R
O
C
K
W
E
L
L
A
U
T
O
M
A
T
I
O
N
|
2
0
1
2
A
N
N
U
A
L
R
E
P
O
R
T
A
N
D
F
O
R
M
1
0
-
K
2012 Annual Report and Form 10-K
INNOVATION &
LEADERSHIP
1
2012
fINaNCIal
HIGHlIGHTs
2009
2010
2011
2012
Sales
$4,332.5
$4,857.0
$6,000.4
$6,259.4
Segment operating earnings1
429.7
717.2
1,027.6
1,131.4
Income from continuing operations
217.9
440.4
697.1
737.0
Diluted earnings per share from
continuing operations
Sales by segment:
1.53
3.05
4.79
5.13
Architecture & Software
1,723.5
2,115.0
2,594.3
2,650.4
Control Products & Solutions
2,609.0
2,742.0
3,406.1
3,609.0
Return on Invested Capital1
10.7%
22.8 %
31.6%
30.3%
(
d
o
l
l
a
r
s
i
n
m
i
l
l
i
o
n
s
,
e
x
c
e
p
t
p
e
r
s
h
a
r
e
a
m
o
u
n
t
s
)
$6,000.4
$6,259.4
$4,857.0
$4,332.5
$5.13
$4.79
(
d
o
l
l
a
r
s
i
n
m
i
l
l
i
o
n
s
)
$3.05
$1.53
2009
2010
2011
2012
2009
2010
2011
2012
SALES
Control Products & Solutions
Architecture & Software
EARNINGS PER SHARE
31.6%
30.3%
$597.6
$561.7
$430.8
$410.7
22.8%
10.7%
2009
2010
2011
2012
2009
2010
2011
2012
RETURN ON INVESTED CAPITAL1
FREE CASH FLOW 1,2
2
(
d
o
l
l
a
r
s
i
n
m
i
l
l
i
o
n
s
)
1 Segment operating earnings,
free
cash fl ow, organic sales and return
on
invested capital are non-GAAP
fi nancial measures. Please see the
Form 10-K and supplemental section
following the Form 10-K for defi nitions
and calculations of these measures.
2 Free cash fl ow for both 2011 and
2010 includes a discretionary pre-tax
contribution of $150 million to the
company’s U.S. pension trust. Free cash
fl ow for 2012 includes a discretionary
pre-tax contribution of $300 million to
the company’s U. S. pension trust.
2012
CHaIRmaN’s
lETTER
To Our Shareowners:
Again this year, Rockwell Automation achieved record
sales and earnings, despite a continued challenging global
macroeconomic environment. Sales reached nearly $6.3 billion,
up 4 percent from 2011, despite a 3 point headwind from cur-
rency translation with organic growth1 in all regions. Earnings per
share from continuing operations were $5.13, a 7 percent increase
compared to 2011. We also expanded operating margin by one
full point while continuing to invest for growth. The company’s
“best-in-class” after-tax return on invested capital remained above
30 percent. This performance continues our track record of providing
superior long-term returns for shareowners, enabling the board of
directors to increase the company’s dividend 11 percent and to authorize
an additional $1 billion for share repurchases. We are grateful to our
customers, partners and employees for making these results possible.
We believe that Rockwell Automation remains a great investment.
To stay competitive in mature markets, manufacturers need to invest in
automation to drive productivity and manufacturing fl exibility, address
regulatory, safety and sustainability needs, and to replace an aging
installed base.
In emerging markets, the case for automation is even more compelling.
Infrastucture investment will continue, and oil and gas and mining are
critical to the economic development. Rising standards of living and a
rapidly growing middle class increase the need for consumer products
manufacturing. Wage infl ation is also a natural tailwind for automation.
As a “pure play” automation company, Rockwell Automation benefi ts from
these underlying growth forces in both mature and emerging markets.
We operate in global markets that grow in excess of GDP.
3
We believe that ethics must drive
our business decisions every day.
4
Emerging economies now account
for 22 percent of our global sales.
Our three platforms of Integrated Architecture, Intelligent
Motor Control, and Solutions and Services provide a com-
prehensive portfolio to serve both end users and OEM machine
builders. We believe these platforms form the foundation for long-
term sustainable growth. We estimate our addressed market at
over $80 billion, which has grown significantly over the past decade,
primarily due to our expanding capabilities in process automation.
Our largest growth opportunity still comes from our highly successful
process initiative that contributed nearly $900 million in sales in 2012,
up about 20 percent from 2011. We continue to win strategic projects
around the world in an increasingly diverse set of industries by leveraging
our leading technology platform, industry domain expertise, and global
delivery capabilities.
Other diversification strategies continue to pay off as we intensify our focus
on unmet customer needs. For example, by understanding the support needs
of automation equipment through its lifecycle, our services organization
has been winning an increasing number of contracts to extend the life of
aging equipment and to help customers migrate to newer technology.
This year we added network consulting and machine safety assessments
and remediation to our broad range of services.
To support customers anywhere in the world they choose to invest, we
also continue to expand customer-facing resources, our global manu-
facturing footprint and technology development capabilities. Our world-
wide PartnerNetworkTM framework helps us deliver the value-added
potential of our solutions. To increase customer access to our growing
portfolio, we developed more effective channels to market during the past
year, especially in emerging countries. As a result of these and other actions,
emerging economies now account for 22 percent of our global sales.
5
Our solid balance sheet and
stable cash flow complement
our strong culture of integrity.
Our 22,000 talented employees provide another source of
differentiation. Their leadership in executing our growth and
performance strategy each day creates exceptional value for
our customers. One of the backbones of our company is our
commitment to integrity and corporate responsibility. We believe
that ethics must drive our business decisions every day and will be
one of the major contributing factors to our ability to deliver greater
value for all our stakeholders – customers, partners, employees,
communities, and shareowners.
Our solid balance sheet and stable cash flow complement our
strong culture of integrity. We maintain a disciplined cash deployment
strategy that first funds organic growth and acquisitions. Two recent
acquisitions, including one in China, strengthened the Control Products
& Solutions segment. Our strong cash flow also enables us to consistently
return cash to shareowners. During the past three years, the company
returned more than $1.3 billion to shareowners through dividends and
share repurchases. We also increased the quarterly dividend by over
60 percent in that same time frame.
Despite near-term uncertainty in the global economic outlook, we are confident
in our strategy and our ability to execute. We remain focused on what we can
control, seeking to ensure sustained growth and performance throughout the
business cycle by balancing the company’s current financial performance with
long-term investments in innovation and leadership.
Thank you for your ongoing support and trust.
Keith D. Nosbusch
Chairman & CEO
6
We plan to double our process
business to about $1.8 billion in
5 years via increasingly larger
global projects such as
Canadian oil sands processing.
7
2012
GROWTH
plaTfORms
We believe our three platforms form the
foundation for long-term sustainable growth.
Integrated Architecture Centered on the Logix Platform
Integrated Architecture centered on Logix is an important
differentiator because we are the only automation provider
that can support discrete, continuous process, batch, safety,
motion and motor control on the same hardware platform
with the same software programming environment. Our
integrated architecture is open and scalable with industry
standard communications protocols that run on unmodified
EtherNet/IP, making it easier for customers to implement
solutions quickly and cost-effectively. A strategic alliance
with Cisco and our co-branded industrial switches further
simplify enterprise and IT connectivity.
Our ongoing investments in the expansion of the Logix
platform resulted this year in significant new mid-range
products that are ideal for OEM machine builders. Features
such as integrated motion, safety, EtherNet/IP connectivity
and common development tools give users the same
flexibility, reduced development time, and ease-of-use
as larger-scale systems from Rockwell Automation. Our
scalable offerings from small to large systems allow our
OEM customers to differentiate themselves through our
machine builder program that lowers the Total Cost To
Design, Develop, and DeliverSM their industrial machinery
product lines.
8
Intelligent Motor Control
Intelligent motor control is one of our core competencies
and an important capability of an automation system.
We have a strong market position with intelligent motor
control sales of over $1 billion. These products and
solutions consist of low- and medium-voltage drives, soft
motor control, electronic motor protection, and the motor
control centers that package them together. Intelligent
motor control enhances the availability, effi ciency and
safe operation of our customers’ critical and most energy-
intensive plant assets.
Motor control is central to many processes in every
industry. Our intelligent motor control off ering can be
integrated seamlessly with the Logix architecture. We
believe that it is a distinct competitive advantage to off er
a comprehensive automation solution that includes
intelligent motor control.
This year we introduced a new line of PowerFlex®
drives that expand
options for mid-range markets.
intelligent motor control
Solutions and Value-add Services
p d a t e
desig
sig
Our deep domain expertise in industrial applications
enables solutions and services that can support
customers through the entire lifecycle of
their automation investment. The com-
bination of this domain expertise with
our
innovative technologies enables
us to help our customers solve their
manufacturing and business challenges.
ate
migrate / u
Services and solutions provide addi-
tional opportunities to diff erentiate our
technology platforms. Through a lifecycle
view of our customers’ applications, we
can marry the initial solution with long-
term support. Our globally distributed delivery
resources can eff ectively serve customers wherever
they operate.
Migration
Services
Legacy
Support
Asset
Management
Remote
Monitoring
o
p
e
r
a
t
e
/
o
p
p
ti
ti
mize
nnnn
n
/
e
Consulting
Engineering
Services
n
g
i
n
e
e
r
Training
Startup
t / i n stall
n sta
s
e
t
9
2012
pROCEss
sOlUTIONs
PlantPAx
Process Automation System
Process continues to be the largest growth opportunity
for Rockwell Automation with an estimated addressable
market of $35 billion. We believe our PlantPAx® process
automation system, built on the integrated architecture
and Logix platform, uniquely provides comprehensive
hardware, software, and application tools, scalability, and
tight linkage with safety and intelligent motor control.
The deep domain expertise of thousands of Rockwell
Automation engineers enables us to deliver a growing range
of process solutions for increasingly large global projects.
This is augmented by process OEMs and independent
solution providers, many of whom are members of our
PartnerNetwork™ framework.
This growth is evidenced by these fi ve indicative process
wins in 2012:
Cynar Plc, a leading technology company in the waste-to-
energy market, awarded us an $11 million order to design
and build a new end-of-life plastics to fuel conversion
plant in Bristol, U.K., for SITA UK Ltd., a Cynar customer
and partner in the development. This win is signifi cant
because it includes process skids, automation architecture,
power control and engineering/startup services in one
integrated solution.
Lauren-Jyoti, a joint venture between Lauren Engineers
and Constructors, a U.S. engineering, procurement and
construction company, and Jyoti Power Structures,
an Indian counterpart, awarded us a $1.9 million
process order. We will provide a PlantPAx-based
power plant distributed control system (DCS)
solution with solar fi eld local controller panels
for Godawari Green Energy in Rajasthan,
India, delivering a solution that creates an
opportunity to set industry standards in
solar power.
10
1
4
2
3
5
1. Cynar Plc
2. Lauren-Jyoti
3. Nyrstar Hobart
4. Warwick Chemicals , Ltd.
5. Daewoo Shipbuilding & Marine Engineering
Nyrstar Hobart, a leading global multi-metals company,
awarded us a $2.5+ million order to replace a DCS at
the company’s zinc smelting operation in Australia, with
PlantPAx. It is one of the world’s largest zinc smelters with
a capacity of 280,000 tons, and a milestone, given the size
and complexity of the DCS conversion.
Warwick Chemicals Ltd. awarded us a $1.9 million order for
a multi-phase project to replace the company’s DCS solution
with PlantPAx to achieve a lower total cost of ownership,
open connectivity with third-party systems, and improved
service and support. It demonstrates Warwick Chemicals’
increasing trust in Rockwell Automation as their process
control supplier.
Daewoo Shipbuilding & Marine Engineering, a South
Korean shipbuilder awarded us a $6+ million order to
provide emergency shutdown, fi re and gas safety systems,
and engineering services for four new off shore drill ships.
This win is signifi cant because it propels us to the forefront
of control and safety solutions for off shore vessels and
drilling rigs.
11
2012
OEm
GROWTH
The OEM machine builder market is another opportunity for
us. In 2012, the OEM business represented about 30 percent
of our revenues. This market has expanded over the last fi ve
years and we estimate it to be a $25 billion opportunity. The
fastest-growing region is Asia-Pacifi c where our presence
and investments are expected to help us gain share.
Globally, OEMs are important in every vertical,
for us
presenting signifi cant opportunity
in traditional markets, across a wide array of
industry segments and regions.
Chief among an OEM’s priorities are faster time
to market and improved machine utilization and
optimization. We off er design and productivity tools
that shorten the Total Cost To Design, Develop, and
DeliverSM new machines. OEMs also benefi t from the
complete integration of our control, power, information,
and safety capability.
Our scalable, multi-discipline control portfolio off ers a
complete solution in one platform. We augment that with a
complementary portfolio of industrial controls and sensing
components.
A Complete Integrated Portfolio Right-sized for OEM Machine Builders
Services & Solutions
Networks
Visualization
Control
Information
Safety
Motor Control
Motion
Distributed I/O
Industrial Control
12
Our global and remote support capabilities also extend OEMs’ reach
and footprint by enabling better support of machines at customer
sites worldwide.
We are developing much closer relationships with OEMs
through our segmented sales organization and our machine
builder program. This program has significantly grown
during the past five years to more than 600 participants
today who are served by technical consultants with
domain expertise in every major OEM segment. These
technical consultants provide OEMs with design and
engineering support, competency training and even
commercial coordination.
13
2012
WORKfORCE
TalENT
We do business in more than 80 countries, and our employ-
ees refl ect the diversity of the markets and customers we
serve throughout the world. We are a global, cross-cultural
organization diff erentiated by our intellectual property, and
our people are the foundation of all we do. This is what sets
us apart as a company as we work to improve the standard
of living for everyone by making the world more productive
and sustainable.
Global collaboration, global connections
We know we can only meet our customer
commitments when we fi rst meet our commit-
ments to one another. We are all connected –
working together, living our values, recognizing
excellence in each other – and it takes each one of
our more than 22,000 employees sharing a common
vision, mission and priorities to drive our results.
We stay connected through our growth and performance
strategy. This roadmap helps each employee make the
best business decisions – choices that support our
priorities and promote our values. It’s this link that
connects the work and contributions of each employee
with our overall success.
Our employee experience
Whether someone has worked 20 years or 20 days with
our company, our approach is the same: we listen to
our employees. We seek out their ideas and input, and
Search for Talent Starts in Early Education
Our search for talent starts in the early educational years. We invest heavily and
participate in Science, Technology, Engineering and Math (STEM) education
programs for children and teens. In addition, we’ve built successful partnerships
with more than 100 colleges and universities worldwide. By advising on educa-
tional curriculum and providing automation equipment for teaching labs, we’re
helping to inspire and train the next generation of engineering talent. Through
our unwavering commitment to improving STEM education, we remain steadfast
in our focus toward quality education and lifelong learning.
14
they directly impact how we will grow and the results we
achieve. That’s why it’s important new employees feel
engaged and productive from day one. To support this
launched a new Global Onboarding
experience, we
program in 2012. Based on best-practice research and new-
hire feedback, this program provides our new employees
with an immediate understanding of our company and
business, helping them feel connected to who we are as an
organization and becoming part of our global community.
Attracting and developing top talent
Our eff orts to ensure we have an engaged workforce
begin well before an employee’s fi rst day on the job. It starts
with our ability to recruit top talent globally, allowing us
to strengthen our successes in the markets we serve – and
in markets we want to enter – anywhere in the world. It also
means we actively recognize and develop our employees to
become leaders for tomorrow.
Our Leadership Development Program exposes young
professionals to all aspects of our business through
rotational placements, coaching, skills development and
leadership training.
training
learning
through summits,
We are also engaging our leaders in ongoing education
and
labs, and
workshops designed to foster an inclusive work culture.
Our leaders participate not just as executive sponsors, but
as leaders who learn about, understand and work through
diff erences. Equally important are our eff orts to embed this
mindset throughout our organization, from our regional
headquarters to our most remote locations. Rather than a
one-time event, we look at this as our way of doing business,
our way of creating a diff erentiated culture that enables
employees to do their best work. While the eff ort starts with
our leaders, it does not end there. Teams throughout our
businesses are identifying potential barriers to an inclusive
workforce and making recommendations to help us achieve
this important goal.
Our people, our success
It’s the commitment and the passion to meet our customers’
needs that diff erentiates us. And we will continue to
invest in the success of our people . . . and the success of
our customers.
15
2012
CORpORaTE
REspONsIBIlITY
With a corporate mission focused on sustainability,
socially responsible practices are inherent in the way we
work and do business. We are consistently recognized
around the world for our eff orts to protect the health and
safety of our employees.
• Our global safety performance is best in class, and in
2012 our employees continued a multi-year trend to
work more safely than the prior year with fewer work-
related injuries.
• For the second consecutive year, the Singapore Ministry
of Manpower’s Workplace Safety and Health Council
presented our Asia Pacifi c Business Center (APBC) with
their top honor. This is the fi fth time the Ministry has
honored the APBC.
• Also for the second consecutive year, the Mexican
Labor Agency recognized our Monterrey Manufacturing
Center as the safest in its industry category with a First
Place Award.
We have made a fi rm commitment to care for the world
around us through effi cient and careful use of resources.
We made progress toward our 2022 goal to reduce energy
and resulting carbon emissions by 30 percent, normalized
to sales, as compared to our 2008 baseline. In our most
recent Corporate Responsibility Report, we noted that we
decreased energy intensity by 14 percent as part of our
2022 commitment. We reduced the amount of solid waste
generated and exceeded our annual goal to recycle or
reclaim 80 percent of that waste.
With the help of our suppliers and the data they
provided, we met a self-imposed 2012 goal to analyze
and determine the RoHS (Restriction of Hazardous
Substances) status of all of our components and
salable products.
16
In the US, we increased our supplier spend
with minority, women and Small Business
Administration-designated businesses by 14
percent. And, for the fi rst time in the history of the
Northern Ohio Minority Supplier Development
four of the organization’s
In presenting the award, the
NOMSDC event chair noted, “From top to bottom,
inside and out,
locally and nationally, this company
embraces and advocates for minority supplier diversity
and development.”
Council, we won all
Corporate Awards.
We build strong business and community relationships
with a shared understanding of values and goals that help
us fulfi ll our corporate mission.
As part of our philanthropic eff orts, we contributed $7.4
million in cash and in-kind donations to community
organizations and programs that address education, health
and human services, and arts and cultural needs.
(Corporate Responsibility) Magazine
CR
included us
on their 2012 “100 Best Corporate Citizens” list. And, as
we have for the past 11 years, we were again listed on
FTSE4Good Index of Companies, a leading social responsibility
investment index, and our overall environmental, social and
governance rating was a 91 out of a possible 100.
In 2012, we were named to the Ethisphere Institute’s an-
nual “World’s Most Ethical Companies” list for the fourth
time. Additionally, we received the BBB International
Torch Award for Marketplace Excellence for demonstrating
“superior commitment to exceptional standards that
benefi t customers, employees, suppliers, shareholders
and surrounding communities.” Another honor was the
American Business Ethics Award, from the Foundation for
Financial Service Professionals.
New lights on the Rockwell Automation /
Allen-Bradley Clock will reduce energy
usage by 81 percent and are expected
to save approximately $750,000 over
their lifetime.
In our commitment to energy
and carbon reduction, we made
progress toward a goal that by
2022 we will reduce carbon
emissions by 30 percent.
17
2012
OffICERs
Keith D. Nosbusch
Chairman of the Board and
Chief Executive Officer
Sujeet Chand
Senior Vice President and
Chief Technology Officer
Kent G. Coppins
Vice President and
General Tax Counsel
Theodore D. Crandall
Senior Vice President and
Chief Financial Officer
David M. Dorgan
Vice President
and Controller
Rondi Rohr-Dralle
Vice President,
Investor Relations and
Corporate Development
Robert A. Ruff
Senior Vice President
Susan J. Schmitt
Senior Vice President,
Human Resources
Martin Thomas
Senior Vice President,
Operations and
Engineering Services
Steven W. Etzel
Vice President
and Treasurer
Douglas M. Hagerman
Senior Vice President,
General Counsel
and Secretary
Frank C. Kulaszewicz
Senior Vice President
John P. McDermott
Senior Vice President
John M. Miller
Vice President and
Chief Intellectual
Property Counsel
Steven A. Eisenbrown
Senior Vice President
Blake D. Moret
Senior Vice President
18
2012
BOaRD Of
DIRECTORs
Keith D. Nosbusch
Chairman of the Board and
Chief Executive Offi cer
Steven R. Kalmanson
Retired Executive Vice President,
Kimberly-Clark Corporation
Betty C. Alewine
Retired President and
Chief Executive Offi cer,
COMSAT Corporation
Verne G. Istock
Retired Chairman
and President,
Bank One Corporation
Barry C. Johnson, Ph.D.
Retired Dean,
College of Engineering,
Villanova University
James P. Keane
Chief Operating Offi cer,
Steelcase, Inc.
William T. McCormick, Jr.
Retired Chairman and
Chief Executive Offi cer,
CMS Energy Corporation
Donald R. Parfet
Managing Director,
Apjohn Group, LLC
IN MEMORIAM
David B. Speer
Chairman and Chief Executive Offi cer,
Illinois Tool Works Inc.
We lost a good friend and valued Board member with the untimely death of David
Speer, 61, on November 17, 2012.
David joined Illinois Tool Works in 1978 and served in numerous selling,
marketing, and management positions. He became president in 2004,
CEO in 2005, and chairman in 2006.
David served on our Board for nine years, and on every one of our committees.
We will miss his energy, perspective and wisdom.
19
2012
GENERal
INfORmaTION
Rockwell Automation
Global Headquarters
1201 South Second Street
Milwaukee, WI 53204
+1 (414) 382-2000
www.rockwellautomation.com
Investor Relations
Securities analysts should call:
Rondi Rohr-Dralle
Investor Relations
+1 (414) 382-8510
Corporate Public Relations
Members of the news media should call:
John A. Bernaden
Corporate Communications
+1 (414) 382-2555
Annual Meeting
The company’s annual meeting of shareowners
will be held at our Global Headquarters,
1201 South Second Street, Milwaukee, Wisconsin,
on Tuesday, Feb. 5, 2013, at 5:30 p.m. CST.
A notice of the meeting and proxy materials will
be furnished to shareowners in December 2012.
Internet
Log on to www.cpushareownerservices.com for convenient
access 24 hours a day, 7 days a week for online services
including account information, change of address, transfer
of shares, lost certificates, dividend payment elections and
additional administrative services.
If you are interested in receiving shareowner information
electronically, enroll in MLinkSM, a self-service program
that provides electronic notification and secure access to
shareowner communications. To enroll, follow the MLink
enrollment instructions when you access your shareowner
account via www.cpushareownerservices.com
Telephone
Call Computershare at one
of the following numbers:
Inside the United States: (800) 204-7800
Outside the United States: +1 (201) 680-6578
In Writing
Correspondence about share ownership, dividend
payments, transfer requirements, change of address, lost
certificates and account status may be directed to:
Computershare
PO Box 358010
Pittsburgh, PA 15252-8010
Shareowner Services
Computershare, our transfer agent and registrar, maintains
the records for our registered shareowners and can help
you with a variety of shareowner-related services. You can
access your shareowner account in one of the following
three ways:
Shareowners wishing to transfer stock should send their
written request, stock certificate(s) and other required
documents to:
Computershare
PO Box 358016
Pittsburgh, PA 15252-8016
20
Transfer Agent and Registrar
Computershare
PO Box 358010
Pittsburgh, PA 15252-8010
(800) 204-7800 or +1 (201) 680-6578
Stock Exchange
Common Stock (Symbol: ROK)
New York Stock Exchange
Ombudsman
Questions or concerns about accounting, internal
controls or auditing matters and the company’s
business conduct should be reported to:
Ombudsman
Rockwell Automation, Inc.
1201 South Second Street
Milwaukee, WI 53204
Telephone: (800) 552-3589
Fax: +1 (414) 382-8485
Email: ombudsman@rockwell.com
You may contact the Ombudsman from any computer
or any device with a Web browser and if you wish
to remain anonymous, visit the following externally
hosted website:
https://rockwellautomationombudsman.alertline.com
Registered or overnight mail should be sent to:
Computershare
500 Ross Street
6th Floor
Pittsburgh, PA 15262
A copy of our annual report (including Form 10-K)
may be obtained without charge by writing to:
Rockwell Automation
Shareowner Relations
1201 South Second Street, E-7F19
Milwaukee, WI 53204
Or call +1 (414) 382-8410. Other investor information
is available in the Investor Relations section of our
website at www.rockwellautomation.com
Shareowners needing further assistance should
contact Rockwell Automation Shareowner Relations
by telephone at +1 (414) 382-8410 or email at
shareownerrelations@ra.rockwell.com
Investor Services Program
Under the Computershare 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.
In addition, the program allows participating
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 full
details of the program, direct inquiries to:
Computershare
PO Box 358035
Pittsburgh, PA 15252-8035
(800) 204-7800 or +1 (201) 680-6578
www.cpushareownerservices.com
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
555 East Wells Street, Suite 1400
Milwaukee, WI 53202
+1 (414) 271-3000
21
FORM 10-K
Rockwell Automation
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 fiscal year ended September 30, 2012
Commission file number 1-12383
Rockwell Automation, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
1201 South 2nd Street
Milwaukee, Wisconsin
(Address of principal executive offices)
25-1797617
(I.R.S. Employer
Identification No.)
53204
(Zip Code)
Registrant’s telephone number, including area code:
(414) 382-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $1 Par Value
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1) No (cid:2)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:2) No (cid:1)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:1) No (cid:2)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes (cid:1) No (cid:2)
Indicate by check mark if disclosure of delinquent filers 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 definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. (cid:1)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large Accelerated Filer (cid:1)
Smaller reporting company (cid:2)
Non-accelerated Filer (cid:2)
Accelerated Filer (cid:2)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:2) No (cid:1)
The aggregate market value of registrant’s voting stock held by non-affiliates of registrant on March 31, 2012 was approximately $11.3 billion.
139,309,300 shares of registrant’s Common Stock, par value $1 per share, were outstanding on October 31, 2012.
Certain information contained in the Proxy Statement for the Annual Meeting of Shareowners of registrant to be held on February 5,
2013 is incorporated by reference into Part III hereof.
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
PART I
3
ITEM 1
Business ..................................................................................................................................................................................................................................................................................................4
ITEM 1A
Risk Factors ......................................................................................................................................................................................................................................................................................6
ITEM 1B Unresolved Staff Comments ..............................................................................................................................................................................................................................8
ITEM 2
Properties ..............................................................................................................................................................................................................................................................................................9
ITEM 3
Legal Proceedings ................................................................................................................................................................................................................................................................9
ITEM 4
Mine Safety Disclosures .........................................................................................................................................................................................................................................10
ITEM 4A
Executive Offi cers of the Company ...................................................................................................................................................................................................10
PART II
11
ITEM 5
Market for the Company’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities ...........................................................................................................................................................................11
ITEM 6
Selected Financial Data ..........................................................................................................................................................................................................................................12
ITEM 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations ...........12
ITEM 7A Quantitative and Qualitative Disclosures About Market Risk .............................................................................................................25
ITEM 8
Financial Statements and Supplementary Data ..........................................................................................................................................................27
Consolidated Balance Sheet ...................................................................................................................................................................................................................................27
Consolidated Statement of Operations ...................................................................................................................................................................................................28
Consolidated Statement of Cash Flows .................................................................................................................................................................................................29
Consolidated Statement of Shareowners’ Equity ....................................................................................................................................................................30
Consolidated Statement of Comprehensive Income (Loss) .....................................................................................................................................30
Notes to Consolidated Financial Statements .................................................................................................................................................................................31
ITEM 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.........54
ITEM 9A Controls and Procedures ......................................................................................................................................................................................................................................54
ITEM 9B Other Information ................................................................................................................................................................................................................................................................54
PART III
ITEM 10
ITEM 11
ITEM 12
ITEM 13
ITEM 14
PART IV
Directors, Executive Offi cers and Corporate Governance ...............................................................................................................................55
Executive Compensation......................................................................................................................................................................................................................................55
Security Ownership of Certain Benefi cial Owners and Management
and Related Stockholder Matters .........................................................................................................................................................................................................55
Certain Relationships and Related Transactions, and Director Independence ..................................................56
Principal Accountant Fees and Services .................................................................................................................................................................................56
55
57
ITEM 15
Exhibits and Financial Statement Schedule .......................................................................................................................................................................57
SIGNATURES ..........................................................................................................................................................................................................................................................................................................................61
2
ROCKWELL AUTOMATION, INC. - Form 10-K
PART I
PART I
Forward-Looking Statements
This Annual Report contains statements (including certain projections and
business trends) that are “forward-looking statements” as defi ned in the
Private Securities Litigation Reform Act of 1995. Words such as “believe”,
“estimate”, “project”, “plan”, “expect”, “anticipate”, “will”, “intend” and
other similar expressions may identify forward-looking statements. Actual
results may differ materially from those projected as a result of certain
risks and uncertainties, many of which are beyond our control, including
but not limited to:
• macroeconomic factors, including global and regional business conditions,
the availability and cost of capital, the cyclical nature of our customers’
capital spending, sovereign debt concerns and currency exchange rates;
• laws, regulations and governmental policies affecting our activities in the
countries where we do business;
• the successful development of advanced technologies and demand for
and market acceptance of new and existing products;
• our ability to successfully address claims by taxing authorities in the various
jurisdictions where we do business;
• our ability to attract and retain qualifi ed personnel;
• our ability to manage costs related to employee retirement and health
care benefi ts;
• the uncertainties of litigation, including liabilities related to the safety and
security of the products, services, and solutions we sell;
• our ability to manage and mitigate the risks associated with our solutions
business;
• a disruption of our distribution channels;
• the availability and price of components and materials;
• the successful integration and management of acquired businesses;
• the successful execution of our cost productivity and globalization
• the availability, effectiveness and security of our information technology
initiatives; and
systems;
• competitive products, services and solutions and pricing pressures,
and our ability to provide high quality products, services and solutions;
• a disruption of our operations due to natural disasters, acts of war,
strikes, terrorism, social unrest or other causes;
• intellectual property infringement claims by others and the ability to
protect our intellectual property;
• other risks and uncertainties, including but not limited to those detailed
from time to time in our Securities and Exchange Commission (SEC) fi lings.
These forward-looking statements refl ect our beliefs as of the date of fi ling
this report. We undertake no obligation to update or revise any forward-
looking statement, whether as a result of new information, future events
or otherwise. See Item 1A. Risk Factors for more information.
ROCKWELL AUTOMATION, INC. - Form 10-K 3
PART I
ITEM 1 Business
ITEM 1 Business
General
Rockwell Automation, Inc. (the Company or Rockwell Automation) is
a leading global provider of industrial automation power, control and
information solutions that help manufacturers achieve a competitive
advantage for their businesses. The Company continues the business
founded as the Allen-Bradley Company in 1903. The privately-owned
Allen-Bradley Company was a leading North American manufacturer of
industrial automation equipment when the former Rockwell International
Corporation (RIC) purchased it in 1985. Our products and services are
designed to meet our customers’ needs to reduce total cost of ownership,
maximize asset utilization, improve time to market and reduce manufacturing
business risk.
The Company was incorporated in Delaware in connection with a tax-free
reorganization completed on December 6, 1996, pursuant to which we
divested our former aerospace and defense businesses (the A&D Business)
to The Boeing Company (Boeing). In the reorganization, RIC contributed
all of its businesses, other than the A&D Business, to the Company
and distributed all capital stock of the Company to RIC’s shareowners.
Boeing then acquired RIC. RIC was incorporated in 1928.
As used herein, the terms “we”, “us”, “our”, 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 our continuing businesses unless otherwise indicated.
