Rockwell Automation (ROK) 10-Q 5 May 10 2010 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information (USD $)
In Billions, except Share data	6 Months Ended Mar. 31, 2010	Mar. 31, 2009
Document and Entity Information [Abstract]
Entity Registrant Name	ROCKWELL AUTOMATION INC
Entity Central Index Key	0001024478
Document Type	10-Q
Document Period End Date	2010-03-31
Amendment Flag	false
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--09-30
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float		$3
Entity Common Stock, Shares Outstanding	142,595,043

Condensed Consolidated Balance

Condensed Consolidated Balance Sheet (Unaudited) (USD $)
In Millions	6 Months Ended Mar. 31, 2010	12 Months Ended Sep. 30, 2009
Current assets:
Cash and cash equivalents	817.2	643.8
Receivables	791.8	726.3
Inventories	524.5	436.4
Deferred income taxes	194.4	174.4
Other current assets	108.6	153.9
Total current assets	2436.5	2134.8
Property, net	510	532.5
Goodwill	889.4	913.2
Other intangible assets, net	218	230.9
Deferred income taxes	296.9	307.6
Prepaid pension	31	30.7
Other assets	160.4	156
TOTAL	4542.2	4305.7
Current liabilities:
Accounts payable	379.3	313.3
Compensation and benefits	204.4	148.9
Advance payments from customers and deferred revenue	199.6	159.1
Customer returns, rebates and incentives	120.8	107.3
Other current liabilities	211.6	218.6
Total current liabilities	1115.7	947.2
Long-term debt	904.8	904.7
Retirement benefits	847	848.9
Other liabilities	255.4	288.5
Commitments and contingent liabilities (Note 13)
Shareowners' equity:
Common stock (shares issued: 181.4)	181.4	181.4
Additional paid-in capital	1,319	1304.8
Retained earnings	2,774	2667.2
Accumulated other comprehensive loss	-769.6	-727.5
Common stock in treasury, at cost (shares held: March 31, 2010, 38.8; September 30, 2009, 39.3)	-2085.5	-2109.5
Total shareowners' equity	1419.3	1316.4
TOTAL	4542.2	4305.7

1_Condensed Consolidated Balanc

Condensed Consolidated Balance Sheet (Unaudited) (Parenthetical)
Share data in Millions	Mar. 31, 2010	Sep. 30, 2009
Shareowners' equity:
Common stock, shares issued	181.4	181.4
Treasury stock, shares	38.8	39.3

Condensed Consolidated Statemen

Condensed Consolidated Statement of Operations (Unaudited) (USD $)
In Millions, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009	6 Months Ended Mar. 31, 2010	6 Months Ended Mar. 31, 2009
Sales
Products and solutions	1049.1	949.8	1998.4	2019.4
Services	115.4	108.3	233.6	227.9
Total sales	1164.5	1058.1	2,232	2247.3
Cost of sales
Products and solutions	-612.8	-613.5	-1172.4	-1248.9
Services	-78.6	(81)	-159.7	-164.4
Total cost of sales	-691.4	-694.5	-1332.1	-1413.3
Gross profit	473.1	363.6	899.9	834
Selling, general and administrative expenses	-323.2	-292.8	-635.7	-606.2
Other expense	-1.2	-0.1	-2.8	-2.6
Interest expense	-15.1	-15.3	-30.5	-30.3
Income from continuing operations before income taxes	133.6	55.4	230.9	194.9
Income tax provision	-21.7	-14.8	-41.2	-38.7
Income from continuing operations	111.9	40.6	189.7	156.2
Income from discontinued operations	25.1		23.9	2.8
Net income	$137	40.6	213.6	$159
Basic earnings per share:
Continuing operations	0.78	0.29	1.33	1.1
Discontinued operations	0.18		0.17	0.02
Net income	0.96	0.29	1.5	1.12
Diluted earnings per share:
Continuing operations	0.77	0.29	1.31	1.1
Discontinued operations	0.18		0.17	0.02
Net income	0.95	0.29	1.48	1.12
Cash dividends per share	0.29	0.29	0.58	0.58
Weighted average outstanding shares:
Basic	142.4	141.5	142.2	141.5
Diluted	144.4	142	144.1	142

