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

Rockwell Automation, Inc.

Delaware		25-1797617
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
1201 South 2nd Street		53204
Milwaukee, Wisconsin		(Zip Code)
(Address of principal executive offices)

Title of each class		Name of each exchange on which registered
Common Stock, $1 Par Value (including the		New York Stock Exchange
associated Preferred Share Purchase Rights)

          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes þ          No o

          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 o          No þ

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

          Indicate by check mark 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.     þ

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer þ          Accelerated Filer o          Non-accelerated Filer o

          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes o          No þ

          The aggregate market value of registrant’s voting stock held by non-affiliates of registrant on March 31, 2006 was approximately $12.7 billion.

          170,173,369 shares of registrant’s Common Stock, par value $1 per share, were outstanding on October 31, 2006.

DOCUMENTS INCORPORATED BY REFERENCE

          Certain information contained in the Proxy Statement for the Annual Meeting of Shareowners of registrant to be held on February 7, 2007 is incorporated by reference into Part III hereof.

 

 

PART I

FORWARD-LOOKING STATEMENTS

          This Annual Report contains statements (including certain projections and business trends) accompanied by such phrases as “believe”, “estimate”, “expect”, “anticipate”, “will”, “intend” and other similar expressions, that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, many of which are beyond our control, including but not limited to:

	•		economic and political changes in global markets where we compete, such as currency exchange rates, inflation rates, interest rates, recession, policies of foreign governments and other external factors we cannot control, and U.S. and local laws affecting our activities abroad and compliance therewith;
	•		successful development of advanced technologies and demand for and market acceptance of new and existing products;
	•		general global and regional economic, business or industry conditions, including levels of capital spending in industrial markets;
	•		the availability, effectiveness and security of our legacy and future information technology systems;
	•		competitive product and pricing pressures;
	•		disruption of our operations due to natural disasters, acts of war, strikes, terrorism, or other causes;
	•		intellectual property infringement claims by others and the ability to protect our intellectual property;
	•		the successful execution of our Power Systems divestiture strategy and redeployment of cash proceeds;
	•		our ability to successfully address claims by taxing authorities in the various jurisdictions where we do business;
	•		our ability to attract and retain qualified personnel;
	•		the uncertainties of litigation;
	•		disruption of our North American distribution channel;
	•		the availability and price of components and materials; and
	•		other risks and uncertainties, including but not limited to those detailed from time to time in our Securities and Exchange Commission filings.

          These forward-looking statements reflect our beliefs as of the date of filing 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 additional information.

Item 1.		Business

General

          Rockwell Automation, Inc. (the Company or Rockwell Automation) is a leading global provider of industrial automation power, control and information products and services. The Company was incorporated in Delaware in 1996 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, the former Rockwell International Corporation (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.

          On June 29, 2001, we completed the spinoff of our Rockwell Collins avionics and communications business into an independent, separately traded, publicly held company named Rockwell Collins, Inc. (Rockwell Collins). In September 2004, we sold our FirstPoint Contact business. Additional information related to this divestiture is contained in Note 13 in the Financial Statements.

          In June 2006, we announced our intention to divest our Dodge mechanical and Reliance Electric motors and motor repair services businesses. These are the principal businesses of our Power Systems operating segment. These businesses are reflected in continuing operations for all periods presented as the criteria for discontinued operations prescribed by Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, had not been met as of September 30, 2006, the date in which this standard requires the criteria to be assessed. On November 7, 2006, we announced that we have entered into a definitive agreement to sell these businesses to Baldor Electric Company (Baldor) for $1.8 billion, comprised of $1.75 billion in cash and $50 million in Baldor common stock. The transaction is subject to customary closing conditions and regulatory approval and is expected to close in the second quarter of our fiscal 2007. In subsequent filings these businesses will be reported as discontinued operations.

          In September 2006, we and Rockwell Collins sold our investment in Rockwell Scientific Company LLC (RSC). Before the sale, we and Rockwell Collins each owned 50 percent of RSC. Additional information regarding the sale of RSC is contained in Note 14 in the Financial Statements.

          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 the Annual Meeting of Shareowners of the Company to be held on February 7, 2007 (the 2007 Proxy Statement), or to information under specific 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 refer to our fiscal year unless otherwise stated.

Operating Segments

          We have two operating segments: Control Systems and Power Systems. In 2006, our total sales were $5.6 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, 2006, is contained under the caption Results of Operations in MD&A, and in Note 18 in the Financial Statements.

          Effective October 1, 2006, we have realigned our internal management reporting structure. The reporting structure changes include realignment of our Control Systems’ services and solutions offerings to report through the Components and Packaged Applications Group (CPAG). Additionally, the Power Systems custom drives and drives related parts and services business has been realigned to also report through CPAG. As a result of changes in the internal management reporting structure, we will begin reporting the historical Control Systems operating segment as two separate operating segments in our first quarter of 2007.

Control Systems

          Control Systems is our largest operating segment with 2006 sales of $4.6 billion (82 percent of our total sales) and approximately 19,000 employees at September 30, 2006. Control Systems supplies industrial automation products, systems, software and services focused on helping customers control and improve manufacturing processes. The operating segment includes two main business groups: CPAG and the Automation Control and Information Group (ACIG).

          CPAG supplies industrial components, power control and motor management products, and packaged and engineered products and systems. CPAG’s sales account for approximately 39 percent of Control Systems’ sales.

          ACIG’s core products are used primarily to control and monitor industrial plants and processes and typically consist of a processor, software and input/output (I/O) devices. ACIG’s integrated architecture and Logix controllers perform multiple types of control applications, including discrete, batch, continuous process, drive system, motion and machine safety across various factory floor operations. ACIG’s sales account for approximately 45 percent of Control Systems’ sales.

          In addition, Control Systems’ offerings also include services and solutions, such as multi-vendor customer support, training, automation systems integration, asset management, and manufacturing information solutions for discrete and targeted batch process industries. Control Systems’ service and solution offerings compete with Emerson Electric Co., General Electric Company, Invensys, Siemens AG and system integrators.

          The following is a summary of the major products and services and major competitors of Control Systems’ two main business groups:

Business Group		Major Products / Services		Major Competitors
CPAG		Motor starters		ABB, Ltd.
		Contactors		Schneider Electric SA
		Push buttons		Siemens AG
		Signaling devices
		Termination and protection devices
		Relays and timers
		Condition sensors
		Adjustable speed drives
		Motor control centers
		Drive systems
ACIG		Controllers		Emerson Electric Co.
		Control platforms		Mitsubishi Corp.
		Software		Omron Corp.
		Input/output devices		Schneider Electric SA
		High performance rotary and linear		Siemens AG
		motion control systems
		Electronic operator interface devices
		Sensors
		Industrial computers
		Machine safety components

          Depending on the product or service involved, Control Systems’ competitors range from large diversified businesses that sell products outside of industrial automation, to smaller companies specializing in niche products and services. Factors that influence Control Systems’ competitive position are its broad product portfolio and scope of solutions, technology leadership, knowledge of customer applications, large installed base, established distribution network, quality of products and services, price and global presence.

          Control Systems’ products are marketed primarily under the Allen-Bradley^® and Rockwell Software^® brand names. Major markets served include consumer products, transportation, oil and gas, mining, metals and forest products.

          In North America, Control Systems’ products are sold primarily through independent distributors that typically do not carry products that compete with Allen-Bradley^® products. Large systems and service offerings are sold principally through a direct sales force, though opportunities are sometimes sourced through distributors or system integrators. Product sales outside the United States occur through a combination of direct sales, sales through distributors and sales through system integrators.

          In 2006, sales in the United States accounted for 57 percent of Control Systems’ sales. Outside the U.S., Control Systems’ primary markets were Canada, China, the United Kingdom, Italy, Germany, Brazil, Australia, Korea and Mexico.

          Control Systems is headquartered in Milwaukee, Wisconsin and has operations in North America; Europe, Middle East and Africa; Asia-Pacific; and Latin America.

Power Systems

          Power Systems recorded 2006 sales of $1.0 billion (18 percent of our total sales) and had approximately 4,000 employees at September 30, 2006. Power Systems consists of two business groups: Dodge mechanical (Mechanical) and Reliance electrical (Electrical).

          The following is a summary of the major products and services and major competitors of the Power Systems operating segment:

Business Group		Major Products / Services		Major Competitors
Mechanical		Mounted bearings		Altra Industrial Motion, Inc.
		Gear reducers		Emerson Electric Co.
		Mechanical drives		Martin Sprocket and Gear, Inc.
		Conveyor pulleys		Regal-Beloit Corporation
		Couplings		Rexnord Corporation
		Bushings		SEW — EURODRIVE GmbH
		Clutches		Siemens AG
		Motor brakes		SKF AB
				TB Woods Corp.
				The Schaeffer Group (INA brand)
				Timken Company
Electrical		Industrial and engineered motors		A.O. Smith Corporation
		Adjustable speed drives		Baldor Electric Company
		Repair services		Emerson Electric Co.
		Motor and mechanical maintenance solutions		General Electric Co.
		Training		Regal-Beloit Corporation
		Consulting services to OEMs,		Siemens AG
		end-users and distributors		TECO-Westinghouse motor company
				Toshiba Corp.
				Weg SA

          Depending on the product involved, Power Systems’ competitors range from large diversified businesses that sell products outside of industrial automation, to smaller companies specializing in niche products and services. Factors that influence Power Systems’ competitive position are product quality, installed base, price and our established distributor network. While Power Systems’ competitive position is strong in the United States, it is limited somewhat by its small presence outside the United States.

          Mechanical’s products are marketed primarily under the Dodge^® brand name while Electrical’s products are marketed primarily under the Reliance^® and Reliance Electric^TM brand names. Major markets served include mining, cement, aggregates, environmental, forest products, food/beverage, oil and gas, metals and material handling.