Whenever an Item of this Annual Report on Form 10-K refers to information
in our Proxy Statement for our Annual Meeting of Shareowners to be
held on February 5, 2013 (the Proxy Statement), or to information under
specifi c captions in Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations (MD&A), or in
Item 8. Financial Statements and Supplementary Data (the Financial
Statements), the information is incorporated in that Item by reference.
All date references to years and quarters refer to our fi scal year and
quarters unless otherwise stated.
Operating Segments
We have two operating segments: Architecture & Software and Control
Products & Solutions. In 2012, our total sales were $6.3 billion. Financial
information with respect to our operating segments, including their
contributions to sales and operating earnings for each of the three years in the
period ended September 30, 2012, is contained under the caption Results
of Operations in MD&A, and in Note 17 in the Financial Statements.
Our Architecture & Software operating segment is headquartered in Mayfi eld
Heights, Ohio and Singapore, and our Control Products & Solutions
operating segment is headquartered in Milwaukee, Wisconsin. Both
operating segments conduct business globally. Major markets served by
both segments include transportation, oil and gas, metals, mining, food
and beverage, and life sciences.
Architecture & Software
Our Architecture & Software operating segment recorded sales of
$2.7 billion (42 percent of our total sales) in 2012. The Architecture &
Software segment contains all of the hardware, software and communication
components of our integrated control and information architecture capable
of controlling the customer’s industrial processes and connecting with their
manufacturing enterprise. Architecture & Software has a broad portfolio
of products, including:
• Control platforms that perform multiple control disciplines and monitoring
of applications, including discrete, batch and continuous process, drives
control, motion control and machine safety control. Products include
controllers, electronic operator interface devices, electronic input/
output devices, communication and networking products and industrial
computers. The information-enabled Logix controllers provide integrated
multi-discipline control that is modular and scalable.
Geographic Information
• Software products that include confi guration and visualization software
used to operate and supervise control platforms, advanced process
control software and manufacturing execution software (MES) that
enables customers to improve manufacturing productivity and meet
regulatory requirements.
• Other products, including rotary and linear motion control products,
sensors and machine safety components.
Control Products & Solutions
Our Control Products & Solutions operating segment recorded 2012 sales
of $3.6 billion (58 percent of our total sales). The Control Products &
Solutions segment combines a comprehensive portfolio of intelligent
motor control and industrial control products, application expertise and
project management capabilities. This comprehensive portfolio includes:
• Low and medium voltage electro-mechanical and electronic motor starters,
motor and circuit protection devices, AC/DC variable frequency drives,
push buttons, signaling devices, termination and protection devices,
relays, timers and condition sensors.
• Value-added solutions ranging from packaged solutions such as confi gured
drives and motor control centers to automation and information solutions
where we provide design, integration and start-up services for custom-
engineered hardware and software systems primarily for manufacturing
applications.
• Services designed to help maximize a customer’s automation investment
and provide total life-cycle support, including technical support and repair,
asset management, training and predictive and preventative maintenance.
In 2012, sales to customers in the United States accounted for 49 percent of
our total sales. Outside the United States, we sell in every region. The largest
sales outside of the United States on a country-of-destination basis are
in Canada, China, the United Kingdom, Italy, Germany, and Brazil. See
Item 1A. Risk Factors for a discussion of risks associated with our
operations outside of the United States. Sales and property information
by major geographic area for each of the past three years is contained in
Note 17 in the Financial Statements.
4
ROCKWELL AUTOMATION, INC. - Form 10-K
PART I
ITEM 1 Business
Competition
Depending on the product or service involved, our competitors range from
large diversifi ed corporations that also have business interests outside
of industrial automation to smaller companies that specialize in niche
industrial automation products and services. Factors that infl uence our
competitive position include the breadth of our product portfolio and scope
of solutions, technology leadership, knowledge of customer applications,
installed base, distribution network, quality of products and services, global
presence and price. Our major competitors of both segments include
Siemens AG, ABB Ltd, Honeywell International Inc., Schneider Electric
SA and Emerson Electric Co.
Distribution
In the United States, Canada and certain other countries, we sell primarily
through the independent distributors in conjunction with our direct sales
force. In the remaining countries, we sell through a combination of our
direct sales force and to a lesser extent, through independent distributors.
Approximately 70 percent of our global sales are through independent
distributors. Sales to our largest distributor in 2012, 2011 and 2010 were
approximately 10 percent of our total sales. The independent distributors
typically do not carry products that compete with Allen-Bradley® products.
Research and Development
Our research and development spending for the years ended September 30, 2012, 2011 and 2010 was $259.1 million, $254.4 million, and $198.9 million,
respectively. Customer-sponsored research and development was not signifi cant in 2012, 2011 or 2010.
Employees
At September 30, 2012, we had approximately 22,000 employees. Approximately 8,500 were employed in the United States.
Raw Materials and Supplies
We purchase a wide range of equipment, components, fi nished products
and materials used in our business. The raw materials essential to the
manufacture of our products generally are available at competitive prices.
Although we have a broad base of suppliers and subcontractors, we
depend upon the ability of our suppliers and subcontractors to meet
performance and quality specifi cations and delivery schedules. See
Item 1A. Risk Factors for a discussion of risks associated with our reliance
on third party suppliers.
Backlog
Our total order backlog at September 30 was (in millions):
Architecture & Software
Control Products & Solutions
2012
167.3 $
962.6
1,129.9 $
2011
160.3
1,016.8
1,177.1
$
$
Backlog is not necessarily indicative of results of operations for future periods due to the short-cycle nature of most of our sales activities. Backlog
orders scheduled for shipment beyond 2013 were approximately $70.8 million as of September 30, 2012.
Environmental Protection Requirements
Information about the effect of compliance with environmental protection requirements and resolution of environmental claims is contained in Note 16
in the Financial Statements and in Item 3. Legal Proceedings.
Patents, Licenses and Trademarks
We own or license numerous patents and patent applications related to
our products and operations. Various claims of patent infringement and
requests for patent indemnifi cation have been made to us. We believe
that none of these claims or requests will have a material adverse effect
on our fi nancial condition. While in the aggregate our patents and licenses
are important in the operation of our business, we do not believe that loss
or termination of any one of them would materially affect our business or
fi nancial condition. See Item 1A. Risk Factors for a discussion of risks
associated with our intellectual property.
The Company’s name and its registered trademark “Rockwell Automation®”
and other trademarks such as “Allen-Bradley®”, “A-B®” and “PlantPAx
Process Automation System™” are important to both of our business
segments. In addition, we own other important trademarks that we
use, such as “ICS Triplex™” for our control products and systems for
industrial automation, and “Rockwell Software®” and “FactoryTalk®” for
our software offerings.
ROCKWELL AUTOMATION, INC. - Form 10-K 5
PART I
ITEM 1A Risk Factors
Seasonality
Our business segments are not subject to signifi cant seasonality. However, the calendarization of our results can vary and may be affected by the
seasonal spending patterns of our customers due to their annual budgeting processes and their working schedules.
Available Information
We maintain a website at http://www.rockwellautomation.com. Our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and amendments to such reports fi led or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(the Exchange Act), as well as our 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 we fi le or furnish these
reports with the SEC. All reports we fi le with the SEC are also available free
of charge via EDGAR through the SEC’s website at http://www.sec.gov.
Our Guidelines on Corporate Governance and charters for our Board
committees are also available on our website. The information contained
on and linked from our website is not incorporated by reference into this
Annual Report on Form 10-K.
ITEM 1A Risk Factors
In the ordinary course of our business, we face various strategic, operating,
compliance and fi nancial risks. These risks could have an impact on our
business, fi nancial condition, operating results and cash fl ows. Our most
signifi cant risks are set forth below and elsewhere in this Annual Report
on Form 10-K.
Our Enterprise Risk Management (ERM) process seeks to identify and
address signifi cant risks. Our ERM process uses the integrated risk
framework of the Committee of Sponsoring Organizations (COSO) to
assess, manage, and monitor risks. We believe that risk-taking is an
inherent aspect of the pursuit of our growth and performance strategy.
Our goal is to manage risks prudently rather than avoiding risks. We can
mitigate risks and their impact on the Company only to a limited extent.
A team of senior executives prioritizes identifi ed risks and assigns an
executive to address each major identifi ed risk area and lead action plans
to manage risks. Our Board of Directors provides oversight of the ERM
process and reviews signifi cant identifi ed risks. The Audit Committee also
reviews signifi cant fi nancial risk exposures and the steps management has
taken to monitor and manage them. Our other Board committees also
play a role in risk management, as set forth in their respective charters.
Our goal is to proactively manage risks in a structured approach in
conjunction with strategic planning, with the intent to preserve and enhance
shareowner value. However, the risks set forth below and elsewhere
in this Annual Report on Form 10-K and other risks and uncertainties
could cause our results to vary materially from recent results or from our
anticipated future results and could adversely affect our business and
fi nancial condition.
Adverse changes in business or industry conditions
and volatility and disruption of the capital and credit
markets may result in decreases in our revenues
and profi tability.
We are subject to macroeconomic cycles and when recessions occur, we
may experience reduced orders, payment delays, supply chain disruptions
or other factors as a result of the economic challenges faced by our
customers, prospective customers and suppliers.
Demand for our products is sensitive to changes in levels of industrial
production and the fi nancial performance of major industries that we
serve. As economic activity slows, credit markets tighten, or sovereign
debt concerns linger, companies tend to reduce their levels of capital
spending, which could result in decreased demand for our products.
6
ROCKWELL AUTOMATION, INC. - Form 10-K
Our ability to access the credit markets, and the related costs of these
borrowings, is affected by the strength of our credit rating and current
market conditions. If our access to credit, including the commercial
paper market, is adversely affected by a change in market conditions
or otherwise, our cost of borrowings may increase or our ability to fund
operations may be reduced.
We generate a substantial portion of our revenues from
international sales and are subject to the risks of doing
business in many countries.
Approximately 51 percent of our revenues in 2012 were made outside of
the U.S. Future growth rates and success of our business depend in large
part on growth in our international sales. Numerous risks and uncertainties
affect our international operations. These risks and uncertainties include
increased fi nancial, legal and operating risks, such as political and economic
instability, compliance with existing and future laws, regulations and policies,
including those related to tariffs, investments, taxation, trade controls,
employment regulations, repatriation of earnings and enforcement of
contract and intellectual property rights. In addition, we are affected by
changes in foreign currency exchange rates, infl ation rates and interest rates.
New legislative and regulatory actions could adversely
affect our business.
Legislative and regulatory action may be taken in the various countries
and other jurisdictions where we operate that may affect our business
activities in these countries or may otherwise increase our costs to do
business. For example, we are increasingly required to comply with
various environmental and other material, product, certifi cation, labeling
and customer requirements. These requirements could increase our
costs and could potentially have an adverse effect on our ability to ship
our products into certain jurisdictions.
An inability to respond to changes in customer
preferences could result in decreased demand
for our products.
Our success depends in part on our ability to anticipate and offer products
that appeal to the changing needs and preferences of our customers in the
various markets we serve. Developing new products requires high levels
of innovation, and the development process is often lengthy and costly. If
we are not able to anticipate, identify, develop and market products that
respond to changes in customer preferences, demand for our products
could decline.
PART I
ITEM 1A Risk Factors
Failures or security breaches of our products or
information technology systems could have an adverse
effect on our business.
Intellectual property infringement claims of others and
the inability to protect our intellectual property rights
could harm our business and our customers.
We rely heavily on information technology (IT) both in our products, solutions
and services for customers and in our enterprise IT infrastructure in order
to achieve our business objectives. Government agencies and security
experts have warned about growing risks of hackers, cyber-criminals and
other attacks targeting every type of IT system including industrial control
systems such as those we sell and service and corporate enterprise
IT systems.
Our portfolio of hardware and software products, solutions and services and
our enterprise IT systems may be vulnerable to damage or intrusion from
a variety of attacks including computer viruses, worms or other malicious
software programs. These attacks have sometimes been successful.
Despite the precautions we take, an intrusion or infection of software,
hardware or a system that we sold or serviced could result in the disruption
of our customers’ business, loss of proprietary or confi dential information,
or injuries to people or property. Similarly, an attack on our enterprise IT
system could result in theft or disclosure of trade secrets or other intellectual
property or a breach of confi dential customer or employee information.
Any such events could have an adverse impact on revenue, harm our
reputation, cause us to incur legal liability and cause us to incur increased
costs to address such events and related security concerns.
We are implementing a global Enterprise Resource Planning (ERP) system
that is resulting in redesigned processes, organization structures and a
common information system. Signifi cant roll-outs of the system occurred
at our U.S. locations and certain non-U.S. locations in 2007 to 2012, and
are scheduled to continue at additional locations in 2013 and beyond.
As we continue to implement new systems, they may not perform as
expected. This could have an adverse effect on our business.
There are inherent risks in our solutions businesses.
Risks inherent in the sale of solutions include assuming greater responsibility
for project completion and success, defi ning and controlling contract
scope, effi ciently executing projects, and managing the quality of our
subcontractors and suppliers. If we are unable to manage and mitigate
these risks, our results of operations could be adversely affected.
Our industry is highly competitive.
We face strong competition in all of our market segments in several
signifi cant respects. We compete based on breadth and scope of our
product portfolio and solution and service offerings, technology differentiation,
product performance, quality of our products and services, knowledge of
integrated systems and applications that address our customers’ business
challenges, pricing, delivery and customer service. The relative importance
of these factors differs across the markets and product areas that we serve.
We seek to maintain acceptable pricing levels by continually developing
advanced technologies for new products and product enhancements and
offering complete solutions for our customers’ business problems. If we
fail to keep pace with technological changes or to provide high quality
products and services, we may experience price erosion, lower revenues
and margins. We expect the level of competition to remain high in the
future, which could limit our ability to maintain or increase our market
share or profi tability.
We face the potential harms of natural disasters,
terrorism, acts of war, international confl icts or
other disruptions to our operations.
Natural disasters, acts or threats of war or terrorism, international confl icts,
political instability and the actions taken by governments could cause damage
to or disrupt our business operations, our suppliers or our customers, and
could create economic instability. Although it is not possible to predict such
events or their consequences, these events could decrease demand for
our products or make it diffi cult or impossible for us to deliver products.
Others may assert intellectual property infringement claims against us or our
customers. We frequently provide a limited intellectual property indemnity
in connection with our terms and conditions of sale to our customers and
in other types of contracts with third parties. Indemnifi cation payments
and legal costs to defend claims could be costly.
In addition, we own the rights to many patents, trademarks, brand
names and trade names that are important to our business. The inability
to enforce our intellectual property rights may have an adverse effect on
our results of operations. Expenses related to enforcing our intellectual
property rights could be signifi cant.
We must successfully defend any claims from taxing
authorities to avoid an adverse effect on our tax
expense and fi nancial position.
We conduct business in many countries, which requires us to interpret the
income tax laws and rulings in each of those taxing jurisdictions. Due to the
ambiguity of tax laws among those jurisdictions as well as the subjectivity
of factual interpretations, our estimates of income tax liabilities may differ
from actual payments or assessments. Claims by taxing authorities related
to these differences could have an adverse impact on our operating results
and fi nancial position.
Our business success depends on attracting and
retaining qualifi ed personnel while appropriately
managing costs related to employee benefi ts.
Our success depends in part on the efforts and abilities of our management
team and key employees. Their skills, experience and industry knowledge
signifi cantly benefi t our operations and performance. One important
aspect of attracting and retaining qualifi ed personnel is continuing to offer
competitive employee retirement and health care benefi ts.
The amount of expenses we record for our defi ned benefi t pension plans
depends on factors such as changes in market interest rates and the
value of plan assets. Signifi cant decreases in market interest rates or the
value of plan assets would increase our expenses. Expenses related to
employer-funded health care benefi ts continue to increase as well.
Increasing employee benefi t costs or the failure to attract and retain
members of our management team and key employees could have a
negative effect on our operating results and fi nancial condition.
Potential liabilities and costs from litigation (including
asbestos claims and environmental remediation)
could reduce our profi tability.
Various lawsuits, claims and proceedings have been or may be asserted
against us relating to the conduct of our business, including those pertaining
to the safety and security of the products, services and solutions we sell,
employment, contract matters and environmental remediation.
We have been named as a defendant in lawsuits alleging personal injury as
a result of exposure to asbestos that was used in certain of our products
many years ago. Our products may also be used in hazardous industrial
activities, which could result in product liability claims. The uncertainties
of litigation (including asbestos claims) and the uncertainties related to the
collection of insurance coverage make it diffi cult to predict the ultimate
resolution.
Our operations are subject to regulation by various environmental regulatory
authorities concerned with the impact of the environment on human health,
the limitation and control of emissions and discharges into the air, ground
and waters, the quality of air and bodies of water, and the handling, use
and disposal of specifi ed substances. Environmental laws and regulations
can be complex and may change. Our fi nancial responsibility to clean up
ROCKWELL AUTOMATION, INC. - Form 10-K 7
PART I
ITEM 1B Unresolved Staff Comments
contaminated property or for natural resource damages may extend to
previously owned or used properties, waterways and properties owned by
unrelated companies or individuals, as well as properties that we currently
own and use, regardless of whether the contamination is attributable to
prior owners. We have been named as a potentially responsible party at
cleanup sites and may be so named in the future, and the costs associated
with these current and future sites may be signifi cant.
We have, from time to time, divested certain of our businesses. In connection
with these divestitures, certain lawsuits, claims and proceedings may be
instituted or asserted against us related to the period that we owned the
businesses, either because we agreed to retain certain liabilities related
to these periods or because such liabilities fall upon us by operation of
law. In some instances, the divested business has assumed the liabilities;
however, it is possible that we might be responsible to satisfy those liabilities
if the divested business is unable to do so.
A disruption to our distribution channel could reduce
our revenues.
In the United States and Canada, approximately 90 percent of our sales
are through distributors. In certain other countries, the majority of our sales
are also through a limited number of distributors. While we maintain the
right to appoint new distributors, any unplanned disruption to our existing
distribution channel could adversely affect our revenues. A disruption could
result from the sale of a distributor to a competitor, fi nancial instability of
a distributor, or other events.
We rely on vendors to supply equipment and
components, which creates certain risks and
uncertainties that may adversely affect our business.
Our business requires that we buy equipment and components, including
fi nished products, which may include computer chips and commodities
such as copper, aluminum and steel. Our reliance on suppliers of these
items involves certain risks, including:
• poor quality can adversely affect the reliability and reputation of our
products;
• the cost of these purchases may change due to infl ation, exchange
rates, commodity market volatility or other factors;
• we may not be able to recover any increase in costs for these purchases
through price increases to our customers; and
• a shortage of components, commodities or other materials could adversely
affect our manufacturing effi ciencies and ability to make timely delivery.
Any of these uncertainties could adversely affect our profi tability and ability
to compete. We also maintain several single-source supplier relationships,
because either alternative sources are not available or the relationship is
advantageous due to performance, quality, support, delivery, capacity,
or price considerations. Unavailability or delivery delays of single-source
components or products could adversely affect our ability to ship the
related products in a timely manner. The effect of unavailability or delivery
delays would be more severe if associated with our higher volume and
more profi table products. Even where substitute sources of supply are
available, qualifying the alternate suppliers and establishing reliable supplies
could cost more or could result in delays and a loss of revenues.
Our competitiveness depends on successfully executing
our globalization and cost productivity initiatives.
Our globalization strategy includes localization of our products and services to
be closer to our customers and identifi ed growth opportunities. Localization
of our products and services includes expanding our capabilities, including
supply chain and sourcing activities, product design, manufacturing,
engineering, marketing and sales and support. These activities expose
us to risks, including those related to political and economic uncertainties,
transportation delays, labor market disruptions, and challenges to protect
our intellectual property. In addition, we continue to invest in initiatives to
reduce our cost structure. The failure to achieve our objectives on these
initiatives could have an adverse effect on our operating results and
fi nancial condition.
Risks associated with acquisitions could have an adverse
effect on us.
We have acquired, and will continue to acquire, businesses in an effort to
enhance shareowner value. Acquisitions involve risks and uncertainties,
including:
• diffi culties in integrating the acquired business, retaining the acquired
business’ customers, and achieving the expected benefi ts of the
acquisition, such as revenue increases, access to technologies, cost
savings and increases in geographic or product presence, in the desired
time frames;
• loss of key employees of the acquired business;
• diffi culties implementing and maintaining consistent standards, controls,
procedures, policies and information systems; and
• diversion of management’s attention from other business concerns.
Future acquisitions could result in debt, dilution, liabilities, increased
interest expense, restructuring charges and amortization expenses related
to intangible assets.
ITEM 1B Unresolved Staff Comments
None.
8
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 3 Legal Proceedings
PART I
ITEM 2 Properties
We operate manufacturing facilities in the United States and multiple foreign countries. Manufacturing space occupied approximately 3.3 million square
feet, of which 37 percent was in the United States and Canada. Our global headquarters are located in Milwaukee, Wisconsin in a facility that we own.
We lease the remaining facilities noted below. Most of our facilities are shared by operations in both segments and may be used for multiple purposes
such as administrative, manufacturing, warehousing and / or distribution.
The following table sets forth information regarding our headquarter locations as of September 30, 2012.
Location
Milwaukee, Wisconsin, United States
Mayfi eld Heights, Ohio, United States
Singapore
Cambridge, Ontario, Canada
Diegem, Belgium
Hong Kong
Weston, Florida, United States
Headquarters
Global and Control Products & Solutions
Architecture & Software
Architecture & Software
Canada
Europe, Middle East and Africa
Asia-Pacifi c
Latin America
The following table sets forth information regarding our principal manufacturing locations as of September 30, 2012.
Location
Monterrey Guadalupe, Mexico
Aarau, Switzerland
Twinsburg, Ohio, United States
Mequon, Wisconsin, United States
Cambridge, Ontario, Canada
Shanghai, China
Singapore
Tecate, Mexico
Ladysmith, Wisconsin, United States
Richland Center, Wisconsin, United States
Katowice, Poland
Jundiai, Brazil
Manufacturing Square Footage
637,000
284,000
257,000
240,000
216,000
196,000
146,000
135,000
124,000
124,000
95,000
94,000
There are no major encumbrances (other than fi nancing arrangements, which in the aggregate are not signifi cant) on any of our plants or equipment. In
our opinion, our 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
McGregor, Texas NWIRP Facility Environmental Claim. RIC operated
the Naval Weapons Industrial Reserve Plant (NWIRP) in McGregor, Texas
from 1958 through 1978 for the United States Navy. Incident to Boeing’s
acquisition of RIC in 1996, we agreed to indemnify RIC and Boeing for
any liability arising out of RIC’s activities at the NWIRP to the extent such
liability is not assumed or indemnifi ed by the U.S. government.
On December 3, 2007, the United States Department of Justice (DOJ) notifi ed
RIC that the United States Navy was seeking to recover environmental
cleanup costs incurred at the NWIRP. The DOJ asserted that it has incurred
more than $50 million (excluding interest, attorneys’ fees and other indirect
costs) in environmental cleanup costs at the NWIRP, and it believes that
it may have a potential cause of action against RIC and other former
contractors at the NWIRP for recovery of those costs. In June 2011, RIC
and one other former contractor at the NWIRP reached a settlement with
the DOJ and the United States Navy to resolve all claims in exchange for
payment of $14 million. RIC will be responsible for half of the settlement
amount. The parties negotiated the terms of a Consent Decree that was
reviewed and approved by the DOJ. The Consent Decree was submitted to
the District Court for approval, and was approved on September 30, 2012
thereby completely resolving this claim.
Asbestos. We (including our subsidiaries) have been named as a defendant
in lawsuits alleging personal injury as a result of exposure to asbestos
that was used in certain components of our products many years ago.
Currently there are a few thousand claimants in lawsuits that name us
as defendants, together with hundreds of other companies. In some
cases, the claims involve products from divested businesses, and we are
indemnifi ed for most of the costs. However, we have agreed to defend and
indemnify asbestos claims associated with products manufactured or sold
by our Dodge mechanical and Reliance Electric motors and motor repair
services businesses prior to their divestiture by us, which occurred on
January 31, 2007. We also are responsible for half of the costs and liabilities
associated with asbestos cases against RIC’s divested measurement and
fl ow control business. But in all cases, for those claimants who do show
that they worked with our products or products of divested businesses for
which we are responsible, we nevertheless believe we have meritorious
defenses, in substantial part due to the integrity of the products, the
encapsulated nature of any asbestos-containing components, and the
lack of any impairing medical condition on the part of many claimants. We
defend those cases vigorously. Historically, we have been dismissed from
the vast majority of these claims with no payment to claimants.
ROCKWELL AUTOMATION, INC. - Form 10-K 9
PART I
ITEM 4 Mine Safety Disclosures
We have maintained insurance coverage that we believe covers indemnity
and defense costs, over and above self-insured retentions, for claims
arising from our former Allen-Bradley subsidiary. Following litigation against
Nationwide Indemnity Company (Nationwide) and Kemper Insurance
(Kemper), the insurance carriers that provided liability insurance coverage
to Allen-Bradley, we entered into separate agreements on April 1, 2008
with both insurance carriers to further resolve responsibility for ongoing
and future coverage of Allen-Bradley asbestos claims. In exchange for a
lump sum payment, Kemper bought out its remaining liability and has been
released from further insurance obligations to Allen-Bradley. Nationwide
entered into a cost share agreement with us to pay the substantial majority
of future defense and indemnity costs for Allen-Bradley asbestos claims. We
believe this arrangement will continue to provide coverage for Allen-Bradley
asbestos claims throughout the remaining life of the asbestos liability.
The uncertainties of asbestos claim litigation make it diffi cult to predict
accurately the ultimate outcome of asbestos claims. That uncertainty is
increased by the possibility of adverse rulings or new legislation affecting
asbestos claim litigation or the settlement process. Subject to these
uncertainties and based on our experience defending asbestos claims,
we do not believe these lawsuits will have a material effect on our fi nancial
condition or results of operations.
Other. Various other lawsuits, claims and proceedings have been or may
be instituted or asserted against us relating to the conduct of our business,
including those pertaining to product liability, 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 us, we believe
the disposition of matters that are pending or have been asserted will not
have a material effect on our fi nancial condition or results of operations.
ITEM 4 Mine Safety Disclosures
Not applicable.
ITEM 4A Executive Offi cers of the Company
The name, age, offi ce and position held with the Company and principal occupations and employment during the past fi ve years of each of the executive
offi cers of the Company as of October 31, 2012 are:
Name, Offi ce and Position, and Principal Occupations and Employment
Keith D. Nosbusch — Chairman of the Board and President and Chief Executive Offi cer
Sujeet Chand — Senior Vice President and Chief Technology Offi cer
Kent G. Coppins — Vice President and General Tax Counsel
Theodore D. Crandall — Senior Vice President and Chief Financial Offi cer
David M. Dorgan — Vice President and Controller
Steven A. Eisenbrown — Senior Vice President
Steven W. Etzel — Vice President and Treasurer since November 2007; Assistant Treasurer previously
Douglas M. Hagerman — Senior Vice President, General Counsel and Secretary
Frank C. Kulaszewicz — Senior Vice President since April 2011; Vice President and General Manager, Control
and Visualization Business previously
John P. McDermott — Senior Vice President
John M. Miller — Vice President and Chief Intellectual Property Counsel
Blake D. Moret — Senior Vice President since April 2011; Vice President and General Manager, Customer Support
and Maintenance previously
Rondi Rohr-Dralle — Vice President, Investor Relations and Corporate Development since February 2009; Vice President,
Corporate Development previously
Robert A. Ruff — Senior Vice President
Susan J. Schmitt — Senior Vice President, Human Resources
Martin Thomas — Senior Vice President, Operations and Engineering Services
Age
61
54
59
57
48
59
52
51
48
54
45
49
56
64
49
54
There are no family relationships, as defi ned by applicable SEC rules, between any of the above executive offi cers and any other executive offi cer or
director of the Company. No offi cer of the Company was selected pursuant to any arrangement or understanding between the offi cer and any person
other than the Company. All executive offi cers are elected annually.
10
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 5 Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
PART II
PART II
ITEM 5 Market for the Company’s Common Equity,
Related Stockholder Matters and Issuer Purchases
of Equity Securities
Our common stock is listed on the New York Stock Exchange and trades under the symbol “ROK.” On October 31, 2012 there were 22,490 shareowners
of record of our common stock.
The following table sets forth the high and low sales price of our common stock on the New York Stock Exchange-Composite Transactions reporting
system during each quarter of our fi scal years ended September 30, 2012 and 2011:
Fiscal Quarters
First
Second
Third
Fourth
$
2012
High
78.01 $
84.71
80.67
73.98
Low
53.06 $
72.21
62.41
61.20
2011
High
72.75 $
94.88
98.19
89.79
Low
60.08
71.79
76.71
50.36
We declare and pay dividends at the sole discretion of our Board of Directors. During 2012 we declared and paid aggregate cash dividends of $1.745 per
common share. We increased our quarterly dividend per common share 11 percent to 47.0 cents per common share effective with the dividend payable
in September 2012 ($1.88 per common share annually). During 2011 we declared and paid aggregate cash dividends of $1.475 per common share.
The table below sets forth information with respect to purchases made by or on behalf of us of shares of our common stock during the three months
ended September 30, 2012:
Total Number
of Shares
Purchased
Period
July 1 – 31, 2012
August 1 – 31, 2012
September 1 – 30, 2012
TOTAL
(1) Average price paid per share includes brokerage commissions.
(2) On November 7, 2007, our Board of Directors approved a $1.0 billion share repurchase program. On June 7, 2012, the Board of Directors authorized us to expend up to
an additional $1.0 billion to repurchase shares of our common stock. As of September 30, 2012 no shares remained subject to repurchase under our November 7, 2007
repurchase program. Our repurchase program allows management to repurchase shares at its discretion. However, during quarterly “quiet periods,” defined as the period of time
from quarter-end until two business days following the furnishing of our quarterly earnings results to the SEC on Form 8-K, shares are repurchased at our broker’s discretion
pursuant to a share repurchase plan subject to price and volume parameters.
963,944 $
106,900
375,229
963,944 $
106,900
375,229
1,446,073
1,446,073
Average Price
Paid Per Share(1)
64.12
70.32
70.56
66.25
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Approx.
Dollar Value of Shares
that may yet be
Purchased Under the
Plans or Programs(2)
970,668,738
963,151,116
936,673,493
ROCKWELL AUTOMATION, INC. - Form 10-K 11
PART II
ITEM 6 Selected Financial Data
ITEM 6 Selected Financial Data
The following table sets forth selected consolidated fi nancial data of our 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 following fi ve years ended September 30, the related
consolidated balance sheet data and other data have been derived from our audited consolidated fi nancial statements.
$
$
2012
6,259.4 $
60.1
737.0
5.20
5.13
1.745
5,636.5 $
157.0
905.0
1,851.7
Year Ended September 30,
2011
2010
2009(a)
2008(b)
6,000.4 $
59.5
697.1
4,857.0 $
60.5
440.4
4,332.5 $
60.9
217.9
4.88
4.79
1.475
3.09
3.05
1.22
1.54
1.53
1.16
5,284.9 $
4,748.3 $
4,305.7 $
—
905.0
1,748.0
—
904.9
1,460.4
—
904.7
1,316.4
5,697.8
68.2
577.6
3.94
3.89
1.16
4,593.6
100.1
904.4
1,688.8
(in millions, except per share data)
Consolidated Statement of Operations Data:
Sales
Interest expense
Income from continuing operations
Earnings per share from continuing operations:
Basic
Diluted
Cash dividends per share
Consolidated Balance Sheet Data:
(at end of period)
Total assets
Short-term debt and current portion of long-term debt
Long-term debt
Shareowners’ equity
Other Data:
Capital expenditures
Depreciation
Intangible asset amortization
(a)
$
151.0
101.3
35.2
Includes costs of $60.4 ($41.8 million after tax, or $0.29 per diluted share) related to restructuring actions designed to better align our cost structure with then-current economic
conditions. The majority of the charges related to severance benefits recognized pursuant to our severance policy and local statutory requirements.