2_Condensed Consolidated Statem

Condensed Consolidated Statement of Cash Flows (Unaudited) (USD $)
In Millions	6 Months Ended Mar. 31, 2010	6 Months Ended Mar. 31, 2009
Operating Activities:
Net income	213.6	$159
Income from discontinued operations	23.9	2.8
Income from continuing operations	189.7	156.2
Adjustments to arrive at cash provided by operating activities:
Depreciation	48.8	48.1
Amortization of intangible assets	14.8	16.3
Share-based compensation expense	17.9	12.3
Retirement benefits expense	42.4	23.4
Pension trust contributions	-14.6	-14.2
Net loss (gain) on disposition of property	1	-0.2
Income tax benefit from the exercise of stock options	0.2
Excess income tax benefit from share-based compensation	-7.4	-0.9
Changes in assets and liabilities, excluding effects of foreign currency adjustments:
Receivables	(78)	166
Inventories	-94.1	23.5
Accounts payable	65.7	(112)
Compensation and benefits	49.5	-73.6
Income taxes	19.2	-5.2
Other assets and liabilities	42.8	(21)
Cash Provided by Operating Activities	297.9	218.7
Investing Activities:
Capital expenditures	-30.5	-45.7
Acquisition of businesses, net of cash acquired		-29.5
Proceeds from sale of property and short-term investments	4.5	2.9
Other investing activities		-4.1
Cash Used for Investing Activities	(26)	-76.4
Financing Activities:
Net repayments of short-term debt		(25)
Cash dividends	-82.7	-82.2
Purchases of treasury stock	-22.6	-53.5
Proceeds from the exercise of stock options	16.2	4.8
Excess income tax benefit from share-based compensation	7.4	0.9
Other financing activities	-0.3	-2.9
Cash Used for Financing Activities	(82)	-157.9
Effect of exchange rate changes on cash	-16.3	-46.8
Cash Provided by (Used for) Continuing Operations	173.6	-62.4
Discontinued Operations:
Cash Used for Discontinued Operating Activities	-0.2	-0.3
Cash Used for Discontinued Operations	-0.2	-0.3
Increase (Decrease) in Cash and Cash Equivalents	173.4	-62.7
Cash and Cash Equivalents at Beginning of Period	643.8	582.2
Cash and Cash Equivalents at End of Period	817.2	519.5

Basis of Presentation and Accou

Basis of Presentation and Accounting Policies
	6 Months Ended Mar. 31, 2010
Basis of Presentation and Accounting Policies [Abstract]
Basis of Presentation and Accounting Policies	1. Basis of Presentation and Accounting Policies In the opinion of management of Rockwell Automation, Inc. (the Company or Rockwell Automation), the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting solely of adjustments of a normal recurring nature, necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. These statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended September30, 2009. The results of operations for the three and six month periods ended March31, 2010 are not necessarily indicative of the results for the full year. All date references to years and quarters herein refer to our fiscal year and fiscal quarter unless otherwise stated. Receivables Receivables are stated net of allowances for doubtful accounts of $20.5million at March31, 2010 and $21.8million at September30, 2009. In addition, receivables are stated net of an allowance for certain customer returns, rebates and incentives of $13.4million at March31, 2010 and $8.8 million at September30, 2009. Earnings Per Share Beginning in fiscal 2010, we changed our accounting for earnings per share (EPS)as a result of new accounting guidance issued by the Financial Accounting Standards Board (FASB). The guidance 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 unvested restricted stock and non-employee director restricted stock units. We present basic and diluted 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 applicable period. Diluted EPS amounts are based upon the weighted average number of common and common equivalent shares outstanding during the applicable period. The difference between basic and diluted EPS is attributable to share-based compensation awards. 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 benefits, 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 exceed the average market price over the applicable period have an antidilutive effect on EPS, and accordingly, we exclude them from the calculation of diluted EPS. For the three and six months ended March31, 2010, share-based compensation awards of 5.5million and 5.6million shares, respectively, were excluded from the diluted EPS calculation because they were antidilutive. For the three and six months ended Mar

