houston, TX 77002
Attention: Candace Grayson
Loan & Agency Services
Telecopy: (713) 750-2938
JPMORGAN CHASE BANK
Commitments
$30,500,000
By:
/s/ KAREN M. SHARF
Name: Karen M. Sharf
Title: Vice President
3
Commitments
$26,500,000
Commitments
$26,500,000
BANK OF AMERICA, N.A.
By:
/s/ MEGAN MCBRIDE
Name: Megan McBride
Title: Principal
CITIBANK, N.A.
By:
/s/ DAVID L. HARRIS
Name: David L. Harris
Title: Vice President
DEUTSCHE BANK AG
NEW YORK BRANCH
By:
/s/ OLIVER SCHWARZ
Name: Oliver Schwarz
Title: Vice President
Commitments
$26,500,000
By:
/s/ DR. MICHAEL DIETZ
Name: Dr. Michael Dietz
Title: Director
4
Commitments
$26,500,000
Commitments
$26,500,000
MELLON BANK, N.A.
By:
/s/ DANIEL J. LENCKOS
Name: Daniel J. Lenckos
Title:
First Vice President
UBS LOAN FINANCE LLC
By:
/s/ WILFRED V. SAINT
Name: Wilfred V. Saint
Title: Associate Director
Banking Products Services
By:
/s/
JOSELIN FERNANDES
Name: Joselin Fernandes
Title: Associate Director
Banking Products Services
WELLS FARGO BANK, N.A.
By:
/s/ CHARLES W. REED
Name: Charles W. Reed
Title: Vice President
Commitments
$26,500,000
By:
/s/ MARY D. FALCK
Name: Mary D. Falck
Title:
Senior Vice President
5
Commitments
$20,750,000
Commitments
$20,750,000
Commitments
$20,750,000
Commitments
$20,750,000
BANK ONE, NA
By:
/s/
JENNY A. GILPIN
Name: Jenny A. Gilpin
Title: Managing Director
COMERICA BANK
By:
/s/
JAMES B. HAEFFNER
Name: James B. HaeÅner
Title:
First Vice President
KEYBANK NATIONAL ASSOCIATION
By:
/s/ THOMAS J. PURCELL
Name: Thomas J. Purcell
Title:
Senior Vice President
THE BANK OF NOVA SCOTIA
By:
/s/ M. KUS
Name: M. Kus
Title: Director
6
Commitments
$15,000,000
Commitments
$15,000,000
Commitments
$15,000,000
CREDIT LYONNAIS
NEW YORK BRANCH
By:
/s/ LEE E. GREVE
Name: Lee E. Greve
Title:
First Vice President
THE BANK OF NEW YORK
By:
/s/ MARK WRIGLEY
Name: Mark Wrigley
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION
By:
/s/ ROBERT A. FLOSBACH
Name: Robert A. Flosbach
Title:
Senior Vice President
M&I MARSHALL & ILSLEY BANK
By:
/s/ LEO D. FREEMAN
Name: Leo D. Freeman
Title: Vice President
Commitments
$10,000,000
By:
/s/
JAMES R. MILLER
Name: James R. Miller
Title: Vice President
7
THE NORTHERN TRUST COMPANY
By:
/s/ DANIEL J. BOOTE
Name: Daniel J. Boote
Title: Vice President
Commitments
$10,000,000
Total Commitments
$337,500,000
8
ROCKWELL AUTOMATION, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Exhibit 12
Fiscal Year Ended September 30,
2001
2000
2002
1999
2003
Earnings available for Ñxed charges:
Income from continuing operations before income taxes ÏÏÏÏÏÏÏ
$299
$233
$168
$507
$438
Adjustments:
Undistributed (income) loss of aÇliates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Minority interest in loss of subsidiaries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(3)
1
(1)
1
1
(1)
5
2
(2)
2
$297
$233
$168
$514
$438
Add Ñxed charges included in earnings:
Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Interest element of rentals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 52
40
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
92
$ 66
41
107
$ 83
41
124
$ 73
46
119
$ 84
43
127
Total earnings available for Ñxed charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$389
$340
$292
$633
$565
Fixed charges:
Fixed charges included in earnings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Capitalized interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 92
Ì
Total Ñxed chargesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 92
$107
Ì
$107
$124
Ì
$124
$119
1
$120
$127
1
$128
Ratio of earnings to Ñxed charges(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
4.2
3.2
2.4
5.3
4.4
(1) In computing the ratio of earnings to Ñxed charges, earnings are deÑned as income from continuing
operations before income taxes, adjusted for minority interest in income or loss of subsidiaries,
undistributed earnings of aÇliates, and Ñxed charges exclusive of capitalized interest. Fixed charges
consist of interest on borrowings and that portion of rentals deemed representative of the interest factor.