Includes net costs of $46.7 million ($30.4 million after tax, or $0.21 per diluted share) primarily related to restructuring actions designed to better align resources with growth
opportunities and to reduce costs as a result of then-current and anticipated market conditions. The 2008 restructuring actions included workforce reductions aimed at
streamlining administrative functions, realigning selling resources to the highest anticipated growth opportunities and consolidating business units. The majority of the charges
related to severance benefits recognized pursuant to our severance policy and local statutory requirements.
139.6 $
103.9
34.7
120.1 $
96.5
34.8
99.4 $
95.7
31.6
101.7
32.4
98.0 $
(b)
ITEM 7 Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Non-GAAP Measures
The following discussion includes organic sales and free cash fl ow, which
are non-GAAP measures. See Supplemental Sales Information for a
reconciliation of reported sales to organic sales and a discussion of why
we believe this non-GAAP measure is useful to investors. See Financial
Condition for a reconciliation of cash fl ows from operating activities to
free cash fl ow and a discussion of why we believe this non-GAAP measure
is useful to investors.
Overview
We are a leading global provider of industrial automation power, control
and information solutions that help manufacturers achieve a competitive
advantage for their businesses. Overall demand for our products and
services is driven by:
• investments in manufacturing, including upgrades, modifi cations and
expansions of existing facilities or production lines, and the creation of
new facilities or production lines;
12
ROCKWELL AUTOMATION, INC. - Form 10-K
• our customers’ needs for productivity and cost reduction, sustainable
production (cleaner, safer and more energy effi cient), quality assurance
and overall global competitiveness;
• industry factors that include our customers’ new product introductions,
demand for our customers’ products or services, and the regulatory and
competitive environments in which our customers operate;
• levels of global industrial production and capacity utilization;
• regional factors that include local political, social, regulatory and economic
circumstances;
• the seasonal spending patterns of our customers due to their annual
budgeting processes and their working schedule; and
• investments in basic materials production capacity, partly in response to
higher commodity pricing.
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II
Long-term Strategy
Our vision of being the most valued global provider of innovative industrial
automation and information products, services and solutions is supported
by our growth and performance strategy, which seeks to:
• achieve growth rates in excess of the automation market by expanding
our served market and strengthening our competitive differentiation;
• diversify our revenue streams by increasing our capabilities in new
applications, broadening our solutions and service capabilities, advancing
our global presence and serving a wider range of industries;
• grow market share by gaining new customers and by capturing a larger
share of existing customers’ spending;
• enhance our market access by building our channel capability and
partner network;
• make acquisitions that serve as catalysts to organic growth by adding
complementary technology, expanding our served market, increasing
our domain expertise or continuing our geographic diversifi cation;
• deploy human and fi nancial resources to strengthen our technology
leadership and our intellectual capital business model; and
• continuously improve quality and customer experience and drive annual
cost productivity.
By implementing the strategy above, we seek to achieve our long-term
fi nancial goals that include revenue growth of 6-8 percent, double-digit
EPS growth, return on invested capital in excess of 20 percent, free cash
fl ow of about 100 percent of net income and 60 percent of our revenue
outside the U.S, including 30 percent of revenue from emerging markets.
Our customers face the challenge of remaining globally cost competitive
and automation can help them achieve their productivity and sustainability
objectives. Our value proposition is to help our customers reduce time
to market, lower total cost of ownership, improve asset utilization and
manage enterprise risks.
Differentiation through Technology and Domain
Expertise
We seek a technology leadership position in industrial automation. We
believe that our three platforms - integrated architecture, intelligent motor
control and solutions and services - provide the foundation for long-term
sustainable growth.
Our integrated control and information architecture, with Logix at its core,
is an important differentiator. We are the only automation provider that
can support discrete, process, batch, safety, motion and motor control
on the same hardware platform with the same software programming
environment. Our integrated architecture is scalable with standard open
communications protocols making it easier for customers to implement
more cost effectively.
Intelligent motor control is one of our core competencies and an important
aspect of an automation system. These products and solutions enhance
the availability, effi ciency and safe operation of our customers’ critical and
most energy-intensive plant assets. Our intelligent motor control offering
can be integrated seamlessly with the Logix architecture.
Domain expertise refers to solutions and services that we provide to support
customers through the entire life cycle of their automation investment.
The combination of industry-specifi c domain expertise of our people with
our innovative technologies enables us to help our customers solve their
manufacturing and business challenges.
Global Expansion
As the manufacturing world continues to expand, we must be able to meet
our customers’ needs in emerging markets. We continue to expand our
footprint in emerging markets. We currently have approximately 60 percent of
our employees outside the U.S., and 51 percent of our revenues outside
of the U.S.
As we expand in markets with considerable growth potential and shift
our global footprint, we expect to continue to broaden the portfolio of
products, solutions and services that we provide to our customers in
these regions. We have made signifi cant investments to globalize our
manufacturing, product development and customer facing resources
in order to be closer to our customers throughout the world. Growth in
the emerging markets of Asia-Pacifi c, including China and India, Latin
America, Central and Eastern Europe and Africa is projected to exceed
global Gross Domestic Product (GDP) growth rates, due to higher levels
of infrastructure investment and the growing middle-class population. We
believe that increased demand for consumer products in these markets will
lead to manufacturing investment and provide us with additional growth
opportunities in the future.
Enhanced Market Access
Over the past decade, our investments in technology and globalization
have enabled us to expand our addressed market to approximately
$80 billion. Our process initiative has been the most important contributor
to this expansion and remains our largest growth opportunity. Logix is
the technology foundation that enabled us to become an industry leader
for batch process applications and to compete effectively with traditional
Distributed Control Systems (DCS) providers for continuous process
applications. We complement that with a growing global network of
engineers and partners to provide solutions to process customers.
OEMs represent another area of addressed market expansion and a
strong growth opportunity. To remain competitive, OEMs need to fi nd the
optimal balance of machine cost and performance while reducing their
time to market. Our scalable integrated architecture and intelligent motor
control offerings, along with design productivity tools and our motion and
safety products, can assist OEMs in addressing these business needs.
We have developed a powerful network of channel partners, technology
partners and commercial partners that act as amplifi ers to our internal
capabilities and enable us to serve our customers’ needs around the world.
Broad Range of Industries Served
We apply our knowledge of manufacturing applications to help customers
solve their business challenges. We serve customers in a wide range of
industries, including consumer products, resource-based and transportation.
Our consumer products customers are engaged in the food and beverage,
home and personal care and life sciences industries. These customers’
needs include new capacity, incremental capacity from existing facilities, an
increasingly fl exible manufacturing environment and regulatory compliance.
These customers operate in an environment where product innovation
and time to market are critical factors.
We serve customers in resource-based industries, including oil and gas,
mining, aggregates, cement, metals, energy, pulp and paper and water/
wastewater. Companies in these industries typically invest when commodity
prices are relatively high and global demand for basic materials is increasing.
In the transportation industry, factors such as geographic expansion,
investment in new model introductions and more fl exible manufacturing
technologies infl uence customers’ automation investment decisions. Our
sales in transportation are primarily to automotive and tire manufacturers.
Outsourcing and Sustainability Trends
Demand for our products, solutions and services across all industries
benefi ts from the outsourcing and sustainability needs of our customers.
Customers increasingly desire to outsource engineering services to achieve
a more fl exible cost base. Our manufacturing application knowledge
enables us to serve these customers globally.
We help our customers meet their sustainability needs pertaining to
energy effi ciency, environmental and safety goals. Higher energy prices
have historically caused customers across all industries to invest in more
energy-effi cient manufacturing processes and technologies, such as
ROCKWELL AUTOMATION, INC. - Form 10-K 13
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
intelligent motor control and energy effi cient solutions and services. In
addition, environmental and safety objectives often spur customers to
invest to ensure compliance and implement sustainable business practices.
Acquisitions
Our acquisition strategy focuses on products, solutions or services that will
be catalytic to the organic growth of our core offerings. In October 2012,
we acquired certain assets of the medium voltage drives business of
Harbin Jiuzhou Electric Co., Ltd., a leading manufacturer of medium
voltage drives, direct current power supplies, switch gear and wind
inverters, headquartered in Harbin, China. The acquisition strengthened
our presence in the Asia-Pacifi c motor control market by adding signifi cant
capabilities in design, engineering and manufacturing of medium voltage
drive products. In March 2012, we acquired certain assets and assumed
certain liabilities of SoftSwitching Technologies Corporation, an industrial
power quality detection and protection systems provider in the United States.
In May 2011, we purchased a majority stake in the equity of Lektronix
Limited and its affi liate, an independent industrial automation repair and
service provider primarily in Europe and Asia. In April 2011, we acquired
certain assets and assumed certain liabilities of Hiprom (Pty) Ltd and its
affi liates, a process control and automation systems integrator for the
mining and mineral processing industry in South Africa.
We believe the acquired companies will help us expand our served market
and deliver value to our customers.
Continuous Improvement
Productivity and continuous improvement are important components of our
culture. We have programs in place that drive ongoing process improvement,
functional streamlining, material cost savings and manufacturing productivity.
We are in the process of developing and implementing common global
processes and an enterprise-wide business system. These are intended
to improve profi tability that can be used to fund investments in growth
and to offset infl ation. Our ongoing productivity initiatives target both cost
reduction and improved asset utilization. Charges for workforce reductions
and facility rationalization may be required in order to effectively execute
our productivity programs.
U. S. Industrial Economic Trends
In 2012, sales to U.S. customers accounted for 49 percent of our total
sales. The various indicators we use to gauge the direction and momentum
of our U.S. served markets include:
• The Industrial Production Index (Total Index), published by the Federal
Reserve, which measures the real output of manufacturing, mining, and
electric and gas utilities. The Industrial Production Index is expressed as
a percentage of real output in a base year, currently 2007. Historically
there has been a meaningful correlation between the changes in the
Industrial Production Index and the level of automation investment made
by our U.S. customers in their manufacturing base.
• The Manufacturing Purchasing Managers’ Index (PMI), published by
the Institute for Supply Management (ISM), which is an indication of
the current and near-term state of manufacturing activity in the U.S.
According to the ISM, a PMI measure above 50 indicates that the U.S.
manufacturing economy is generally expanding while a measure below
50 indicates that it is generally contracting.
• Industrial Equipment Spending, which is an economic statistic compiled
by the Bureau of Economic Analysis (BEA). This statistic provides insight
into spending trends in the broad U.S. industrial economy. This measure
over the longer term has proven to demonstrate a reasonable correlation
with our domestic growth.
• Capacity Utilization (Total Industry), which is an indication of plant operating
activity published by the Federal Reserve. Historically there has been a
meaningful correlation between Capacity Utilization and levels of U.S.
industrial production.
The table below depicts the trends in these indicators from
fi scal 2010 to 2012, which point to moderating growth in manufacturing
activity during fi scal 2012. These indicators are among the factors that
lead us to anticipate a period of slower industrial growth. We continue
to believe this is a pause in the recovery and not an infl ection point. We
expect to see improved market conditions in fi scal 2013 but not until the
latter part of the year.
Industrial
Production
Index
97.2
97.3
96.7
95.3
94.2
92.9
92.6
91.6
91.1
89.7
87.8
86.3
Industrial
Equipment
Spending
(in billions)
Capacity
Utilization
(percent)
197.9
197.8
190.7
196.6
187.0
171.6
169.6
161.3
156.5
156.4
146.9
149.9
78.5
78.9
78.7
77.9
77.1
76.3
76.2
75.4
74.8
73.3
71.4
69.5
PMI
51.5
49.7
53.4
53.1
52.5
55.8
59.7
57.3
56.4
56.0
59.3
55.8
Fiscal 2012
Quarter ended:
September 2012
June 2012
March 2012
December 2011
Fiscal 2011
Quarter ended:
September 2011
June 2011
March 2011
December 2010
Fiscal 2010
Quarter ended:
September 2010
June 2010
March 2010
December 2009
Note: Economic indicators are subject to revisions by the issuing organizations.
14
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II
Non-U.S. Regional Trends
Summary of Results of Operations
In 2012, sales to non-U.S. customers accounted for 51 percent of our
total sales. These customers include both indigenous companies and
multinational companies with expanding global presence. International
demand, particularly in emerging markets, has historically been driven
by the strength of the industrial economy in each region, investments in
infrastructure and expanding consumer markets.
We use changes in Gross Domestic Product (GDP) as one indicator of
the growth opportunities in each region where we do business. In 2012,
worldwide GDP growth has slowed, and in some regions GDP has
declined, indicating a global economic slowdown. In Europe, sovereign
debt concerns have put downward pressure on industrial growth. Western
Europe continues to operate in a recessionary environment, with potential
for an improved outlook in some economies later next year. The emerging
markets in Europe, the Middle East and Africa (EMEA) experienced strong
growth that is expected to continue next year. In Asia, China experienced
its slowest GDP growth since early 2009 but the economy shows some
signs of improvement. India was fl at in 2012 compared to 2011, and there
is no indication of any near term improvement. In Latin America, Mexico
was the strongest performing country with projected continued growth.
Brazil experienced an economic slowdown in 2012 but the outlook is for
some improvement in 2013. We still expect that emerging markets will be
the fastest growing automation markets over the long term.
Despite a diffi cult economic environment in 2012, we delivered sales growth
of 4 percent, or 6 percent organically, and ended the year with record
sales of $6,259.4 million. All regions experienced organic sales growth
year over year, led by Canada with organic sales growth of 20 percent.
EMEA had strong organic growth of 6 percent in the face of a recession
in Western Europe. The end markets with the strongest sales growth for
the year were transportation and oil and gas.
We continued to execute our key initiatives, which contributed to our
positive performance:
• Sales related to our process initiative grew approximately 20 percent
year over year in 2012.
• Logix organic sales increased 8 percent compared to 2011.
• Sales in emerging markets increased 4 percent, or 8 percent organically,
as compared to 2011, with particular strength in Central and Eastern
Europe. Acquisitions contributed 2 percentage points to the increase
and currency translation reduced sales by 6 percentage points. Emerging
markets represented 22 percent of total company sales in 2012, and
we expect this proportion to continue to grow.
Total segment operating margin expanded one full percentage point while
we continued to invest for growth.
Our effective tax rate for 2012 was 23.7 percent compared to 19.7 percent
in 2011, primarily due to larger discrete tax benefi ts a year ago.
The following tables refl ect our sales and operating results for the years ended September 30, 2012, 2011 and 2010 (in millions, except per share amounts):
Year Ended September 30,
2012
2011
2010
2,650.4 $
3,609.0
6,259.4 $
2,594.3 $
3,406.1
6,000.4 $
2,115.0
2,742.0
4,857.0
Sales
Architecture & Software
Control Products & Solutions
TOTAL SALES (A)
Segment operating earnings (1)
Architecture & Software
Control Products & Solutions
$
$
$
702.8 $
428.6
1,131.4
(19.8)
(85.6)
(60.1)
965.9
(228.9)
737.0
—
737.0 $
659.1 $
368.5
1,027.6
(19.8)
(80.7)
(59.5)
867.6
(170.5)
697.1
0.7
697.8 $
Total segment operating earnings (2) (B )
Purchase accounting depreciation and amortization
General corporate — net
Interest expense
Income from continuing operations before income taxes
Provision for income taxes
Income from continuing operations
Income from discontinued operations (3)
NET INCOME
Diluted earnings per share:
Continuing operations
Discontinued operations
NET INCOME
Diluted weighted average outstanding shares
TOTAL SEGMENT OPERATING MARGIN(2) (B/A)
(1) See Note 17 in the Condensed Consolidated Financial Statements for the definition of segment operating earnings.
(2) Total segment operating earnings and total segment operating margin are non-GAAP financial measures. We believe that these measures are useful to investors as measures
of operating performance. We use these measures to monitor and evaluate the profitability of the company. Our measure of total segment operating earnings and total segment
operating margin may be different from those used by other companies.
3.05
0.17
3.22
144.0
14.8%
4.79 $
0.01
4.80 $
5.13 $
—
5.13 $
17.1%
18.1%
143.4
145.2
$
$
$
475.4
241.8
717.2
(18.9)
(93.6)
(60.5)
544.2
(103.8)
440.4
23.9
464.3
(3) See Note 13 in the Condensed Consolidated Financial Statements for a description of items reported as discontinued operations.
ROCKWELL AUTOMATION, INC. - Form 10-K 15
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
2012 Compared to 2011
(in millions, except per share amounts)
Sales
Income from continuing operations before income taxes
Diluted earnings per share from continuing operations
Sales
$
2012
6,259.4
965.9
5.13
$
2011
6,000.4
867.6
4.79
$
Change
259.0
98.3
0.34
Sales in fi scal 2012 increased 4 percent compared to 2011. Organic sales
increased 6 percent. Acquisitions contributed 1 percentage point to the
growth rate and currency translation reduced sales by 3 percentage points.
Organic sales in our solutions and services businesses grew 12 percent
year over year, acquisitions contributed 2 percentage points to the increase
and currency translation reduced sales by 4 percentage points. Year-end
backlog in these businesses was 7 percent lower than a year ago due to
an increase in order delays. Product organic sales grew 4 percent year
over year and currency translation reduced sales by 3 percentage points.
Volume accounted for substantially all of the organic sales growth during
the year as pricing contributed less than 1 percentage point to growth.
The table below presents our sales for the year ended September 30, 2012 by geographic region and the percentage change in sales from the year
ended September 30, 2011 (in millions, except percentages):
United States
Canada
Europe, Middle East and Africa
Asia-Pacifi c
Latin America
TOTAL SALES
(1) We attribute sales to the geographic regions based upon country of destination.
(2) Organic sales are sales excluding the effect of changes in currency exchange rates and acquisitions. See Supplemental Sales Information for information on this non-GAAP measure.
5%
17%
1%
3%
(1)%
4%
5%
20%
6%
5%
8%
6%
$
Year Ended
September 30, 2012(1)
3,067.3
$
464.3
1,280.6
942.4
504.8
6,259.4
Change vs.
Year Ended
September 30, 2011
Change in Organic
Sales vs. Year Ended
September 30, 2011(2)
• Organic sales growth in the United States was driven by transportation
and oil and gas industries, as consumer industries lagged the region
growth rate.
• Strong organic sales growth in Canada refl ected continued strength in
the resource-based industries.
• EMEA’s organic sales growth was driven by strong double digit growth
in its emerging markets, particularly in Central and Eastern Europe.
• Asia-Pacifi c organic sales growth was mixed across the countries in the
region with mature markets generally outperforming emerging markets
and Australia experiencing signifi cant sales declines.
• Organic sales growth in Latin America was driven by strong growth in
transportation and oil and gas industries in Mexico, partially offset by
year-over-year declines in Brazil, which is experiencing an economic
slowdown.
Income from Continuing Operations
before Income Taxes
Income from continuing operations before income taxes increased 11 percent
from $867.6 million in 2011 to $965.9 million in 2012. The increase was
predominantly due to increased volume and lower incentive compensation
expense, partially offset by increased spending to support growth.
Architecture & Software
(in millions, except percentages)
Sales
Segment operating earnings
Segment operating margin
Sales
Income Taxes
The effective tax rate for 2012 was 23.7 percent compared to 19.7 percent
in 2011. The 2012 and 2011 effective tax rates were lower than the U.S.
statutory rate of 35 percent because our sales outside of the U.S. benefi ted
from lower tax rates.
During 2012, we recognized net discrete tax benefi ts of $2.1 million primarily
related to the favorable resolution of worldwide tax matters. During 2011,
we recognized net discrete tax benefi ts of $25.0 million related to the
favorable resolution of worldwide tax matters and the retroactive extension
of the U.S. federal research credit.
See Note 15 in the Financial Statements for a complete reconciliation
of the United States statutory tax rate to the effective tax rate and more
information on tax events in 2012 and 2011 affecting the respective tax rates.
$
2012
2,650.4 $
702.8
26.5%
2011
Change
2,594.3 $
659.1
25.4%
56.1
43.7
1.1 pts
Architecture & Software sales increased 2 percent in 2012. Organic
sales increased 5 percent, and the effects of currency translation reduced
sales by 3 percentage points. Pricing contributed less than 1 percentage
point to growth during the year. Year-over-year organic sales growth in
all regions other than Canada and EMEA was slightly above the segment
average. Logix organic sales increased 8 percent in 2012 compared
to 2011 and currency translation reduced sales by 3 percentage points.
16
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II
Operating Margin
Architecture & Software segment operating earnings increased 7 percent. Operating margin expanded 1.1 points to 26.5 percent in 2012 as compared
to 2011. The increase was predominantly due to volume increases and lower incentive compensation expense, partially offset by increased spending
to support growth.
Control Products & Solutions
(in millions, except percentages)
Sales
Segment operating earnings
Segment operating margin
Sales
Control Products & Solutions sales increased 6 percent. Organic
sales increased 8 percent. Acquisitions contributed 1 percentage point
to the growth rate and currency translation reduced sales by 3 percentage
points. Pricing contributed less than 1 percentage point to growth during
the year. Canada was the strongest performing region for the segment
with double digit year-over-year organic sales growth during the year.
Year-over-year organic sales growth in Latin America and EMEA was
slightly above the segment average, while year-over-year organic sales
growth in the United States and Asia-Pacifi c was less than the segment
average growth rate.
2011 Compared to 2010
(in millions, except per share amounts)
Sales
Income from continuing operations
Diluted earnings per share from continuing operations
Sales
$
2012
3,609.0 $
428.6
11.9%
2011
3,406.1 $
368.5
10.8%
Change
202.9
60.1
1.1 pts
Operating Margin
Control Products & Solutions segment operating earnings increased
16 percent. Operating margin expanded 1.1 points to 11.9 percent in 2012
as compared to 2011. The increase was predominantly due to volume
increases and lower incentive compensation expense, partially offset by
increased spending to support growth.
$
2011
6,000.4
697.1
4.79
$
2010
4,857.0
440.4
3.05
$
Change
1,143.4
256.7
1.74
Our sales increased $1,143.4 million, or 24 percent, from $4,857.0 million
in 2010 to $6,000.4 million in 2011. Sales in our solutions and services
businesses increased 24 percent year over year, and year-end backlog in
these businesses was 12 percent higher than a year ago. Product sales
also grew 24 percent year over year refl ecting continued improvement in
customers’ spending and increased OEM demand. Volume accounted
for substantially all the organic sales growth during the period as pricing
contributed less than 1 percentage point to growth during the period.
The table below presents our sales for the year ended September 30, 2011 by geographic region and the percentage change in sales from the year
ended September 30, 2010 (in millions, except percentages):
$
United States
Canada
Europe, Middle East and Africa
Asia-Pacifi c
Latin America
TOTAL SALES
$
(1) We attribute sales to the geographic regions based upon country of destination.
(2) Organic sales are sales excluding the effect of changes in currency exchange rates and acquisitions. See Supplemental Sales Information for information on this non-GAAP measure.
18%
17%
22%
18%
30%
20%
19%
23%
28%
26%
38%
24%
Year Ended
September 30, 2011(1)
2,917.8
396.2
1,267.6
910.6
508.2
6,000.4
Change vs.
Year Ended
September 30, 2010
Change in Organic
Sales vs. Year Ended
September 30, 2010(2)
• Organic sales growth in the United States was driven by heavy and
transportation industries, as consumer industries lagged the region
growth rate.
• Organic sales growth in Canada was driven primarily by heavy industries.
• Europe’s strong organic sales growth was driven primarily by transportation
and consumer industries, and strong OEM demand.
• Asia-Pacifi c organic sales growth was driven by strength in emerging
markets, including China and India with 23 and 26 percent growth,
respectively. (1)
• Latin America growth was driven by mining and oil and gas industries.
Income from Continuing Operations
Income from continuing operations increased 58 percent from $440.4 million
in 2010 to $697.1 million in 2011. The increase was predominantly due to
increased volume, partially offset by increased spending to support growth.
Selling, general and administrative expenses increased by $137.9 million
from $1,323.3 to $1,461.2, but decreased as a percentage of sales by
2.8 points to 24.4 percent as volume increases outpaced spending increases.
General corporate expenses were net of a $3.8 million gain in 2011 resulting
from the sale of an investment.
(1) Organic sales growth in China and India exclude 4 and 3 percentage points from the effect of changes in currency, respectively.
ROCKWELL AUTOMATION, INC. - Form 10-K 17
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Income Taxes
The effective tax rate for 2011 was 19.7 percent compared to 19.1 percent
in 2010. The 2011 and 2010 effective tax rates were lower than the U.S.
statutory rate of 35 percent because our sales outside of the U.S. benefi ted
from lower tax rates.
During 2011, we recognized net discrete tax benefi ts of $25.0 million
related to the favorable resolution of worldwide tax matters and the
retroactive extension of the U.S. federal research credit. During 2010, we
recognized discrete tax benefi ts of $27.2 million primarily related to the
favorable resolution of tax matters, partially offset by discrete tax expenses
of $9.6 million primarily related to the impact of a change in Mexican tax
law and interest related to unrecognized tax benefi ts.
See Note 15 in the Financial Statements for a complete reconciliation
of the United States statutory tax rate to the effective tax rate and more
information on tax events in 2011 and 2010 affecting the respective tax rates.
Discontinued Operations
Income from discontinued operations was $0.7 million in 2011 compared
to $23.9 million in 2010. Income from discontinued operations in the prior
year included a $21.3 million tax benefi t resulting from the resolution of
a domestic tax matter relating to the January 2007 sale of our Dodge
mechanical and Reliance Electric motors and motor repair services
businesses.
Architecture & Software
(in millions, except percentages)
Sales
Segment operating earnings
Segment operating margin
$
2011
2,594.3 $
659.1
25.4%
2010
2,115.0 $
475.4
22.5%
Change
479.3
183.7
2.9 pts
Sales
Operating Margin
Architecture & Software sales increased 23 percent to $2,594.3 million
in 2011 compared to $2,115.0 million in 2010. Organic sales increased
20 percent, and the effects of currency translation contributed 3 percentage
points to the total increase. Substantially all of the organic sales increase
resulted from increased volume due to positive macroeconomic conditions
in most regions and industries. Pricing had an immaterial effect on revenue
during the period. Year-over-year sales increases in all regions other than
the United States were greater than the segment average rate of increase.
Logix sales increased 29 percent in 2011 compared to 2010.
Control Products & Solutions
(in millions, except percentages)
Sales
Segment operating earnings
Segment operating margin
Sales
Control Products & Solutions sales increased 24 percent to $3,406.1 million
in 2011 compared to $2,742.0 million in 2010. Organic sales increased
20 percent, and the effects of currency translation and acquisitions
contributed 3 percentage points and 1 percentage point, respectively,
to the total increase. The segment’s organic sales increase resulted from
growth in both products and solutions and services businesses, which
grew at rates similar to the segment average. Latin America, Asia-Pacifi c
and EMEA reported year-over-year growth above the segment average,
while year-over-year sales increases in the United States and Canada were
less than the segment average growth rate. Pricing had an immaterial
effect on revenue during the period.
Operating Margin
Control Products & Solutions segment operating earnings were $368.5 million
in 2011, up 52 percent from $241.8 million in the same period of 2010.
Operating margin increased 2.0 points to 10.8 percent in 2011 as compared
to 2010. The increase was predominantly due to volume increases, partially
offset by sales mix and increased spending to support growth.
Architecture & Software segment operating earnings were $659.1 million
in 2011, up 39 percent from $475.4 million in 2010. Operating margin
increased 2.9 points to 25.4 percent in 2011 as compared to 2010.
The increase in operating margin was predominantly due to volume
increases as a result of higher worldwide levels of industrial production
and capital spending by our customers, partially offset by sales mix and
increased spending to support growth.
$
2011
3,406.1 $
368.5
10.8%
2010
2,742.0 $
241.8
8.8%
Change
664.1
126.7
2.0 pts
Introduction of new non-GAAP measures and
changes to defi nition of segment operating
earnings for fi scal 2013
In order to provide transparency into the operational results of our business,
beginning in fi scal 2013, we will provide non-GAAP earnings measures
(Adjusted Income and Adjusted EPS) that exclude non-operating pension
costs and their related tax effects from income from continuing operations.
We defi ne non-operating pension costs as defi ned benefi t plan interest
cost, expected return on plan assets, amortization of actuarial gains
and losses and the impacts of any plan curtailments or settlements.
These components of net periodic benefi t cost primarily relate to changes
in pension assets and liabilities that are a result of market performance;
we consider these costs to be unrelated to the operational performance
of our business. In addition, we will redefi ne segment operating earnings
to exclude non-operating pension costs. Service cost and amortization
of prior service cost will continue to be included in our segment operating
earnings as these components of net periodic benefi t cost represent the
operating cost of providing pension benefi ts to our employees.
18
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II
Adjusted Income and Adjusted Earnings Per Share (EPS)
Adjusted EPS and Adjusted Income are non-GAAP measures that exclude
the effects of the non-operating pension costs and their related tax effects.
We believe these non-GAAP measures provide useful information to
investors about our operating performance and allow management and
investors to compare our operating performance period over period.
Our measures of Adjusted Income and Adjusted EPS may be different from
measures used by other companies. These non-GAAP measures should
not be considered a substitute for income from continuing operations
and diluted EPS.
Income from continuing operations
Non-operating pension costs
Tax effect of non-operating pension costs
ADJUSTED INCOME
Diluted EPS from continuing operations
Non-operating pension costs per diluted share, before tax
Tax effect of non-operating pension costs per diluted share
ADJUSTED EPS
Operating and Non-Operating Pension Costs
Service cost
Prior service credit amortization
Operating pension cost
Interest cost
Expected return on plan assets
Net actuarial loss
Other
Non-operating pension cost
NET PERIODIC BENEFIT COST
$
$
$
$
2013
(Estimate)
$
$
92.6 $
(2.5)
90.1
160.8
(227.2)
145.1
—
78.7
168.8
$
$
$
$
$
$
2012
737.0
35.2
(12.6)
759.6
5.13
0.25
(0.09)
5.29
2012
71.8
(2.3)
69.5
167.6
(228.1)
94.7
1.0
35.2
104.7
$
2011
697.1
23.5
(8.5)
712.1
4.79
0.16
(0.06)
4.89
2011
70.1
(2.2)
67.9
163.9
(204.5)
63.7
0.4
23.5
91.4
$
$
$
$
$
$
2010
440.4
10.1
(3.6)
446.9
3.05
0.07
(0.02)
3.10
2010
68.7
(3.8)
64.9
159.7
(192.1)
42.1
0.4
10.1
75.0
Segment Operating Earnings (non-GAAP)
The table below reflects our operating results for years ended
September 30, 2012, 2011 and 2010 with non-operating pension costs
reclassifi ed to their own line item for all periods presented. These costs
were previously included in the operating earnings of each segment and
in general corporate-net. Fiscal 2012, 2011 and 2010 non-operating
pension costs excluded from Architecture & Software segment operating
earnings were $11.6 million, $11.3 million and $3.4 million, respectively.
Fiscal 2012, 2011 and 2010 non-operating pension costs excluded from
Control Products & Solutions segment operating earnings were $20.9 million,
$9.9 million and $6.2 million, respectively. Fiscal 2012, 2011 and 2010
non-operating pension costs excluded from general corporate-net were
$2.7 million, $2.3 million and $0.5 million, respectively.