          Mechanical’s products are sold primarily through distributors while Electrical’s products are sold primarily through a direct sales force.

          In 2006, sales in the United States accounted for 85 percent of Power Systems’ sales. Outside the U.S., Power Systems’ primary markets were Canada, China and Mexico.

          Power Systems is headquartered in Greenville, South Carolina and has operations in North America, Europe, Latin America and Asia-Pacific.

Geographic Information

          In 2006, sales in the United States accounted for 62 percent of our total sales. Our principal markets outside the United States are in Canada, China, the United Kingdom, Italy, Germany, Mexico, Brazil, Australia and Korea. 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 18 in the Financial Statements.

Research and Development

     Our research and development spending is (in millions):

		Year Ended September 30,
		2006				2005				2004
Control Systems		$	148.5			$	128.2			$	111.8
Power Systems			11.9				10.4				9.9
		$	160.4			$	138.6			$	121.7

          Customer-sponsored research and development was not significant in 2006, 2005 or 2004.

Employees

          At September 30, 2006 we had approximately 23,000 employees. Approximately 14,000 were employed in the United States, and, of these employees, about 5 percent were represented by various local or national unions.

Raw Materials and Supplies

          We purchase many items of equipment, components and materials used to produce our products from others. The raw materials essential to the conduct of each of our business segments 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 specifications 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 was $911.7 million at September 30, 2006 and $772.5 million at September 30, 2005. Backlog is not necessarily indicative of results of operations for future periods due to the short-cycle nature of most of our sales activities.

Environmental Protection Requirements

          Information about the effect of compliance with environmental protection requirements and resolution of environmental claims is contained in Note 17 in the Financial Statements. See also 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 indemnification have been made to us. We believe that none of these claims will have a material adverse effect on our financial condition. See Item 3. Legal Proceedings. 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 financial 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^®” is important to each of our business segments. In addition, we own other important trademarks that we use for certain products and services, such as “Allen-Bradley^®” and “A-B^®” for electronic controls and systems for industrial automation, “Reliance^®” and “Reliance Electric^TM” for electric motors and drives and “Dodge^®” for mechanical power transmission products. Although we have announced the signing of a definitive agreement to sell the principal businesses of our Power Systems operating segment, we will retain the Reliance Electric^TM and Reliance^® branded drives business and related parts and services as an integral part of our global drives and services businesses. We will retain a long-term license to the Reliance^® and Reliance Electric^TM trademarks in connection with the drives business.

Seasonality

          Our business segments are not subject to significant seasonality. However, the calendarization of our results can be affected by the seasonal capital spending patterns of our customers due to their annual capital budgeting processes and their working schedules combined with seasonal changes in the composition of the products and services our customers purchase.

Available Information

          We maintain an Internet site 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 filed 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 file or furnish these reports with the Securities and Exchange Commission (SEC). All reports we file 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 at our Internet site. These Guidelines and charters are also available in print to any shareowner upon request. The information contained on and linked from our Internet site is not incorporated by reference into this Annual Report on Form 10-K.

          The certifications of our Chief Executive Officer and Chief Financial Officer required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included as Exhibits to this Annual Report on Form 10-K and were included as Exhibits to each of our Quarterly Reports on Form 10-Q filed during 2006. Our Chief Executive Officer certified to the New York Stock Exchange (NYSE) on March 2, 2006 pursuant to Section 303A.12 of the NYSE’s listing standards, that he was not aware of any violation by the Company of the NYSE’s corporate governance listing standards as of that date.

Item 1A.		Risk Factors

We generate a substantial portion of our revenues from international sales and are subject to the risks of doing business outside of the United States.

          Approximately 38 percent of our revenues in 2006 were outside of the U.S. Future growth rates and success of our business depend in large part on continued growth in our non-U.S. operations. Numerous risks and uncertainties affect our non-U.S. operations. These risks and uncertainties include political and economic instability, changes in local governmental laws, regulations and policies, including those related to tariffs, investments, taxation, exchange controls, employment regulations and repatriation of earnings, and enforcement of contract and intellectual property rights. International transactions may also involve increased financial and legal risks due to differing legal systems and customs, including risks of non-compliance with U.S. and local laws affecting our activities abroad. In addition, we are affected by changes in foreign currency exchange rates, inflation rates and interest rates. While these factors and the impact of these factors are difficult to predict, any one or more of them could adversely affect our business, financial condition or operating results.

An inability to anticipate 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 and our operating results would be adversely affected.

General economic, business or industry conditions may result in a decrease in our revenues and profitability.

          Demand for our products is sensitive to changes in levels of global industrial production. As economic activity slows down, companies tend to reduce their levels of capital spending, resulting in decreased demand for our products. If this occurs, our revenues and profitability may be negatively affected.

Information technology infrastructure failures could significantly affect our business.

          We depend heavily on our information technology infrastructure in order to achieve our business objectives. If we experience a problem that impairs this infrastructure, such as a computer virus, a problem with the functioning of an important IT application, or an intentional disruption of our IT systems by a third party, the resulting disruptions could impede our ability to record or process orders, manufacture and ship in a timely manner, or otherwise carry on our business in the ordinary course. Any such events could cause us to lose customers or revenue and could require us to incur significant expense to eliminate these problems and address related security concerns.

          We are in the process of introducing a global Enterprise Resource Planning (ERP) system that will redesign and deploy new processes, organization structures and a common information system over a period of several years. Our first significant roll-outs of the system are scheduled to occur at several of our U.S. locations in fiscal 2007. As we implement the ERP system, the new system may not perform as expected. This could have an adverse effect on our business.

The growth of our Control Systems solutions offerings may create additional risks.

          Risks inherent in the sale of systems and solutions include assuming greater responsibility for project completion and success, defining and controlling contract scope, efficiently executing projects, and managing the efficiency and quality of our subcontractors. Our inability to control, manage, and mitigate these risks could adversely affect our results of operations.

The global industrial automation power, control and information products and services industry is highly competitive.

          We face strong competition in all of our market segments in several specific respects, including pricing, product performance, developing integrated systems and applications that address the business challenges faced by our customers and customer service. The relative importance of these factors differs across the geographic markets and product areas that we serve. Price competition in our various industries is intense. We seek to maintain acceptable pricing levels by continually developing advanced technologies for new products and product enhancements. If we fail to keep pace with technological changes, we may experience price erosion and lower margins. We expect that the level of competition will remain high in the future, which could limit our ability to maintain or increase our market share or profitability.

A disruption to our distribution channel could have an adverse effect on our operating results.

          In the United States and Canada, approximately 75 percent of our sales are through a limited number of third party distributors. While we maintain the right to appoint new distributors, any unplanned disruption to the existing channel could adversely affect our revenues and profitability. A disruption could be caused by the sale of a distributor to a competitor, financial instability of the distributor, or other events.

Potential liabilities and costs from litigation (including asbestos claims) could adversely affect our business.

          Various lawsuits, claims and proceedings have been or may be asserted against us relating to the conduct of our business, including those pertaining to product liability, safety and health, employment and contract matters. 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. The uncertainties of litigation (including asbestos claims) and the uncertainties related to the collection of insurance coverage make it difficult to predict the ultimate resolution.

The inability to secure and maintain rights to intellectual property could harm our business and our customers.

          We own the rights to many patents, trademarks, brand names and trade names that are important to our business. The loss of patents or licenses used in principal portions of our business may have an adverse effect on our results of operations. Expenses related to enforcing our intellectual property rights could be significant. In addition, others may assert intellectual property infringement claims against us or our customers. We sometimes 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. Indemnification payments and legal costs to defend claims could have an adverse effect on our business.

Dispositions of businesses involve risks and uncertainties.

          Our business strategy and long-term objectives may result in decisions to dispose of assets or businesses. The disposition of assets or businesses can be highly uncertain. In June 2006 we announced our intention to divest the principal businesses of our Power Systems operating segment and on November 7, 2006, we announced that we have entered into a definitive agreement to sell these businesses to Baldor Electric Company. The transaction is subject to customary closing conditions and regulatory approval. Any failures or delays in satisfying closing conditions for this divestiture or difficulties in re-deploying the proceeds to minimize the dilutive effect of the sale could have an adverse effect on our ability to execute on our strategy.

Our reliance on third party suppliers creates certain risks and uncertainties.

          Our manufacturing processes require that we purchase a high volume of equipment, components and materials from third party suppliers. Our reliance on these suppliers involves certain risks, including:

	•		the cost of these purchases may change due to inflation, exchange rates or other factors;
	•		poor quality can adversely affect the reliability and reputation of our products; and
	•		a shortage of components or materials could adversely affect our manufacturing efficiencies and delivery capabilities, which could reduce sales and profitability.

          Any of these uncertainties could adversely affect our profitability 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 product in desired quantities and in a timely manner. The effect of unavailability or delivery delays would be more severe if associated with our higher volume and more profitable products. Even where alternative 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.

Potential liabilities and costs relating to environmental remediation could adversely affect our business.

          Our operations, both in the United States and abroad, 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 specified substances. Environmental laws and regulations can be complex and may change. Our financial responsibility for the cleanup or other remediation of 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 as well, and the costs associated with these current and future sites may be significant.

The inability to successfully defend claims from taxing authorities related to our current and divested businesses could adversely affect our operating results and financial 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 subjectivity of tax laws between those jurisdictions as well as the subjectivity of factual interpretations, our estimates of income tax liabilities may differ from actual payments or assessments. Claims from taxing authorities related to these differences could have an adverse impact on our operating results and financial position. In connection with the divestiture of certain businesses in prior years, we retained tax liabilities and the rights to tax refunds for periods before the divestitures. As a result, from time to time, we may be required to make payments related to tax matters associated with those divested businesses.

Natural disasters, terrorism, acts of war, international conflicts or other disruptions to our operations could harm our business.