Share-Based Compensation

Share-Based Compensation
	6 Months Ended Mar. 31, 2010
Share-Based Compensation [Abstract]
Share-Based Compensation	2. Share-Based Compensation We recognized $9.2million and $17.9million in share-based compensation expense during the three and six months ended March31, 2010, respectively. We recognized $7.7million and $12.3million in share-based compensation expense during the three and six months ended March 31, 2009, respectively. Our annual grant of share-based compensation takes place during the first quarter of each fiscal year. The number of shares granted to all employees and non-employee directors and the weighted average fair value per share during the periods presented was (in thousands except per share amounts): Six Months Ended March 31, 2010 2009 Wtd. Avg. Wtd. Avg. Share Share Grants Fair Value Grants Fair Value Stock options 2,169 $ 13.59 2,788 $ 7.75 Performance shares 146 54.81 192 31.82 Restricted stock and restricted stock units 146 43.66 86 29.29 Unrestricted stock 11 44.20 16 34.82

Acquisitions

Acquisitions
	6 Months Ended Mar. 31, 2010
Acquisitions [Abstract]
Acquisitions	3. Acquisitions In January2009, we acquired the assets and assumed certain liabilities of Xian Hengsheng Science Technology Company Limited (Hengsheng). Hengsheng delivers automation solutions to the electrical power and other heavy process industries in central and western China. In March2009, we acquired a majority of the assets and assumed certain liabilities of the automation business of Rutter Hinz Inc. (Hinz). Hinz offers industrial control systems engineering and related support, with domain expertise in industrial automation, process control and power distribution, specifically for the oil and gas industry, as well as other resource-based industries, in Canada. We recorded goodwill of $13.6million, customer relationships of $6.3million (10-year weighted average useful life), technology of $1.2million (8-year weighted average useful life) and other intangible assets of $1.3million (4-year weighted average useful life) resulting from the final purchase price allocations of Hengsheng and Hinz. We expect $5.9million of the goodwill to be deductible for tax purposes. We assigned the full amount of goodwill for Hengsheng and Hinz to our Control Products Solutions segment. The results of operations of the acquired businesses have been included in our Condensed Consolidated Statement of Operations since the dates of acquisition. Pro forma financial information and allocation of the purchase price are not presented as the individual effects of these acquisitions are not material to our results of operations and financial position.

Inventories

Inventories
	6 Months Ended Mar. 31, 2010
Inventories [Abstract]
Inventories	4. Inventories Inventories consist of (in millions): March 31, September 30, 2010 2009 Finished goods $ 200.7 $ 166.4 Work in process 135.0 109.1 Raw materials, parts and supplies 188.8 160.9 Inventories $ 524.5 $ 436.4 We report inventories net of the allowance for excess and obsolete inventory of $51.6million at March31, 2010 and $53.2million at September30, 2009.

Property

Property
	6 Months Ended Mar. 31, 2010
Property [Abstract]
Property	5. Property Property consists of (in millions): March 31, September 30, 2010 2009 Land $ 4.8 $ 4.7 Buildings and improvements 275.6 276.7 Machinery and equipment 1,085.2 1,116.4 Internal-use software 334.5 324.8 Construction in progress 34.1 36.5 Total 1,734.2 1,759.1 Less accumulated depreciation (1,224.2 ) (1,226.6 ) Property, net $ 510.0 $ 532.5