2012
2011
2010
Segment operating earnings:
Architecture & Software
Control Products & Solutions
$
714.4 $
449.5
1,163.9
(19.8)
(82.9)
(35.2)
(60.1)
965.9
(228.9)
737.0 $
5.13 $
670.4 $
378.4
1,048.8
(19.8)
(78.4)
(23.5)
(59.5)
867.6
(170.5)
697.1 $
4.79 $
Total segment operating earnings (1)
Purchase accounting depreciation and amortization
General corporate-net
Non-operating pension costs
Interest expense
Income from continuing operations before income taxes
Income tax provision
Income from continuing operations
Diluted EPS from continuing operations
Average diluted shares
Segment operating margin:
22.6%
Architecture & Software
9.0%
Control Products & Solutions
15.0%
Total segment operating margin (1)
(1) Total segment operating earnings and total segment operating margin are non-GAAP financial measures. We believe that these measures are useful to investors as measures
of operating performance. We use these measures to monitor and evaluate the profitability of our operating segments. Our measures of total segment operating earnings and
total segment operating margin may be different from measures used by other companies.
27.0%
12.5%
18.6%
25.8%
11.1%
17.5%
145.2
143.4
$
$
478.8
248.0
726.8
(18.9)
(93.1)
(10.1)
(60.5)
544.2
(103.8)
440.4
3.05
144.0
ROCKWELL AUTOMATION, INC. - Form 10-K 19
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Financial Condition
The following is a summary of our cash fl ows from operating, investing and fi nancing activities, as refl ected in the Consolidated Statement of Cash
Flows (in millions):
Cash provided by (used for):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash
CASH (USED FOR) PROVIDED BY CONTINUING OPERATIONS
The following table summarizes free cash fl ow (in millions):
Cash provided by continuing operating activities
Capital expenditures of continuing operations
Excess income tax benefi t from share-based compensation
FREE CASH FLOW
Our defi nition of free cash fl ow, which is a non-GAAP fi nancial measure, takes
into consideration capital investments required to maintain the operations
of our businesses and execute our strategy. Cash provided by continuing
operating activities adds back non-cash depreciation expense to earnings
and thus does not refl ect a charge for necessary capital expenditures.
Our defi nition of free cash fl ow excludes the operating cash fl ows and
capital expenditures related to our discontinued operations. Operating,
investing and fi nancing cash fl ows of our discontinued operations are
presented separately in our statement of cash fl ows. Our accounting for
share-based compensation requires us to report the related excess income
tax benefi t as a fi nancing cash fl ow rather than as an operating cash fl ow.
We have added this benefi t back to our calculation of free cash fl ow in
order to generally classify cash fl ows arising from income taxes as operating
cash fl ows. In our opinion, free cash fl ow provides useful information to
investors regarding our ability to generate cash from business operations
that is available for acquisitions and other investments, service of debt
principal, dividends and share repurchases. We use free cash fl ow as one
measure to monitor and evaluate performance. Our defi nition of free cash
fl ow may differ from defi nitions used by other companies.
Free cash flow was a source of $597.6 million for the year ended
September 30, 2012 compared to a source of $561.7 million for the year
ended September 30, 2011. Free cash fl ow for 2012 and 2011 include
discretionary pre-tax contributions to our U.S. qualifi ed pension trust of
$300 million and $150 million, respectively. The increase in free cash fl ow
is primarily due to higher income from continuing operations and a smaller
increase in working capital, partially offset by a higher discretionary pre-tax
contribution to our U.S. qualifi ed pension trust in 2012.
We purchased $487.5 million of short-term investments in the year ended
September 30, 2012, of which $137.5 million matured during the same period.
We repurchased approximately 3.7 million shares of our common stock
under our share repurchase program in 2012. The total cost of these shares
was $265.3 million, of which $7.6 million was recorded in accounts payable
at September 30, 2012, related to 110,000 shares that did not settle until
October 2012. In 2011, we repurchased approximately 4.0 million shares
of our common stock. The total cost of these shares was $299.2 million,
of which $1.7 million was recorded in accounts payable at September
30, 2011, related to 30,000 shares that did not settle until October 2011.
Our decision to repurchase stock in 2013 will depend on business conditions,
free cash fl ow generation, other cash requirements and stock price. At
September 30, 2012 we had approximately $936.7 million remaining for
stock repurchases under our existing board authorization. See Part II, Item
5, Market for the Company’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities, for additional
information regarding share repurchases.
20
ROCKWELL AUTOMATION, INC. - Form 10-K
Year Ended September 30,
2012
2011
2010
$
$
$
$
718.7 $
(503.2)
(282.7)
(16.8)
(84.0) $
718.7 $
(139.6)
18.5
597.6
$
643.7 $
(160.9)
(297.9)
(5.8)
179.1
$
643.7 $
(120.1)
38.1
561.7
$
494.0
(89.0)
(241.4)
6.8
170.4
494.0
(99.4)
16.1
410.7
We expect future uses of cash to include working capital requirements,
capital expenditures, additional contributions to our retirement plans,
acquisitions of businesses, dividends to shareowners, repurchases of
common stock and repayments of debt. We expect capital expenditures
in 2013 to be about $150 million. We expect to fund future uses of cash
with a combination of existing cash balances and short-term investments,
cash generated by operating activities, commercial paper borrowings or a
new issuance of debt or other securities.
Given our extensive international operations, a signifi cant amount of our
cash, cash equivalents and short-term investments (funds) are held in
non-U.S. subsidiaries where our undistributed earnings are permanently
reinvested. Generally, these funds would be subject to U.S. tax if repatriated.
The percentage of such non-U.S. funds can vary from quarter to quarter
with a range of approximately 70 percent to 90 percent over the past eight
quarters. As of September 30, 2012, approximately 90 percent of our funds
were held in such non-U.S. subsidiaries. We have not encountered and do
not expect to encounter any diffi culty meeting the liquidity requirements of
our domestic and international operations.
In addition to cash generated by operating activities, we have access to
existing fi nancing sources, including the public debt markets and unsecured
credit facilities with various banks. Commercial paper is our principal source of
short-term fi nancing. At September 30, 2012, commercial paper borrowings
outstanding were $157.0 million, with a weighted average interest rate
of 0.27 percent. We had no commercial paper borrowings outstanding during
the year ended September 30, 2011. Our debt-to-total-capital ratio was 36.4
percent at September 30, 2012 and 34.1 percent at September 30, 2011.
At September 30, 2012 and 2011, our total current borrowing capacity
under our unsecured revolving credit facility, which expires in March 2015,
was $750.0 million. We have not borrowed against this credit facility
at September 30, 2012 or 2011. Borrowings under this credit facility
bear interest based on short-term money market rates in effect during
the period the borrowings are outstanding. The terms of this credit facility
contain covenants under which we would be in default if our debt-to-
total-capital ratio was to exceed 60 percent. We were in compliance with
all covenants under this credit facility at September 30, 2012 and 2011.
Separate short-term unsecured credit facilities of approximately
$120.6 million at September 30, 2012 were available to non-U.S. subsidiaries.
Among other uses, we can draw on our credit facility as a standby liquidity
facility to repay our outstanding commercial paper as it matures. This
access to funds to repay maturing commercial paper is an important
factor in maintaining the short-term credit ratings set forth in the table
below. Under our current policy with respect to these ratings, we expect
to limit our other borrowings under our credit facility, if any, to amounts
that would leave enough credit available under the facility so that we
could borrow, if needed, to repay all of our then outstanding commercial
paper as it matures.
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II
The following is a summary of our credit ratings as of September 30, 2012:
Credit Rating Agency
Standard & Poor’s
Moody’s
Fitch Ratings
Our ability to access the commercial paper market, and the related costs
of these borrowings, is affected by the strength of our credit rating and
market conditions. We have not experienced any diffi culty in accessing
the commercial paper market to date. If our access to the commercial
paper market is adversely affected due to a change in market conditions
or otherwise, we would expect to rely on a combination of available cash
and our unsecured committed credit facility to provide short-term funding.
In such event, the cost of borrowings under our unsecured committed
credit facility could be higher than the cost of commercial paper borrowings.
We regularly monitor the third-party depository institutions that hold
our cash and cash equivalents. Our emphasis is primarily on safety and
liquidity of principal and secondarily on maximizing yield on those funds.
We diversify our cash and cash equivalents among counterparties to
minimize exposure to any one of these entities.
Short Term
Rating
A-1
P-2
F1
Long Term
Rating
A
A3
A
Outlook
Stable
Stable
Stable
We enter into contracts to offset changes in the amount of future cash fl ows
associated with certain third-party sales and intercompany transactions
denominated in foreign currencies forecasted to occur within the next
two years and to offset transaction gains or losses associated with some
of our assets and liabilities that are denominated in currencies other than
their functional currencies resulting from intercompany loans and other
transactions with third parties denominated in foreign currencies. Our
foreign currency forward exchange contracts are usually denominated in
currencies of major industrial countries. We diversify our foreign currency
forward exchange contracts among counterparties to minimize exposure
to any one of these entities.
Cash dividends to shareowners were $247.4 million in 2012 ($1.745 per
common share), $211.0 million in 2011 ($1.475 per common share) and
$173.6 million in 2010 ($1.22 per common share). Our current quarterly
dividend rate is $0.47 per common share ($1.88 per common share
annually), which is determined at the sole discretion of our Board of Directors.
A summary of our projected contractual cash obligations at September 30, 2012 are (in millions):
Payments by Period
$
Thereafter
2,290.5
Long-term debt and interest (a)
99.7
Minimum operating lease payments
Postretirement benefi ts (b)
100.4
—
Pension funding contribution (c)
Purchase obligations (d)
24.4
Other long-term liabilities (e)
—
—
Unrecognized tax benefi ts (f)
TOTAL
2,515.0
(a) The amounts for long-term debt assume that the respective debt instruments will be outstanding until their scheduled maturity dates. The amounts include interest, but exclude
Total
2,575.0 $
377.6
172.5
40.4
173.2
81.4
90.4
3,510.5 $
2017
56.9 $
35.7
12.7
—
7.5
—
—
112.8 $
2016
56.9 $
40.8
13.6
—
7.6
—
—
118.9 $
2015
56.9 $
54.5
14.5
—
7.6
—
—
133.5 $
2014
56.9 $
67.3
15.2
—
17.7
—
—
157.1 $
2013
56.9 $
79.6
16.1
40.4
108.4
17.3
—
318.7 $
$
the unamortized discount of $45.0 million. See Note 6 in the Financial Statements for more information regarding our long-term debt.
(b) Our postretirement plans are unfunded and are subject to change. Amounts reported are estimates of future benefit payments, to the extent estimable.
(c) Amounts reported for pension funding contributions reflect current estimates of known commitments. Contributions to our pension plans beyond 2013 will depend on future
investment performance of our pension plan assets, changes in discount rate assumptions and governmental regulations in effect at the time. Amounts subsequent to 2013 are
excluded from the summary above, as these amounts cannot be estimated with certainty. The minimum contribution for our U.S. pension plan as required by the Employee
Retirement Income Security Act (ERISA) is currently zero. We may make additional contributions to this plan at the discretion of management.
(d) This item includes long-term obligations under agreements with various service providers, contractual commitments for capital expenditures and contractually required cash
payments for acquisitions. Amounts payable in 2013 include $84.4 million for acquisition of the medium voltage drives business of Harbin Jiuzhou Electric Co., Ltd in
October 2012. See Note 19 in the Financial Statements for more information regarding the acquisition.
(e) Other long-term liabilities include environmental liabilities net of related receivables, asset retirement obligations and indemnifications. Amounts subsequent to 2013 are
excluded from the summary above, as we are unable to make a reasonably reliable estimate of when the liabilities will be paid.
(f) Amount for unrecognized tax benefits includes accrued interest and penalties. We are unable to make a reasonably reliable estimate of when the liabilities for unrecognized tax
benefits will be settled or paid.
Supplemental Sales Information
We translate sales of subsidiaries operating outside of the United States
using exchange rates effective during the respective period. Therefore,
changes in currency rates affect our reported sales. Sales by businesses
we acquired also affect our reported sales. We believe that organic sales,
defi ned as sales excluding the effects of changes in currency exchange
rates and acquisitions, which is a non-GAAP fi nancial measure, provides
useful information to investors because it refl ects regional and operating
segment performance from the activities of our businesses without the
effect of changes in currency rates or acquisitions. We use organic sales as
one measure to monitor and evaluate our regional and operating segment
performance. We determine the effect of changes in currency exchange
rates by translating the respective period’s sales using the currency
exchange rates that were in effect during the prior year. We determine the
effect of acquisitions by excluding sales in the current period for which
there are no sales in the comparable prior period. Organic sales growth
is calculated by comparing organic sales to reported sales in the prior
year. We attribute sales to the geographic regions based on the country
of destination.
ROCKWELL AUTOMATION, INC. - Form 10-K 21
Year Ended
September 30, 2011
Year Ended
September 30, 2010
Sales
2,917.8
396.2
1,267.6
910.6
508.2
6,000.4
Sales
2,456.2
321.0
987.3
724.3
368.2
4,857.0
Sales
2,594.3
3,406.1
6,000.4
Sales
2,115.0
2,742.0
4,857.0
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a reconciliation of our reported sales to organic sales (in millions):
United States
Canada
Europe, Middle East and Africa
Asia-Pacifi c
Latin America
TOTAL COMPANY SALES
$
$
United States
Canada
Europe, Middle East and Africa
Asia-Pacifi c
Latin America
TOTAL COMPANY SALES
$
$
Sales
3,067.3 $
464.3
1,280.6
942.4
504.8
6,259.4 $
Sales
2,917.8 $
396.2
1,267.6
910.6
508.2
6,000.4 $
Year Ended September 30, 2012
Sales Excluding
Changes in
Currency
Effect of
Changes in
Currency
Effect of
Acquisitions
3.3 $
9.4
98.3
11.8
43.1
165.9 $
3,070.6 $
473.7
1,378.9
954.2
547.9
6,425.3 $
Organic Sales
3,068.3
$
473.7
1,345.8
952.9
547.9
6,388.6
$
(2.3) $
—
(33.1)
(1.3)
—
(36.7) $
Year Ended September 30, 2011
Sales Excluding
Changes in
Currency
Effect of
Changes in
Currency
Effect of
Acquisitions
(6.7) $
(21.5)
(42.8)
(52.4)
(30.4)
(153.8) $
2,911.1 $
374.7
1,224.8
858.2
477.8
5,846.6 $
Organic Sales
2,910.5
$
374.7
1,209.0
857.9
477.8
5,829.9
$
(0.6) $
—
(15.8)
(0.3)
—
(16.7) $
The following is a reconciliation of our reported sales by operating segment to organic sales (in millions):
Architecture & Software
Control Products & Solutions
TOTAL COMPANY SALES
Architecture & Software
Control Products & Solutions
TOTAL COMPANY SALES
Sales
2,650.4 $
3,609.0
6,259.4 $
Sales
2,594.3 $
3,406.1
6,000.4 $
$
$
$
$
Year Ended September 30, 2012
Sales Excluding
Changes in
Currency
Effect of
Changes in
Currency
Effect of
Acquisitions
73.5 $
92.4
165.9 $
2,723.9 $
3,701.4
6,425.3 $
Organic Sales
2,723.9
3,664.7
6,388.6
$
$
— $
(36.7)
(36.7) $
Year Ended September 30, 2011
Sales Excluding
Changes in
Currency
Effect of
Changes in
Currency
Effect of
Acquisitions
(64.5) $
(89.3)
(153.8) $
2,529.8 $
3,316.8
5,846.6 $
Organic Sales
2,529.8
3,300.1
5,829.9
$
$
— $
(16.7)
(16.7) $
Year Ended
September 30, 2011
Year Ended
September 30, 2010
Critical Accounting Policies and Estimates
We have prepared the consolidated fi nancial statements in accordance
with accounting principles generally accepted in the United States, which
require us to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the consolidated fi nancial
statements and revenues and expenses during the periods reported. Actual
results could differ from those estimates. We believe the following critical
accounting policies could have the most signifi cant effect on our reported
results or require subjective or complex judgments by management.
Retirement Benefi ts — Pension
amortization of differences between the assumptions and actual experience
will affect the amount of pension expense in future periods.
Our global pension expense in 2012 was $104.7 million compared to
$91.4 million in 2011. Approximately 72 percent of our 2012 global pension
expense relates to our U.S. pension plan. The actuarial assumptions used to
determine our 2012 U.S. pension expense included the following: discount
rate of 5.20 percent (compared to 5.60 percent for 2011); expected rate of
return on plan assets of 8.00 percent (compared to 8.00 percent for 2011);
and an assumed long-term compensation increase rate of 4.00 percent
(compared to 4.00 percent for 2011).
Pension costs and obligations are actuarially determined and are infl uenced
by assumptions used to estimate these amounts, including the discount
rate, the expected rate of return on plan assets, the assumed annual
compensation increase rate, the retirement rate, the mortality rate and
the employee turnover rate. Changes in any of the assumptions and the
In 2012, 2011 and 2010, we were not required to make contributions
to satisfy minimum statutory funding requirements in our U.S. pension
plans. However, we made voluntary contributions of $300.0 million,
$150.0 million, and $150.0 million to our U.S pension plans in 2012,
2011, and 2010, respectively.
22
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II
We estimate our pension expense will be approximately $168.8 million
in 2013, an increase of approximately $64.1 million from 2012, of which
$20.6 million and $43.5 million relate to operating and non-operating
pension costs, respectively. Further information on operating and non-
operating pension costs is provided in “Introduction of new non-GAAP
measures and changes to defi nition of segment operating earnings for fi scal
2013” section in Part II, Item 7. “Management’s Discussion and Analysis”.
For 2013, our U.S. discount rate will decrease to 4.15 percent. The discount
rate was set as of our September 30 measurement date and was determined
by modeling a portfolio of bonds that match the expected cash fl ow of
our benefi t plans. We have assumed a U.S. long-term compensation
increase rate of 4.00 percent in 2013. We established this rate by analyzing
all elements of compensation that are pension-eligible earnings. Our
expected rate of return on U.S. plan assets will remain at 8.00 percent.
In estimating the expected return on plan assets, we considered actual
returns on plan assets over the long term, adjusted for forward-looking
considerations, such as infl ation, interest rates, equity performance and
the active management of the plans’ invested assets. We also considered
our current and expected mix of plan assets in setting this assumption.
The target allocations and ranges of expected return for our major categories
of U.S. plan assets are as follows:
Asset Category
Equity Securities
Debt Securities
Other
Target
Allocations
55%
40%
5%
Expected Return
9% – 10%
4% – 6%
6% – 11%
The fi nancial markets produced strong results in 2012. The plan’s
Debt Securities return exceeded the expected return range in 2012,
as lower market interest rates resulted in higher bond values.
The plan’s Equity Securities return exceeded the expected return range
in 2012, largely due to higher U.S. equity returns. While the fi nancial
markets continue to experience volatility, we have not changed our
expectation for long-term returns for the asset categories in which our
plan assets are invested. Actual return for our portfolio of U.S. plan
assets was approximately 6.60 percent annualized for the 15 years
ended September 30, 2012, and was approximately 9.00 percent annualized
for the 20 years ended September 30, 2012.
The changes in our discount rate and return on plan assets have an inverse
relationship with our net periodic benefi t cost. The change in our discount
rate also has an inverse relationship with our projected benefi t obligation.
The change in our compensation increase rate has a direct relationship
with our net periodic benefi t cost and projected benefi t obligation.
The following chart illustrates the estimated change in benefi t obligation and annual net periodic pension cost assuming a change of 25 basis points in
the key assumptions for our U.S. pension plans (in millions):
Discount rate
Return on plan assets
Compensation increase rate
Pension Benefi ts
Change in
Projected Benefi t
Obligation
$
121.3 $
—
23.6
Change in
Net Periodic
Benefi t Cost
11.0
5.9
4.8
More information regarding pension benefi ts is contained in Note 12 in the Financial Statements.
Revenue Recognition
For approximately 80 percent of our consolidated sales, we record sales
when all of the following have occurred: an agreement of sale exists; pricing
is fi xed or determinable; collection is reasonably assured; and product
has been delivered and acceptance has occurred, as may be required
according to contract terms, or services have been rendered. Within this
category, we will at times enter into arrangements that involve the delivery
of multiple products and/or the performance of services, such as installation
and commissioning. The timing of delivery, though varied based upon the
nature of the undelivered component, is generally short-term in nature.
For these arrangements, revenue is allocated to each deliverable based
on that element’s relative selling price, provided the delivered element has
value to customers on a standalone basis and, if the arrangement includes
a general right of return, delivery or performance of the undelivered items is
probable and substantially in our control. Relative selling price is obtained
from sources such as vendor-specifi c objective evidence (VSOE), which
is based on the separate selling price for that or a similar item, or from
third-party evidence such as how competitors have priced similar items.
If such evidence is not available, we use our best estimate of the selling
price, which includes various internal factors such as our pricing strategy
and market factors.
We recognize substantially all of the remainder of our sales as construction-
type contracts using either the percentage-of-completion or completed
contract methods of accounting. We record sales relating to these contracts
using the percentage-of-completion method when we determine that
progress toward completion is reasonably and reliably estimable; we use
the completed contract method for all others. Under the percentage-
of-completion method, we recognize sales and gross profi t as work is
performed using the relationship between actual costs incurred and total
estimated costs at completion. Under the percentage-of-completion
method, we adjust sales and gross profi t for revisions of estimated total
contract costs or revenue in the period the change is identifi ed. We record
estimated losses on contracts when they are identifi ed.
We use contracts and customer purchase orders to determine the existence
of an agreement of sale. We use shipping documents and customer
acceptance, when applicable, to verify delivery. We assess whether the
fee is fi xed or determinable based on the payment terms associated
with the transaction and whether the sales price is subject to refund or
adjustment. We assess collectibility based on the creditworthiness of the
customer as determined by credit evaluations and analysis, as well as the
customer’s payment history.
Returns, Rebates and Incentives
Our primary incentive program provides distributors with cash rebates or
account credits based on agreed amounts that vary depending on the
customer to whom our distributor ultimately sells the product. We also offer
various other incentive programs that provide distributors and direct sale
customers with cash rebates, account credits or additional products and
services based on meeting specifi ed program criteria. Certain distributors
are offered a right to return product, subject to contractual limitations.
ROCKWELL AUTOMATION, INC. - Form 10-K 23
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
We record accruals for customer returns, rebates and incentives at the
time of revenue recognition based primarily on historical experience.
Adjustments to the accrual may be required if actual returns, rebates
and incentives differ from historical experience or if there are changes to
other assumptions used to estimate the accrual. A critical assumption
used in estimating the accrual for our primary distributor rebate program
is the time period from when revenue is recognized to when the rebate
is processed. If the time period were to change by 10 percent, the effect
would be an adjustment to the accrual of approximately $10.7 million.
Returns, rebates and incentives are recognized as a reduction of sales if
distributed in cash or customer account credits. Rebates and incentives
are recognized in cost of sales for additional products and services to be
provided. Accruals are reported as a current liability in our balance sheet
or, where a right of offset exists, as a reduction of accounts receivable. The
accrual for customer returns, rebates and incentives was $176.6 million at
September 30, 2012 and $162.0 million at September 30, 2011, of which
$7.9 million at September 30, 2012 and $8.0 million at September 30, 2011
was included as an offset to accounts receivable.
Litigation, Claims and Contingencies
We record liabilities for litigation, claims and contingencies when an obligation
is probable and when we have a basis to reasonably estimate the value of
an obligation. We also record liabilities for environmental matters based on
estimates for known environmental remediation exposures. The liabilities
include accruals for sites we currently own or operate or formerly owned or
operated and third-party sites where we were determined to be a potentially
responsible party. At third-party environmental sites where more than one
potentially responsible party has been identifi ed, we record a liability for our
estimated allocable share of costs related to our involvement with the site
as well as an estimated allocable share of costs related to the involvement
of insolvent or unidentifi ed parties. At environmental sites where we are
the only responsible party, we record a liability for the total estimated costs
of remediation. We do not discount future expenditures for environmental
remediation obligations to their present value. Environmental liability
estimates may be affected by changing determinations of what constitutes
an environmental exposure or an acceptable level of cleanup. To the extent
that remediation procedures change, additional contamination is identifi ed,
or the fi nancial condition of other potentially responsible parties is adversely
affected, the estimate of our environmental liabilities may change.
Our accrual for environmental matters was $45.2 million, net of related
receivables of $32.1 million, at September 30, 2012 and $41.1 million, net
of related receivables of $32.5 million, at September 30, 2011. Our recorded
liability for environmental matters relates almost entirely to businesses formerly
owned by us (legacy businesses) for which we retained the responsibility
to remediate. The nature of our current business is such that the likelihood
of new environmental exposures that could result in a signifi cant charge to
earnings is low. As a result of remediation efforts at legacy sites and limited
new environmental matters, we expect that gradually, over a long period
of time, our environmental obligations will decline. However, changes in
remediation procedures at existing legacy sites or discovery of contamination
at additional sites could result in increases to our environmental obligations.
Our principal self-insurance programs include product liability where we
are self-insured up to a specifi ed dollar amount. Claims exceeding this
amount up to specifi ed limits are covered by policies issued by commercial
insurers. We estimate the reserve for product liability claims using our claims
experience for the periods being valued. Adjustments to the product liability
reserves may be required to refl ect emerging claims experience and other
factors such as infl ationary trends or the outcome of claims. The reserve
for product liability claims was $22.3 million at September 30, 2012 and
$20.1 million at September 30, 2011.
Various lawsuits, claims and proceedings have been or may be instituted or
asserted against us relating to the conduct of our business. As described
in Part I, Item 3. Legal Proceedings, we have been named as a defendant
in lawsuits alleging personal injury as a result of exposure to asbestos
that was used in certain components of our products many years ago.
See Part I, Item 3 for further discussion.
We accrue for costs related to the legal obligation associated with the
retirement of a tangible long-lived asset that results from the acquisition,
construction, development or the normal operation of the long-lived asset.
The obligation to perform the asset retirement activity is not conditional
even though the timing or method may be conditional. Identifi ed conditional
asset retirement obligations include asbestos abatement and remediation
of soil contamination beneath current and previously divested facilities.
We estimate conditional asset retirement obligations using site-specifi c
knowledge and historical industry expertise. A signifi cant change in
the costs or timing could have a signifi cant effect on our estimates.
We recorded these liabilities in the Consolidated Balance Sheet, which
totaled $3.4 million in other current liabilities and $22.4 million in other
liabilities at September 30, 2012 and $4.7 million in other current liabilities
and $23.9 million in other liabilities at September 30, 2011.
In conjunction with the sale of our Dodge mechanical and Reliance
Electric motors and motor repair services businesses, we agreed to
indemnify Baldor Electric Company for costs and damages related
to certain legacy legal, environmental and asbestos matters of these
businesses arising before January 31, 2007, for which the maximum
exposure is capped at the amount received for the sale. We estimate the
potential future payments we could incur under these indemnifi cations may
approximate $13.5 million, of which $1.6 million has been accrued in other
current liabilities at September 30, 2012 and 2011, and $8.8 million and
$10.1 million has been accrued in other liabilities at September 30, 2012
and 2011, respectively. A signifi cant change in the costs or timing could
have a signifi cant effect on our estimates.
More information regarding litigation, claims and contingencies is contained
in Note 16 in the Financial Statements.
Income Taxes
We operate in numerous taxing jurisdictions and are subject to regular
examinations by U.S. Federal, state and non-U.S. jurisdictions. Additionally,
we have retained tax liabilities and the rights to tax refunds in connection
with various divestitures of businesses in prior years. Our income tax
positions are based on research and interpretations of the income tax laws
and rulings in each of the jurisdictions in which we do business. Due to the
subjectivity of interpretations of laws and rulings in each jurisdiction, the
differences and interplay in tax laws between those jurisdictions as well
as the inherent uncertainty in estimating the fi nal resolution of complex
tax audit matters, our estimates of income tax liabilities may differ from
actual payments or assessments.
While we have support for the positions we take on our tax returns, taxing
authorities may assert interpretations of laws and facts and may challenge
cross jurisdictional transactions. Cross jurisdictional transactions between
our subsidiaries involving the transfer price for products, services, and/or
intellectual property as well as various U.S. state tax matters comprise our
more signifi cant income tax exposures. The gross liability for unrecognized
tax benefi ts, excluding interest and penalties, was recorded in other liabilities
in the Consolidated Balance Sheet in the amount of $70.3 million at
September 30, 2012 and $75.1 million at September 30, 2011. The amount
of net unrecognized tax benefi ts that would reduce our effective tax rate for
continuing operations if recognized was $23.3 million at September 30, 2012
and $30.2 million at September 30, 2011. We recognize interest and
penalties related to income taxes in income tax expense. Total accrued
interest and penalties were $20.1 million at September 30, 2012 and
$16.9 million at September 30, 2011. We believe it is reasonably possible
that the amount of unrecognized tax benefi ts could be reduced by up
to $1.2 million during the next 12 months as a result of the resolution of
worldwide tax matters and the lapses of statutes of limitations.
We recorded a valuation allowance for a portion of our deferred
tax assets related to net operating loss, tax credit, and capital loss
carryforwards (Carryforwards) and certain temporary differences in the
amount of $31.8 million at September 30, 2012 and $32.8 million at
September 30, 2011 based on the projected profi tability of the entity in
the respective tax jurisdiction. The valuation allowance is based on an
evaluation of the uncertainty that the Carryforwards and certain temporary
24
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 7A Quantitative and Qualitative Disclosures About Market Risk
PART II
differences will be realized. Our income would increase if we determine we
will be able to use more Carryforwards or certain temporary differences
than currently expected.
Our consolidated fi nancial statements provide for tax liability on undistributed
earnings of our subsidiaries that will be repatriated to the U.S. As of
September 30, 2012, we have not provided U.S. deferred taxes for
$2,081.0 million of such earnings, since these earnings have been, and
under current plans will continue to be, permanently reinvested outside
the U.S.
At the end of each interim reporting period, we estimate a base effective
tax rate that we expect for the full fi scal year based on our most recent
forecast of pretax income, permanent book and tax differences and
global tax planning strategies. We use this base rate to provide for income
taxes on a year-to-date basis, excluding the effect of signifi cant unusual
or extraordinary items and items that are reported net of their related tax
effects. We record the tax effect of signifi cant unusual or extraordinary
items and items that are reported net of their tax effects in the period in
which they occur.
More information regarding income taxes is contained in Note 15 in the
Financial Statements.
Recent Accounting Pronouncements
See Note 1 in the Financial Statements regarding recent accounting pronouncements.
ITEM 7A Quantitative and Qualitative Disclosures
About Market Risk
We are exposed to market risk during the normal course of business from changes in foreign currency exchange rates and interest rates. We manage
exposure to these risks through a combination of normal operating and fi nancing activities and derivative fi nancial instruments in the form of foreign
currency forward exchange contracts. We sometimes use interest rate swap contracts to manage the balance of fi xed and fl oating rate debt.
Foreign Currency Risk
We are exposed to foreign currency risks that arise from normal business
operations. These risks include the translation of local currency balances
of foreign subsidiaries, transaction gains and losses associated with
intercompany loans with foreign subsidiaries and transactions denominated
in currencies other than a location’s functional currency. Our objective is
to minimize our exposure to these risks through a combination of normal
operating activities and the use of foreign currency forward exchange
contracts. Contracts are usually denominated in currencies of major
industrial countries. The fair value of our foreign currency forward exchange
contracts is an asset of $12.4 million and a liability of $23.0 million at
September 30, 2012. We enter into these contracts with major fi nancial
institutions that we believe to be creditworthy.
We do not enter into derivative fi nancial instruments for speculative
purposes. In 2012, the relative strengthening of the U.S. dollar against
foreign currencies had an unfavorable impact on our revenues and results
of operations, while in 2011 the relative weakening of the U.S. dollar had
a favorable impact. While future changes in foreign currency exchange
rates are diffi cult to predict, our revenues and profi tability may be adversely
affected if the U.S. dollar further strengthens relative to 2012 levels.