          Natural disasters, acts or threats of war or terrorism, international conflicts, and the actions taken by the United States and other governments in response to such events could cause damage or disrupt our business operations, our suppliers, or our customers, and could create political or economic instability, any of which could have an adverse effect on our business. Although it is not possible to predict such events or their consequences, these events could decrease demand for our products, make it difficult or impossible for us to deliver products, or disrupt our supply chain.

Our failure to attract and retain qualified personnel could lead to a loss of revenue or profitability.

          Our success depends in part on the efforts and abilities of our senior management team and key employees. Their skills, experience and industry contacts significantly benefit our operations and administration. The failure to attract and retain members of our senior management team and key employees could have a negative effect on our operating results.

Risks associated with acquisitions could have an adverse effect on us.

          We have acquired, and anticipate continuing to acquire, businesses in an effort to enhance shareowner value. Acquisitions involve risks and uncertainties, including:

	•		difficulties integrating the acquired business, retaining the acquired business’ customers, and achieving the expected benefits of the acquisition, such as revenue increases, cost savings, and increases in geographic or product presence, in the desired time frames, if at all;
	•		loss of key employees of the acquired business;
	•		difficulties implementing and maintaining consistent standards, controls, procedures, policies and information systems; and
	•		diversion of management’s attention from other business concerns.

          Future acquisitions could cause us to incur debt, dilution, contingent liabilities, increased interest expense, and amortization expenses related to intangible assets. Impairment losses on goodwill and intangible assets with an indefinite life, or restructuring charges, could also occur as a result of acquisitions.

Item 1B.		Unresolved Staff Comments

          None.

Item 2.		Properties

          At September 30, 2006, we operated 73 plants, principally in North America. We also had 284 sales and administrative offices and a total of 41 warehouses, service centers and other facilities. The aggregate floor space of our facilities was approximately 14.1 million square feet. Of this floor space, we owned approximately 23 percent and leased approximately 77 percent. Manufacturing space occupied approximately 6.3 million square feet. Our Control Systems segment occupied approximately 3.3 million square feet, and our Power Systems segment occupied the remaining approximately 3.0 million square feet of manufacturing space. At September 30, 2006, approximately 450 thousand square feet of floor space was not in use, principally in owned facilities.

          In November 2005, we sold and leased back 24 properties in North America comprising approximately 3.8 million square feet. See Note 17 in the Financial Statements for additional information.

          There are no major encumbrances (other than financing arrangements, which in the aggregate are not significant) 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

          Rocky Flats Plant. RIC operated the Rocky Flats Plant (the Plant), Golden, Colorado, from 1975 through December 1989 for the Department of Energy (DOE). Incident to Boeing’s acquisition of RIC in 1996, we assumed and agreed to indemnify RIC and Boeing for any liability arising out of RIC’s activities at the Plant to the extent such liability is not assumed or indemnified by the government, and RIC and Boeing assigned to us the right to any reimbursements or other proceeds to which they might be entitled under RIC’s Rocky Flats contracts with the DOE.

          On January 30, 1990, a class action was filed in the United States District Court for the District of Colorado against RIC and another former operator of the Plant. The action alleges the improper production, handling and disposal of radioactive and other hazardous substances, constituting, among other things, violations of various environmental, health and safety laws and regulations, and misrepresentation and concealment of the facts relating thereto. On October 8, 1993, the court certified separate medical monitoring and property value classes. On February 14, 2006, a jury empanelled to try certain of the class action plaintiffs’ property damage claims found the contractor defendants liable for trespass and nuisance, and awarded $176 million in compensatory damages and $200 million in punitive damages against the two defendants collectively. The jury also found RIC to be 10% responsible for the trespass and 70% responsible for the nuisance. No appealable judgment has been entered on the jury verdict, in part because the court has yet to decide how the damages are to be allocated between the defendants and among the plaintiff class members. Appeals are likely after judgment is entered. Effective August 1, 1996, the DOE assumed control of the defense of the contractor defendants, including RIC, in the action and has either reimbursed or paid directly the costs of RIC’s defense. We believe that RIC is entitled under applicable law and its contract with the DOE to be indemnified for the verdict and other costs associated with this action.

          On November 13, 1990, RIC was served with another civil action brought against it in the same court by James Stone, claiming to act in the name of the United States, alleging violations of the U.S. False Claims Act in connection with its operation of the Plant (and seeking treble damages and forfeitures). On December 6, 1995, the DOE notified RIC that it would no longer reimburse costs incurred by RIC in defense of the action. On November 19, 1996, the court granted the Department of Justice leave to intervene in the case on the government’s behalf. On April 1, 1999 a jury awarded the plaintiffs approximately $1.4 million in damages. On May 18, 1999, the court entered judgment against RIC for approximately $4.2 million, trebling the jury’s award as required by the False Claims Act, and imposing a civil penalty of $15,000. If the judgment is affirmed on appeal, Mr. Stone will also be entitled to an award of attorneys’ fees but the court refused to award fees until appeals from the judgment have been exhausted. On September 24, 2001, a panel of the 10^th Circuit Court of Appeals affirmed the judgment. On November 2, 2001, RIC filed a petition for rehearing with the Court of Appeals seeking reconsideration of that portion of the decision holding that Mr. Stone is entitled to an award of attorneys’ fees. On March 4, 2002, the Court of Appeals remanded the case to the trial court for the limited purpose of making findings of fact and conclusions of law pertaining to Mr. Stone’s relator status and, the trial court having made findings of fact on the issue, on March 15, 2004, a panel of the Court of Appeals again ruled that Mr. Stone is entitled to an award of attorneys’ fees. On January 4, 2006, the 10^th Circuit Court of Appeals denied en banc review, and on April 4, 2006, RIC filed a petition for certiorari seeking Supreme Court review of the 10^th Circuit’s decision. On September 25, 2006 the Supreme Court granted our petition for certiorari and set the case for argument on December 5, 2006. We believe that RIC is entitled under applicable law and its contract with the DOE to be indemnified for all costs and any liability associated with this action, and RIC has filed a claim with the DOE seeking reimbursement that is described more fully below. We believe that an outcome adverse to RIC will not have a material effect on our business or financial condition.

          On January 8, 1991, RIC filed suit in the United States Court of Federal Claims against the DOE, seeking recovery of $6.5 million of award fees that it alleges are owed to it under the terms of its contract with the DOE for management and operation of the Plant during the period October 1, 1988 through September 30, 1989. On July 17, 1996, the government filed an amended answer and counterclaim alleging violations of the U.S. False Claims Act previously asserted in the Stone civil action described in the preceding paragraph. On May 4, 2005, RIC filed another claim with the DOE, seeking recovery of $11.3 million in unreimbursed costs incurred in defense of the Stone suit. On September 30, 2005, the DOE Contracting Officer denied that claim and demanded repayment of $4 million in previously reimbursed Stone defense costs. On November 10, 2005, RIC appealed both aspects of the Contracting Officer’s decision regarding Stone defense costs to the Energy Board of Contract Appeals. Both parties have filed motions for summary judgment. In the second quarter of 2006, we recorded a $5.0 million ($3.0 million after-tax) accrual in discontinued operations for legal contingencies related to this matter.

          Russellville. On March 24, 1997, the Circuit Court of Franklin County, Kentucky in Commonwealth of Kentucky, Natural Resources and Environmental Protection Cabinet vs. Rockwell, an action filed in 1986 seeking remediation of PCB contamination resulting from unpermitted discharges of PCBs from a plant in Russellville, Kentucky owned and operated by RIC’s Measurement & Flow Control Division before its divestiture in March 1989, entered judgment establishing PCB cleanup levels for the former plant site and certain offsite property and ordering additional characterization of possible contamination in the Mud River and its flood plain. The Court deferred any decision to impose civil penalties pending implementation of an appropriate remediation program. On August 13, 1999, the Court of Appeals affirmed the trial court’s judgment, a ruling that the Kentucky Supreme Court has let stand. We have been proceeding with remediation and characterization efforts consistent with the trial court’s ruling.

          Solaia Technology LLC. For nearly five years we were a party in several suits in which one or both of Solaia Technology LLC (Solaia) and Schneider Automation, Inc (Schneider) were adverse to us. In 2001, Solaia acquired U.S. Patent No. 5,038,318 (the ‘318 patent) from Schneider, a competitor in the field of factory automation. Schneider retained certain interests in the ‘318 patent, including a share in any licensing income. Solaia, formed to license and enforce the ‘318 patent, asserted that the patent covers computer-controlled factory automation systems used throughout most modern factories in the United States, issued demand letters to a wide range of factory owners and operators, and filed lawsuits for alleged infringement of the ‘318 patent.

          Among other lawsuits filed by Solaia concerning the ‘318 patent, Solaia filed suit on July 2, 2002 accusing sixteen companies of infringing the ‘318 patent. Solaia Technology LLC v. ArvinMeritor, Inc., et al. (02-C-4704, N.D. Ill.) (the Chicago patent suit). We believed that Solaia’s claims in the Chicago patent suit were without merit and baseless, and in December 2002, we sought to protect our customers from Solaia’s claims by bringing an action in federal court in Milwaukee against Solaia, its law firm Niro, Scavone, Haller & Niro, and Schneider. Rockwell Automation, Inc., et al. v. Schneider Automation, Inc., et al (Case No. 02-C-1195 E.D. Wis.) (the Milwaukee action). On May 12, 2003, Solaia sued us directly in the Chicago patent suit for patent infringement.

          In April 2006, following rulings in our favor on motions for summary judgment, we entered into an agreement with Solaia and its law firm that ended the Chicago patent suit and provided that the various other lawsuits between us and Solaia and its law firm would be dismissed. Separately, in October 2006, we entered into a settlement agreement with Schneider that ended the Milwaukee action. All lawsuits concerning the Company and the ‘318 patent are now completely resolved.