ROCKWELL AUTOMATION, INC.
LIST OF SUBSIDIARIES OF THE COMPANY
As of September 30, 2003
Name and Jurisdiction
Anorad Corporation (New York) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Anorad Israel Ltd. (Israel) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Anorad Europe BV (Netherlands) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Entek IRD International Corporation (Ohio) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
W. Interconnections Inc. (Delaware) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
W. Interconnections S.A. de C.V. (Mexico)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
W. Interconnections Canada, Inc. (Canada) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation Sales Company, LLC (Delaware) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Reliance Electric Company (Delaware)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
REC Holding, Inc. (Delaware)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Reliance Electric Limited (Japan) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Federal PaciÑc Electric Co. (Delaware) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Reliance Electric Tech, LLC (Delaware) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Vermont Reserve Insurance Company (Vermont) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Software, Inc. (Delaware)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Allen-Bradley Technical Services, Inc. (Wisconsin) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation (Xiamen) Ltd. (China)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation do Brasil Ltda. (Brazil) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Comercia e Servicos de Automacao Ltda. (Brazil) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation de Venezuela, C.A. (Venezuela) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation Southeast Asia Pte Ltd. (Singapore) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation Taiwan Co., Ltd. (Taiwan) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation Asia-PaciÑc Limited (Hong Kong) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation Australia Ltd. (Australia) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation (N.Z.) Ltd. (New Zealand) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Tecate S.A. de C.V. (Mexico)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Grupo Industrias Reliance S.A. de C.V. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Dodge de Mexico S.A. de C.V.ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation de Mexico S.A. de C.V. (Mexico)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation Technologies Inc. (Ohio)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell ScientiÑc Company LLC (Delaware) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell ScientiÑc Licensing LLC (Delaware) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation International Holdings LLC (Delaware) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation Argentina S.A. (Argentina)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation European Headquarters S.A./N.V. (Belgium) ÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation Control Systems (Shanghai) Co. Ltd. (China) ÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation S.r.L. (Italy) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Exhibit 21
Percentage of Voting
Securities Owned By
Registrant
Subsidiary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
96.52%
100%
99%
100%
100%
89%
0.04%
100%
100%
100%
100%
100%
19%
100%
100%
100%
100%
100%
3.48%
100%
1%
100%
100%
50%
100%
11%
100%
99.96%
100%
100%
Name and Jurisdiction
Rockwell Automation Japan Co., Ltd. (Japan) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation India Ltd. (India)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Samsung Automation Ltd. (Korea)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation Holdings B.V. (Netherlands) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation B.V. (Netherlands)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation (Proprietary) Ltd. (South Africa) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation A.G. (Switzerland)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Breter S.r.L. (Italy) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Sprecher & Schuh Inc. (New York) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation Holdings G.m.b.H. (Germany)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Tesch G.m.b.H. & Co. KG (Germany)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell International G.m.b.H. (Germany) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Propack Data G.m.b.H. (Germany) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Propack Data Corporation (Delaware)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell International Overseas Corp. (Delaware) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation Canada Holdings ULC (Canada)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation Canada Inc. (Canada) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation Canada Control Systems (Canada) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell European Holdings Ltd. (England) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell International Ltd. (England) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation S.A./N.V. (Belgium) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Automation Ltd. (England) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
EJA Engineering Ltd. (England) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell FirstPoint Contact Corporation (Delaware) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell Electronic Commerce Tech LLC (Delaware) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Rockwell FirstPoint Contact Australia Pty. Limited (Australia) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Percentage of Voting
Securities Owned By
Registrant
Subsidiary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
11%
100%
100%
11%
100%
100%
100%
100%
100%
100%
100%
89%
89%
100%
Listed above are certain consolidated subsidiaries included in the consolidated Ñnancial statements of the
Company (other than Reliance Electric Limited (Japan) and Rockwell ScientiÑc Company LLC over which
the Company does not have a controlling Ñnancial interest). Unlisted subsidiaries, considered in the aggregate,
do not constitute a signiÑcant subsidiary.
2
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos. 333-17031, 333-17055,
333-17405, 333-89219, 333-93593, 333-34826, 333-38444 and 333-101780 on Form S-8 and Nos. 333-24685
and 333-43071 on Form S-3 of Rockwell Automation, Inc. of our report dated November 5, 2003 (which
report expresses an unqualiÑed opinion and includes an explanatory paragraph relating to the Company's
adoption of Statement of Financial Accounting Standards No. 142, ""Goodwill and Other Intangible Assets'',
on October 1, 2001), appearing in this Annual Report on Form 10-K of Rockwell Automation, Inc. for the
year ended September 30, 2003.