Certain of our locations have assets and liabilities denominated in currencies
other than their functional currencies. We enter into foreign currency
forward exchange contracts to offset the transaction gains or losses
associated with some of these assets and liabilities. For such assets and
liabilities without offsetting foreign currency forward exchange contracts,
a 10 percent adverse change in the underlying foreign currency exchange
rates would reduce our pre-tax income by approximately $10 million.
We record all derivatives on the balance sheet at fair value regardless of
the purpose for holding them. The use of these contracts allows us to
manage transactional exposure to exchange rate fl uctuations as the gains
or losses incurred on the foreign currency forward exchange contracts
will offset, in whole or in part, losses or gains on the underlying foreign
currency exposure. 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 offset by changes in the fair value of the hedged
assets, liabilities or fi rm commitments through earnings or recognized in
other comprehensive loss until the hedged item is recognized in earnings.
We recognize the ineffective portion of a derivative’s change in fair value in
earnings immediately. The ineffective portion was not signifi cant in 2012
and 2011. A hypothetical 10 percent adverse change in underlying foreign
currency exchange rates associated with these contracts would not be
signifi cant to our fi nancial condition or results of operations.
ROCKWELL AUTOMATION, INC. - Form 10-K 25
PART II
ITEM 7A Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
In addition to existing cash balances and cash provided by normal operating
activities, we use a combination of short-term and long-term debt to fi nance
operations. We are exposed to interest rate risk on certain of these debt
obligations.
Our short-term debt obligations relate to commercial paper borrowings
and bank borrowings. Commercial paper borrowings outstanding at
September 30, 2012 were $157.0 million with remaining maturities of
6 days at a weighted average interest rate of 0.27 percent. We had no
outstanding commercial paper or bank borrowings at September 30, 2011.
As these obligations mature, we issued, and anticipate continuing to issue,
additional short-term commercial paper obligations to refi nance all or part
of these borrowings. Changes in market interest rates on commercial
paper borrowings affect our results of operations. In 2012, a 100 basis
point increase in average market interest rates would have increased
our interest expense by $2.7 million. Due to the low level of variable-rate
borrowings in 2011, interest rate changes would not have had a material
impact on interest expense.
We had outstanding fi xed rate long-term debt obligations with a carrying
value of $905.0 million at September 30, 2012 and 2011. The fair value of
this debt was $1,187.9 million at September 30, 2012 and $1,125.4 million
at September 30, 2011. The potential reduction in fair value on such
fi xed-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. We currently have no plans to repurchase our outstanding fi xed-rate
instruments before their maturity and, therefore, fl uctuations in market
interest rates would not have an effect on our results of operations or
shareowners’ equity.
26
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 8 Financial Statements and Supplementary Data
PART II
ITEM 8 Financial Statements and Supplementary Data
Consolidated Balance Sheet
(in millions)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Receivables
Inventories
Deferred income taxes
Other current assets
Total current assets
Property, net
Goodwill
Other intangible assets, net
Deferred income taxes
Other assets
TOTAL
LIABILITIES AND SHAREOWNERS’ EQUITY
Current liabilities:
Short-term debt
Accounts payable
Compensation and benefi ts
Advance payments from customers and deferred revenue
Customer returns, rebates and incentives
Other current liabilities
Total current liabilities
Long-term debt
Retirement benefi ts
Other liabilities
Commitments and contingent liabilities (Note 16)
Shareowners’ equity:
Common stock (shares issued: 181.4)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Common stock in treasury, at cost (shares held: 2012, 41.6; 2011, 39.5)
Total shareowners’ equity
TOTAL
See Notes to Consolidated Financial Statements.
September 30,
2012
2011
$
$
$
$
903.9 $
350.0
1,187.3
619.0
208.6
118.7
3,387.5
587.1
948.8
209.5
351.1
152.5
5,636.5
$
157.0 $
547.6
246.4
204.1
168.7
207.8
1,531.6
905.0
1,105.8
242.4
181.4
1,416.7
3,858.8
(1,225.3)
(2,379.9)
1,851.7
5,636.5
$
988.9
—
1,063.4
641.7
199.6
181.5
3,075.1
561.4
952.6
218.0
336.2
141.6
5,284.9
—
455.1
319.6
189.0
154.0
212.2
1,329.9
905.0
1,059.3
242.7
181.4
1,381.4
3,382.8
(992.9)
(2,204.7)
1,748.0
5,284.9
ROCKWELL AUTOMATION, INC. - Form 10-K 27
PART II
ITEM 8 Financial Statements and Supplementary Data
Consolidated Statement of Operations
(in millions, except per share amounts)
Sales
Products and solutions
Services
Cost of sales
Products and solutions
Services
Gross profi t
Selling, general and administrative expenses
Other expense (Note 14)
Interest expense
Income from continuing operations before income taxes
Income tax provision (Note 15)
Income from continuing operations
Income from discontinued operations (Note 13)
NET INCOME
Basic earnings per share:
Continuing operations
Discontinued operations
NET INCOME
Diluted earnings per share:
Continuing operations
Discontinued operations
NET INCOME
Weighted average outstanding shares:
Basic
Diluted
See Notes to Consolidated Financial Statements.
$
$
$
$
$
$
Year Ended September 30,
2012
2011
2010
5,656.1 $
603.3
6,259.4
5,430.8 $
569.6
6,000.4
(3,315.9)
(420.8)
(3,736.7)
2,522.7
(1,491.7)
(5.0)
(60.1)
965.9
(228.9)
737.0
(3,224.0)
(386.0)
(3,610.0)
2,390.4
(1,461.2)
(2.1)
(59.5)
867.6
(170.5)
697.1
—
737.0
$
0.7
697.8
$
5.20 $
—
5.20
$
5.13 $
—
5.13
$
4.88 $
—
4.88
$
4.79 $
0.01
4.80
$
141.5
143.4
142.7
145.2
4,357.9
499.1
4,857.0
(2,576.2)
(344.4)
(2,920.6)
1,936.4
(1,323.3)
(8.4)
(60.5)
544.2
(103.8)
440.4
23.9
464.3
3.09
0.17
3.26
3.05
0.17
3.22
142.0
144.0
28
ROCKWELL AUTOMATION, INC. - Form 10-K
Consolidated Statement of Cash Flows
(in millions)
Continuing operations:
Operating activities:
Net income
Income from discontinued operations
Income from continuing operations
Adjustments to arrive at cash provided by operating activities:
Depreciation
Amortization of intangible assets
Share-based compensation expense
Retirement benefi t expense
Pension trust contributions
Deferred income taxes
Net loss (gain) on disposition of property and investments
Income tax benefi t from the exercise of stock options
Excess income tax benefi t from share-based compensation
Changes in assets and liabilities, excluding effects of acquisitions, divestitures,
and foreign currency adjustments:
Receivables
Inventories
Accounts payable
Compensation and benefi ts
Income taxes
Other assets and liabilities
Cash provided by operating activities
Investing activities:
Capital expenditures
Acquisition of businesses, net of cash acquired
Purchases of short-term investments
Proceeds from maturities of short-term investments
Proceeds from sale of property and investments
Cash used for investing activities
Financing activities:
Net issuance of short-term debt
Cash dividends
Purchases of treasury stock (See Note 10 for non-cash fi nancing activities)
Proceeds from the exercise of stock options
Excess income tax benefi t from share-based compensation
Other fi nancing activities
Cash used for fi nancing activities
Effect of exchange rate changes on cash
Cash (used for) provided by continuing operations
Discontinued operations:
Cash used for discontinued operating activities
Cash used for discontinued operations
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See Notes to Consolidated Financial Statements.
ITEM 8 Financial Statements and Supplementary Data
PART II
Year Ended September 30,
2012
2011
2010
$
737.0 $
—
737.0
697.8 $
(0.7)
697.1
103.9
34.7
43.5
105.9
(341.1)
82.2
1.0
0.7
(18.5)
(135.7)
21.4
90.2
(67.0)
35.7
24.8
718.7
(139.6)
(16.2)
(487.5)
137.5
2.6
(503.2)
157.0
(247.4)
(259.4)
49.0
18.5
(0.4)
(282.7)
(16.8)
(84.0)
96.5
34.8
39.5
100.9
(184.7)
46.5
(0.9)
3.1
(38.1)
(207.2)
(41.9)
15.0
16.9
49.2
17.0
643.7
(120.1)
(45.9)
—
—
5.1
(160.9)
—
(211.0)
(298.7)
174.0
38.1
(0.3)
(297.9)
(5.8)
179.1
(1.0)
(1.0)
(85.0)
988.9
903.9
$
(3.6)
(3.6)
175.5
813.4
988.9
$
$
464.3
(23.9)
440.4
95.7
31.6
36.3
89.1
(181.2)
57.5
5.5
0.6
(16.1)
(131.7)
(166.4)
117.2
143.9
(22.7)
(5.7)
494.0
(99.4)
—
—
—
10.4
(89.0)
—
(173.6)
(118.8)
35.2
16.1
(0.3)
(241.4)
6.8
170.4
(0.8)
(0.8)
169.6
643.8
813.4
ROCKWELL AUTOMATION, INC. - Form 10-K 29
PART II
ITEM 8 Financial Statements and Supplementary Data
Consolidated Statement of Shareowners’ Equity
(in millions, except per share amounts)
Common stock (no shares issued during years)
Additional paid-in capital
Beginning balance
Income tax benefi ts from share-based compensation
Share-based compensation expense
Shares delivered under incentive plans
Ending balance
Retained earnings
Beginning balance
Net income
Cash dividends (2012, $1.745 per share; 2011, $1.475 per share;
2010, $1.22 per share)
Shares delivered under incentive plans
Ending balance
Accumulated other comprehensive loss
Beginning balance
Other comprehensive loss
Ending balance
Treasury stock
Beginning balance
Purchases
Shares delivered under incentive plans
Ending balance
Total shareowners’ equity
See Notes to Consolidated Financial Statements.
Year Ended September 30,
2012
181.4
$
2011
181.4
$
1,381.4
19.2
42.7
(26.6)
1,416.7
3,382.8
737.0
(247.4)
(13.6)
3,858.8
(992.9)
(232.4)
(1,225.3)
(2,204.7)
(265.3)
90.1
(2,379.9)
1,851.7
$
1,344.2
41.2
38.7
(42.7)
1,381.4
2,912.4
697.8
(211.0)
(16.4)
3,382.8
(841.2)
(151.7)
(992.9)
(2,136.4)
(299.2)
230.9
(2,204.7)
1,748.0
$
$
$
Consolidated Statement of Comprehensive Income
(in millions)
Net income
Other comprehensive loss:
Pension and other postretirement benefi t plan adjustments
(net of tax benefi t of $103.1, $93.2 and $71.8)
Currency translation adjustments
Net change in unrealized gains and losses on cash fl ow hedges
(net of tax benefi t of $3.1 and expense of $2.3 and $5.0)
Net change in unrealized gains and losses on investment securities, net of tax
Other comprehensive loss
Comprehensive income
See Notes to Consolidated Financial Statements.
Year Ended September 30,
2012
737.0 $
2011
697.8 $
(192.4)
(35.0)
(5.0)
—
(232.4)
504.6 $
(178.7)
23.4
3.9
(0.3)
(151.7)
546.1 $
$
$
2010
181.4
1,304.8
16.7
35.8
(13.1)
1,344.2
2,667.2
464.3
(173.6)
(45.5)
2,912.4
(727.5)
(113.7)
(841.2)
(2,109.5)
(120.0)
93.1
(2,136.4)
1,460.4
2010
464.3
(126.6)
4.4
8.3
0.2
(113.7)
350.6
30
ROCKWELL AUTOMATION, INC. - Form 10-K
Notes to Consolidated Financial Statements
ITEM 8 Financial Statements and Supplementary Data
PART II
NOTE 1
Basis of Presentation and Accounting Policies
Rockwell Automation, Inc. (the Company or Rockwell Automation) is a
leading global provider of industrial automation power, control and information
solutions that help manufacturers achieve a competitive advantage for their
businesses.
Basis of Presentation
Except as indicated, amounts refl ected in the consolidated fi nancial statements
or the notes thereto relate to our continuing operations.
Principles of Consolidation
The accompanying consolidated fi nancial statements include the accounts
of the Company and its wholly-owned and controlled majority owned
subsidiaries. Intercompany accounts and transactions have been eliminated
in consolidation. Investments in affi liates over which we do not have control
but exercise signifi cant infl uence are accounted for using the equity method
of accounting. These affi liated companies are not material individually or in
the aggregate to our fi nancial position, results of operations or cash fl ows.
Use of Estimates
The consolidated fi nancial statements have been prepared in accordance with
accounting principles generally accepted in the United States (U.S. GAAP),
which require us to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the consolidated fi nancial
statements and revenues and expenses during the periods reported. Actual
results could differ from those estimates. We use estimates in accounting for,
among other items, customer returns, rebates and incentives; allowance for
doubtful accounts; excess and obsolete inventory; share-based compensation;
acquisitions; product warranty obligations; retirement benefi ts; litigation,
claims and contingencies, including environmental matters, conditional
asset retirement obligations and contractual indemnifi cations; and income
taxes. We account for changes to estimates and assumptions prospectively
when warranted by factually based experience.
Revenue Recognition
Product and solution revenues consist of industrial automation power, control
and information; hardware and software products; and custom-engineered
systems. Service revenues include multi-vendor customer technical support
and repair, asset management and optimization consulting and training. All
service revenue recorded in our results of operations is associated with our
Control Products & Solutions segment.
For approximately 80 percent of our consolidated sales, we record sales
when all of the following have occurred: an agreement of sale exists; pricing
is fi xed or determinable; collection is reasonably assured; and product
has been delivered and acceptance has occurred, as may be required
according to contract terms, or services have been rendered. Within this
category, we will at times enter into arrangements that involve the delivery
of multiple products and/or the performance of services, such as installation
and commissioning. The timing of delivery, though varied based upon the
nature of the undelivered component, is generally short-term in nature.
For these arrangements, revenue is allocated to each deliverable based
on that element’s relative selling price, provided the delivered element has
value to customers on a standalone basis and, if the arrangement includes
a general right of return, delivery or performance of the undelivered items is
probable and substantially in our control. Relative selling price is obtained
from sources such as vendor-specifi c objective evidence (VSOE), which
is based on the separate selling price for that or a similar item, or from
third-party evidence such as how competitors have priced similar items.
If such evidence is not available, we use our best estimate of the selling
price, which includes various internal factors such as our pricing strategy
and market factors.
We recognize substantially all of the remainder of our sales as construction-
type contracts using either the percentage-of-completion or completed
contract method of accounting. We record sales relating to these contracts
using the percentage-of-completion method when we determine that
progress toward completion is reasonably and reliably estimable; we use the
completed contract method for all others. Under the percentage-of-completion
method, we recognize sales and gross profi t as work is performed using
the relationship between actual costs incurred and total estimated costs at
completion. Under the percentage-of-completion method, we adjust sales
and gross profi t for revisions of estimated total contract costs or revenue in
the period the change is identifi ed. We record estimated losses on contracts
when they are identifi ed.
We use contracts and customer purchase orders to determine the existence
of an agreement of sale. We use shipping documents and customer
acceptance, when applicable, to verify delivery. We assess whether the fee
is fi xed or determinable based on the payment terms associated with the
transaction and whether the sales price is subject to refund or adjustment.
We assess collectibility based on the creditworthiness of the customer as
determined by credit evaluations and analysis, as well as the customer’s
payment history.
Shipping and handling costs billed to customers are included in sales and
the related costs are included in cost of sales in the Consolidated Statement
of Operations.
Returns, Rebates and Incentives
Our primary incentive program provides distributors with cash rebates or
account credits based on agreed amounts that vary depending on the
customer to whom our distributor ultimately sells the product. We also offer
various other incentive programs that provide distributors and direct sale
customers with cash rebates, account credits or additional products and
services based on meeting specifi ed program criteria. Certain distributors
are offered a right to return product, subject to contractual limitations.
We record accruals for customer returns, rebates and incentives at the
time of sale based primarily on historical experience. Returns, rebates and
incentives are recognized as a reduction of sales if distributed in cash or
customer account credits. Rebates and incentives are recognized in cost
of sales for additional products and services to be provided. Accruals are
reported as a current liability in our balance sheet or, where a right of offset
exists, as a reduction of accounts receivable.
Taxes on Revenue Producing Transactions
Taxes assessed by governmental authorities on revenue producing
transactions, including sales, value added, excise and use taxes, are
recorded on a net basis (excluded from revenue).
Cash and Cash Equivalents
Cash and cash equivalents include time deposits and certifi cates of deposit
with original maturities of three months or less at the time of purchase.
ROCKWELL AUTOMATION, INC. - Form 10-K 31
PART II
ITEM 8 Financial Statements and Supplementary Data
Short-term Investments
Short-term investments include time deposits and certifi cates of deposit
with original maturities of more than three months but no more than one
year at the time of purchase. These investments are stated at cost, which
approximates fair value.
when the undiscounted expected future cash fl ows derived from an asset
are less than its carrying amount. If we determine that an asset is impaired,
we measure the impairment to be recognized as the amount by which the
recorded amount of the asset exceeds its fair value. We report assets to be
disposed of at the lower of the recorded amount or fair value less cost to
sell. We determine fair value using a discounted future cash fl ow analysis.
Receivables
We record allowances for doubtful accounts based on customer-specifi c
analysis and general matters such as current assessments of past
due balances and economic conditions. Receivables are stated net of
allowances for doubtful accounts of $28.0 million at September 30, 2012 and
$26.1 million at September 30, 2011. In addition, receivables are stated
net of an allowance for certain customer returns, rebates and incentives of
$7.9 million at September 30, 2012 and $8.0 million at September 30, 2011.
Inventories
Inventories are stated at the lower of cost or market using the fi rst-in, fi rst-
out (FIFO) or average cost methods. Market is determined on the basis of
estimated realizable values.
Property
Property, including internal use software, is stated at cost. We calculate
depreciation of property using the straight-line method over 15 to
40 years for buildings and improvements, 3 to 10 years for machinery
and equipment and 3 to 8 years for computer hardware and internal-use
software. We capitalize signifi cant renewals and enhancements and write off
replaced units. We expense maintenance and repairs, as well as renewals
of minor amounts.
Intangible Assets
Goodwill and other intangible assets generally result from business acquisitions.
We account for business acquisitions by allocating the purchase price to
tangible and intangible assets acquired and liabilities assumed at their
fair values; the excess of the purchase price over the allocated amount is
recorded as goodwill.
We review goodwill and other intangible assets with indefi nite useful lives
for impairment annually or more frequently if events or circumstances
indicate impairment may be present. Any excess in carrying value over the
estimated fair value is charged to results of operations. We perform an annual
impairment test during the second quarter of our fi scal year.
We amortize certain customer relationships on an accelerated basis over
the period of which we expect the intangible asset to generate future cash
fl ows. We amortize all other intangible assets with fi nite useful lives on a
straight-line basis over their estimated useful lives. Useful lives assigned
range from 2 to 10 years for trademarks, 7 to 20 years for customer
relationships, 7 to 17 years for technology and 2 to 30 years for other
intangible assets.
Intangible assets also include costs of software developed by our software
business to be sold, leased or otherwise marketed. Amortization of developed
computer software products is calculated on a product-by-product basis
as the greater of (a) the unamortized cost at the beginning of the year
times the ratio of the current year gross revenue for a product to the total
of the current and anticipated future gross revenue for that product, (b) the
straight-line amortization over the remaining estimated economic life of the
product or (c) one-fourth of the total deferred software cost for the project.
Impairment of Long-Lived Assets
We evaluate the recoverability of the recorded amount of long-lived assets
whenever events or changes in circumstances indicate that the recorded
amount of an asset may not be fully recoverable. Impairment is assessed
Derivative Financial Instruments
We use derivative fi nancial instruments in the form of foreign currency
forward exchange contracts to manage foreign currency risks. We use
foreign currency forward exchange contracts to offset changes in the
amount of future cash fl ows associated with certain third-party sale and
intercompany transactions expected to occur within the next two years (cash
fl ow 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. Our accounting method for derivative
fi nancial instruments is based upon the designation of such instruments as
hedges under U.S. GAAP. It is our policy to execute such instruments with
global fi nancial institutions that we believe to be creditworthy and not to
enter into derivative fi nancial instruments for speculative purposes. Foreign
currency forward exchange contracts are usually denominated in currencies
of major industrial countries.
Foreign Currency Translation
We translate assets and liabilities of subsidiaries operating outside of the
United States with a functional currency other than the U.S. dollar into U.S.
dollars using exchange rates at the end of the respective period. We translate
sales, costs and expenses at average exchange rates effective during the
respective period. We report foreign currency translation adjustments as
a component of other comprehensive loss. Currency transaction gains
and losses are included in the results of operations in the period incurred.
Research and Development Expenses
We expense research and development (R&D) costs as incurred; these costs
were $259.1 million in 2012, $254.4 million in 2011 and $198.9 million in 2010.
We include R&D expenses in cost of sales in the Consolidated Statement
of Operations.
Income Taxes
We account for uncertain tax positions by determining whether it is more
likely than not that a tax position will be sustained upon examination based
on the technical merits of the position. For tax positions that meet the more-
likely-than-not recognition threshold, we determine the amount of benefi t
to recognize in the fi nancial statements based on our assertion of the most
likely outcome resulting from an examination, including the resolution of any
related appeals or litigation processes.
Earnings Per Share
We present basic and diluted earnings per share (EPS) amounts. Basic
EPS is calculated by dividing earnings available to common shareowners,
which is income excluding the allocation to participating securities, by
the weighted average number of common shares outstanding during the
year, excluding unvested restricted stock. Diluted EPS amounts are based
upon the weighted average number of common and common equivalent
shares outstanding during the year. We use the treasury stock method to
calculate the effect of outstanding share-based compensation awards,
which requires us to compute total employee proceeds as the sum of
(a) the amount the employee must pay upon exercise of the award, (b) the
amount of unearned share-based compensation costs attributed to future
services and (c) the amount of tax benefi ts, if any, that would be credited
to additional paid-in capital assuming exercise of the award. Share-based
compensation awards for which the total employee proceeds of the award
exceed the average market price of the same award over the period have
32
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 8 Financial Statements and Supplementary Data
PART II
an antidilutive effect on EPS, and accordingly, we exclude them from the
calculation. Antidilutive share-based compensation awards for the years
ended September 30, 2012 (2.3 million shares), 2011 (2.1 million shares)
and 2010 (4.9 million shares) were excluded from the diluted EPS calculation.
U.S. GAAP requires unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents, whether paid
or unpaid, to be treated as participating securities and included in the
computation of earnings per share pursuant to the two-class method.
Our participating securities are composed of unvested restricted stock and
non-employee director restricted stock units.
The following table reconciles basic and diluted EPS amounts (in millions, except per share amounts):
Income from continuing operations
Less: Allocation to participating securities
Income from continuing operations available to common shareowners
Income from discontinued operations
Less: Allocation to participating securities
Income from discontinued operations available to common shareowners
Net income
Less: Allocation to participating securities
Net income available to common shareowners
Basic weighted average outstanding shares
Effect of dilutive securities
Stock options
Performance shares
Diluted weighted average outstanding shares
Basic earnings per share:
Continuing operations
Discontinued operations
Net income
Diluted earnings per share:
Continuing operations
Discontinued operations
Net income
$
$
$
$
$
$
$
$
$
$
2012
737.0 $
(1.4)
735.6 $
— $
—
— $
737.0 $
(1.4)
735.6 $
141.5
1.6
0.3
143.4
5.20 $
—
5.20 $
5.13 $
—
5.13
$
2011
697.1 $
(1.4)
695.7 $
0.7 $
—
0.7 $
697.8 $
(1.4)
696.4 $
142.7
2.1
0.4
145.2
4.88 $
—
4.88 $
4.79 $
0.01
4.80
$
2010
440.4
(1.0)
439.4
23.9
(0.1)
23.8
464.3
(1.1)
463.2
142.0
1.7
0.3
144.0
3.09
0.17
3.26
3.05
0.17
3.22
Share-Based Compensation
Conditional Asset Retirement Obligations
We recognize share-based compensation expense for equity awards on
a straight-line basis over the service period of the award based on the
fair value of the award as of the grant date.
Product and Workers’ Compensation
Liabilities
We record accruals for product and workers’ compensation claims in the
period in which they are probable and reasonably estimable. Our principal
self-insurance programs include product liability and workers’ compensation
where we self-insure up to a specifi ed dollar amount. Claims exceeding
this amount up to specifi ed limits are covered by policies purchased from
commercial insurers. We estimate the liability for the majority of the self-
insured claims using our claims experience for the periods being valued.
Environmental Matters
We record accruals for environmental matters in the period in which our
responsibility is probable and the cost can be reasonably estimated.
We make changes to the accruals in the periods in which the estimated
costs of remediation change. At third-party environmental sites for which
more than one potentially responsible party has been identifi ed, we record a
liability for our estimated allocable share of costs related to our involvement
with the site as well as an estimated allocable share of costs related to
the involvement of insolvent or unidentifi ed parties. At environmental sites
for which we are the only responsible party, we record a liability for the
total estimated costs of remediation. We do not discount to their present
value future expenditures for environmental remediation obligations. If we
determine that recovery from insurers or other third parties is probable,
we record a receivable for the estimated recovery.
We accrue for costs related to a legal obligation associated with the
retirement of a tangible long-lived asset that results from the acquisition,
construction, development or the normal operation of the long-lived asset.
The obligation to perform the asset retirement activity is not conditional
even though the timing or method may be conditional.
Reclassifi cations
Certain prior year amounts have been reclassifi ed to conform to the
current year presentation.
Recent Accounting Pronouncements
In July 2012, the Financial Accounting Standards Board (FASB) issued
guidance to amend and simplify the rules related to testing indefi nite-lived
intangible assets other than goodwill for impairment. The revised guidance
allows an entity to perform an initial qualitative assessment, based on the
entity’s events and circumstances, to determine whether it is more likely
than not that an indefi nite-lived intangible asset is impaired. The results of
this qualitative assessment determine whether it is necessary to perform the
quantitative impairment test. The new guidance is effective for us beginning
October 1, 2012. The adoption of this guidance will not have a material
effect on our consolidated fi nancial statements and related disclosures.
ROCKWELL AUTOMATION, INC. - Form 10-K 33
PART II
ITEM 8 Financial Statements and Supplementary Data
NOTE 2
Acquisitions
In March 2012, we acquired certain assets and assumed certain liabilities
of SoftSwitching Technologies Corporation (SoftSwitching), an industrial
power quality detection and protection systems provider in the United States.
We recorded no goodwill associated with this acquisition.
In April 2011, we acquired certain assets and assumed certain liabilities of
Hiprom (Pty) Ltd and its affi liates (Hiprom), a process control and automation
systems integrator for the mining and mineral processing industry in
South Africa. In May 2011, we purchased a majority stake in the equity
of Lektronix Limited and its affi liate (Lektronix), an independent industrial
automation repairs and service provider in Europe and Asia. We purchased
the remaining minority shares for $10.9 million in December 2011. The
aggregate purchase price of the Hiprom and Lektronix acquisitions was
$58.8 million. We recorded goodwill of $34.8 million attributable to intangible
assets that do not meet the criteria for separate recognition, including an
assembled workforce with industry-wide technical expertise and customer
service capabilities. We assigned the full amount of goodwill for Hiprom
and Lektronix to our Control Products & Solutions segment. None of the
goodwill recorded is expected to be deductible for tax purposes.
The fair values and weighted average useful lives that have been assigned to the acquired identifi able intangible assets of these acquisitions are:
(in millions, except useful lives)
Customer relationships
Technology
Trademarks
Other intangible assets
2012
2011
Fair Value
Wtd. Avg.
Useful Life
$
3.2
10 years
Fair Value
14.3
1.5
1.3
0.6
Wtd. Avg.
Useful Life
14 years
10 years
2 years
4 years
The results of operations of the acquired businesses have been included in our Consolidated Statement of Operations since the dates of acquisition.
Pro forma fi nancial information and allocation of the purchase price are not presented as the effects of these acquisitions are not material to our results
of operations or fi nancial position.
NOTE 3
Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill for the years ended September 30, 2012 and 2011 were (in millions):
Balance as of September 30, 2010
Acquisition of businesses
Translation and other
Balance as of September 30, 2011
Translation and other
BALANCE AS OF SEPTEMBER 30, 2012
Other intangible assets consist of (in millions):
Amortized intangible assets:
Computer software products
Customer relationships
Technology
Trademarks
Other
Total amortized intangible assets
Intangible assets not subject to amortization
TOTAL
Amortized intangible assets:
Computer software products
Customer relationships
Technology
Trademarks
Other
Total amortized intangible assets
Intangible assets not subject to amortization
TOTAL
34
ROCKWELL AUTOMATION, INC. - Form 10-K
Architecture
& Software
Control Products
& Solutions
$
$
385.5 $
—
1.2
386.7
1.0
387.7 $
527.0 $
34.8
4.1
565.9
(4.8)
561.1
$
September 30, 2012
Accumulated
Amortization
Carrying
Amount
123.4 $
72.6
88.9
32.1
21.4
338.4
43.7
382.1 $
61.2 $
30.7
50.9
12.9
16.9
172.6
—
172.6 $
September 30, 2011
Accumulated
Amortization
Carrying
Amount
101.2 $
72.4
85.1
31.2
21.6
311.5
43.7
355.2 $
45.3 $
23.2
44.0
9.0
15.7
137.2
—
137.2 $
$
$
$
$
Total
912.5
34.8
5.3
952.6
(3.8)
948.8
Net
62.2
41.9
38.0
19.2
4.5
165.8
43.7
209.5
Net
55.9
49.2
41.1
22.2
5.9
174.3
43.7
218.0
ITEM 8 Financial Statements and Supplementary Data
PART II
Computer software products represent costs of computer software to
be sold, leased or otherwise marketed. Computer software products
amortization expense was $15.9 million in 2012, $16.8 million in 2011 and
$13.6 million in 2010.
The Allen-Bradley® trademark has an indefi nite life, and therefore is not
subject to amortization.
Estimated amortization expense is $31.1 million in 2013, $32.7 million in 2014,
$27.0 million in 2015, $23.4 million in 2016 and $19.4 million in 2017.
We performed the annual evaluation of our goodwill and indefi nite life
intangible assets for impairment during the second quarter of 2012 and
concluded these assets are not impaired.
NOTE 4
Inventories
Inventories consist of (in millions):
Finished goods
Work in process
Raw materials, parts and supplies
INVENTORIES
NOTE 5
Property, net
Property consists of (in millions):
Land
Buildings and improvements
Machinery and equipment
Internal-use software
Construction in progress
Total
Less accumulated depreciation
PROPERTY, NET
NOTE 6
Long-term and Short-term Debt
Long-term debt consists of (in millions):
5.65% notes, payable in 2017
6.70% debentures, payable in 2028
6.25% debentures, payable in 2037
5.20% debentures, payable in 2098
Unamortized discount and other
LONG-TERM DEBT
At September 30, 2012 and 2011, our total current borrowing capacity
under our unsecured revolving credit facility, which expires in March 2015,
was $750.0 million. We have not borrowed against this credit facility
at September 30, 2012 or 2011. Borrowings under this credit facility
bear interest based on short-term money market rates in effect during
the period the borrowings are outstanding. The terms of this credit facility
contain covenants under which we would be in default if our debt-to-
total-capital ratio was to exceed 60 percent. We were in compliance with
all covenants under this credit facility at September 30, 2012 and 2011.
Separate short-term unsecured credit facilities of approximately
$120.6 million at September 30, 2012 were available to non-U.S. subsidiaries.
There were no signifi cant commitment fees or compensating balance
requirements under any of our credit facilities. Borrowings under our credit
facilities during fi scal 2012 and 2011 were not signifi cant.