          Asbestos. Like thousands of other companies, we (including our subsidiaries) have been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos that was used in certain components of our products many years ago. Currently there are thousands of claimants in lawsuits that name us as defendants, together with hundreds of other companies. The great bulk of the complaints, however, do not identify any of our products or specify which of these claimants, if any, were exposed to asbestos attributable to our products; and past experience has shown that the vast majority of the claimants will never identify any of our products.

          In addition, when our products appear to be identified, they are frequently from divested businesses, and we are indemnified for most of the costs. For those claimants who do show that they worked with our products, we nevertheless believe we have meritorious defenses, in substantial part due to the integrity of our 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 most of these claims. We initiated litigation in the Milwaukee County Circuit Court on February 12, 2004 to enforce the insurance policies against Nationwide Indemnity Company and Kemper Insurance, the insurance carriers that provided liability insurance coverage to our former Allen-Bradley subsidiary. As a result, the insurance carriers have paid some past defense and indemnity costs and have agreed to pay the substantial majority of future defense and indemnity costs for Allen-Bradley asbestos claims, subject to policy limits. If either carrier becomes insolvent or the policy limits of either carrier are exhausted, our share of future defense and indemnity costs may increase. However, coverage under excess policies may be available to pay some or all of these costs.

          The uncertainties of asbestos claim litigation and the long term solvency of our insurance companies make it difficult 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 adverse effect on our financial condition.

          Foreign Corrupt Practices Act. As a result of an internal review, we determined during the fourth quarter of 2006 that actions by a small number of employees at certain of our operations in one jurisdiction may have violated the U.S. Foreign Corrupt Practices Act (FCPA) or other applicable laws. We and some of our distributors do business in this jurisdiction with government owned enterprises or government owned enterprises that are evolving to commercial businesses. These actions involved payments for non-business travel expenses and certain other business arrangements involving potentially improper payment mechanisms for legitimate business expenses. Special outside counsel has been engaged to investigate the actions and report to the Audit Committee. Their review is ongoing.

          We voluntarily disclosed these actions to the U.S. Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) beginning in September 2006. We are implementing thorough remedial measures, and are cooperating on these issues with the DOJ and SEC. We have agreed to update the DOJ and SEC periodically regarding any further developments as the investigation continues.

          If violations of the FCPA occurred, we may be subject to consequences that could include fines, penalties, other costs and business-related impacts. We could also face similar consequences from local authorities. While we are not in a position to reasonably estimate potential consequences at this time, we do not believe the consequences of this investigation, the remediation or any related penalties or business related impacts have had or will have a material adverse effect on our business, results of operations or financial condition.

          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 adverse effect on our business or financial condition.

Item 4.		Submission of Matters to a Vote of Security Holders

          No matters were submitted to a vote of security holders during the fourth quarter of 2006.

Item 4A.		Executive Officers of the Company

          The name, age, office and position held with the Company and principal occupations and employment during the past five years of each of the executive officers of the Company as of October 31, 2006 are:

Name, Office and Position, and Principal Occupations and Employment		Age
Keith D. Nosbusch — Chairman of the Board of Rockwell Automation since February 2005, and President and Chief Executive Officer of Rockwell Automation since February 2004; Senior Vice President of Rockwell Automation and President, Rockwell Automation Control Systems prior thereto			55
John D. Cohn — Senior Vice President, Strategic Development and Communications of Rockwell Automation			52
Kent G. Coppins — Vice President and General Tax Counsel of Rockwell Automation			53
Theodore D. Crandall — Senior Vice President of Rockwell Automation since February 2004; Senior Vice President, Components and Packaged Applications Group of Rockwell Automation Control Systems prior thereto			51
David M. Dorgan — Vice President and Controller of Rockwell Automation			42
Steven A. Eisenbrown — Senior Vice President of Rockwell Automation since February 2004; Senior Vice President, Automation Control and Information Group of Rockwell Automation Control Systems prior thereto			53
James V. Gelly — Senior Vice President and Chief Financial Officer of Rockwell Automation since January 2004; Vice President and Treasurer of Honeywell International (diversified technology and manufacturing) prior thereto			46
Douglas M. Hagerman — Senior Vice President, General Counsel and Secretary of Rockwell Automation since May 2004; Litigation partner at Foley & Lardner LLP (law firm) and Co-Chair of the Securities Litigation, Enforcement and Regulation Practice Group prior thereto			45
Mary Jane Hall — Senior Vice President, Human Resources of Rockwell Automation since February 2004; Vice President of Rockwell Automation and Senior Vice President, Human Resources of Rockwell Automation Control Systems prior thereto			63
John P. McDermott — Senior Vice President of Rockwell Automation since February 2004; Senior Vice President, Global Sales and Marketing (formerly Global Sales and Solutions) of Rockwell Automation Control Systems since October 2005; Senior Vice President, Global Manufacturing Solutions Group of Rockwell Automation Control Systems from November 2002 to October 2005; Senior Vice President, Americas Sales of Rockwell Automation Control Systems prior thereto			48
John M. Miller — Vice President and Chief Intellectual Property Counsel of Rockwell Automation since October 2004; Associate Intellectual Property Counsel of Rockwell Automation prior thereto			39
Timothy C. Oliver — Vice President and Treasurer of Rockwell Automation since May 2004; Vice President, Investor Relations and Financial Planning of Raytheon Company (manufacturer of defense electronics and business aviation aircraft) prior thereto			38
Rondi Rohr-Dralle — Vice President, Corporate Development of Rockwell Automation			50
Robert A. Ruff — Senior Vice President of Rockwell Automation since February 2004; Senior Vice President of Americas Sales of Rockwell Automation Control Systems since November 2002; Regional Vice President-Detroit Region Sales of Rockwell Automation Control Systems prior thereto			58
A. Lawrence Stuever — Vice President and General Auditor of Rockwell Automation since June 2003; Vice President, Compensation of Rockwell Automation prior thereto			54
Joseph D. Swann — Senior Vice President of Rockwell Automation and President, Rockwell Automation Power Systems			65

          There are no family relationships, as defined by applicable SEC rules, between any of the above executive officers and any other executive officer or director of the Company. No officer of the Company was selected pursuant to any arrangement or understanding between the officer and any person other than the Company. All executive officers are elected annually.

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”. We delisted our common stock from the Pacific Exchange and the London Stock Exchange in 2006. On October 31, 2006, there were 31,883 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 fiscal years ended September 30, 2006 and 2005:

		2006								2005
Fiscal Quarters		High				Low				High				Low
First		$	60.67			$	50.35			$	49.97			$	37.72
Second			73.96				58.52				63.30				45.40
Third			79.47				62.61				58.40				45.49
Fourth			74.67				53.49				55.25				48.16

          The declaration and payment of dividends by the Company is at the sole discretion of our Board of Directors. During 2006, we declared and paid aggregate cash dividends of $0.90 ($0.225 per quarter) per common share. In 2005, we declared and paid aggregate cash dividends of $0.78 ($0.165 for each of the first and second quarters and $0.225 for each of the third and fourth quarters) per common share, while in 2004 we declared and paid aggregate cash dividends of $0.66 ($0.165 per quarter) per common share.

          The table below sets forth information with respect to purchases made by or on behalf of the Company of shares of Company common stock during the three months ended September 30, 2006:

Total Number

of Shares

Maximum Number

Purchased as

of Shares

Total

Part of Publicly

that May Yet

Number

Average

Announced

Be Purchased

of Shares

Price Paid

Plans or

Under the Plans or

Period

Purchased

Per Share(1)

Programs

Programs(2)

July 1 - 31, 2006

1,145,400

$

64.7468

1,145,400

735,200

August 1 - 31, 2006

735,200

62.5359

735,200

0

September 1 - 30, 2006

3,407,200

56.1112

3,407,200

5,592,800

Total

5,287,800

58.8750

5,287,800

Item 6.		Selected Financial Data

     The following table sets forth selected consolidated financial 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 five years ended September 30, the related consolidated balance sheet data and other data have been derived from our audited consolidated financial statements.

		Year Ended September 30,
		2006(a)				2005				2004				2003(b)				2002(c)
		(in millions, except per share data)
Consolidated Statement of Operations Data:
Sales		$	5,561.4			$	5,003.2			$	4,411.1			$	3,992.3			$	3,775.7
Interest expense			58.4				45.8				41.7				52.5				66.1
Income from continuing operations before accounting changes			628.1				518.4				354.1				281.4				223.7
Earnings per share from continuing operations before accounting changes:
Basic			3.55				2.83				1.91				1.51				1.21
Diluted			3.49				2.77				1.85				1.48				1.19
Cumulative effect of accounting changes per diluted share(d)			(0.10	)			—				—				—				(0.58	)
Cash dividends per share			0.90				0.78				0.66				0.66				0.66
Consolidated Balance Sheet Data: (at end of period)
Total assets		$	4,735.4			$	4,525.1			$	4,213.3			$	4,006.3			$	3,955.8
Short-term debt			219.8				1.2				0.2				8.7				161.6
Long-term debt			748.2				748.2				757.7				764.0				766.8
Shareowners’ equity			1,918.2				1,649.1				1,861.0				1,586.8				1,609.0
Other Data:
Capital expenditures		$	150.1			$	124.1			$	98.0			$	107.6			$	99.6
Depreciation			129.7				150.8				159.7				168.5				178.4
Other intangible asset amortization			23.9				20.4				27.0				22.1				19.3

Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

     Non-GAAP Measures

          The following discussion includes sales excluding the effect of changes in currency exchange rates and free cash flow, which are non-GAAP measures. See Supplemental Sales Information for a reconciliation of reported sales to sales excluding the effect of changes in currency exchange rates in addition to a discussion of why we believe this non-GAAP measure is useful to investors. See Financial Condition for a reconciliation of cash flows from operating activities to free cash flow and a discussion of why we believe this non-GAAP measure is useful to investors.