Goodwill and Other Intangible A

Goodwill and Other Intangible Assets
	6 Months Ended Mar. 31, 2010
Goodwill and Other Intangible Assets [Abstract]
Goodwill and Other Intangible Assets	6.Goodwill and Other Intangible Assets Changes in the carrying amount of goodwill for the six months ended March31, 2010 are (in millions): Control Architecture Products Software Solutions Total Balance as of September30, 2009 $ 386.8 $ 526.4 $ 913.2 Translation and other (6.7 ) (17.1 ) (23.8 ) Balance as of March31, 2010 $ 380.1 $ 509.3 $ 889.4 Other intangible assets consist of (in millions): March 31, 2010 Carrying Accumulated Amount Amortization Net Amortized intangible assets: Computer software products $ 148.7 $ 99.5 $ 49.2 Customer relationships 57.1 13.1 44.0 Technology 82.3 34.6 47.7 Trademarks 30.8 5.6 25.2 Other 23.2 15.0 8.2 Total amortized intangible assets 342.1 167.8 174.3 Intangible assets not subject to amortization 43.7 43.7 Total $ 385.8 $ 167.8 $ 218.0 September 30, 2009 Carrying Accumulated Amount Amortization Net Amortized intangible assets: Computer software products $ 140.9 $ 93.7 $ 47.2 Customer relationships 59.8 10.8 49.0 Technology 84.2 32.0 52.2 Trademarks 9.4 4.2 5.2 Other 24.3 14.2 10.1 Total amortized intangible assets 318.6 154.9 163.7 Intangible assets not subject to amortization 67.2 67.2 Total $ 385.8 $ 154.9 $ 230.9 The Allen-Bradley trademark has an indefinite life, and therefore is not subject to amortization. During the second quarter of fiscal 2010, it was determined that the ICS TriplexTM trademark no longer has an indefinite life, and beginning January1, 2010, we began amortizing the asset over its estimated useful life of 10years using the straight line method. Estimated amortization expense is $32.6million in 2010, $31.1million in 2011, $27.4million in 2012, $20.9million in 2013 and $16.2million in 2014. We performed the annual evaluation of our goodwill and indefinite life intangible assets for impairment as required by accounting principles generally accepted in the United States (U.S. GAAP) during the second quarter of 2010 and concluded that none of these assets is impaired.

Other Current Liabilities

Other Current Liabilities
	6 Months Ended Mar. 31, 2010
Other Current Liabilities [Abstract]
Other Current Liabilities	7. Other Current Liabilities Other current liabilities consist of (in millions): March 31, September 30, 2010 2009 Unrealized losses on foreign exchange contracts $ 13.2 $ 19.1 Product warranty obligations 33.3 32.1 Taxes other than income taxes 33.3 30.3 Accrued interest 15.7 15.6 Restructuring and special items 28.3 60.8 Income taxes payable 30.5 Other 57.3 60.7 Other current liabilities $ 211.6 $ 218.6

Product Warranty Obligations

Product Warranty Obligations
	6 Months Ended Mar. 31, 2010
Product Warranty Obligations [Abstract]
Product Warranty Obligations	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 from installation to an end-user or Original Equipment Manufacturer (OEM) customer. We also record a liability for specific warranty matters when they become probable and reasonably estimable. Our product warranty obligations are included in other current liabilities in the Condensed Consolidated Balance Sheet. Changes in the product warranty obligations for the six months ended March31, 2010 and 2009 are (in millions): Six Months Ended March 31, 2010 2009 Balance at beginning of period $ 32.1 $ 33.5 Warranties recorded at time of sale 18.4 16.6 Adjustments to pre-existing warranties (0.5 ) (0.9 ) Settlements of warranty claims (16.7 ) (18.1 ) Balance at end of period $ 33.3 $ 31.1

Long-term Debt

Long-term Debt
	6 Months Ended Mar. 31, 2010
Long-term Debt [Abstract]
Long-term Debt	9. Long-term Debt Long-term debt consists of (in millions): March 31, September 30, 2010 2009 5.65% notes, payable in 2017 $ 250.0 $ 250.0 6.70% debentures, payable in 2028 250.0 250.0 6.25% debentures, payable in 2037 250.0 250.0 5.20% debentures, payable in 2098 200.0 200.0 Unamortized discount and other (45.2 ) (45.3 ) Long-term debt $ 904.8 $ 904.7 On March16, 2009, we replaced our former five-year $600.0million unsecured revolving credit facility with two new unsecured revolving credit facilities totaling $535.0million, each with an individual borrowing limit of $267.5million. One facility has a three-year term and the other facility had a 364-day term. On March15, 2010, we replaced our former 364-day $267.5million unsecured revolving credit facility with a new 364-day $300million unsecured revolving credit facility, increasing our current borrowing capacity under the two facilities to $567.5million. The new credit facility includes a term-out option that allows us to borrow, on March14, 2011, up to $300.0million as a term loan for one year. We have not drawn down under any of these credit facilities at March31, 2010 or September30, 2009. Borrowings under these credit facilities bear interest based on short-term money market rates in effect during the period the borrowings are outstanding. The terms of these credit facilities contain covenants under which we would be in default if our debt-to-total-capital ratio was to exceed 60percent. We were in compliance with all covenants under these credit facilities at March31, 2010 and September30, 2009. Separate short-term unsecured credit facilities of approximately $133.7million at March31, 2010 were available to non-U.S. subsidiaries. There were no significant commitment fees or compensating balance requirements under any of our credit facilities. Borrowings under our credit facilities during the three and six months ended March31, 2010 and 2009 were not significant.