September 30,
2012
262.5 $
149.5
207.0
619.0 $
2011
265.0
139.4
237.3
641.7
September 30,
2012
3.7 $
292.5
1,022.1
414.6
65.7
1,798.6
(1,211.5)
587.1
$
2011
3.8
277.2
996.3
368.5
74.7
1,720.5
(1,159.1)
561.4
September 30,
2012
250.0 $
250.0
250.0
200.0
(45.0)
905.0
$
2011
250.0
250.0
250.0
200.0
(45.0)
905.0
$
$
$
$
$
$
Our short-term debt obligations primarily relate to commercial paper
borrowings. At September 30, 2012, commercial paper outstanding
was $157.0 million. At September 30, 2012 the weighted average
interest rate and maturity period of the commercial paper outstanding
were 0.27 percent and six days, respectively. At September 30, 2011,
we had no commercial paper borrowings outstanding.
Interest payments were $59.0 million during 2012, $60.1 million during
2011 and $59.4 million during 2010.
ROCKWELL AUTOMATION, INC. - Form 10-K 35
PART II
ITEM 8 Financial Statements and Supplementary Data
NOTE 7
Other Current Liabilities
Other current liabilities consist of (in millions):
Unrealized losses on foreign exchange contracts (Note 9)
Product warranty obligations (Note 8)
Taxes other than income taxes
Accrued interest
Income taxes payable
Other
OTHER CURRENT LIABILITIES
September 30,
2012
21.5 $
37.8
37.1
15.6
14.7
81.1
207.8 $
2011
6.3
38.5
40.0
15.6
31.0
80.8
212.2
$
$
NOTE 8
Product Warranty Obligations
We record a liability for product warranty obligations at the time of sale to a
customer based upon historical warranty experience. Most of our products
are covered under a warranty period that runs for twelve months from
either the date of sale or installation. We also record a liability for specifi c
Changes in product warranty obligations are (in millions):
warranty matters when they become known and reasonably estimable.
Our product warranty obligations are included in other current liabilities
in the Consolidated Balance Sheet.
Balance at beginning of period
Warranties recorded at time of sale
Adjustments to pre-existing warranties
Settlements of warranty claims
BALANCE AT END OF PERIOD
September 30,
2012
38.5 $
35.0
(2.1)
(33.6)
37.8
$
2011
37.3
38.2
(3.9)
(33.1)
38.5
$
$
NOTE 9
Derivative Instruments and Fair Value Measurement
We use foreign currency forward exchange contracts to manage certain
foreign currency risks. We enter into these contracts to offset changes in
the amount of future cash fl ows associated with certain third-party and
intercompany transactions denominated in foreign currencies forecasted
to occur within the next two years (cash fl ow hedges). Certain of our
locations have assets and liabilities denominated in currencies other than
their functional currencies resulting from intercompany loans and other
transactions with third parties denominated in foreign currencies. We also
enter into foreign currency forward exchange contracts that we do not
designate as hedging instruments to offset the transaction gains or losses
associated with some of these assets and liabilities.
We recognize all derivative fi nancial instruments as either assets or
liabilities at fair value in the Consolidated Balance Sheet. We value our
forward exchange contracts using a market approach. We use a valuation
model based on inputs including forward and spot prices for currency
and interest rate curves. We did not change our valuation techniques
during fi scal 2012, 2011, or 2010. We report in other comprehensive
income (loss) the effective portion of the gain or loss on derivative fi nancial
instruments that we designate and that qualify as cash fl ow hedges. We
reclassify these gains or losses into earnings in the same periods when the
hedged transactions affect earnings. Gains and losses on derivative fi nancial
instruments for which we do not elect hedge accounting are recognized
in the Consolidated Statement of Operations in each period, based upon
the change in the fair value of the derivative fi nancial instruments.
It is our policy to execute such instruments with major fi nancial institutions
that we believe to be creditworthy and not to enter into derivative fi nancial
instruments for speculative purposes. We diversify our forward exchange
contracts among counterparties to minimize exposure to any one of
these entities. Most of our forward exchange contracts are denominated
in currencies of major industrial countries. The notional values of our
forward exchange contracts outstanding at September 30, 2012 were
$994.6 million, of which $614.6 million were designated as cash fl ow
hedges. Currency pairs (buy / sell) comprising the most signifi cant contract
notional value were United States dollar (USD) / euro, USD / Canadian
dollar, Swiss franc / euro, Swiss franc / USD, Singapore dollar / USD, and
Swiss franc / Canadian dollar.
We also use foreign currency denominated debt obligations to hedge portions
of our net investments in non-U.S. subsidiaries. The currency effects of the
debt obligations are refl ected in accumulated other comprehensive loss
within shareowners’ equity where they offset gains and losses recorded
on our net investments globally. We had $14.6 million and $14.1 million of
foreign currency denominated debt designated as net investment hedges
at September 30, 2012 and 2011, respectively.
U.S. GAAP defi nes fair value as the price that would be received for an asset
or paid to transfer a liability (exit price) in an orderly transaction between
market participants in the principal or most advantageous market for the
asset or liability. U.S. GAAP also classifi es the inputs used to measure
fair value into the following hierarchy:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices in active markets for similar assets or liabilities,
quoted prices for identical or similar assets or liabilities in markets
that are not active, or inputs other than quoted prices that are
observable for the asset or liability.
Level 3: Unobservable inputs for the asset or liability.
36
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 8 Financial Statements and Supplementary Data
PART II
Assets and liabilities measured at fair value on a recurring basis and their location in our Consolidated Balance Sheet were (in millions):
Derivatives Designated as Hedging Instruments
Forward exchange contracts
Forward exchange contracts
Forward exchange contracts
Forward exchange contracts
TOTAL
Derivatives Not Designated as Hedging Instruments
Forward exchange contracts
Forward exchange contracts
Forward exchange contracts
TOTAL
Balance Sheet Location
Other current assets
Other assets
Other current liabilities
Other liabilities
Balance Sheet Location
Other current assets
Other assets
Other current liabilities
$
$
$
$
Fair Value (Level 2)
September 30, 2012
September 30, 2011
8.7 $
1.3
(8.4)
(1.5)
0.1
$
15.9
1.6
(5.9)
(1.4)
10.2
Fair Value (Level 2)
September 30, 2012
September 30, 2011
2.3 $
0.1
(13.1)
(10.7) $
12.1
—
(0.4)
11.7
The pre-tax amount of (losses) gains recorded in other comprehensive loss related to hedges that would have been recorded in the Consolidated
Statement of Operations had they not been so designated was (in millions):
Forward exchange contracts (cash fl ow hedges)
Foreign currency denominated debt (net investment hedges)
TOTAL
$
$
2012
(1.7) $
(0.5)
(2.2) $
2011
3.0 $
(0.2)
2.8
$
2010
9.0
—
9.0
Approximately $0.3 million ($0.2 million net of tax) of net unrealized gains on cash fl ow hedges as of September 30, 2012 will be reclassifi ed into earnings
during the next 12 months. We expect that these net unrealized losses will be offset when the hedged items are recognized in earnings.
The pre-tax amount of (losses) gains reclassifi ed from accumulated other comprehensive loss into the Consolidated Statement of Operations related
to derivative forward exchange contracts designated as cash fl ow hedges, which offset the related losses and gains on the hedged items during the
periods presented, was:
Sales
Cost of sales
TOTAL
$
$
2012
(1.1) $
7.5
6.4
$
2011
0.3 $
(3.5)
(3.2) $
2010
(2.2)
(2.2)
(4.4)
The amount recognized in earnings as a result of ineffective hedges was not signifi cant.
The pre-tax amount of (losses) gains from forward exchange contracts not designated as hedging instruments recognized in the Consolidated Statement
of Operations during the periods presented was:
Other expense
Cost of sales
TOTAL
$
$
2012
(21.9) $
—
(21.9) $
2011
6.2
0.4
6.6
$
$
2010
(15.8)
(0.4)
(16.2)
We also hold fi nancial instruments consisting of cash, short-term investments, short-term debt and long-term debt. The fair values of our cash, short-
term investments and short-term debt approximate their carrying amounts as reported in our Consolidated Balance Sheet due to the short-term nature
of these instruments. We base the fair value of long-term debt upon quoted market prices for the same or similar issues. The following table presents
the carrying amounts and estimated fair values of fi nancial instruments not measured at fair value in the Consolidated Balance Sheet (in millions):
Cash and cash equivalents
Short-term investments
Short-term debt
Long-term debt
Long-term debt
September 30, 2012
$
Carrying
Amount
903.9 $
350.0
157.0
905.0
Total
903.9 $
350.0
157.0
1,187.9
Fair Value
Level 1
779.4 $
—
—
—
Level 2
124.5 $
350.0
157.0
1,187.9
Level 3
—
—
—
—
September 30, 2011
Carrying Value
$
905.0 $
Fair Value
1,125.4
ROCKWELL AUTOMATION, INC. - Form 10-K 37
PART II
ITEM 8 Financial Statements and Supplementary Data
NOTE 10 Shareowners’ Equity
Common Stock
At September 30, 2012, the authorized stock of the Company consisted of one billion shares of common stock, par value $1.00 per share,
and 25 million shares of preferred stock, without par value. At September 30, 2012, 19.1 million shares of authorized common stock were reserved
for various incentive plans.
Changes in outstanding common shares are summarized as follows (in millions):
Beginning balance
Treasury stock purchases
Shares delivered under incentive plans
ENDING BALANCE
2012
141.9
(3.7)
1.6
139.8
2011
141.7
(4.0)
4.2
141.9
2010
142.1
(2.2)
1.8
141.7
During September 2012, we repurchased 110,000 shares of common stock for $7.6 million that did not settle until October 2012. During September 2011,
we repurchased 30,000 shares of common stock for $1.7 million that did not settle until October 2011. These outstanding purchases were recorded
in accounts payable at September 30, 2012 and 2011.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss consists of (in millions):
Pension and other postretirement benefi t plan adjustments (Note 12)
Accumulated currency translation adjustments
Net unrealized gains on cash fl ow hedges
ACCUMULATED OTHER COMPREHENSIVE LOSS
NOTE 11 Share-Based Compensation
During 2012, 2011 and 2010 we recognized $43.5 million, $39.5 million and
$36.3 million of pre-tax share-based compensation expense, respectively.
The total income tax benefit related to share-based compensation
expense was $13.8 million during 2012, $12.9 million during 2011 and
$11.9 million during 2010. We recognize compensation expense on grants
of share-based compensation awards on a straight-line basis over the
service period of each award recipient. As of September 30, 2012, total
unrecognized compensation cost related to share-based compensation
awards was $39.9 million, net of estimated forfeitures, which we expect
to recognize over a weighted average period of approximately 1.7 years.
Our 2012 Long-Term Incentives Plan (2012 Plan) authorizes us to deliver up
to 6.8 million shares of our common stock upon exercise of stock options,
or upon grant or in payment of stock appreciation rights, performance
Stock Options
September 30,
2012
(1,226.0) $
0.5
0.2
(1,225.3) $
2011
(1,033.6)
35.5
5.2
(992.9)
$
$
shares, performance units, restricted stock units and restricted stock.
Our 2003 Directors Stock Plan, as amended, authorizes us to deliver up
to 0.5 million shares of our common stock upon exercise of stock options
or upon grant of shares of our common stock and restricted stock units.
Shares relating to awards under our 2012 Plan, 2008 Long-Term Incentive
Plan, as amended, or our 2000 Long-Term Incentives Plan, as amended,
that terminate by expiration, forfeiture, cancellation or otherwise without
the issuance or delivery of shares will be available for further awards under
the 2012 Plan. Approximately 6.9 million shares under our 2012 Plan
and 0.3 million shares under our 2003 Directors Stock Plan remain available
for future grant or payment at September 30, 2012. We use treasury stock
to deliver shares of our common stock under these plans. Our 2012 Plan
does not permit share-based compensation awards to be granted after
February 7, 2022.
We have granted non-qualifi ed and incentive stock options to purchase our common stock under various incentive plans at prices equal to the fair market
value of the stock on the grant dates. The exercise price for stock options granted under the plans may be paid in cash, shares of common stock or a
combination of cash and shares. Stock options expire ten years after the grant date and vest ratably over three years.
The per share weighted average fair value of stock options granted during the years ended September 30, 2012, 2011 and 2010 was $23.49, $21.39 and
$13.59, respectively. The total intrinsic value of stock options exercised was $43.9 million, $157.3 million and $49.7 million during 2012, 2011 and 2010,
respectively. We estimated the fair value of each stock option on the date of grant using the Black-Scholes pricing model and the following assumptions:
Average risk-free interest rate
Expected dividend yield
Expected volatility
Expected term (years)
2012
1.06%
2.29%
0.43
5.3
2011
1.94%
2.37%
0.39
5.5
2010
2.15%
3.16%
0.41
5.5
The average risk-free interest rate is based on U.S. treasury security rates
corresponding to the expected term in effect as of the grant date. The expected
dividend yield is based on the expected annual dividend as a percentage of
the market value of our common stock as of the grant date. We determined
expected volatility using daily historical volatility of our stock price over the
most recent period corresponding to the expected term as of the grant date.
We determined the expected term of the stock options using historical data
adjusted for the estimated exercise dates of unexercised options.
38
ROCKWELL AUTOMATION, INC. - Form 10-K
A summary of stock option activity for the year ended September 30, 2012 is:
ITEM 8 Financial Statements and Supplementary Data
PART II
Outstanding at October 1, 2011
Granted
Exercised
Forfeited
Cancelled
OUTSTANDING AT SEPTEMBER 30, 2012
Vested or expected to vest at September 30, 2012
Exercisable at September 30, 2012
Performance Share Awards
Shares
(in thousands)
7,781 $
1,388
(1,187)
(106)
(3)
7,873
7,647
4,781
Wtd. Avg.
Exercise Price
51.46
74.12
41.58
65.97
54.21
56.75
56.45
50.32
Wtd. Avg.
Remaining
Contractual Term
(years)
Aggregate Intrinsic
Value of In-The-
Money Options
(in millions)
6.5 $
6.4
5.3
107.6
106.4
92.1
Certain offi cers and key employees are also eligible to receive shares of our common stock in payment of performance share awards granted to
them. Grantees of performance shares will be eligible to receive shares of our common stock depending upon our total shareowner return, assuming
reinvestment of all dividends, relative to the performance of the S&P 500 over a three-year period.
A summary of performance share activity for the year ended September 30, 2012 is as follows:
Outstanding at October 1, 2011
Granted
Vested
Forfeited
OUTSTANDING AT SEPTEMBER 30, 2012
Performance Shares
(in thousands)
382 $
93
(173)
(5)
297
Wtd. Avg. Grant Date
Share Fair Value
50.70
101.57
31.82
90.27
76.84
Maximum potential shares to be delivered in payment under the
fi scal 2012 and 2011 awards are 179,144 shares and 146,220 shares,
respectively. There will be a 173 percent payout of the target number
of shares awarded in fi scal 2010, with a maximum of 232,337 shares
to be delivered in payment under the awards in December 2012. There
were 200 percent and 42 percent payouts of the target number of shares
awarded in fi scal 2009 and 2008, with 345,432 and 43,767 shares delivered
in payment under the awards in December 2011 and December 2010,
respectively.
The per share fair value of performance share awards granted during the years ended September 30, 2012, 2011 and 2010 was $101.57, $87.00 and
$54.81, respectively, which we determined using a Monte Carlo simulation and the following assumptions:
Average risk-free interest rate
Expected dividend yield
Expected volatility (Rockwell Automation)
2012
0.39%
2.29%
0.43
2011
0.63%
2.01%
0.49
2010
1.22%
2.51%
0.48
The average risk-free interest rate is based on the three-year U.S. treasury security rate in effect as of the grant date. The expected dividend yield is
based on the expected annual dividend as a percentage of the market value of our common stock as of the grant date. The expected volatilities were
determined using daily historical volatility for the most recent three-year period as of the grant date.
Restricted Stock and Restricted Stock Units
We grant restricted stock to certain employees, and non-employee
directors may elect to receive a portion of their compensation in
restricted stock units. Restrictions on restricted stock generally lapse
over periods ranging from one to fi ve years. We value restricted stock
and restricted stock units at the closing market value of our common
stock on the date of grant. The weighted average grant date fair value
of restricted stock and restricted stock unit awards granted during the
years ended September 30, 2012, 2011 and 2010 was $73.73, $69.00
and $43.76, respectively. The total fair value of shares vested during the
years ended September 30, 2012, 2011, and 2010 was $6.2 million,
$4.5 million, and $5.3 million, respectively.
A summary of restricted stock and restricted stock unit activity for the year ended September 30, 2012 is as follows:
Outstanding at October 1, 2011
Granted
Vested
Forfeited
OUTSTANDING AT SEPTEMBER 30, 2012
Restricted Stock
and Restricted
Stock Units
(in thousands)
276 $
84
(83)
(8)
269
Wtd. Avg.
Grant Date
Share Fair Value
47.52
73.73
31.97
80.55
59.57
ROCKWELL AUTOMATION, INC. - Form 10-K 39
PART II
ITEM 8 Financial Statements and Supplementary Data
NOTE 12 Retirement Benefi ts
We sponsor funded and unfunded pension plans and other postretirement
benefi t plans for our employees. The pension plans cover most of our
employees and provide for monthly pension payments to eligible employees
after retirement. Pension benefi ts for salaried employees generally are
based on years of credited service and average earnings. Pension benefi ts
for hourly employees are primarily based on specifi ed benefi t amounts
and years of service. Effective July 1, 2010 we closed participation in our
U.S. and Canada pension plans to employees hired after June 30, 2010.
Employees hired after June 30, 2010 are instead eligible to participate in
employee savings plans. The Company contributions are based on age
and years of service and range from 3% to 7% of eligible compensation.
Effective October 1, 2010, we also closed participation in our UK pension
The components of net periodic benefi t cost are (in millions):
plan to employees hired after September 30, 2010 and these employees
are now eligible for a defi ned contribution plan. Benefi ts to be provided to
plan participants hired before July 1, 2010 or October 1, 2010, respectively,
are not affected by these changes. Our policy with respect to funding our
pension obligations is to fund the minimum amount required by applicable
laws and governmental regulations. We may, however, at our discretion,
fund amounts in excess of the minimum amount required by laws and
regulations, as we did in 2012, 2011 and 2010. Other postretirement
benefi ts are primarily in the form of retirement medical plans that cover
most of our United States employees and provide for the payment of certain
medical costs of eligible employees and dependents after retirement.
Service cost
Interest cost
Expected return on plan assets
Amortization:
$
Prior service credit
Net transition obligation
Net actuarial loss
Settlements
NET PERIODIC BENEFIT COST
2012
71.8 $
167.6
(228.1)
(2.3)
—
94.7
1.0
Pension
Benefi ts
2011
70.1 $
163.9
(204.5)
(2.2)
0.4
63.7
—
91.4
$
2010
68.7 $
159.7
(192.1)
(3.8)
0.4
42.1
—
75.0
$
Other Postretirement
Benefi ts
2012
2.2 $
7.2
—
2011
3.5 $
10.2
—
(10.6)
(10.6)
—
2.4
—
1.2
$
—
6.4
—
9.5
$
2010
3.8
12.5
—
(10.6)
—
8.4
—
14.1
$
104.7
$
Benefi t obligation, plan assets, funded status, and net liability information is summarized as follows (in millions):
Pension
Benefi ts
Other Postretirement
Benefi ts
2012
3,482.6 $
71.8
167.6
597.0
—
5.4
(176.6)
2.4
4,150.2
2,572.9
470.6
341.1
5.4
(176.6)
(0.1)
3,213.3
(936.9) $
0.8 $
(10.2)
(927.5)
(936.9) $
2011
3,179.7 $
70.1
163.9
220.5
—
5.7
(182.4)
25.1
3,482.6
2,486.6
50.3
184.7
5.7
(182.4)
28.0
2,572.9
(909.7) $
4.3 $
(9.4)
(904.6)
(909.7) $
$
$
$
$
2012
157.7 $
2.2
7.2
24.0
(3.1)
10.4
(26.6)
0.7
172.5
—
—
16.2
10.4
(26.6)
—
—
(172.5) $
— $
(15.8)
(156.7)
(172.5) $
2011
209.3
3.5
10.2
(46.0)
—
11.0
(30.2)
(0.1)
157.7
—
—
19.2
11.0
(30.2)
—
—
(157.7)
—
(16.5)
(141.2)
(157.7)
Benefi t obligation at beginning of year
Service cost
Interest cost
Actuarial losses (gains)
Plan amendments
Plan participant contributions
Benefi ts paid
Currency translation and other
Benefi t obligation at end of year
Plan assets at beginning of year
Actual return on plan assets
Company contributions
Plan participant contributions
Benefi ts paid
Currency translation and other
Plan assets at end of year
FUNDED STATUS OF PLANS
Net amount on balance sheet consists of:
Other assets
Compensation and benefi ts
Retirement benefi ts
NET AMOUNT ON BALANCE SHEET
40
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 8 Financial Statements and Supplementary Data
PART II
Amounts included in accumulated other comprehensive loss, net of tax, at September 30, 2012 and 2011 which have not yet been recognized in net
periodic benefi t cost are as follows (in millions):
Prior service credit
Net actuarial loss
Net transition benefi t
TOTAL
Pension
2012
(0.3)
1,210.7
(0.1)
1,210.3
$
$
2011
(2.1)
1,038.0
(0.1)
1,035.8
$
$
$
$
Other Postretirement
Benefi ts
$
2012
(21.8)
37.5
—
15.7
$
2011
(28.4)
26.2
—
(2.2)
During 2012, we recognized prior service credits of $12.9 million
($8.2 million net of tax) and net actuarial losses of $97.1 million
($62.5 million net of tax) in pension and other postretirement net periodic
benefi t cost, which were included in accumulated other comprehensive
loss at September 30, 2011. In 2013 we expect to recognize prior
service credits of $13.3 million ($8.4 million net of tax), and net actuarial
losses of $149.5 million ($96.0 million net of tax) in pension and other
postretirement net periodic benefi t cost, which are included in accumulated
other comprehensive loss at September 30, 2012.
Net Periodic Benefi t Cost Assumptions
In 2012, 2011, and 2010 we made discretionary pre-tax contributions
of $300.0 million, $150.0 million, and $150.0 million, respectively, to our
U.S. qualifi ed pension plan trust.
The accumulated benefi t obligation for our pension plans was $3,865.3 million
and $3,264.9 million at September 30, 2012 and 2011, respectively.
Signifi cant assumptions used in determining net periodic benefi t cost for the period ended September 30 are (in weighted averages):
U.S. Plans
Discount rate
Expected return on plan assets
Compensation increase rate
Non-U.S. Plans
Discount rate
Expected return on plan assets
Compensation increase rate
Pension Benefi ts
September 30,
2011
5.60%
8.00%
4.00%
4.14%
6.07%
3.09%
2012
5.20%
8.00%
4.00%
4.15%
5.93%
3.03%
2010
6.20%
8.00%
4.30%
4.67%
6.18%
2.88%
Other Postretirement Benefi ts
September 30,
2011
2012
4.90%
—
—
4.10%
—
—
5.10%
—
—
4.75%
—
—
2010
6.00%
—
—
5.00%
—
—
Net Benefi t Obligation Assumptions
Signifi cant assumptions used in determining the benefi t obligations are (in weighted averages):
Pension Benefi ts
September 30,
2012
2011
Other Postretirement Benefi ts
September 30,
2012
2011
U.S. Plans
Discount rate
Compensation increase rate
Healthcare cost trend rate (1)
Non-U.S. Plans
4.10%
Discount rate
—
Compensation increase rate
7.12%
Healthcare cost trend rate (2)
(1) The healthcare cost trend rate reflects the estimated increase in gross medical claims costs. As a result of the plan amendment adopted effective October 1, 2002, our effective
per person retiree medical cost increase is zero percent beginning in 2005 for the majority of our postretirement benefit plans. For our other plans, we assume the gross
healthcare cost trend rate will decrease to 5.50% in 2017.
3.85%
—
8.00%
4.90%
—
8.50%
3.80%
—
6.68%
5.20%
4.00%
—
4.15%
4.00%
—
3.37%
3.03%
—
4.15%
3.03%
—
(2) Decreasing to 4.50% in 2017.
ROCKWELL AUTOMATION, INC. - Form 10-K 41
PART II
ITEM 8 Financial Statements and Supplementary Data
In determining the expected long-term rate of return on assets assumption, we consider actual returns on plan assets over the long term, adjusted for
forward-looking considerations, such as infl ation, interest rates, equity performance and the active management of the plan’s invested assets. We also
considered our current and expected mix of plan assets in setting this assumption. This resulted in the selection of the weighted average long-term rate
of return on assets assumption. Our global weighted-average targeted and actual asset allocations at September 30, by asset category, are:
Asset Category
Equity Securities
Debt Securities
Other
Allocation Range
30% – 65%
35% – 50%
0% – 35%
Target
Allocations
September 30,
2012
52%
40%
8%
52%
41%
7%
2011
49%
43%
8%
The investment objective for pension funds related to our defi ned benefi t
plans is to meet the plan’s benefi t obligations, while maximizing the long-term
growth of assets without undue risk. We strive to achieve this objective by
investing plan assets within target allocation ranges and diversifi cation within
asset categories. Target allocation ranges are guidelines that are adjusted
periodically based on ongoing monitoring by plan fi duciaries. Investment
risk is controlled by rebalancing to target allocations on a periodic basis
and ongoing monitoring of investment manager performance relative to
the investment guidelines established for each manager.
As of September 30, 2012 and 2011, our pension plans do not own our
common stock.
In certain countries where we operate, there are no legal requirements or
fi nancial incentives provided to companies to pre-fund pension obligations.
In these instances, we typically make benefi t payments directly from cash
as they become due, rather than by creating a separate pension fund.
The valuation methodologies used for our pension plans’ investments
measured at fair value are described as follows. There have been no
changes in the methodologies used at September 30, 2012 and 2011.
Common stock — Valued at the closing price reported on the active
market on which the individual securities are traded.
Mutual funds — Valued at the closing price reported on the active market
on which the individual funds are traded.
Corporate debt — Valued at either the yields currently available on
comparable securities of issuers with similar credit ratings or valued under
a discounted cash fl ow approach that maximizes observable inputs, such
as current yields of similar instruments, but includes adjustments for
certain risks that may not be observable such as credit and liquidity risks.
Government securities — Valued at the most recent closing price reported
on the active market on which the individual securities are traded.
Common collective trusts — Valued at the net asset value (NAV) as
determined by the custodian of the fund. The NAV is based on the fair
value of the underlying assets owned by the fund, minus its liabilities then
divided by the number of units outstanding.
Private equity and alternative equity — Valued at the estimated fair value,
as determined by the respective fund manager, based on the net asset
value of the investment units held at year end which is subject to judgment.
Real estate - Consists of the direct investment into Swiss real estate
(2011 only) and real estate funds. Real estate funds provide an indirect
investment into a diversifi ed and multi-sector portfolio of property assets.
Real estate funds are valued at the most recent closing price reported on
the SIX Swiss Exchange.
Insurance contracts — Valued at the aggregate amount of accumulated
contribution and investment income less amounts used to make benefi t
payments and administrative expenses which approximates fair value.
Other — Consists of other fi xed income investments and common collective
trusts with a mix of equity and fi xed income underlying assets. Other fi xed
income investments are valued at the most recent closing price reported
on the active market on which the individual securities are traded.
42
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 8 Financial Statements and Supplementary Data
PART II
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or refl ective of future fair values.
Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies
or assumptions to determine the fair value of certain fi nancial instruments could result in a different fair value measurement at the reporting date. Refer
to Note 9 for further information regarding levels in the fair value hierarchy. The following table presents our pension plans’ investments measured at
fair value as of September 30, 2012:
Level 1
Level 2
Level 3
$
0.4 $
— $
— $
U.S. Plans
Cash
Equity securities:
Common stock
Mutual funds
Common collective trusts
Fixed income securities:
Corporate debt
Government securities
Common collective trusts
Other types of investments:
Private equity
Alternative equity
Insurance contracts
Non-U.S. Plans
Cash
Equity securities:
Common stock
Common collective trusts
Fixed income securities:
Corporate debt
Government securities
Common collective trusts
Other types of investments:
Real estate
Insurance contracts
Other
653.7
160.0
—
—
287.9
—
—
—
—
26.8
39.3
—
—
0.8
—
—
—
—
—
—
530.5
525.9
80.5
145.5
—
—
—
—
—
296.9
68.7
—
167.1
46.2
—
2.8
Total
0.4
653.7
160.0
530.5
525.9
368.4
145.5
83.2
53.4
0.8
26.8
39.3
296.9
68.7
0.8
167.1
—
—
—
—
—
—
83.2
53.4
0.8
—
—
—
—
—
—
—
38.5
4.4
180.3 $
46.2
38.5
7.2
3,213.3
TOTAL PLAN INVESTMENTS
$
1,168.9 $
1,864.1 $
ROCKWELL AUTOMATION, INC. - Form 10-K 43
PART II
ITEM 8 Financial Statements and Supplementary Data
The following table presents our pension plans’ investments measured at fair value as of September 30, 2011:
Level 1
Level 2
Level 3
$
0.4 $
— $
— $
U.S. Plans
Cash
Equity securities:
Common stock
Mutual funds
Common collective trusts
Fixed income securities:
Corporate debt
Government securities
Common collective trusts
Other types of investments:
Private equity
Alternative equity
Insurance contracts
Non-U.S. Plans
Cash
Equity securities:
Common stock
Common collective trusts
Fixed income securities:
Corporate debt
Government securities
Common collective trusts
Other types of investments:
Real estate
Insurance contracts
Other
504.0
144.2
—
—
246.3
—
—
—
—
32.2
31.5
—
—
1.9
—
—
—
—
—
—
317.5
347.6
22.6
237.5
—
—
—
—
—
257.8
52.1
—
161.0
42.2
—
4.3
Total
0.4
504.0
144.2
317.5
347.6
268.9
237.5
85.0
49.0
0.9
32.2
31.5
257.8
52.1
1.9
161.0
—
—
—
—
—
—
85.0
49.0
0.9
—
—
—
—
—
—
3.9
26.9
4.1
169.8 $
46.1
26.9
8.4
2,572.9
TOTAL PLAN INVESTMENTS
$
960.5 $
1,442.6 $
The Company has corrected the classifi cation of certain pension plan investments related to the fair value hierarchy and/or the investment category as
of and for the year ended September 30, 2011. Within the fair value hierarchy in the table above, level 1 increased by $153 million, level 2 decreased
by $202 million and level 3 increased by $49 million. We have also refl ected the level 3 asset correction in the table below which summarizes changes
in fair market value for our pension plans’ level 3 assets.
44
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 8 Financial Statements and Supplementary Data
PART II
The table below sets forth a summary of changes in fair market value of our pension plans’ Level 3 assets for the year ended September 30, 2012.
U.S. Plans
Private equity
Alternative equity
Insurance contracts
Non-U.S. Plans
Real estate
Insurance contracts
Other
Balance
October 1, 2011
Realized Gains
Unrealized
Gains (Losses)
Purchases, Sales,
Issuances, and
Settlements, Net
Balance
September 30, 2012
$
$
85.0 $
49.0
0.9
3.9
26.9
4.1
169.8 $
18.0 $
4.4
—
—
—
—
22.4 $
(9.3) $
(1.4)
—
—
7.9
0.1
(2.7) $
(10.5) $
1.4
(0.1)
(3.9)
3.7
0.2
(9.2) $
83.2
53.4
0.8
—
38.5
4.4
180.3
The table below sets forth a summary of changes in fair market value of our pension plans’ Level 3 assets for the year ended September 30, 2011.