     Overview

          Overall demand for our products and services is driven by:

	•		Investments in manufacturing capacity, including upgrades, modifications, and expansions of existing manufacturing facilities, and the creation of new manufacturing facilities;
	•		Our customers’ needs for greater productivity, cost reduction, quality, and overall global competitiveness;
	•		Industry factors that include our customers’ new product introductions, trends in the actual and forecasted demand for our customers’ products or services, and the regulatory and competitive environments in which our customers operate;
	•		Levels of global industrial production;
	•		Regional factors that include local political, social, regulatory and economic circumstances; and
	•		The seasonal capital spending patterns of our customers due to their annual capital budgeting processes and their working schedules.

     U. S. Industrial Economic Trends

          In 2006, sales in the U.S. accounted for more than 62 percent of our total sales. The trend of improving conditions in the U.S. manufacturing economy during 2004 and 2005 continued into the first half of 2006 and moderated somewhat in the second half. The various indicators we use to gauge the direction and momentum of our served markets include:

	•		Industrial Equipment Spending, which is an economic statistic compiled by the Bureau of Economic Analysis (BEA). This statistic provides insight into spending trends in the broad U.S. industrial economy, which includes our primary customer base. This measure, over the longer term, has proven to have reasonable predictive value, and to be a good directional indicator of our growth trend.
	•		Capacity Utilization, which is an indication of plant operating activity published by the Federal Reserve. Historically there has been a meaningful correlation between Capacity Utilization and the level of capital investment made by our customers in their manufacturing base.
	•		The Purchasing Managers’ Index (PMI), published by the Institute for Supply Management (ISM), which is an indication of the level of manufacturing activity in the U.S. According to the ISM, a PMI measure above 50 indicates that the manufacturing economy is generally expanding while a measure below 50 indicates that it is generally contracting.

          The table below depicts the continued gradual improvement in U.S. Industrial Equipment Spending and Capacity Utilization, and the sustained strength in the PMI since December 2003. While we still expect moderate growth in 2007, we are planning for a deceleration to a more sustainable level of growth in the U.S. economy in 2007.

		Industrial
		Equipment				Capacity
		Spending				Utilization
		(in billions)				(percent)				PMI
Fiscal 2006
September 2006		$	173.0				81.9				52.9
June 2006			170.1				82.5				53.8
March 2006			163.4				81.3				55.2
December 2005			163.9				81.1				55.6
Fiscal 2005
September 2005			157.0				79.1				58.0
June 2005			149.5				80.3				54.0
March 2005			150.1				79.9				55.3
December 2004			143.7				79.7				58.6
Fiscal 2004
September 2004			140.9				78.7				58.0
June 2004			139.5				78.4				61.5
March 2004			145.3				77.6				62.3
December 2003			137.1				76.9				63.2

Note: Economic indicators are subject to revisions by the issuing organizations.

     Non-U.S. Regional Trends

          Outside the U.S., demand is principally driven by the strength of the industrial economy in each region and by our customers’ ability and propensity to invest in their manufacturing assets. These customers may include both multinational companies with expanding global presence and growing indigenous companies. Recent strength in demand has, in part, been driven by investment in infrastructure in developing economies, in basic materials production capacity in response to higher-end product pricing and in expanding consumer markets. We continue to see strong demand in China, India and Latin America. We also saw considerable growth in Europe during the second half of 2006, following nearly two years of little or no growth. In 2006, our European operations benefited from our targeted growth investments in customer-facing resources as well as improving macro-economic conditions. We expect strong growth in Latin America, Europe and the emerging economies in Asia Pacific will continue into 2007.

     Revenue by Geographic Region

          The table below presents our actual sales for the year ended September 30, 2006 by geographic region and the change in sales from the year ended September 30, 2005 (in millions, except percentages):

										Change
										Excluding the
										Effect of Changes
						Change vs.				In Currency Exchange
		Year Ended				Year Ended				Rates vs. Year Ended
		September 30, 2006(1)				September 30, 2005				September 30, 2005(2)
U.S. and Canada		$	3,827.1				12%				11%
Europe, Middle East and Africa			856.5				4%				7%
Asia-Pacific			573.1				11%				11%
Latin America			304.7				26%				19%
Total sales		$	5,561.4				11%				11%

     Industry Views

          We serve customers in a wide range of industries including consumer products, transportation, basic materials, and oil and gas. During 2006 we benefited from growing demand in most of the industries we serve.

          Our consumer products customers are engaged in the food and beverage; home, health and beauty; and life sciences industries. These customers’ needs include global expansion, incremental capacity from existing facilities, an increasingly flexible manufacturing environment and regulatory compliance. In addition, these customers operate in an environment where product innovation and time to market are critical factors. As a result, consumer products customers’ capital investments are generally less cyclical than those of heavy manufacturing customers.

          In transportation, factors such as plant closings, customer investment in new model introductions and more flexible manufacturing technologies affect our sales. While our global automotive revenue was flat in 2006, our traditional North American automotive installed base experienced a significant slowdown during the second half of the year. This had a negative impact on sales and operating earnings in our Control Systems business, primarily on sales of our Logix and PLC products. Our plan for 2007 does not anticipate any recovery.

          Our customers in basic materials industries, including mining, aggregates, metals, forest products and cement, all benefit from higher commodity prices and higher global demand for basic materials, both of which encourage investment in capacity and productivity in these industries.

          As energy prices rise, customers in the oil and gas industry increase their investment in production and transmission capacity. During 2006, high energy prices contributed to strong growth in resource and energy based industries.

          In addition, higher energy prices have historically caused customers across all industries to consider investing in more energy-efficient manufacturing processes and technologies, such as intelligent motor controls.

     Outlook for 2007

          The following is a summary of key objectives for 2007:

	•		Successfully complete the divestiture of the principal businesses of our Power Systems operating segment;
	•		Execute our cost productivity initiatives;
	•		Continue our globalization efforts with a particular focus on emerging markets; and
	•		Sustain the growth of our integrated control and information architecture by accelerating the proliferation and adoption rate, enhancing features and functionality, and by aggressively pursuing growth in an expanded addressable market.

          Our key objectives assume a certain amount of cost productivity in 2007. Our cost productivity initiatives will likely include workforce reductions and facility rationalization. These actions are consistent with the planned divestiture of most of our Power Systems operating segment and our globalization and cost productivity efforts. Costs associated with these actions will be recorded when the relevant recognition criteria have been met.

          Our outlook for 2007 is based on expected demand and assumes sustained momentum outside of North America with slower rates of growth in the U.S. and Canada than in the previous three years. Our outlook also assumes sustained momentum across most industrial end markets. The actual growth reported in any particular quarter may out perform or lag that trend. This oscillation of performance around a trend is attributed to the inherent variability in our business with short lead times and minimal backlog in our non-project businesses. Extrapolation of growth rates or levels of profitability from any one quarter can lead to incorrect conclusions about future performance.

          As of the date of filing this report, based upon current economic conditions and business trends, we expect to grow revenue in 2007 by 7 to 8 percent, consistent with our long-term growth trend. As of the date hereof, we also expect full year 2007 diluted earnings per share to be in the range of $3.70 to $3.90. This includes an expected effective income tax rate that will average about 32 percent for the full year, excluding the effect of acquisitions, divestitures or other items separately reported net of their related tax effects. This tax rate assumes continued execution of our globalization strategy. We also plan to generate free cash flow approximately equal to net income. This guidance does not incorporate the impact of future acquisitions or divestures, including the planned divestiture of our Dodge mechanical and Reliance Electric motors and motor repair services businesses.

     Summary of Results of Operations

		Year Ended September 30,
		2006				2005				2004
						(in millions)
Sales:
Control Systems		$	4,551.3			$	4,123.6			$	3,658.6
Power Systems			1,010.1				879.6				752.5
Total		$	5,561.4			$	5,003.2			$	4,411.1
Segment operating earnings (a):
Control Systems		$	873.1			$	756.9			$	527.9
Power Systems			162.6				110.3				67.5
Total			1,035.7				867.2				595.4
Purchase accounting depreciation and amortization			(13.3	)			(14.7	)			(27.3	)
General corporate-net			(92.5	)			(69.7	)			(88.3	)
Interest expense			(58.4	)			(45.8	)			(41.7	)
Gain on sale of investment (b)			19.9				—				—
Income from continuing operations before income taxes and cumulative effect of accounting change			891.4				737.0				438.1
Provision for income taxes (c)			(263.3	)			(218.6	)			(84.0	)
Income from continuing operations before cumulative effect of accounting change			628.1				518.4				354.1
(Loss) income from discontinued operations (d)			(3.0	)			21.6				60.8
Cumulative effect of accounting change (e)			(18.1	)			—				—
Net income		$	607.0			$	540.0			$	414.9

     2006 Compared to 2005

(in millions, except per share amounts)		2006				2005				Increase
Sales		$	5,561.4			$	5,003.2			$	558.2
Income from continuing operations before accounting change			628.1				518.4				109.7
Diluted earnings per share from continuing operations before accounting change			3.49				2.77				0.72

     Sales

          Sales increased 11 percent in 2006 compared to 2005 with double digit growth at both Control Systems and Power Systems. Total sales were not significantly affected year over year by changes in currency exchange rates. Sales in the U.S. and Canada increased by 11 percent in 2006 compared to 2005. Sales in the U.S. and Canada benefited from the strength in our power-centric businesses, however, were negatively impacted by the weakness in the North American automotive market in the second half of the year. Sales in the Asia-Pacific region grew by 11 percent in 2006 compared to 2005 with particularly strong growth in the emerging economies, including China and India. Latin America sales grew by 19 percent in 2006 compared to 2005, excluding the effect of currency translation, led by strength in the oil and gas and mining industries. Sales in Europe grew by 7 percent in 2006 compared to 2005, excluding the effects of currency translation. Europe experienced considerable growth during the second half of 2006. Our operations in Europe benefited from our investment in customer facing resources and improving macro-economic conditions.

