MILWAUKEE (July 25, 2007) – Rockwell Automation, Inc. (NYSE: ROK) today reported fiscal 2007 third quarter net income of $164.2 million ($1.05 per share) compared to net income of $149.0 million ($0.83 per share) in the third quarter of 2006. Income from continuing operations for the third quarter of 2007 was $167.5 million ($1.07 per share) compared to $123.4 million ($0.69 per share) in the same quarter in 2006. Sales in the quarter were $1,280.6 million, up 9 percent compared to $1,171.7 million in 2006. The effect of currency translation added 2 percentage points to the growth rate. Sales in the U.S. increased 2 percent compared to the third quarter of 2006. International sales increased 13 percent, excluding the effect of currency translation, with continued strength in Europe and Latin America, and improved performance in Asia Pacific and Canada. From an end market perspective, sales growth in consumer industries outpaced the growth in resource-based industries.
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Segment operating earnings were $262.3 million, up 21 percent compared to $216.1 million in 2006. Segment operating margin of 20.5 percent was 2.1 points higher than the third quarter of 2006. Third quarter 2007 free cash flow from continuing operations, excluding tax payments related to the Power Systems sale, was $183.5 million, versus $138.1 million in the third quarter of 2006. Return on invested capital expanded 2.6 percentage points to 23.7 percent. Free cash flow and return on invested capital are non-GAAP measures that are defined in the attachments to this release under “Other Supplemental Information”. Commenting on the results, Keith D. Nosbusch, chairman and chief executive officer, said, “This quarter played out very much as we anticipated. Our entire organization executed extremely well this quarter and delivered the results we expect from our powerful business model. Revenue was in line with our expectations across all regions and earnings were better than anticipated. We were pleased to achieve simultaneous growth and productivity.”
Outlook Commenting on the outlook, Nosbusch said, “Our current outlook anticipates a gradually expanding global industrial economy across most end markets through the remainder of this year and into fiscal 2008. We remain intensely focused on generating above-market organic revenue growth. We are diversifying our revenue base by driving more growth from consumer industries, emerging economies and the continued adoption of our Integrated Architecture™. I am confident we will close out a very successful 2007 and carry that momentum into 2008.”
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The company is increasing its full year 2007 guidance to reflect both the performance in the third quarter and the effect of the recent ICS Triplex acquisition. The company is raising its revenue growth guidance to approximately 10 percent, which represents the high end of the prior guidance of 8 to 9 percent and an additional 1 percentage point due to the acquisition. The company now expects full year diluted earnings per share from continuing operations excluding special charges to be between $3.65 and $3.70 per share. Previous guidance was $3.55 to $3.65 per share.
Following is a discussion of third quarter results for each of the segments.
Architecture & Software The Architecture & Software segment contains all elements of the company’s integrated control and information architecture capable of connecting the customer’s entire manufacturing enterprise. Architecture & Software third quarter sales were $582.5 million, an increase of 11 percent compared to $525.4 million in the third quarter of 2006. Our Logix platform business grew by 15 percent in the quarter, led by strength in process applications and the CompactLogix product offering. Segment operating earnings were $164.7 million compared to $133.6 million in the third quarter of 2006. Profitability benefited from volume, productivity efforts, and price, partially offset by inflation. Architecture & Software segment operating margin was 28.3 percent in the third quarter of 2007 compared to 25.4 percent in 2006.
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Control Products & Solutions The Control Products & Solutions segment combines a comprehensive portfolio of intelligent motor control and industrial control products, along with the customer support and application knowledge necessary to implement and maintain an automation solution on the plant floor. Control Products & Solutions third quarter sales were $698.1 million, an increase of 8 percent compared to sales of $646.3 million in the 2006 third quarter. Segment operating earnings were $97.6 million compared to $82.5 million in the third quarter of 2006. Profitability benefited from volume, productivity efforts, and price, partially offset by inflation and revenue mix. Control Products & Solutions segment operating margin was 14.0 percent in the third quarter of 2007 compared to 12.8 percent in 2006.
General Corporate – Net Third quarter general corporate expenses were $17.6 million compared to $21.2 million in the 2006 third quarter. The decrease is primarily due to interest income on the remaining proceeds from the Power Systems sale.
Income Taxes The continuing operations effective tax rate for the third quarter of 2007 was 26.2 percent compared to 30.7 percent in the third quarter of 2006. The tax rate in the third quarter of 2007 was lower due to global earnings mix and the resolution of certain state tax matters. The company still expects the full year effective tax rate for continuing operations to be 28 to 29 percent.
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Discontinued Operations Income from discontinued operations in the third quarter of 2007 primarily relates to an after-tax charge of $2.6 million for legal matters related to a legacy business. Income from discontinued operations in the third quarter of 2006 represents the results of operations of our former Power Systems business.
Share Repurchase During the quarter the company repurchased 6.2 million shares at a cost of $382.7 million. The company had $284.1 million available at June 30, 2007 under its existing $1.0 billion share repurchase authorization.
Conference Call A conference call to discuss our financial results will take place at 8:30 A.M. Eastern Time on July 25. The call will be webcast and accessible via the Rockwell Automation website (www.rockwellautomation.com).
This news release contains statements (including certain projections and business trends) accompanied by such phrases as “believe”, “estimate”, “expect”, “anticipate”, “will”, “intend” and other similar expressions, that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, many of which are beyond our control, including but not limited to: | 