U.S. Plans
Private equity
Alternative equity
Insurance contracts
Non-U.S. Plans
Real estate
Insurance contracts
Other
Balance
October 1, 2010
Realized Gains
Unrealized
Gains (Losses)
Purchases, Sales,
Issuances, and
Settlements, Net
Balance
September 30, 2011
$
$
62.2 $
46.3
0.9
3.9
28.5
7.4
149.2 $
3.2 $
7.0
—
—
—
—
10.2 $
13.3 $
5.8
—
—
(4.7)
0.2
14.6
$
6.3 $
(10.1)
—
—
3.1
(3.5)
(4.2) $
85.0
49.0
0.9
3.9
26.9
4.1
169.8
Estimated Future Payments
We expect to contribute approximately $40 million related to our worldwide pension plans and $16 million to our postretirement benefi t plans in 2013.
The following benefi t payments, which include employees’ expected future service, as applicable, are expected to be paid (in millions):
2013
2014
2015
2016
2017
2018 – 2022
$
Pension
Benefi ts
214.7 $
210.6
215.6
219.4
226.5
1,275.1
Other
Postretirement
Benefi ts
16.1
15.2
14.5
13.6
12.7
54.2
Other Postretirement Benefi ts
A one-percentage point change in assumed healthcare cost trend rates would have the following effect (in millions):
Increase (decrease) to total of service and interest cost components $
Increase (decrease) to postretirement benefi t obligation
2012
0.2 $
2.4
2011
0.2 $
2.7
2012
(0.2) $
(2.1)
2011
(0.1)
(2.4)
One-Percentage Point Increase
One-Percentage Point Decrease
ROCKWELL AUTOMATION, INC. - Form 10-K 45
PART II
ITEM 8 Financial Statements and Supplementary Data
Pension Benefi ts
Information regarding our pension plans with accumulated benefi t obligations in excess of the fair value of plan assets (underfunded plans) at
September 30, 2012 and 2011 are as follows (in millions):
Projected benefi t obligation
Accumulated benefi t obligation
Fair value of plan assets
Defi ned Contribution Savings Plans
$
2012
3,850.4
3,573.5
2,919.0
$
2011
3,064.4
2,876.2
2,172.7
We also sponsor certain defi ned contribution savings plans for eligible employees. Expense related to these plans was $38.2 million in 2012,
$31.2 million in 2011 and $23.3 million in 2010.
NOTE 13 Discontinued Operations
During 2011, we recorded a net $0.7 million benefi t from the settlement
of an indemnifi cation of Baldor Electric Company and certain tax matters
related to divested businesses, partially offset by a change in estimate for
an environmental matter pertaining to a discontinued business.
During 2010, we recorded a $21.3 million tax benefi t as a result of the
resolution of a domestic tax matter relating to the January 2007 sale of
our Dodge mechanical and Reliance Electric motors and repair services
businesses. We also recorded a net $2.6 million after-tax benefi t relating
to changes in estimate for environmental and legal matters of our divested
businesses.
NOTE 14 Other Expense
The components of other expense are (in millions):
Net gain (loss) on dispositions of securities and property
Interest income
Royalty income
Environmental charges
Other
OTHER EXPENSE
NOTE 15
Income Taxes
Selected income tax data from continuing operations (in millions):
Components of income before income taxes:
United States
Non-United States
TOTAL
Components of the income tax provision:
Current:
United States
Non-United States
State and local
Total current
Deferred:
United States
Non-United States
State and local
Total deferred
INCOME TAX PROVISION
Total income taxes paid
$
$
$
$
$
$
$
2012
(1.0) $
7.8
2.3
(9.3)
(4.8)
(5.0) $
2012
469.6
496.3
965.9
71.3
72.3
3.1
146.7
76.8
0.4
5.0
82.2
228.9
167.5
$
$
$
$
$
2011
0.9 $
6.0
3.6
(4.5)
(8.1)
(2.1) $
2011
364.3 $
503.3
867.6 $
51.0 $
75.0
(2.0)
124.0
46.6
(5.2)
5.1
46.5
170.5 $
118.6 $
2010
(5.5)
5.0
2.4
(5.9)
(4.4)
(8.4)
2010
144.9
399.3
544.2
9.7
36.7
(0.1)
46.3
41.2
13.1
3.2
57.5
103.8
100.7
During 2012, we recognized net discrete tax benefi ts of $2.1 million primarily related to the favorable resolution of worldwide tax matters.
During 2011, we recognized net discrete tax benefi ts of $25.0 million related to the favorable resolution of worldwide tax matters and the retroactive
extension of the U.S. federal research credit.
46
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 8 Financial Statements and Supplementary Data
PART II
During 2010, we recognized discrete tax benefi ts of $27.2 million primarily related to the favorable resolution of tax matters, partially offset by discrete
tax expenses of $9.6 million primarily related to the impact of a change in Mexican tax law and interest related to unrecognized tax benefi ts.
Effective Tax Rate Reconciliation
The reconciliation between the U.S. federal statutory rate and our effective tax rate was:
Statutory tax rate
State and local income taxes
Non-United States taxes
Foreign tax credit utilization
Employee stock ownership plan benefi t
Change in valuation allowances
Domestic manufacturing deduction
Resolution of prior period tax matters
Other
EFFECTIVE INCOME TAX RATE
2012
35.0%
0.8
(10.3)
0.4
(0.3)
(0.2)
(1.1)
(0.6)
—
23.7%
2011
35.0%
0.7
(12.7)
0.9
(0.3)
0.8
(0.8)
(2.9)
(1.0)
19.7%
2010
35.0%
0.3
(12.8)
1.3
(0.4)
(3.2)
(0.2)
(4.1)
3.2
19.1%
We operate in certain non-U.S. tax jurisdictions under various government sponsored tax incentive programs, which expire during 2016 through 2019 and
may be extended if certain additional requirements are met. The tax incentive programs reduced our effective income tax rate by 4.3, 5.0 and 5.9 percentage
points in 2012, 2011 and 2010, respectively.
Deferred Taxes
The tax effects of temporary differences that give rise to our net deferred income tax assets and liabilities were (in millions):
2012
2011
Current deferred income tax assets:
Compensation and benefi ts
Product warranty costs
Inventory
Allowance for doubtful accounts
Deferred credits
Returns, rebates and incentives
Self-insurance reserves
Restructuring reserves
Net operating loss carryforwards
U.S. federal tax credit carryforwards
State tax credit carryforwards
Other — net
Current deferred income tax assets
Long-term deferred income tax assets (liabilities):
Retirement benefi ts
Property
Intangible assets
Environmental reserves
Share-based compensation
Self-insurance reserves
Deferred gains
Net operating loss carryforwards
Capital loss carryforwards
U.S. federal tax credit carryforwards
State tax credit carryforwards
Other — net
Subtotal
Valuation allowance
Net long-term deferred income tax assets
TOTAL DEFERRED INCOME TAX ASSETS
$
$
$
28.7 $
14.3
58.4
15.6
9.5
47.5
2.7
2.4
3.7
—
0.9
24.9
208.6
369.3 $
(90.3)
(34.1)
13.7
40.1
6.2
3.3
38.5
17.2
1.5
3.4
14.1
382.9
(31.8)
351.1
559.7
$
26.1
14.1
57.3
15.2
9.4
44.3
2.2
1.1
1.6
8.4
—
19.9
199.6
335.4
(80.3)
(28.9)
11.9
33.6
5.7
3.8
41.6
18.3
1.5
3.5
22.9
369.0
(32.8)
336.2
535.8
ROCKWELL AUTOMATION, INC. - Form 10-K 47
PART II
ITEM 8 Financial Statements and Supplementary Data
Total deferred tax assets were $715.9 million at September 30, 2012
and $682.8 million at September 30, 2011. Total deferred tax liabilities
were $124.4 million at September 30, 2012 and $114.2 million at
September 30, 2011.
We have not provided U.S. deferred taxes for $2,081.0 million of undistributed
earnings of the Company’s subsidiaries, since these earnings have been,
and under current plans will continue to be, permanently reinvested outside
the U.S. It is not practicable to estimate the amount of additional taxes
that may be payable upon distribution.
We believe it is more likely than not that we will realize current and long-
term deferred tax assets through the reduction of future taxable income,
other than for the deferred tax assets refl ected below. Signifi cant factors
we considered in determining the probability of the realization of the
deferred tax assets include our historical operating results and expected
future earnings.
Tax attributes and related valuation allowances at September 30, 2012 are (in millions):
Tax Attribute to be Carried Forward
Non-United States net operating loss carryforward
Non-United States net operating loss carryforward
Non-United States capital loss carryforward
United States net operating loss carryforward
United States tax credit carryforward
State and local net operating loss carryforward
State tax credit carryforward
Subtotal — tax carryforwards
Other deferred tax assets
TOTAL
Tax Benefi t
Amount
7.2 $
12.4
17.2
7.0
1.5
15.6
4.3
65.2
1.8
67.0 $
$
$
Valuation
Allowance
5.3
6.8
17.2
—
—
0.7
—
30.0
1.8
31.8
Carryforward
Period Ends
2013-2022
Indefi nite
Indefi nite
2019-2027
2018-2027
2012-2031
2015-2026
Indefi nite
During 2012, there was no material change in the valuation allowance. During 2011, the valuation allowance increased $6.1 million primarily due to the
utilization of a non-U.S. capital loss carryforward.
Unrecognized Tax Benefi ts
We operate in numerous taxing jurisdictions and are subject to regular
examinations by various U.S. federal, state and non-U.S. jurisdictions for
various tax periods. Additionally, we have retained tax liabilities and the rights
to tax refunds in connection with various divestitures of businesses in prior
years. Our income tax positions are based on research and interpretations
of the income tax laws and rulings in each of the jurisdictions in which we
do business. Due to the subjectivity of interpretations of laws and rulings
in each jurisdiction, the differences and interplay in tax laws between
those jurisdictions as well as the inherent uncertainty in estimating the
fi nal resolution of complex tax audit matters, our estimates of income tax
liabilities may differ from actual payments or assessments.
A reconciliation of our gross unrecognized tax benefi ts, excluding interest and penalties, is as follows (in millions):
Gross unrecognized tax benefi ts balance at beginning of year
Additions based on tax positions related to the current year
Additions based on tax positions related to prior years
Reductions based on tax positions related to prior years
Reductions related to settlements with taxing authorities
Reductions related to lapses of statute of limitations
Effect of foreign currency translation
Gross unrecognized tax benefi ts balance at end of year
Offsetting tax benefi ts
NET UNRECOGNIZED TAX BENEFITS
$
$
2012
75.1 $
—
3.3
—
(6.3)
(2.4)
0.6
70.3
(47.0)
23.3
$
2011
66.3 $
22.3
9.3
(0.6)
(18.5)
(3.0)
(0.7)
75.1
(44.9)
30.2
$
2010
116.7
6.3
1.0
(12.0)
(44.0)
(3.7)
2.0
66.3
(51.1)
15.2
The amount of gross unrecognized tax benefi ts that would reduce our
effective tax rate if recognized was $70.3 million ($23.3 million net of
offsetting tax benefi ts) as of September 30, 2012, $75.1 million ($30.2 million
net of offsetting tax benefi ts) as of September 30, 2011 and $57.5 million
($9.5 million net of offsetting tax benefi ts) as of September 30, 2010.
Offsetting tax benefi ts primarily consist of tax receivables that were
recorded in other assets and foreign tax credit items that were recorded
in deferred income taxes.
During 2012, there was no material change in the amount of gross
unrecognized tax benefi ts.
During the next 12 months, we believe it is reasonably possible that the
amount of gross unrecognized tax benefi ts could be reduced by up to
$1.2 million and the amount of offsetting tax benefi ts could be reduced by
up to $0.8 million as a result of the resolution of worldwide tax matters
and the lapses of statutes of limitations.
We recognize interest and penalties related to income taxes in income tax
expense. Benefi ts (expense) recognized were $(3.1) million, $9.7 million,
and $0.9 million during 2012, 2011 and 2010, respectively. Accrued interest
and penalties were $20.1 million and $16.9 million at September 30, 2012
and 2011, respectively.
We conduct business globally and are routinely audited by the various tax
jurisdictions in which we operate. We are no longer subject to U.S. federal
income tax examinations for years before 2009 and are no longer subject to
state, local and non-U.S. income tax examinations for years before 2003.
48
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 8 Financial Statements and Supplementary Data
PART II
NOTE 16 Commitments and Contingent Liabilities
Environmental Matters
Lease Commitments
Federal, state and local requirements relating to the discharge of substances
into the environment, the disposal of hazardous wastes and other activities
affecting the environment have and will continue to have an effect on
our manufacturing operations. Thus far, compliance with environmental
requirements and resolution of environmental claims have been accomplished
without material effect on our liquidity and capital resources, competitive
position, fi nancial condition or results of operations.
We have been designated as a potentially responsible party at 13 Superfund
sites, excluding sites as to which our records disclose no involvement or
as to which our potential liability has been fi nally determined and assumed
by third parties. We estimate the total reasonably possible costs we could
incur for the remediation of Superfund sites at September 30, 2012 to
be $14.3 million, of which $8.0 million has been accrued.
Various other lawsuits, claims and proceedings have been asserted against
us 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, 2012,
we have estimated the total reasonably possible costs we could incur
from these matters to be $88.1 million. We have recorded environmental
accruals for these matters of $38.9 million. In addition to the above
matters, certain environmental liabilities are substantially indemnifi ed by
ExxonMobil Corporation. At September 30, 2012, we recorded a liability
of $30.4 million and a receivable of $29.1 million for these matters. We
estimate the total reasonably possible costs that we could incur from
these matters to be $37.1 million.
Based on our assessment, we believe that our 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 effect on our
liquidity and capital resources, competitive position, fi nancial condition or
results of operations. We cannot assess the possible effect of compliance
with future requirements.
Conditional Asset Retirement Obligations
We accrue for costs related to a legal obligation associated with the
retirement of a tangible long-lived asset that results from the acquisition,
construction, development or the normal operation of the long-lived asset.
The obligation to perform the asset retirement activity is not conditional
even though the timing or method may be conditional. Identifi ed conditional
asset retirement obligations include asbestos abatement and remediation
of soil contamination beneath current and previously divested facilities.
We estimated conditional asset retirement obligations using site-specifi c
knowledge and historical industry expertise. We recorded $3.4 million in
other current liabilities and $22.4 million in other liabilities for these obligations
at September 30, 2012. At September 30, 2011, we recorded liabilities for
these asset retirement obligations of $4.7 million in other current liabilities
and $23.9 million in other liabilities.
Rental expense was $115.0 million in 2012, $111.5 million in 2011
and $106.0 million in 2010. Minimum future rental commitments under
operating leases having noncancelable lease terms in excess of one year
aggregated $377.6 million as of September 30, 2012 and are payable
as follows (in millions):
2013
2014
2015
2016
2017
Beyond 2017
TOTAL
$
$
79.6
67.3
54.5
40.8
35.7
99.7
377.6
Commitments from third parties under sublease agreements having
noncancelable lease terms in excess of one year aggregated $1.4 million as
of September 30, 2012 and are receivable through 2017 at approximately
$0.3 million per year. Most leases contain renewal options for varying
periods, and certain leases include options to purchase the leased property.
Other Matters
Various other lawsuits, claims and proceedings have been or may be
instituted or asserted against us relating to the conduct of our business,
including those pertaining to product liability, 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 us,
we believe the disposition of matters that are pending or have been
asserted will not have a material effect on our business, fi nancial condition
or results of operations.
We (including our subsidiaries) have been named as a defendant in lawsuits
alleging personal injury as a result of exposure to asbestos that was used
in certain components of our products many years ago. Currently there
are a few thousand claimants in lawsuits that name us as defendants,
together with hundreds of other companies. In some cases, the claims
involve products from divested businesses, and we are indemnifi ed for
most of the costs. However, we have agreed to defend and indemnify
asbestos claims associated with products manufactured or sold by our
former Dodge mechanical and Reliance Electric motors and motor repair
services businesses prior to their divestiture by us, which occurred on
January 31, 2007. We are also responsible for half of the costs and liabilities
associated with asbestos cases against our former Rockwell International
Corporation’s divested measurement and fl ow control business. But in
all cases, for those claimants who do show that they worked with our
products or products of divested businesses for which we are responsible,
we nevertheless believe we have meritorious defenses, in substantial
part due to the integrity of the products, the encapsulated nature of any
asbestos-containing components, and the lack of any impairing medical
condition on the part of many claimants. We defend those cases vigorously.
Historically, we have been dismissed from the vast majority of these claims
with no payment to claimants.
ROCKWELL AUTOMATION, INC. - Form 10-K 49
PART II
ITEM 8 Financial Statements and Supplementary Data
We have maintained insurance coverage that we believe covers indemnity
and defense costs, over and above self-insured retentions, for claims
arising from our former Allen-Bradley subsidiary. Following litigation against
Nationwide Indemnity Company (Nationwide) and Kemper Insurance
(Kemper), the insurance carriers that provided liability insurance coverage
to Allen-Bradley, we entered into separate agreements on April 1, 2008
with both insurance carriers to further resolve responsibility for ongoing
and future coverage of Allen-Bradley asbestos claims. In exchange for a
lump sum payment, Kemper bought out its remaining liability and has been
released from further insurance obligations to Allen-Bradley. Nationwide
entered into a cost share agreement with us to pay the substantial majority
of future defense and indemnity costs for Allen-Bradley asbestos claims.
We believe that this arrangement with Nationwide will continue to provide
coverage for Allen-Bradley asbestos claims throughout the remaining life
of the asbestos liability.
The uncertainties of asbestos claim litigation make it diffi cult to predict
accurately the ultimate outcome of asbestos claims. That uncertainty is
increased by the possibility of adverse rulings or new legislation affecting
asbestos claim litigation or the settlement process. Subject to these
uncertainties and based on our experience defending asbestos claims,
we do not believe these lawsuits will have a material effect on our fi nancial
condition or results of operations.
We have, from time to time, divested certain of our businesses. In connection
with these divestitures, certain lawsuits, claims and proceedings may be
instituted or asserted against us related to the period that we owned the
businesses, either because we agreed to retain certain liabilities related
to these periods or because such liabilities fall upon us by operation of
law. In some instances the divested business has assumed the liabilities;
however, it is possible that we might be responsible to satisfy those
liabilities if the divested business is unable to do so.
In connection with the spin-offs of our former automotive component
systems business, semiconductor systems business and Rockwell Collins
avionics and communications business, the spun-off companies have
agreed to indemnify us for substantially all contingent liabilities related
to the respective businesses, including environmental and intellectual
property matters.
In conjunction with the sale of our Dodge mechanical and Reliance Electric
motors and motor repair services businesses, we agreed to indemnify Baldor
Electric Company for costs and damages related to certain legal, legacy
environmental and asbestos matters of these businesses arising before
January 31, 2007, for which the maximum exposure would be capped at
the amount received for the sale. We estimate the potential future payments
we could incur under these indemnifi cations may approximate $13.5 million,
of which $1.6 million has been accrued in other current liabilities and
$8.8 million has been accrued in other liabilities at September 30, 2012. We
recorded $1.6 million and $10.1 million in other current liabilities and other
liabilities, respectively, at September 30, 2011 for these indemnifi cations.
In many countries we provide a limited intellectual property indemnity as
part of our terms and conditions of sale. We also at times provide limited
intellectual property indemnities in other contracts with third parties, such as
contracts concerning the development and manufacture of our products,
the divestiture of businesses and the licensing of intellectual property. Due
to the number of agreements containing such provisions, we are unable
to estimate the maximum potential future payments.
NOTE 17 Business Segment Information
Rockwell Automation is a leading global provider of industrial automation
power, control and information solutions that help manufacturers achieve
a competitive advantage for their businesses. We determine our operating
segments based on the information used by our chief operating decision
maker, our Chief Executive Offi cer, to allocate resources and assess
performance. Based upon these criteria, we organized our products
and services into two operating segments: Architecture & Software and
Control Products & Solutions.
Architecture & Software
The Architecture & Software segment contains all of the hardware, software
and communication components of our integrated control and information
architecture capable of controlling the customer’s industrial processes and
connecting with their manufacturing enterprise. Architecture & Software
has a broad portfolio of products including:
• Control platforms that perform multiple control disciplines and monitoring
of applications, including discrete, batch, continuous process, drives
control, motion control and machine safety control. Our platform products
include controllers, electronic operator interface devices, electronic input/
output devices, communication and networking products and industrial
computers. The information-enabled Logix controllers provide integrated
multi-discipline control that is modular and scalable.
• Software products that include confi guration and visualization software
used to operate and supervise control platforms, advanced process
control software and manufacturing execution software (MES) that
addresses information needs between the factory fl oor and a customer’s
enterprise business system.
• Other Architecture & Software products, including rotary and linear motion
control products, sensors and machine safety components.
Control Products & Solutions
The Control Products & Solutions segment combines a comprehensive
portfolio of intelligent motor control and industrial control products, application
expertise and project management capabilities. This comprehensive
portfolio includes:
• Low and medium voltage electro-mechanical and electronic motor starters,
motor and circuit protection devices, AC/DC variable frequency drives,
push buttons, signaling devices, termination and protection devices,
relays and timers and condition sensors.
• Value-added solutions ranging from packaged solutions such as confi gured
drives and motor control centers to automation and information solutions
where we provide design, integration and start-up services for custom-
engineered hardware and software systems primarily for manufacturing
applications.
• Services designed to help maximize a customer’s automation investment
and provide total life-cycle support, including technical support and
repair, customized safety solutions, asset management, training and
predictive and preventative maintenance.
50
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 8 Financial Statements and Supplementary Data
PART II
The following tables refl ect the sales and operating results of our reportable segments for the years ended September 30 (in millions):
Sales:
Architecture & Software
Control Products & Solutions
TOTAL
Segment operating earnings:
Architecture & Software
Control Products & Solutions
Total
Purchase accounting depreciation and amortization
General corporate-net
Interest expense
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
2012
2011
2010
$
$
$
$
2,650.4 $
3,609.0
6,259.4
$
702.8 $
428.6
1,131.4
(19.8)
(85.6)
(60.1)
965.9
$
2,594.3 $
3,406.1
6,000.4
$
659.1 $
368.5
1,027.6
(19.8)
(80.7)
(59.5)
867.6
$
2,115.0
2,742.0
4,857.0
475.4
241.8
717.2
(18.9)
(93.6)
(60.5)
544.2
Among other considerations, we evaluate performance and allocate
resources based upon segment operating earnings before income taxes,
interest expense, costs related to corporate offi ces, certain nonrecurring
corporate initiatives, gains and losses from the disposition of businesses
and incremental acquisition related expenses resulting from purchase
accounting adjustments such as intangible asset amortization, depreciation,
inventory and purchased research and development charges. Depending
on the product, intersegment sales within a single legal entity are either
at cost or cost plus a mark-up, which does not necessarily represent a
market price. Sales between legal entities are at an appropriate transfer
price. We allocate costs related to shared segment operating activities to
the segments using a methodology consistent with the expected benefi t.
Redefi ning segment operating earnings for fi scal 2013
Beginning in fi scal 2013, we are changing our defi nition of segment operating
earnings to also exclude non-operating pension costs. Non-operating
pension costs consist of defi ned benefi t plan interest cost, expected
return on plan assets, amortization of actuarial gains and losses and
the impacts of any plan curtailments or settlements. We will continue to
include service cost and amortization of prior service cost in the business
segment that incurred the expense.
The following tables summarize the identifi able assets at September 30 and 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):
Identifi able assets:
Architecture & Software
Control Products & Solutions
Corporate
TOTAL
Depreciation and amortization:
Architecture & Software
Control Products & Solutions
Corporate
Total
Purchase accounting depreciation and amortization
TOTAL
Capital expenditures for property:
Architecture & Software
Control Products & Solutions
Corporate
TOTAL
2012
2011
2010
$
$
$
$
$
$
$
$
$
$
$
1,648.4
2,270.7
1,717.4
5,636.5
61.6
57.1
0.1
118.8
19.8
138.6
24.6
55.3
59.7
$
$
$
$
$
1,608.4
2,116.1
1,560.4
5,284.9
60.0
51.4
0.1
111.5
19.8
131.3
28.1
38.2
53.8
139.6
$
120.1
$
1,238.8
1,897.1
1,612.4
4,748.3
54.0
54.3
0.1
108.4
18.9
127.3
33.0
26.6
39.8
99.4
Identifi able assets at Corporate consist principally of cash, net deferred
income tax assets, prepaid pension and property. Property shared by the
segments and used in operating activities is also reported in Corporate
identifi able assets and Corporate capital expenditures. Corporate
identifi able assets include shared net property balances of $318.0 million,
$315.7 million and $293.2 million at September 30, 2012, 2011 and 2010,
respectively, for which depreciation expense has been allocated to
segment operating earnings based on the expected benefi t to be realized
by each segment. Corporate capital expenditures include $59.7 million,
$53.8 million and $39.1 million in 2012, 2011 and 2010, respectively, that
will be shared by our operating segments.
ROCKWELL AUTOMATION, INC. - Form 10-K 51
PART II
ITEM 8 Financial S tatements and S upplementary D ata
We conduct a signifi cant portion of our business activities outside the United States. The following tables present sales and property by geographic
region (in millions):
United States
Canada
Europe, Middle East and Africa
Asia-Pacifi c
Latin America
TOTAL
$
$
Sales
Property
2012
3,067.3 $
464.3
1,280.6
942.4
504.8
6,259.4 $
2011
2,917.8 $
396.2
1,267.6
910.6
508.2
6,000.4 $
2010
2,456.2 $
321.0
987.3
724.3
368.2
4,857.0 $
2012
458.8 $
8.6
41.6
39.4
38.7
587.1 $
2011
446.1 $
9.2
42.6
36.8
26.7
561.4 $
2010
424.9
9.7
40.3
34.2
27.8
536.9
We attribute sales to the geographic regions based on the country of
destination.
In the United States, Canada and certain other countries, we sell our
products primarily through independent distributors. In the remaining
countries, we sell products through a combination of direct sales and sales
through distributors. We sell large systems and service offerings principally
through a direct sales force, though opportunities are sometimes identifi ed
through distributors. Sales to our largest distributor in 2012, 2011 and 2010,
which are attributable to both segments, were approximately 10 percent of
our total sales.
NOTE 18 Quarterly Financial Information (Unaudited)
(in millions, except per share amounts)
Sales
Gross profi t
Income before income taxes
Net income
Earnings per share:
Basic
Diluted
$
First
1,473.9 $
618.7
242.9
183.3
2012 Quarters
Second
1,561.1 $
618.3
223.3
167.8
Third
1,560.4 $
631.5
244.8
190.7
Fourth
1,664.0 $
654.2
254.9
195.2
1.29
1.27
1.18
1.16
1.34
1.33
1.39
1.38
$
(in millions, except per share amounts)
Sales
Gross profi t
Income from continuing operations before income taxes
Income from continuing operations
Income from discontinued operations (a)
Net income
Basic earnings per share:
Continuing operations
Discontinued operations (a)
Net income
Diluted earnings per share:
Continuing operations
Discontinued operations (a)
Net income
First
1,365.8 $
543.9
186.7
150.1
—
150.1
1.06
—
1.06
1.04
—
1.04
2011 Quarters
Second
1,464.1 $
576.5
203.6
166.4
—
166.4
Third
1,516.2 $
606.8
221.2
178.8
0.7
179.5
1.16
—
1.16
1.14
—
1.14
1.24
0.01
1.25
1.22
0.01
1.23
Fourth
1,654.3 $
663.2
256.1
201.8
—
201.8
1.41
—
1.41
1.39
—
1.39
Note: The sum of the quarterly per share amounts will not necessarily equal the annual per share amounts presented.
(a) See Note 13 for more information on discontinued operations.
2012
6,259.4
2,522.7
965.9
737.0
5.20
5.13
2011
6,000.4
2,390.4
867.6
697.1
0.7
697.8
4.88
—
4.88
4.79
0.01
4.80
NOTE 19 Subsequent Event
In October 2012, we acquired certain assets of the medium voltage
drives business of Harbin Jiuzhou Electric Co., Ltd. (Harbin), a leading
manufacturer of medium voltage drives, direct current power supplies, switch
gear and wind inverters, headquartered in Harbin, China. The acquisition
strengthened our presence in the Asia-Pacifi c motor control market by
adding signifi cant capabilities in design, engineering and manufacturing
of medium voltage drive products. The preliminary purchase price of the
acquisition was $84.4 million. The accounting for the Harbin acquisition was
incomplete at the time we issued our fi nancial statements. Accordingly, it
is impracticable for us to make certain business combination disclosures
such as the amount of goodwill and intangibles acquired and the amount
of goodwill expected to be deductible for tax purposes.
52
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 8 Report of Independent Registered Public Accounting Firm
PART II
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareowners of
Rockwell Automation, Inc.
Milwaukee, Wisconsin
We have audited the accompanying consolidated balance sheets of Rockwell Automation, Inc. (the “Company”) as of September 30, 2012 and 2011,
and the related consolidated statements of operations, shareowners’ equity, cash fl ows, and comprehensive income for each of the three years in
the period ended September 30, 2012. Our audits also included the fi nancial statement schedule listed in the Index at Item 15(a)(2). We also have
audited the Company’s internal control over fi nancial reporting as of September 30, 2012, based on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for these
fi nancial statements and fi nancial statement schedule, for maintaining effective internal control over fi nancial reporting, and for its assessment of the
effectiveness of internal control over fi nancial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.
Our responsibility is to express an opinion on these fi nancial statements and fi nancial statement schedule and an opinion on the Company’s internal
control over fi nancial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement
and whether effective internal control over fi nancial reporting was maintained in all material respects. Our audits of the fi nancial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements, assessing the accounting principles used
and signifi cant estimates made by management, and evaluating the overall fi nancial statement presentation. Our audit of internal control over fi nancial
reporting included obtaining an understanding of internal control over fi nancial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over fi nancial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal
fi nancial offi cers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of fi nancial reporting and the preparation of fi nancial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over fi nancial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly refl ect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of fi nancial statements in accordance with generally accepted
accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the company’s assets that could have a material effect on the fi nancial statements.
Because of the inherent limitations of internal control over fi nancial reporting, including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over fi nancial reporting to future periods are subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated fi nancial statements referred to above present fairly, in all material respects, the fi nancial position of Rockwell
Automation, Inc. as of September 30, 2012 and 2011, and the results of its operations and its cash fl ows for each of the three years in the period ended
September 30, 2012, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such fi nancial
statement schedule, when considered in relation to the basic consolidated fi nancial statements taken as a whole, presents fairly, in all material respects,
the information set forth therein. Also, in our opinion, the Company maintained, in all material respects, effective internal control over fi nancial reporting
as of September 30, 2012, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
/s/ DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
November 19, 2012
ROCKWELL AUTOMATION, INC. - Form 10-K 53
PART II
ITEM 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
ITEM 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
None.
ITEM 9A Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management,
including the Chief Executive Offi cer and Chief Financial Offi cer, we have
evaluated the effectiveness, as of September 30, 2012, of our disclosure
controls and procedures, as defi ned in Rule 13a-15(e) and Rule 15d-15(e)
of the Exchange Act. Based on that evaluation, our Chief Executive Offi cer
and Chief Financial Offi cer have concluded that our disclosure controls
and procedures were effective as of September 30, 2012.
Management’s Report on Internal Control Over Financial Reporting
We are responsible for establishing and maintaining adequate internal control
over fi nancial reporting, as defi ned in Rule 13a-15(f) under the Exchange
Act. Our internal control over fi nancial reporting is a process designed
to provide reasonable assurance regarding the reliability of our fi nancial
reporting and the preparation of fi nancial statements for external purposes
in accordance with generally accepted accounting principles. Under the
supervision and with the participation of our management, including the Chief
Executive Offi cer and Chief Financial Offi cer, we evaluated the effectiveness
of our internal control over fi nancial reporting based on the framework
in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based
upon that evaluation, management has concluded that our internal control
over fi nancial reporting was effective as of September 30, 2012.
The effectiveness of our internal control over fi nancial reporting as
of September 30, 2012 has been audited by Deloitte & Touche LLP, as
stated in their report that is included on the previous two pages.