     Segment Operating Earnings

          Segment operating earnings increased by $168.5 million from 2005 to $1,035.7 million in 2006. Segment operating earnings benefited from higher volume, productivity programs and favorable pricing, partially offset by inflation and higher growth initiative spending in comparison to the prior year. Segment operating earnings in 2006 include $19.8 million of stock compensation expense due to the adoption of a new accounting standard, SFAS 123(R), Share-Based Payment (SFAS 123(R)). Additionally, 2006 results include $27.3 million of increased pension and retiree medical expense compared to 2005. Segment operating earnings in 2005 include a benefit of $12.3 million related to an insurance settlement and a charge of $21.5 million related to special charges associated with restructuring activities in Europe and a U.S. plant closing.

     General Corporate — Net

          General corporate expenses were $92.5 million in 2006 compared to $69.7 million in 2005. The increase includes $9.7 million of stock compensation expense, lower interest income and higher contributions to the Rockwell Automation Charitable Corporation.

     Interest Expense

          Interest expense was $58.4 million in 2006 compared to $45.8 million in 2005. The increase was due to our commercial paper borrowings during 2006, as well as higher interest rates associated with our interest rate swap (see Note 6 in the Financial Statements).

     Income Taxes

          The effective tax rate for 2006 was 29.5 percent compared to 29.7 percent in 2005. The 2006 effective tax rate differed from the federal statutory rate of 35 percent due to the reversal of $27.2 million ($0.15 per diluted share) of valuation allowances on capital loss carryforwards, settlement of audit matters with the U.S. Internal Revenue Service for the years 2003 and 2004, lower non-U.S. tax rates, Foreign Sales Corporation (FSC) and Extra Territorial Income (ETI) tax benefits and other provision adjustments.

          The effective tax rate for 2005 was lower than the federal statutory tax rate of 35 percent due to a benefit of $19.7 million ($0.10 per diluted share) related to the settlement of audit matters with the U.S. Internal Revenue Service for the years 1998 through 2002, utilization of foreign tax credits, FSC and ETI tax benefits and other provision adjustments.

          See Note 16 in the Financial Statements for additional information on tax events in 2006 and 2005 affecting the respective tax rates.

     Discontinued Operations

          See Note 13 and Note 16 in the Financial Statements regarding discontinued operations.

     Control Systems

(in millions, except percentages)		2006				2005				Increase
Sales		$	4,551.3			$	4,123.6			$	427.7
Segment operating earnings			873.1				756.9				116.2
Segment operating margin			19.2	%			18.4	%		0.8pts

     Sales

          Sales increased 10 percent in 2006 compared to 2005, and were not significantly affected year over year by changes in currency exchange rates. Sales in the U.S. and Canada increased by 11 percent in 2006 compared to 2005, excluding the effects of changes in foreign currency exchange rates. Sales in the U.S. and Canada benefited from the strength in our power-centric businesses, however, were negatively impacted by the weakness in the North American automotive market in the second half of the year. Sales in the Asia-Pacific region grew by 9 percent in 2006 compared to 2005 with particularly strong growth in the emerging economies including China and India. Latin America sales grew by 19 percent in 2006 compared to 2005, excluding the effect of currency translation, led by strength in the oil and gas and mining industries. European sales grew by 7 percent in 2006 compared to 2005, excluding the effects of currency translation. Europe experienced considerable growth in the second half of 2006. Our operations in Europe benefited from our investment in customer facing resources and improving macro-economic conditions.

     Operating Earnings

          Segment operating earnings grew 15% due to higher volume, productivity programs, lower restructuring costs and favorable pricing, partially offset by inflation and higher growth initiative spending in comparison to the prior year. Segment operating earnings in 2006 include $15.8 million of stock compensation expense due to the adoption of a new accounting standard, SFAS 123(R). Additionally, 2006 results include $21.5 million of increased pension and retiree medical expense compared to 2005. Segment operating earnings in 2005 include a benefit of $12.3 million related to an insurance settlement and a charge of $16.5 million related to special charges associated with restructuring activities in Europe.

     Power Systems

(in millions, except percentages)		2006				2005				Increase
Sales		$	1,010.1			$	879.6			$	130.5
Segment operating earnings			162.6				110.3				52.3
Segment operating margin			16.1	%			12.5	%		3.6pts

     Sales

          Power Systems sales increased 15 percent compared to 2005 with growth in both our Dodge mechanical and Reliance electrical business groups. Sales at Power Systems benefited from continued strong momentum resulting from high energy and commodity prices. These higher prices resulted in the segment’s predominantly U.S. based customers investing in capacity expansion after several years of under-investment and reduced capital spending.

     Operating Earnings

          Power Systems operating earnings grew 47 percent due to higher volume, productivity initiatives, a balanced dynamic between price and cost, and lower restructuring costs, somewhat offset by inflation. Segment operating earnings in 2006 include stock compensation expense of $4.0 million and increased pension and retiree medical expense of $5.8 million compared to 2005. Segment operating earnings in 2005 include a charge of $5.0 million associated with a facility closure and the corresponding write-down of property to its fair value.

     2005 Compared to 2004

(in millions, except per share amounts)		2005				2004				Increase
Sales		$	5,003.2			$	4,411.1			$	592.1
Income from continuing operations			518.4				354.1				164.3
Diluted earnings per share from continuing operations			2.77				1.85				0.92

     Sales

          Sales increased 13 percent compared to 2004 driven by double digit growth at both Control Systems and Power Systems. Two percentage points of the growth was due to the effect of changes in currency exchange rates, primarily resulting from the strength of the major European currencies and the Canadian dollar in relation to the U.S. dollar. Sales rose by double digit percentages in all regions except for EMEA where difficult economic conditions dampened growth in the major economies of Western Europe, primarily France, Germany and the U.K. The emerging economies in Asia-Pacific, led by China and India, experienced particularly strong growth. Strength of the oil and gas and mining industries in Latin America and oil and gas industry in Canada contributed to particularly strong sales growth in those regions.

          Sales in the global water/wastewater, oil and gas, aggregate and cement, and mining industries grew at a rate higher than our annual growth rate of 13 percent. Sales in the food and transportation industries grew at rates approximate to our annual growth rate, while sales in life sciences, semiconductor, and beverage grew at a rate less than our annual growth rate.

     Segment Operating Earnings

          Segment operating earnings benefited from higher volume, productivity programs and favorable pricing offset slightly by inflation in comparison to the prior year. Additionally, segment operating earnings in 2005 include $21.5 million related to special charges associated with restructuring activities in Europe and a U.S. plant closing, offset by $12.3 million of benefits received related to insurance settlements. Segment operating earnings in 2004 include $26.3 million for special facilities related charges.

     General Corporate — Net

          General corporate expenses were $69.7 million in 2005 compared to $88.3 million in 2004. Expense decreased primarily due to reduced environmental costs, lower contributions to our charitable corporation and increased interest income.

     Interest Expense

          Interest expense was $45.8 million in 2005 compared to $41.7 million in 2004, primarily due to higher interest rates associated with our interest rate swap (see Note 6 in the Financial Statements).

     Income Taxes

          The effective tax rate was 29.7 percent in 2005 and 19.2 percent in 2004. The effective tax rate for 2005 was lower than the federal statutory tax rate of 35 percent due to a benefit of $19.7 million ($0.10 per diluted share) related to the settlement of audit matters with the U.S. Internal Revenue Service for the years 1998 through 2002, utilization of foreign tax credits, FSC and ETI tax benefits and other provision adjustments.

          The effective tax rate for 2004 was lower than the federal statutory tax rate of 35 percent due to benefits totaling $46.3 million ($0.24 per diluted share) from the resolution of various tax matters in non-U.S. jurisdictions, state tax benefits involving refund claims, lower non-U.S. tax rates, FSC and ETI tax benefits and other provision adjustments.

          See Note 16 in the Financial Statements for a complete reconciliation of the United States statutory tax rate to the effective tax rate and additional information on tax events in 2005 and 2004 affecting the respective tax rates.

     Discontinued Operations

          See Note 13 and Note 16 in the Financial Statements regarding discontinued operations.

     Control Systems

(in millions, except percentages)		2005				2004				Increase
Sales		$	4,123.6			$	3,658.6			$	465.0
Segment operating earnings			756.9				527.9				229.0
Segment operating margin			18.4	%			14.4	%		4.0pts

     Sales

          Control Systems sales increased 13 percent compared to 2004. Three percentage points of the sales increase was due to the effect of changes in currency exchange rates, primarily resulting from the relative strength of the major European currencies and the Canadian dollar in relation to the U.S. dollar. Sales of our Logix offering grew by more than 26 percent compared to 2004, which was somewhat offset by a decline in our legacy control platform products that are being replaced by Logix. Growth in sales of our Logix offering was driven by our introduction of new functionality and an expanded addressable market. Our intelligent motor control products also delivered significantly higher revenue driven by strong sales to extraction-based and heavy industrial customers. Higher commodity prices and a renewed investment in energy efficiency programs led to the strong demand from these customers.

     Operating Earnings

          Segment operating earnings increased by 43 percent compared to 2004. The increase in segment operating earnings is due to higher volume, cost productivity and favorable pricing that was somewhat offset by inflation. Control Systems 2005 results include $12.3 million of benefits related to insurance settlements offset by $16.5 million of special charges associated with realignment of administrative functions and a reduction in workforce in Europe. Prior year segment operating earnings include a $26.3 million charge related to a facilities rationalization program.