Derivative Instruments and Fair

Derivative Instruments and Fair Value Measurement
	6 Months Ended Mar. 31, 2010
Derivative Instruments and Fair Value Measurement [Abstract]
Derivative Instruments and Fair Value Measurement	10. 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 flows associated with certain third-party and intercompany transactions denominated in foreign currencies expected to occur within the next two years (cash flow 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, which we do not designate as hedging instruments, to offset the transaction gains or losses associated with some of these assets and liabilities. We value our forward exchange contracts using a market approach. We use an internally developed valuation model based on inputs including forward and spot prices for currency and interest rate curves. We have not changed our valuation techniques during the six months ended March31, 2010. The notional values of our forward exchange contracts outstanding at March31, 2010 were $689.8 million, of which $349.5million were designated as cash flow hedges. Contracts with the most significant notional values relate to transactions denominated in the United States dollar, British pound sterling and euro. U.S. GAAP defines 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 classifies 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. Assets and liabilities measured at fair value on a recurring basis and their location in our Condensed Consolidated Balance Sheet were (in millions): Fair Value (Level 2) March 31, September 30, Derivatives Designated as Hedging Instruments Balance Sheet Location 2010 2009 Forward exchange contracts Other current assets $ 5.4 $ 4.1 Forward exchange contracts Other assets 3.8 1.7 Forward exchange contracts Other current liabilities (5.8 ) (12.2 ) Forward exchange contracts Other liabilities (0.4 ) (3.6 ) Total $ 3.0 $ (10.0 ) Fair Value (Level 2) March 31, September 30, Derivatives Not Designated as Hedging Instruments Balance Sheet Location 2010 2009 Forward exchange contracts Other current assets $ 4.8

Retirement Benefits

Retirement Benefits
	6 Months Ended Mar. 31, 2010
Retirement Benefits [Abstract]
Retirement Benefits	11. Retirement Benefits The components of net periodic benefit cost in income from continuing operations are (in millions): Pension Benefits Three Months Ended Six Months Ended March 31, March 31, 2010 2009 2010 2009 Service cost $ 16.1 $ 13.7 $ 32.6 $ 27.6 Interest cost 39.7 38.2 79.8 76.6 Expected return on plan assets (47.8 ) (47.4 ) (96.0 ) (94.9 ) Amortization: Prior service cost (1.1 ) (1.2 ) (2.1 ) (2.3 ) Net transition obligation 0.2 0.2 Net actuarial loss 10.5 4.1 21.0 8.3 Net periodic benefit cost $ 17.4 $ 7.6 $ 35.3 $ 15.5 Other Postretirement Benefits Three Months Ended Six Months Ended March 31, March 31, 2010 2009 2010 2009 Service cost $ 1.0 $ 0.9 $ 1.9 $ 1.8 Interest cost 3.2 3.3 6.3 6.6 Amortization: Prior service cost (2.7 ) (2.5 ) (5.3 ) (5.2 ) Net actuarial loss 2.1 2.3 4.2 4.7 Net periodic benefit cost $ 3.6 $ 4.0 $ 7.1 $ 7.9