Deloitte & Touche LLP
Milwaukee, Wisconsin
December 3, 2003
Exhibit 24
POWER OF ATTORNEY
I, the undersigned Director and/or OÇcer of Rockwell Automation, Inc., a Delaware corporation (the
Company), hereby constitute WILLIAM J. CALISE, JR. and PETER R. KOLYER, and each of them
singly, my true and lawful attorneys with full power to them and each of them to sign for me, and in my name
and in the capacity or capacities indicated below,
(1)
the Company's Annual Report on Form 10-K for the Ñscal year ended September 30, 2003
and any amendments thereto;
(2)
any and all amendments (including supplements and post-eÅective amendments) to the
Registration Statement on Form S-3 (Registration No. 333-43071) registering debt securities of the
Company in an aggregate principal amount of up to $1,000,000,000 and any shares of Common Stock,
par value $1 per share, of the Company (including the associated Preferred Share Purchase Rights)
(collectively, the Common Stock) issuable or deliverable upon conversion or exchange of any such debt
securities that are convertible into or exchangeable for Common Stock;
(3)
any and all amendments (including supplements and post-eÅective amendments) to
(a)
the Registration Statement on Form S-8 registering securities to be sold under the
Company's 2000 Long-Term Incentives Plan (Registration No. 333-38444);
(b)
the Registration Statement on Form S-8 registering securities to be sold under the
Company's 1995 Long-Term Incentives Plan and 1988 Long-Term Incentives Plan (Registration
No. 333-17055);
(c)
the Registration Statement on Form S-8 registering securities to be sold pursuant to the
Company's Salaried Retirement Savings Plan, as amended, the Company's Retirement Savings Plan
for Certain Employees, as amended, and the Company's Non-Represented Hourly Retirement
Savings Plan, as amended, (Registration No. 333-17031);
(d)
the Registration Statement on Form S-8 registering securities to be sold pursuant to the
Company's Employee Savings and Investment Plan for Represented Hourly Employees, as amended
(Registration No. 333-17405);
(e)
the Registration Statement on Form S-8 registering securities to be sold pursuant to the
Company's Retirement Savings Plan for Represented Hourly Employees, as amended (Registration
No. 333-89219);
(f)
the Registration Statement on Form S-8 registering securities to be sold under the
Company's Deferred Compensation Plan (Registration No. 333-34826);
(g)
the Registration Statement on Form S-8 registering securities to be sold under the
Company's Directors Stock Plan (Registration No. 333-93593); and
(h)
the Registration Statement on Form S-8 registering securities to be sold pursuant to the
Company's 2003 Directors Stock Plan (Registration No. 333-101780).
(4)
any and all amendments (including supplements and post-eÅective amendments) to the
Registration Statement on Form S-3 Registration No. 333-24685) registering
(a)
certain shares of Common Stock acquired or which may be acquired by permitted
transferees upon the exercise of transferable options assigned or to be assigned to them by certain
participants in the Company's 1988 Long-Term Incentives Plan in accordance with that Plan; and
(b)
the oÅer and resale by any such permitted transferee who may be deemed to be an
""aÇliate'' of the Company within the meaning of Rule 405 under the Securities Act of 1933, as
amended (an AÇliate Selling Shareowner), of Common Stock so acquired or which may be
acquired by such AÇliate Selling Shareowner upon exercise of any such transferable option.
Signature
Title
Date
/s/ DON H. DAVIS, JR.
Don H. Davis, Jr.
/s/ BETTY C. ALEWINE
Betty C. Alewine
/s/
J. MICHAEL COOK
J. Michael Cook
/s/ WILLIAM H. GRAY, III
William H. Gray, III
/s/ VERNE G. ISTOCK
Verne G. Istock
/s/ WILLIAM T. MCCORMICK, JR.
William T. McCormick, Jr.
/s/ BRUCE M. ROCKWELL
Bruce M. Rockwell
/s/ DAVID B. SPEER
David B. Speer
/s/
JOSEPH F. TOOT, JR.
Joseph F. Toot, Jr.
/s/ KENNETH F. YONTZ
Kenneth F. Yontz
/s/ MICHAEL A. BLESS
Michael A. Bless
/s/ WILLIAM J. CALISE, JR.
William J. Calise, Jr.