     Power Systems

(in millions, except percentages)		2005				2004				Increase
Sales		$	879.6			$	752.5			$	127.1
Segment operating earnings			110.3				67.5				42.8
Segment operating margin			12.5	%			9.0	%		3.5pts

     Sales

          Power Systems sales increased 17 percent compared to 2004 with growth in both our Dodge mechanical and Reliance electrical business groups. Growth was driven by demand from the power-centric customers in heavy, extraction-based industries such as mining and oil and gas. Higher commodity prices are causing the segment’s predominantly U.S. based customers to invest in capacity expansion after several years of under-investment and reduced capital spending.

     Operating Earnings

          Power Systems operating earnings grew 63 percent due to higher volume, favorable pricing and productivity somewhat offset by inflation and significantly higher material costs. Segment operating earnings in 2005 include a charge of $5.0 million associated with a facility closure and the corresponding write-down of property to its fair value compared to $4.0 million of charges related to restructuring activities in 2004.

Financial Condition

     The following is a summary of our cash flows from operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows (in millions):

		Year Ended September 30,
		2006				2005				2004
Cash provided by (used for):
Operating activities		$	426.2			$	638.9			$	596.9
Investing activities			82.5				(122.8	)			(65.2	)
Financing activities			(556.4	)			(550.6	)			(312.0	)
Effect of exchange rate changes on cash			(1.2	)			(3.1	)			1.8
Cash (used for) provided by continuing operations		$	(48.9	)		$	(37.6	)		$	221.5
The following table summarizes free cash flow (in millions):
Cash provided by operating activities		$	426.2			$	638.9			$	596.9
Excess income tax benefit from stock option exercises			47.4				—				—
Capital expenditures			(150.1	)			(124.1	)			(98.0	)
Free cash flow		$	323.5			$	514.8			$	498.9

          Our definition of free cash flow, which is a non-GAAP financial measure, takes into consideration capital investment required to maintain the operations of our businesses and execute our strategy. In the first quarter of 2006, we adopted SFAS 123(R) (see Note 1 in the Financial Statements), which requires that we report excess tax benefits related to share-based compensation as a financing cash flow rather than as an operating cash flow. We have added this benefit back to our operating cash flow to present free cash flow on a basis that is consistent with our historical presentation. In our opinion, free cash flow provides useful information to investors regarding our ability to generate cash from business operations that is available for acquisitions and other investments, service of debt principal, dividends and share repurchases. We use free cash flow as one measure to monitor and evaluate performance. Our definition of free cash flow may differ from definitions used by other companies.

          Free cash flow was $323.5 million for the year ended September 30, 2006 compared to $514.8 million for the year ended September 30, 2005. Free cash flow in 2006 includes voluntary contributions to our U.S. pension plan of $450.0 million compared to $150.0 million of such contributions in 2005. In addition, increased capital spending and working capital in 2006 resulted from the operating growth and growth investments that occurred during the year.

          Commercial paper is our principal source of short-term financing. Commercial paper borrowings outstanding at September 30, 2006 were $219.0 million. The weighted average interest rate on these borrowings was 5.4 percent. At September 30, 2005, and throughout 2005, we had no commercial paper borrowings outstanding due to our cash position.

          In October 2005, we contributed $450 million to our U.S. qualified pension trust. We funded the contribution with a combination of cash on hand and $300 million of commercial paper borrowings. In November 2005, we sold 24 owned properties in a sale-leaseback transaction for net cash proceeds of approximately $147.5 million. We used the cash proceeds to repay commercial paper borrowings. In September of 2006 we received $83.4 million of cash from the sale of our investment in RSC.

          In 2006, we repurchased approximately 12.2 million shares of our common stock of which 0.4 million shares did not settle until October 2006. The total cost of these shares was $743.1 million, of which $20.6 million was recorded in accounts payable at September 30, 2006. We repurchased 9.8 million shares of our common stock at a cost of $499.2 million in 2005. We anticipate repurchasing stock in 2007, the amount of which will depend ultimately on business conditions, stock price and other cash requirements. At September 30, 2006 we had authorization from our Board of Directors to purchase up to approximately 5.6 million additional shares through September 30, 2007.

          On November 7, 2006, we announced that we have entered into a definitive agreement to divest the principal businesses included in our Power Systems operating segment for $1.8 billion, comprised of $1.75 billion in cash and $50 million in common stock of the acquirer. The divestiture is subject to customary closing conditions and regulatory approval and is expected to close in our second fiscal quarter. We expect to use a significant portion of the after-tax cash proceeds to repurchase common stock, to pay down outstanding commercial paper balances, or to pursue growth opportunities.

          We expect future significant uses of cash to include repurchases of common stock, repayments of short-term borrowings, dividends to shareowners, capital expenditures and acquisitions of businesses and may include additional contributions to our pension plans. We expect capital expenditures in 2007 to be about $175 million. We expect to fund each of these future uses of cash with existing cash balances, cash generated by operating activities, commercial paper borrowings, divestures of businesses, a new issue of debt or issuance of other securities.

          In addition to cash generated by operating activities, we have access to existing financing sources, including the public debt markets and unsecured credit facilities with various banks. Our debt-to-total-capital ratio was 33.5 percent at September 30, 2006 and 31.2 percent at September 30, 2005.

          In October 2004, we entered into a five-year $600.0 million unsecured revolving credit facility that replaced our then existing $675.0 million unsecured credit facilities. In September 2006 we entered into a 364-day $250.0 million unsecured revolving credit facility. Both credit facilities remain in effect and we had not drawn down under either of them at September 30, 2006 or 2005. 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 60 percent. We were in compliance with all covenants under these credit facilities at September 30, 2006 and 2005. In addition to our $600.0 million and $250.0 million credit facilities, short-term unsecured credit facilities of approximately $125.2 million at September 30, 2006 were available to foreign subsidiaries.

          The following is a summary of our credit ratings as of September 30, 2006:

Credit Rating Agency		Short Term Rating		Long Term Rating		Outlook
Standard & Poor’s		A-1		A		Stable
Moody’s		P-2		A3		Positive
Fitch Ratings		F1		A		Stable

          Among other uses, we can draw our credit facilities as standby liquidity facilities 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 ratings set forth in the table above that have been given to our commercial paper. Under our current policy with respect to these ratings, we expect to limit our other borrowings under the credit facilities, if any, to amounts that would leave enough credit available under the facilities so that we could borrow, if needed, to repay all of our then outstanding commercial paper as it matures.

          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 the unsecured committed credit facilities to provide short-term funding. In such event, the cost of borrowings under the unsecured committed credit facilities could be higher than the cost of commercial paper borrowings.

          Cash dividends to shareowners were $159.3 million ($0.90 per share) in 2006 and $142.7 million ($0.78 per share) in 2005. Although declaration and payment of dividends are at the sole discretion of our Board of Directors, we expect to pay quarterly dividends in 2007 of $0.29 per outstanding share.

          Certain of our contractual cash obligations at September 30, 2006 are:

						Payments by Period
		Total				2007				2008				2009				2010				2011				Thereafter
Long-term debt and interest (a)		$	2,144.0			$	48.7			$	387.9			$	27.1			$	27.1			$	27.1			$	1,626.1
Minimum operating lease payments(b)			359.9				70.3				62.0				46.2				31.8				28.1				121.5
Purchase obligations(c)			164.3				16.7				16.3				16.0				13.9				13.8				87.6
Total		$	2,668.2			$	135.7			$	466.2			$	89.3			$	72.8			$	69.0			$	1,835.2

          We sponsor pension and other postretirement benefit plans for certain employees. See Note 12 in the Financial Statements for information regarding these plans and expected future cash outflows related to the plans.

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. We believe that sales excluding the effect of changes in currency exchange rates, which is a non-GAAP financial measure, provides useful information to investors because it reflects regional performance from the activities of our businesses without the effect of changes in currency rates. We use sales excluding the effect of changes in currency exchange rates to monitor and evaluate our regional performance. We determine the effect of changes in currency exchange rates by translating the respective period’s sales using the same currency exchange rates as were in effect in the preceding year. We attribute sales to the geographic regions based on the country of destination.

     The following is a reconciliation of our reported sales to sales excluding the effect of changes in currency exchange rates (in millions):

		Year Ended September 30, 2006												Year Ended September 30, 2005
										Sales												Sales
										Excluding												Excluding
										the Effect												the Effect
										of Changes												of Changes
										in Currency												in Currency
						Currency				Exchange								Currency				Exchange
		Sales				Translation				Rates				Sales				Translation				Rates
U.S. and Canada		$	3,827.1			$	(31.5	)		$	3,795.6			$	3,420.6			$	(32.0	)		$	3,388.6
Europe, Middle East and Africa			856.5				25.7				882.2				821.3				(35.6	)			785.7
Asia-Pacific			573.1				0.3				573.4				518.7				(21.2	)			497.5
Latin America			304.7				(14.8	)			289.9				242.6				(11.6	)			231.0
Total Company Sales		$	5,561.4			$	(20.3	)		$	5,541.1			$	5,003.2			$	(100.4	)		$	4,902.8

          The following is a reconciliation of reported sales of our Control Systems segment to sales excluding the effect of changes in currency exchange rates (in millions):

		Year Ended September 30, 2006												Year Ended September 30, 2005
										Sales												Sales
										Excluding												Excluding
										the Effect												the Effect
										of Changes												of Changes
										in Currency												in Currency
						Currency				Exchange								Currency				Exchange
		Sales				Translation				Rates				Sales				Translation				Rates
U.S. and Canada		$	2,923.6			$	(28.0	)		$	2,895.6			$	2,619.4			$	(28.4	)		$	2,591.0
Europe, Middle East and Africa			834.4				25.8				860.2				807.4				(35.3	)			772.1
Asia-Pacific			521.8				1.2				523.0				480.4				(20.9	)			459.5
Latin America			271.5				(14.4	)			257.1				216.4				(11.5	)			204.9
Total Control Systems Sales		$	4,551.3			$	(15.4	)		$	4,535.9			$	4,123.6			$	(96.1	)		$	4,027.5

Critical Accounting Policies and Estimates

          We have prepared the consolidated financial 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 financial 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 significant effect on our reported results or require subjective or complex judgments by management.