Comprehensive Income

Comprehensive Income
	6 Months Ended Mar. 31, 2010
Comprehensive Income [Abstract]
Comprehensive Income	12. Comprehensive Income Comprehensive income consists of (in millions): Three Months Ended Six Months Ended March 31, March 31, 2010 2009 2010 2009 Net income $ 137.0 $ 40.6 $ 213.6 $ 159.0 Other comprehensive loss: Unrecognized pension and postretirement benefit plan liabilities 4.3 1.4 8.6 2.8 Currency translation adjustments (54.3 ) (40.1 ) (59.8 ) (161.1 ) Net unrealized gains on cash flow hedges 7.1 0.1 9.0 13.5 Other 0.1 0.3 0.1 0.1 Other comprehensive loss (42.8 ) (38.3 ) (42.1 ) (144.7 ) Comprehensive income $ 94.2 $ 2.3 $ 171.5 $ 14.3

Commitments and Contingent Liab

Commitments and Contingent Liabilities
	6 Months Ended Mar. 31, 2010
Commitments and Contingent Liabilities [Abstract]
Commitments and Contingent Liabilities	13. Commitments and Contingent Liabilities Various 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 adverse effect on our business or financial condition. 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 thousands of 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 indemnified 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 January31, 2007. We are also responsible for half of the costs and liabilities associated with asbestos cases against the former Rockwell International Corporations (RICs) divested measurement and flow 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. 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 and Kemper Insurance, the insurance carriers that provided liability insurance coverage to Allen-Bradley, we entered into separate agreements on April1, 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 administers the Kemper buyout funds and has entered into a cost share agreement to pay the substantial majority of future defense and indemnity costs for Allen-Bradley asbestos claims once the Kemper buy-out funds are depleted. We believe that these arrangements will continue to provide coverage for Allen-Bradley asbestos claims throughout the remaining life of the asbestos liability. The

Income Taxes

Income Taxes
	6 Months Ended Mar. 31, 2010
Income Taxes [Abstract]
Income Taxes	14. Income Taxes At the end of each interim period, we estimate a base effective tax rate that we expect for the full fiscal 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 significant unusual or extraordinary items and items that are reported net of their related tax effects. We record the tax effect of significant unusual or extraordinary items and items that are reported net of their tax effects in the period in which they occur. The effective tax rate for the six months ended March31, 2010 was 17.8percent. The effective tax rate was lower than the U.S. statutory rate of 35percent because we benefited from lower non-U.S. tax rates and a discrete tax benefit of $11.3million primarily related to the favorable resolution of domestic and non-U.S. tax matters. This was partially offset by a discrete tax expense of $2.4 million related to the impact of a change in Mexican tax law. Gross unrecognized tax benefits and offsetting tax benefits were (in millions): March 31, 2010 Gross Unrecognized Offsetting Tax Benefits Tax Benefits Net Amounts that would reduce tax provision: Continuing operations $ 75.1 $ (44.8 ) $ 30.3 Discontinued operations 9.3 (3.3 ) 6.0 Total $ 84.4 $ (48.1 ) $ 36.3 September 30, 2009 Gross Unrecognized Offsetting Tax Benefits Tax Benefits Net Amounts that would reduce tax provision: Continuing operations $ 85.2 $ (44.3 ) $ 40.9 Discontinued operations 31.5 (4.8 ) 26.7 Total $ 116.7 $ (49.1 ) $ 67.6 During the first six months of 2010, the amount of unrecognized tax benefits decreased by $28.0 million ($26.9million net of offsetting tax benefits) as a result of the resolution of domestic and international tax matters. Of that amount, $21.1million ($20.0million net of offsetting tax benefits) related to the discontinued Dodge mechanical and Reliance Electric motors and repair services businesses and did not impact continuing operations. During the next 12months we believe it is reasonably possible that the amount of unrecognized tax benefits could decrease by up to $15.0million and the amount of offsetting tax benefits could decrease by up to $3.2million as a result of the resolution of worldwide tax matters and the lapses of statutes of limitations. We recognize interest and penalties related to tax matters in tax expense. Accrued interest and penalties were $24.9million and $1.7million at March31, 2010 and $25.8million and $1.8million at September30, 2009, respectively. We conduct business globally and are routinely audited by the various tax jurisdictions in which we operate. Our U.S. federal tax returns for 2008 and 2009, Wisconsin tax returns for 2006 through 2009, and tax returns