Because of its inherent limitations, internal control over fi nancial reporting
may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of the changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
There has not been any change in our internal control over fi nancial
reporting (as such term is defi ned in Exchange Act Rule 13a-15(f)) during
the fi scal quarter to which this report relates that has materially affected,
or is reasonably likely to materially affect, our internal control over fi nancial
reporting.
As previously disclosed, we are in the process of developing and
implementing common global process standards and an enterprise-wide
information technology system. Additional implementations will occur at
the remaining locations of our company throughout fi scal 2013-2014.
ITEM 9B Other Information
None.
54
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 12 Security Ownership of Certain Benefi cial Owners and Management and Related Stockholder Matters
PART III
PART III
ITEM 10 Directors, Executive Offi cers and Corporate Governance
Other than the information below, the information required by this
Item is incorporated by reference to the sections entitled Election of
Directors, Information about Director Nominees and Continuing
Directors, Board of Directors and Committees and Section 16(a)
Benefi cial Ownership Reporting Compliance in the 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 about executive offi cers of
the Company under Item 4A of Part I.
We have adopted a code of ethics that applies to our executive offi cers,
including the principal executive offi cer, principal fi nancial offi cer and
principal accounting offi cer. A copy of our code of ethics is posted on
our Internet site at http://www.rockwellautomation.com. In the event
that we amend or grant any waiver from a provision of the code of ethics
that applies to the principal executive offi cer, principal fi nancial offi cer or
principal accounting offi cer and that requires disclosure under applicable
SEC rules, we intend to disclose such amendment or waiver and the
reasons therefor on our Internet site.
ITEM 11 Executive Compensation
The information required by this Item is incorporated by reference to the sections entitled Executive Compensation, Director Compensation and Compensation
Committee Report in the Proxy Statement.
ITEM 12 Security Ownership of Certain Benefi cial Owners
and Management and Related Stockholder Matters
Other than the information below, the information required by this Item is incorporated by reference to the sections entitled Ownership of Equity
Securities of the Company in the Proxy Statement.
The following table provides information as of September 30, 2012 about our common stock that may be issued upon the exercise of options, warrants
and rights granted to employees, consultants or directors under all of our existing equity compensation plans, including our 2012 Long-Term Incentives
Plan, 2008 Long-Term Incentives Plan, 2000 Long-Term Incentives Plan and 2003 Directors Stock Plan.
Number of Securities
to be issued
upon Exercise of
Outstanding Options,
Warrants and Rights
(a)
Weighted Average
Exercise Price
of Outstanding
Options, Warrants
and Rights
(b)
56.75
n/a
56.75
$
Number of Securities Remaining
Available for Future Issuance
under Equity Compensation
Plans (excluding Securities
refl ected in Column (a))
(c)
Plan Category
Equity compensation plans approved by shareowners
Equity compensation plans not approved by shareowners
TOTAL
(1) Represents outstanding options and shares issuable in payment of outstanding performance shares (at maximum payout) and restricted stock units under our 2012 Long-Term
7,171,114(2)
—
8,484,725(1) $
8,484,725
7,171,114
—
Incentives Plan, 2008 Long-Term Incentives Plan, 2000 Long-Term Incentives Plan and 2003 Directors Stock Plan.
(2) Represents 6,883,453 and 287,661 shares available for future issuance under our 2012 Long-Term Incentives Plan and our 2003 Directors Stock Plan, respectively.
ROCKWELL AUTOMATION, INC. - Form 10-K 55
PART III
ITEM 13 Certain Relationships and Related Transactions, and Director Independence
ITEM 13 Certain Relationships and Related Transactions,
and Director Independence
The information required by this Item is incorporated by reference to the sections entitled Board of Directors and Committees and Corporate
Governance in the Proxy Statement.
ITEM 14 Principal Accountant Fees and Services
The information required by this Item is incorporated by reference to the section entitled Proposal to Approve the Selection of Independent Registered
Public Accounting Firm in the Proxy Statement.
56
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 15 Exhibits and Financial Statement Schedule
PART IV
PART IV
ITEM 15 Exhibits and Financial Statement Schedule
(a) Financial Statements, Financial Statement Schedule and Exhibits
(1) Financial Statements (all fi nancial statements listed below are those of the Company
and its consolidated subsidiaries)
Consolidated Balance Sheet, September 30, 2012 and 2011.......................................................................................................................................................................... 27
Consolidated Statement of Operations, years ended September 30, 2012, 2011 and 2010 ................................................................................... 28
Consolidated Statement of Cash Flows, years ended September 30, 2012, 2011 and 2010 ................................................................................. 2 9
Consolidated Statement of Shareowners’ Equity, years ended September 30, 2012, 2011 and 2010 ....................................................... 3 0
Consolidated Statement of Comprehensive Income (Loss), years ended September 30, 2012, 2011 and 2010.......................... 3 0
Notes to Consolidated Financial Statements ........................................................................................................................................................................................................................ 3 1
Report of Independent Registered Public Accounting Firm .............................................................................................................................................................................. 53
(2) Financial Statement Schedule for the years ended September 30, 2012, 2011 and 2010
Schedule II—Valuation and Qualifying Accounts .......................................................................................................................................................................................................... S-1
Schedules not fi led 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 fi nancial statements or notes thereto.
(3) Exhibits
3-a
3-b
4-a-1
4-a-2
4-a-3
4-a-4
4-a-5
*10-a-1
*10-a-2
*10-a-3
Restated Certifi cate of Incorporation of the Company, fi led 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, as amended and restated effective September 5, 2012, fi led as Exhibit 3.2 to the Company’s Current Report
on Form 8-K dated September 11, 2012, are hereby incorporated by reference.
Indenture dated as of December 1, 1996 between the Company and The Bank of New York Trust Company, N.A. (formerly JPMorgan
Chase, successor to The Chase Manhattan Bank, successor to Mellon Bank, N.A.), as Trustee, fi led as Exhibit 4-a to Registration
Statement No. 333-43071, is hereby incorporated by reference.
Form of certifi cate for the Company’s 6.70% Debentures due January 15, 2028, fi led as Exhibit 4-b to the Company’s Current Report
on Form 8-K dated January 26, 1998, is hereby incorporated by reference.
Form of certifi cate for the Company’s 5.20% Debentures due January 15, 2098, fi led as Exhibit 4-c to the Company’s Current Report
on Form 8-K dated January 26, 1998, is hereby incorporated by reference.
Form of certifi cate for the Company’s 5.65% Notes due December 31, 2017, fi led as Exhibit 4.1 to the Company’s Current Report on
Form 8-K dated December 3, 2007, is hereby incorporated by reference.
Form of certifi cate for the Company’s 6.25% Debentures due December 31, 2037, fi led as Exhibit 4.2 to the Company’s Current Report
on Form 8-K dated December 3, 2007, 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, fi led 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, fi led as Exhibit 4-d to the Company’s Registration Statement on Form S-8
(No. 333-101780), 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, fi led 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.
* Management contract or compensatory plan or arrangement.
ROCKWELL AUTOMATION, INC. - Form 10-K 57
PART IV
ITEM 15 Exhibits and Financial Statement Schedule
*10-a-4 Memorandum of Amendments to the Company’s 2003 Directors Stock Plan approved and adopted by the Board of Directors of the
*10-a-5
Company on April 25, 2003, fi led 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.
Summary of Non-Employee Director Compensation and Benefi ts as of October 1, 2012, fi led as Exhibit 10 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2012, is hereby incorporated by reference.
*10-a-6 Memorandum of Amendments to the Company’s 2003 Directors Stock Plan approved and adopted by the Board of Directors of
the Company on November 7, 2007, fi led as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
December 31, 2007, is hereby incorporated by reference.
*10-a-8
*10-a-7 Memorandum of Amendments to the Company’s 2003 Directors Stock Plan approved and adopted by the Board of Directors of
the Company on September 3, 2008, fi led as Exhibit 10-b-16 to the Company’s Annual Report on Form 10-K for the year ended
September 30, 2008, is hereby incorporated by reference.
Form of Restricted Stock Unit Agreement under Section 6 of the Company’s 2003 Director’s Stock Plan, as amended, fi led as
Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, is hereby incorporated by
reference.
Copy of the Company’s 2000 Long-Term Incentives Plan, as amended through February 4, 2004, fi led as Exhibit 10-e-1 to
the Company’s Annual Report on Form 10-K for the year ended September 30, 2004, is hereby incorporated by reference.
*10-b-1
*10-b-2 Memorandum of Proposed Amendments to the Rockwell International Corporation 2000 Long-Term Incentives Plan approved and
adopted by the Board of Directors of the Company on June 6, 2001, in connection with the spinoff of Rockwell Collins, fi led 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, fi led as Exhibit 10-e-6 to the Company’s
Annual Report on Form 10-K for the year ended September 30, 2002, are hereby incorporated by reference.
Form of Restricted Stock Agreement under the Company’s 2000 Long-Term Incentives Plan, fi led as Exhibit 10.3 to the Company’s
Quarterly Report on Form 10-Q for the quarter ended December 31, 2001, is hereby incorporated by reference.
*10-b-3
*10-b-4
*10-b-5 Memorandum of Amendments to the Company’s 2000 Long-Term Incentives Plan, as amended, fi led as Exhibit 10.2 to the Company’s
Current Report on Form 8-K dated April 7, 2005, is hereby incorporated by reference.
*10-b-6 Memorandum of Amendments to the Company’s 2000 Long-Term Incentives Plan, as amended, fi led as Exhibit 99.1 to the Company’s
*10-b-7
Current Report on Form 8-K dated November 4, 2005, is hereby incorporated by reference.
Form of Restricted Stock Agreement under the Company’s 2000 Long-Term Incentives Plan, as amended, fi led as Exhibit 10.2
to the Company’s Current Report on Form 8-K dated November 4, 2005, is hereby incorporated by reference.
*10-b-8 Memorandum of Proposed Amendment and Restatement of the Company’s 2000 Long-Term Incentives Plan, as amended, approved
and adopted by the Board of Directors of the Company on November 7, 2007, fi led as Exhibit 10.4 to the Company’s Quarterly Report
on Form 10-Q for the quarter ended December 31, 2007, is hereby incorporated by reference.
Forms of Stock Option Agreement under the Company’s 2000 Long-Term Incentives Plan, as amended, for options granted to executive
offi cers of the Company after December 1, 2007, fi led as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter
ended December 31, 2007, is hereby incorporated by reference.
*10-b-9
*10-b-10 Form of Restricted Stock Agreement under the Company’s 2000 Long-Term Incentives Plan, as amended, for shares of restricted
stock awarded after December 1, 2007, fi led as Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
December 31, 2007, is hereby incorporated by reference.
*10-c-1
*10-c-3
*10-c-2
*10-c-4
*10-b-11 Copy of resolutions of the Board of Directors of the Company, adopted December 5, 2007 and effective February 6, 2008, amending
the Company’s 2000 Long-Term Incentives Plan, as amended, fi led as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2008, is hereby incorporated by reference.
Copy of the Company’s 2008 Long-Term Incentives Plan, as amended and restated through June 4, 2010, fi led as Exhibit 99 to the
Company’s Current Report on Form 8-K dated June 10, 2010, is hereby incorporated by reference.
Form of Stock Option Agreement under the Company’s 2008 Long-Term Incentives Plan, fi led as Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, is hereby incorporated by reference.
Form of Restricted Stock Agreement under the Company’s 2008 Long-Term Incentives Plan, fi led as Exhibit 10-e-3 to the Company’s
Annual Report on Form 10-K for the year ended September 30, 2008, is hereby incorporated by reference.
Forms of Stock Option Agreement under the Company’s 2008 Long-Term Incentives Plan for options granted to executive offi cers
of the Company after December 1, 2008, fi led as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
December 31, 2008, is hereby incorporated by reference.
Form of Performance Share Agreement under the Company’s 2008 Long-Term Incentives Plan for performance shares awarded after
December 1, 2008, fi led as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2008,
is hereby incorporated by reference.
Form of Restricted Stock Agreement under the Company’s 2008 Long-Term Incentives Plan for shares of restricted stock awarded after
December 1, 2008, fi led as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2008,
is hereby incorporated by reference.
Form of Stock Option Agreement under the Company’s 2008 Long-Term Incentives Plan, as amended, for options granted to executive
offi cers of the Company after December 6, 2010, fi led as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter
ended December 31, 2010, is hereby incorporated by reference.
Form of Restricted Stock Agreement under the Company’s 2008 Long-Term Incentives Plan, as amended, for shares of restricted
stock awarded to executive offi cers of the Company after December 6, 2010, fi led as Exhibit 10.2 to the Company’s Quarterly Report
on Form 10-Q for the quarter ended December 31, 2010, is hereby incorporated by reference.
*10-c-7
*10-c-6
*10-c-8
*10-c-5
* Management contract or compensatory plan or arrangement.
58
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 15 Exhibits and Financial Statement Schedule
PART IV
*10-c-9
Form of Performance Share Agreement under the Company’s 2008 Long-Term Incentives Plan, as amended, for performance shares
awarded to executive offi cers of the Company after December 6, 2010, fi led as Exhibit 10.3 to the Company’s Quarterly Report
on Form 10-Q for the quarter ended December 31, 2010, is hereby incorporated by reference.
*10-c-10 Form of Stock Option Agreement under the Company’s 2008 Long-Term Incentives Plan, as amended, for options granted to executive
offi cers of the Company after November 30, 2011, fi led as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter
ended December 31, 2011, is hereby incorporated by reference.
*10-c-11 Form of Restricted Stock Agreement under the Company’s 2008 Long-Term Incentives Plan, as amended, for shares of restricted stock
awarded to executive offi cers of the Company after November 30, 2011, fi led as Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended December 31, 2011, is hereby incorporated by reference.
*10-c-12 Form of Performance Share Agreement under the Company’s 2008 Long-Term Incentives Plan, as amended, for performance shares
awarded to executive offi cers of the Company after November 30, 2011, fi led as Exhibit 10.3 to the Company’s Quarterly Report
on Form 10-Q for the quarter ended December 31, 2011 is hereby incorporated by reference.
*10-c-13 Copy of the Company’s 2012 Long-Term Incentives Plan, fi led as Exhibit 4-c to the Company’s Registration Statement on Form S-8
*10-d
(No. 333-180557), is hereby incorporated by reference.
Copy of resolutions of the Compensation and Management Development Committee of the Board of Directors of the Company, adopted
February 5, 2003, regarding the Corporate Offi ce vacation plan, fi led 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.
Copy of the Company’s Deferred Compensation Plan, as amended and restated September 6, 2006, fi led as Exhibit 10-f to the
Company’s Annual Report on Form 10-K for the year ended September 30, 2006, is hereby incorporated by reference.
*10-e-2 Memorandum of Proposed Amendment and Restatement of the Company’s Deferred Compensation Plan approved and adopted
*10-e-1
*10-f
*1 0-g-1
*1 0-g-2
*10-h-1
*10-h-2
*10-h-3
*10-h-4
*10-h-5
10-i-1
10-i-2
10-i-3
10-j-1
10-j-2
10-j-3
10-k-1
10-k- 2
by the Board of Directors of the Company on November 7, 2007, fi led as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q
for the quarter ended December 31, 2007, is hereby incorporated by reference.
Copy of the Company’s Directors Deferred Compensation Plan approved and adopted by the Board of Directors of the Company on
November 5, 2008, fi led as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2008,
is hereby incorporated by reference.
Copy of the Company’s Annual Incentive Compensation Plan for Senior Executive Offi cers, as amended December 3, 2003, fi led as
Exhibit 10-i-1 to the Company’s Annual Report for the year ended September 30, 2004, is hereby incorporated by reference.
Copy of the Company’s Incentive Compensation Plan, fi led as Exhibit 10 to the Company’s Current Report on Form 8-K dated
September 7, 2005, is hereby incorporated by reference.
Change of Control Agreement dated as of September 27, 2010 between the Company and Keith D. Nosbusch, fi led as Exhibit 99.1
to the Company’s Current Report on Form 8-K dated September 27, 2010, is hereby incorporated by reference.
Form of Change of Control Agreement dated as of September 27, 2010 between the Company and each of Theodore D. Crandall,
Steven A. Eisenbrown, Douglas M. Hagerman, Robert A. Ruff and certain other corporate offi cers fi led as Exhibit 99.2 to the Company’s
Current Report on Form 8-K dated September 27, 2010, is hereby incorporated by reference.
Letter Agreement dated September 3, 2009 between the Company and Keith D. Nosbusch, fi led as Exhibit 99.1 to the Company’s
Current Report on Form 8-K dated September 8, 2009, is hereby incorporated by reference.
Letter Agreement dated September 3, 2009 between Registrant and Theodore D. Crandall, fi led as Exhibit 99.2 to the Company’s
Current Report on Form 8-K dated September 8, 2009, is hereby incorporated by reference.
Description of relocation and expatriate package for Robert A. Ruff, contained in the Company’s Current Report on Form 8-K dated
April 8, 2011, 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.,
fi led as Exhibit 1 0-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), fi led
as Exhibit 10-c to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 1996, is hereby incorporated by
reference.
Tax Allocation Agreement dated as of December 6, 1996, among Rockwell International Corporation (renamed Boeing North
American, Inc.), the Company (formerly named New Rockwell International Corporation) and The Boeing Company, fi led 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., fi led 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.,
fi led as Exhibit 2.2 to the Company’s Current Report on Form 8-K dated October 10, 1997, is hereby incorporated by reference.
Tax Allocation Agreement dated as of September 30, 1997 by and between the Company and Meritor Automotive, Inc.,
fi led 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., fi led 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., fi led as Exhibit 2.2 to the Company’s Current Report on Form 8-K dated January 12, 1999, is hereby incorporated
by reference.
* Management contract or compensatory plan or arrangement.
ROCKWELL AUTOMATION, INC. - Form 10-K 59
PART IV
ITEM 15 Exhibits and Financial Statement Schedule
10-k-3
10-l-1
10-l-2
10-l-3
10-m
1 0-n
10-o-1
10-o-2
12
21
23
24
Tax Allocation Agreement dated as of December 31, 1998 by and between the Company and Conexant Systems, Inc., fi led
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 Scientifi c Company
LLC, fi led as Exhibit 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 Scientifi c
Company LLC, fi led 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., fi led as Exhibit 2.3
to the Company’s Current Report on Form 8-K dated July 11, 2001, is hereby incorporated by reference.
$750,000,000 Four-Year Credit Agreement dated as of March 14, 2011 among the Company, the Banks listed on the signature
pages thereof, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A., as Syndication Agent, and Citibank,
N.A., The Bank of New York Mellon and Wells Fargo Bank, National Association, as Documentation Agents, fi led as Exhibit 99
to the Company’s Current Report on Form 8-K dated March 15, 2011, is hereby incorporated by reference.
Purchase and Sale Agreement dated as of August 24, 2005 by and between the Company and First Industrial Acquisitions, Inc.,
including the form of Lease Agreement attached as Exhibit I thereto, together with the First Amendment to Purchase and
Sale Agreement dated as of September 30, 2005 and the Second Amendment to Purchase and Sale Agreement dated as of
October 31, 2005, fi led as Exhibit 10-p to the Company’s Annual Report on Form 10-K for the year ended September 30, 2005,
is hereby incorporated by reference.
Purchase Agreement, dated as of November 6, 2006, by and among Rockwell Automation, Inc., Rockwell Automaton of Ohio, Inc.,
Rockwell Automation Canada Control Systems, Grupo Industrias Reliance S.A. de C.V., Rockwell Automation GmbH (formerly known
as Rockwell International GmbH) and Baldor Electric Company, contained in the Company’s Current Report on Form 8-K dated
November 9, 2006, is hereby incorporated by reference.
First Amendment to Purchase Agreement dated as of January 24, 2007 by and among Rockwell Automation, Inc., Rockwell Automation
of Ohio, Inc., Rockwell Automation Canada Control Systems, Grupo Industrias Reliance S.A. de C.V., Rockwell Automation GmbH and
Baldor Electric Company, fi led as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007,
is hereby incorporated by reference.
Computation of Ratio of Earnings to Fixed Charges for the Five Years Ended September 30, 2012.
List of Subsidiaries of the Company.
Consent of Independent Registered Public Accounting Firm.
Powers of Attorney authorizing certain persons to sign this Annual Report on Form 10-K on behalf of certain directors and offi cers
of the Company.
Certifi cation of Periodic Report by the Chief Executive Offi cer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
Certifi cation of Periodic Report by the Chief Financial Offi cer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
Certifi cation of Periodic Report by the Chief Executive Offi cer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certifi cation of Periodic Report by the Chief Financial Offi cer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Interactive Data Files.
31.1
31.2
32.1
32.2
101
* Management contract or compensatory plan or arrangement.
60
ROCKWELL AUTOMATION, INC. - Form 10-K
ITEM 15 Exhibits and Financial Statement Schedule
PART IV
Signatures
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.
Dated: November 19, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on the 19th day of November 2012 by the
following persons on behalf of the registrant and in the capacities indicated.
ROCKWELL AUTOMATION, INC.
By
/s/ THEODORE D. CRANDALL
Theodore D. Crandall
Senior Vice President and
Chief Financial Offi cer
By
By
/s/ THEODORE D. CRANDALL
Theodore D. Crandall
Senior Vice President and
Chief Financial Offi cer
(Principal Financial Offi cer)
/s/ DAVID M. DORGAN
David M. Dorgan
Vice President and Controller
(Principal Accounting Offi cer)
Keith D. Nosbusch *
Chairman of the Board,
President and
Chief Executive Offi cer
(Principal Executive Offi cer)
and Director
Betty C. Alewine*
Director
Verne G. Istock*
Director
Barry C. Johnson*
Director
Steven R. Kalmanson*
Director
James P. Keane*
Director
William T. McCormick, Jr.*
Director
Donald R. Parfet *
Director
*By
**By
/s/ DOUGLAS M. HAGERMAN
Douglas M. Hagerman, Attorney-in-fact**
authority of powers of attorney fi led herewith
ROCKWELL AUTOMATION, INC. - Form 10-K 61
PART IV
ITEM 15 Exhibits and Financial Statement Schedule
Schedule II
Rockwell Automation, Inc.
Valuation and Qualifying Accounts
FOR THE YEARS ENDED SEPTEMBER 30, 2012, 2011 AND 2010
Additions
Balance at
Beginning of Year
Charged to
Costs and
Expenses
Charged
to Other
Accounts
Balance at
End of Year
Deductions(b)
(in millions)
Description
*Year ended September 30, 2012
Allowance for doubtful accounts (a)
Valuation allowance for deferred tax assets
*Year ended September 30, 2011
Allowance for doubtful accounts (a)
Valuation allowance for deferred tax assets
*Year ended September 30, 2010
Allowance for doubtful accounts (a)
Valuation allowance for deferred tax assets
(a)
(b) Consists of amounts written off for the allowance for doubtful accounts and adjustments resulting from our ability to utilize foreign tax credits, capital losses, or net operating
Includes allowances for current and other long-term receivables.
28.9 $
32.8
24.6 $
43.8
20.7 $
26.7
10.2 $
10.6
4.6 $
19.4
7.8 $
1.0
5.9 $
2.5
0.7 $
2.3
2.0 $
4.5
— $
0.5
— $
—
— $
—
30.8
31.8
20.7
26.7
28.9
32.8
$
$
$
loss carryforwards for which a valuation allowance had previously been recorded.
Amounts reported relate to continuing operations in all periods presented.
*
S-1
ROCKWELL AUTOMATION, INC. - Form 10-K
Index to Exhibits *
PART IV
INDEX TO EXHIBITS
Exhibit No. Exhibit
12
21
23
24
31.1
31.2
32.1
32.2
101
*
Computation of Ratio of Earnings to Fixed Charges for the Five Years Ended September 30, 2012.
List of Subsidiaries of the Company.
Consent of Independent Registered Public Accounting Firm.
Powers of Attorney authorizing certain persons to sign this Annual Report on Form 10-K on behalf of certain directors and offi cers
of the Company.
Certifi cation of Periodic Report by the Chief Executive Offi cer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
Certifi cation of Periodic Report by the Chief Financial Offi cer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
Certifi cation of Periodic Report by the Chief Executive Offi cer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certifi cation of Periodic Report by the Chief Financial Offi cer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Interactive Data Files.
See Part IV, Item 15(a)(3) for exhibits incorporated by reference.
ROCKWELL AUTOMATION, INC. - Form 10-K E-1
PART IV
EXHIBIT 31 .1
EXHIBIT 31.1 Certifi cation
I, Keith D. Nosbusch, certify that:
1.
2
3.
4.
I have reviewed this annual report on Form 10-K of Rockwell Automation, Inc.;
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;
Based on my knowledge, the fi nancial statements, and other fi nancial information included in this report, fairly present in all material respects the
fi nancial condition, results of operations and cash fl ows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying offi cer and I are responsible for establishing and maintaining disclosure controls and procedures (as defi ned in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over fi nancial reporting (as defi ned in Exchange Act Rules 13a-15(f) and 15d-15(f))
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) Designed such internal control over fi nancial reporting, or caused such internal control over fi nancial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of fi nancial reporting and the preparation of fi nancial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over fi nancial reporting that occurred during the registrant’s most recent
fi scal quarter (the registrant’s fourth fi scal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over fi nancial reporting; and
5.
The registrant’s other certifying offi cer and I have disclosed, based on our most recent evaluation of internal control over fi nancial 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 signifi cant defi ciencies and material weaknesses in the design or operation of internal control over fi nancial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report fi nancial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a signifi cant role in the registrant’s internal control
over fi nancial reporting.
Date: November 19, 2012
/s/ KEITH D. NOSBUSCH
Keith D. Nosbusch
Chairman, President and
Chief Executive Offi cer
E-2
ROCKWELL AUTOMATION, INC. - Form 10-K
PART IV
EXHIBIT 31 .2
EXHIBIT 31.2 Certifi cation
I, Theodore D. Crandall, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Rockwell Automation, Inc.;
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;
Based on my knowledge, the fi nancial statements, and other fi nancial information included in this report, fairly present in all material respects the
fi nancial condition, results of operations and cash fl ows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying offi cer and I are responsible for establishing and maintaining disclosure controls and procedures (as defi ned in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over fi nancial reporting (as defi ned in Exchange Act Rules 13a-15(f) and 15d-15(f))
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) Designed such internal control over fi nancial reporting, or caused such internal control over fi nancial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of fi nancial reporting and the preparation of fi nancial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over fi nancial reporting that occurred during the registrant’s most recent
fi scal quarter (the registrant’s fourth fi scal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over fi nancial reporting; and
5.
The registrant’s other certifying offi cer and I have disclosed, based on our most recent evaluation of internal control over fi nancial 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 signifi cant defi ciencies and material weaknesses in the design or operation of internal control over fi nancial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report fi nancial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a signifi cant role in the registrant’s internal control
over fi nancial reporting.
Date: November 19, 2012
/s/ THEODORE D. CRANDALL
Theodore D. Crandall
Senior Vice President and
Chief Financial Offi cer
ROCKWELL AUTOMATION, INC. - Form 10-K E-3
PART IV
EXHIBIT 32.1
EXHIBIT 32.1 Certifi cation of Periodic Report
I, Keith D. Nosbusch, Chairman, President and Chief Executive Offi cer 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, 2012 (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 fi nancial condition and results of operations of the Company.
Date: November 19, 2012
/s/ KEITH D. NOSBUSCH
Keith D. Nosbusch
Chairman, President and
Chief Executive Offi cer
E-4
ROCKWELL AUTOMATION, INC. - Form 10-K
PART IV
EXHIBIT 32 .2
EXHIBIT 32.2 Certifi cation of Periodic Report
I, Theodore D. Crandall, Senior Vice President and Chief Financial Offi cer 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, 2012 (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 fi nancial condition and results of operations of the Company.
Date: November 19, 2012
/s/ THEODORE D. CRANDALL
Theodore D. Crandall
Senior Vice President and
Chief Financial Offi cer
ROCKWELL AUTOMATION, INC. - Form 10-K E-5
(This page intentionally left blank)
Rockwell Automation, Inc.
Return On Invested Capital
and Comparison of Five-Year
Cumulative Total Return
This section does not constitute part of our Annual Report on
Form 10-K for the fiscal year ended September 30, 2012.
ROCKWELL AUTOMATION, INC. - Form 10-K a
(This page intentionally left blank)
b
ROCKWELL AUTOMATION, INC. - Form 10-K
Supplemental Information
Return On Invested Capital
Our annual report contains information regarding Return On Invested Capital (ROIC), which is a non-GAAP financial measure. We
believe that ROIC is useful to investors as a measure of performance and of the effectiveness of the use of capital in our operations.
We use ROIC as one measure to monitor and evaluate performance. Our measure of ROIC may be different from that used by other
companies. We define ROIC as the percentage resulting from the following calculation:
(a)
Income from continuing operations, before interest expense, income tax provision, and purchase accounting
depreciation and amortization, divided by;
(b) average invested capital for the year, calculated as a five quarter rolling average using the sum of short-term debt,
long-term debt, shareowners’ equity, and accumulated amortization of goodwill and other intangible assets, minus cash
and cash equivalents and short-term investments, multiplied by;
(c) one minus the effective tax rate for the period.
ROIC is calculated as follows:
(in millions, except percentages)
(a) Return
Income from continuing operations
Interest expense
Income tax provision
Purchase accounting depreciation and amortization
Return
(b) Average Invested Capital
Short-term debt
Long-term debt
Shareowners’ equity
Accumulated amortization of goodwill and intangibles
Cash and cash equivalents
Short-term investments
Average invested capital
(c) Effective Tax Rate
Income tax provision
Income from continuing operations before income taxes
Effective tax rate
(a) / (b) * (1-c) Return On Invested Capital
Twelve Months Ended
September 30,
2012
2011
$737.0
60.1
228.9
19.8
1,045.8
207.2
905.0
1,881.5
751.0
(878.8)
(232.5)
$697.1
59.5
170.5
19.8
946.9
–
904.9
1,709.7
716.7
(922.7)
–
2,633.4
2,408.6
228.9
$965.9
23.7%
30.3%
170.5
$867.6
19.7%
31.6%
This page does not constitute part of our Annual Report on Form 10-K for the fiscal year ended September 30, 2012.
ROCKWELL AUTOMATION, INC. - Form 10-K c
Comparison of Five-Year Cumulative Total Return
Rockwell Automation,
S&P 500 Index and S&P Electrical Components & Equipment
The following line graph compares the cumulative total shareowner return on our Common Stock against the
cumulative total return of the S&P Composite-500 Stock Index and the S&P Electrical Components & Equipment
Index for the period of five fiscal years from October 1, 2007 to September 30, 2012, assuming in each case a fixed
investment of $100 at the respective closing prices on September 30, 2007 and reinvestment of all dividends.
$150
$125
$100
$75
$50
2007
2008
2009
2010
2011
2012
Rockwell Automation
S&P 500 Index
S&P Electrical Components & Equipment
The cumulative total returns on Rockwell Automation Common Stock and each index as of each September 30, 2007 - 2012
plotted in the above graph are as follows:
2007
2008
2009
2010
2011
2012
Rockwell Automation*
$100.00
$54.85
$65.12
$96.54
$89.42
$113.69
S&P 500 Index
100.00
S&P Electrical Components & Equipment
100.00
78.02
74.57
72.64
80.02
80.93
105.37
79.86
106.12
89.20
119.08
Cash dividends per common share
1.16
1.16
1.16
1.22
1.475
1.745
* Includes the reinvestment of all dividends in our Common Stock.
This page does not constitute part of our Annual Report on Form 10-K for the fiscal year ended September 30, 2012.
d
ROCKWELL AUTOMATION, INC. - Form 10-K
ROCKWELL AUTOMATION
1201 South Second Street Milwaukee, WI 53204 USA
+1 (414) 382-2000 | www.rockwellautomation.com