/s/ DAVID M. DORGAN
David M. Dorgan
Chairman of the Board and Chief
Executive OÇcer (principal
executive oÇcer)
November 5, 2003
Director
November 5, 2003
Director
November 5, 2003
Director
November 5, 2003
Director
November 5, 2003
Director
November 5, 2003
Director
November 5, 2003
Director
November 5, 2003
Director
November 5, 2003
Director
November 5, 2003
Senior Vice President and Chief
Financial OÇcer (principal
Ñnancial oÇcer)
November 4, 2003
Senior Vice President, General
Counsel and Secretary
November 4, 2003
Vice President and Controller
(principal accounting oÇcer)
November 4, 2003
2
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Don H. Davis, Jr., Chairman of the Board and Chief Executive OÇcer of Rockwell Automation, Inc.,
certify that:
1.
I have reviewed this annual report on Form 10-K of Rockwell Automation, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the Ñnancial statements, and other Ñnancial information included in
this report, fairly present in all material respects the Ñnancial condition, results of operations and cash
Öows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying oÇcer and I are responsible for establishing and maintaining
disclosure controls and procedures (as deÑned in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Evaluated the eÅectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the eÅectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over Ñnancial
reporting that occurred during the registrant's most recent Ñscal quarter (the registrant's fourth Ñscal
quarter in case of an annual report) that has materially aÅected, or is reasonably likely to materially
aÅect, the registrant's internal control over Ñnancial reporting; and
5. The registrant's other certifying oÇcer and I have disclosed, based on our most recent evaluation
of internal control over Ñnancial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):
a) All signiÑcant deÑciencies and material weaknesses in the design or operation of internal
control over Ñnancial reporting which are reasonably likely to adversely aÅect the registrant's ability
to record, process, summarize and report Ñnancial information; and
b) Any fraud, whether or not material, that involves management or other employees who have
a signiÑcant role in the registrant's internal control over Ñnancial reporting.
/s/ DON H. DAVIS, JR.
Don H. Davis, Jr.
Chairman of the Board
and Chief Executive OÇcer
Date: December 3, 2003
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Michael A. Bless, Senior Vice President and Chief Financial OÇcer of Rockwell Automation, Inc.,
certify that:
1.
I have reviewed this annual report on Form 10-K of Rockwell Automation, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the Ñnancial statements, and other Ñnancial information included in
this report, fairly present in all material respects the Ñnancial condition, results of operations and cash
Öows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying oÇcer and I are responsible for establishing and maintaining
disclosure controls and procedures (as deÑned in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Evaluated the eÅectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the eÅectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over Ñnancial
reporting that occurred during the registrant's most recent Ñscal quarter (the registrant's fourth Ñscal
quarter in case of an annual report) that has materially aÅected, or is reasonably likely to materially
aÅect, the registrant's internal control over Ñnancial reporting; and
5. The registrant's other certifying oÇcer and I have disclosed, based on our most recent evaluation
of internal control over Ñnancial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):
a) All signiÑcant deÑciencies and material weaknesses in the design or operation of internal
control over Ñnancial reporting which are reasonably likely to adversely aÅect the registrant's ability
to record, process, summarize and report Ñnancial information; and
b) Any fraud, whether or not material, that involves management or other employees who have
a signiÑcant role in the registrant's internal control over Ñnancial reporting.
/s/ MICHAEL A. BLESS
Michael A. Bless
Senior Vice President
and Chief Financial OÇcer
Date: December 3, 2003
Exhibit 32.1
CERTIFICATION OF PERIODIC REPORT
I, Don H. Davis, Jr., Chairman of the Board and Chief Executive OÇcer of Rockwell Automation, Inc.
(the ""Company''), hereby certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350, that:
(1) the Annual Report on Form 10-K of the Company for the year ended September 30, 2003 (the
""Report'') fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934;
and
(2) the information contained in the Report fairly presents, in all material respects, the Ñnancial
condition and results of operations of the Company.
/s/ DON H. DAVIS, JR.
Don H. Davis, Jr.
Chairman of the Board
and Chief Executive OÇcer
Date: December 3, 2003
Exhibit 32.2
CERTIFICATION OF PERIODIC REPORT
I, Michael A. Bless, Senior Vice President and Chief Financial OÇcer of Rockwell Automation, Inc.
(the ""Company''), hereby certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350, that:
(1) the Annual Report on Form 10-K of the Company for the year ended September 30, 2003 (the
""Report'') fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934;
and
(2) the information contained in the Report fairly presents, in all material respects, the Ñnancial
condition and results of operations of the Company.
/s/ MICHAEL A. BLESS
Michael A. Bless
Senior Vice President
and Chief Financial OÇcer
Date: December 3, 2003
R O C K W E L L AU TO M AT I O N
777 east wisconsin ave nue. suite 14oo. milwauke e wi 532o2
414-212-52oo www.rockwellautomation.com