Restructuring Charges and Speci

Restructuring Charges and Special Items
	6 Months Ended Mar. 31, 2010
Restructuring Charges and Special Items [Abstract]
Restructuring Charges and Special Items	15. Restructuring Charges and Special Items The following table sets forth a summary of restructuring activities during the six months ended March31, 2010 (in millions): Non-Cash September 30, Activity March 31, 2009 Accrual and 2010 Actions Accrual Payments Adjustments Currency Accrual Fiscal 2007 Manufacturing Globalization Employee severance benefits $ 9.1 $ (2.0 ) $ $ $ 7.1 Fiscal 2008 Reduce Cost Structure for Anticipated Market Conditions Employee severance benefits 5.0 (2.2 ) (0.4 ) (0.2 ) 2.2 Fiscal 2009 Reduce Cost Structure for Global Recession Employee severance benefits 35.7 (14.1 ) (1.9 ) (1.1 ) 18.6 Asset impairments 8.8 (8.8 ) Lease exit costs 2.2 (1.6 ) (0.2 ) 0.4 Total $ 60.8 $ (19.9 ) $ (2.3 ) $ (10.3 ) $ 28.3 We recorded the $2.3million benefit related to the accrual adjustments as a component of selling, general and administrative expenses during the three and six months ended March31, 2010. We currently anticipate that the remaining accrual balance of $28.3million will be paid over the next 12 months.

Segment Information

Segment Information
	6 Months Ended Mar. 31, 2010
Segment Information [Abstract]
Segment Information	16. Segment Information The following tables reflect the sales and operating results of our reportable segments (in millions): Three Months Ended Six Months Ended March 31, March 31, 2010 2009 2010 2009 Sales Architecture Software $ 516.2 $ 393.5 $ 985.2 $ 899.9 Control Products Solutions 648.3 664.6 1,246.8 1,347.4 Total $ 1,164.5 $ 1,058.1 $ 2,232.0 $ 2,247.3 Segment Operating Earnings Architecture Software $ 122.6 $ 33.2 $ 221.6 $ 142.8 Control Products Solutions 54.7 53.0 92.5 121.0 Total 177.3 86.2 314.1 263.8 Purchase accounting depreciation and amortization (5.0 ) (4.8 ) (9.6 ) (9.8 ) General corporate net (23.6 ) (14.7 ) (43.1 ) (32.8 ) Interest expense (15.1 ) (15.3 ) (30.5 ) (30.3 ) Special items 4.0 4.0 Income tax provision (21.7 ) (14.8 ) (41.2 ) (38.7 ) Income from continuing operations $ 111.9 $ 40.6 $ 189.7 $ 156.2 Among other considerations, we evaluate performance and allocate resources based upon segment operating earnings before income taxes, interest expense, costs related to corporate offices, 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 that are within a single legal entity are recorded 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 benefit. In the United States and Canada, we sell our products primarily through independent distributors. We sell large systems and service offerings principally through a direct sales force, though opportunities are sometimes identified through distributors. Outside the United States and Canada, we sell products through a combination of direct sales and sales through distributors. Sales to our largest distributor in the second quarter and first six months of both 2010 and 2009 were approximately 10percent of our total sales.

Discontinued Operations

Discontinued Operations
	6 Months Ended Mar. 31, 2010
Discontinued Operations [Abstract]
Discontinued Operations	17. Discontinued Operations In the six months ended March31, 2010, we recorded a $21.3million tax benefit as a result of the resolution of a domestic tax matter relating to the January2007 sale of our Dodge mechanical and Reliance Electric motors and repair services businesses. We also recorded a net $2.6million after-tax benefit relating to changes in estimate for environmental and legal matters of our divested businesses. In the six months ended March31, 2009, we recorded a benefit of $4.5million ($2.8million net of tax) related to a change in estimate for legal contingencies associated with RICs operation of the Rocky Flats facility for the U.S. Department of Energy.