     Retirement Benefits

     Pension Benefits

          Pension costs and obligations are actuarially determined and are influenced 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 amortization of differences between the assumptions and actual experience will affect the amount of pension expense recognized in future periods.

          Our global pension expense in 2006 was $83.6 million compared to $66.2 million in 2005. Approximately 70 percent of our 2006 global pension expense relates to our U.S. qualified pension plan. The actuarial assumptions used to determine our 2006 U.S. pension expense included the following: discount rate of 5.25 percent (compared to 6.25 percent for 2005); expected rate of return on plan assets of 8.50 percent (compared to 8.50 percent for 2005); and an assumed compensation increase rate of 4.06 percent (compared to 4.50 percent for 2005).

          In 2006, we made voluntary contributions of $450.0 million to our primary U.S. qualified pension plan trust compared to $150.0 million in 2005.

          The Pension Protection Act of 2006 was signed into law in August 2006. We are currently evaluating this legislation and the effect it will have on our future pension contributions.

          We estimate our pension expense will be approximately $46 million in 2007, a decrease of approximately $37 million from 2006. Our estimated 2007 pension expense reflects the net cost related to changes in actuarial assumptions in the U.S. pension plan and the benefit of the $450.0 million contribution in October 2005.

          For 2007, changes in actuarial assumptions include an increase in our discount rate to 6.50 percent from the 5.25 percent rate used in 2006. The discount rate is set as of our June 30^th measurement date and was determined by modeling a portfolio of bonds that match the expected cash flow of our benefit plans. Our assumed rate of return on plan assets will be reduced to 8.00 percent, compared to the 8.50 percent assumed rate of return used in 2006. We considered actual returns on plan assets over the long term as well as the current and expected mix of plan investments in setting this assumption. We intend, over time, to change the U.S. plan’s mix of investments by increasing the weighting in debt securities. We have assumed a compensation increase rate of 4.19 percent in 2007 compared to 4.06 percent used in 2006. We established this rate using an analysis of all elements of employee compensation that are considered pension eligible earnings.

          The following chart illustrates the estimated change in benefit obligation and net periodic pension cost assuming a change of 25 basis points in the assumptions for our U.S. pension plans (in millions):

		Pension Benefits
		Change in				Change in
		Projected Benefit				Net Periodic Benefit
		Obligation				Cost
Discount Rate		$	62.0			$	7.2
Rate of Return			—				4.5

          Additional information regarding pension benefits, including our pension obligation and minimum pension liability adjustment, is contained in Note 12 in the Financial Statements.

     Other Postretirement Benefits

          We estimate the costs and obligations for postretirement benefits other than pensions using assumptions, including the discount rate and, for plans other than our primary U.S. postretirement healthcare benefit program, expected trends in the cost for healthcare services. Changes in these assumptions and differences between the assumptions and actual experience will affect the amount of postretirement benefit expense recognized in future periods. The discount rate used to calculate our 2006 other postretirement benefits expense was 5.00 percent (compared to 6.25 percent in 2005). For 2007, the discount rate assumption for other postretirement benefit expense will increase to 6.50 percent. The discount rate is set as of our June 30^th measurement date and was determined by modeling a portfolio of bonds that match the expected cash flow of our benefit plans.

          Effective October 1, 2002, we amended our primary U.S. postretirement healthcare benefit program in order to mitigate our share of the increasing cost of postretirement healthcare services. As a result of this amendment to our primary U.S. program, there is no increase in healthcare costs resulting from healthcare inflationary trends as of January 1, 2005.

          Net periodic benefit cost in 2006 was $35.4 million compared to $24.9 million in 2005. We expect net periodic benefit cost in 2007 of approximately $13 million and the estimated postretirement projected benefit obligation to approximate $255 million. The decreases are due primarily to the increase in the discount rate by 150 basis points to 6.50 percent and our transition of all eligible retirees to a more efficient Medicare Advantage Plan.

          Additional information regarding postretirement benefits is contained in Note 12 in the Financial Statements.

     Revenue Recognition

          We record sales of products and services, representing approximately 90 percent of our consolidated sales, when all of the following have occurred: an agreement of sale exists; pricing is fixed 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.

          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 profit as work is performed using either (i) the relationship between actual costs incurred and total estimated costs at completion or (ii) units-of-delivery. Under the percentage-of-completion method, we adjust sales and gross profit for revisions of estimated total contract costs or revenue in the period the change is identified. We record estimated losses on contracts when they are identified.

          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 fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We assess collectibility based on the creditworthiness of the customer as determined by credit evaluations and analysis, as well as the customer’s payment history.

     Returns, Rebates and Incentives

          Our primary incentive program provides distributors with cash rebates or account credits based on agreed amounts that vary depending on the end user or original equipment manufacturing (OEM) customer to whom our distributor ultimately sells the product. We also offer various other incentive programs that provide distributors and direct sale customers with cash rebates, account credits or additional products and services based on meeting specified program criteria. Certain distributors are offered a right to return product, subject to contractual limitations.

          We record accruals for customer returns, rebates and incentives at the time of revenue recognition based primarily on historical experience. 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 $6.0 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 set-off exists, as a reduction of accounts receivable. The accrual for customer returns, rebates and incentives was $121.8 million at September 30, 2006 and $117.6 million at September 30, 2005, of which $8.5 million at September 30, 2006 and $9.4 million at September 30, 2005 was included as an offset to accounts receivable.

     Impairment of Long-Lived Assets

          We evaluate the recoverability of the carrying amount of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable through future cash flows. We evaluate the recoverability of goodwill and other intangible assets with indefinite useful lives annually or more frequently if events or circumstances indicate that an asset might be impaired. We use judgment when applying the impairment rules to determine when an impairment test is necessary. Factors we consider that could trigger an impairment review include significant underperformance relative to historical or forecasted operating results, a significant decrease in the market value of an asset, a significant change in the extent or manner in which an asset is used and significant negative industry or economic trends.

          Impairment losses are measured as the amount by which the carrying value of an asset exceeds its estimated fair value. To determine fair value, we must make estimates of the future cash flows related to the asset being reviewed. These estimates require assumptions about demand for our products and services, future market conditions and technological developments. Other assumptions include the discount rate and future growth rates.

          We perform our annual impairment test on non-amortized intangible assets during the second quarter of our fiscal year. As of the second quarter of 2006, the estimated fair value of our Reliance trademark exceeded its $72.8 million net book value. Either an increase in the discount rate or a decrease in planned future growth or profitability of our Electrical business group could result in an impairment charge to write down the book value of the Reliance trademark to the revised estimated fair value.

     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 sites where more than one potentially responsible party has been identified, 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 unidentified 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 identified, or the financial condition of other potentially responsible parties is adversely affected, the estimate of our environmental liabilities may change.

          Effective September 30, 2006, we adopted FIN 47, which clarifies the guidance included in SFAS No. 143, Accounting for Asset Retirement Obligations (SFAS 143). Under FIN 47, companies must 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.

          Identified 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-specific knowledge and historical industry expertise. The application of FIN 47 resulted in a charge, net of tax, of $18.1 million included in the Consolidated Statement of Operations for the year ended September 30, 2006 as the cumulative effect of a change in accounting principle.

          Our reserve for environmental matters, net of related receivables, was $66.6 million at September 30, 2006 and $39.3 million at September 30, 2005. The reserve in 2006 includes $29.3 million recorded in Other liabilities in our Consolidated Balance Sheet at September 30, 2006 resulting from our adoption of FIN 47; see Note 17 in the Financial Statements for additional information. During 2006, we recorded adjustments totaling $5.2 million, excluding the adoption of FIN 47, to increase the environmental reserves related to several legacy sites compared to 2005 adjustments of $8.5 million.

          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 significant 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.

          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. As described in 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 Item 3 for further discussion.

          Our principal self-insurance programs include product liability where we are self-insured up to a specified dollar amount. Claims exceeding this amount up to specified limits are covered by policies purchased from commercial insurers. We estimate the reserve for product liability claims, excluding asbestos, using our claims experience for the periods being valued. Adjustments to the product liability reserves may be required to reflect emerging claims experience and other factors such as inflationary trends or the outcome of claims. The reserve for product liability claims was $29.7 million at September 30, 2006 and $29.5 million at September 30, 2005.

          Additional information regarding litigation, claims and contingencies is contained in Note 17 in the Financial Statements.

     Income Taxes

          We operate in numerous taxing jurisdictions and are subject to regular examinations by various U.S. Federal, state and foreign 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 final 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 taken on our tax returns, taxing authorities are increasingly asserting interpretations of laws and facts and challenging 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 significant income tax exposures. We regularly assess our position with regard to tax exposures and record liabilities for uncertain tax positions and related interest and penalties, if any, according to the principles of SFAS No. 5, Accounting for Contingencies. We have recorded an accrual of $85.1 million at September 30, 2006 and $103.1 million at September 30, 2005 that reflects our estimate of the likely outcome of current and future audits, which is included in Other liabilities in our Consolidated Balance Sheet. A final determination of these tax audits or changes in our estimates may result in additional future income tax expense or benefit.

          We have recorded a valuation allowance for the majority of our deferred tax assets in the amount of $36.8 million at September 30, 2006 and $55.5 million at September 30, 2005 related to non-U.S. net operating loss and capital loss carryforwards (Carryforwards) based on the projected profitability of the entity in the respective tax jurisdiction. The valuation allowance is based on an evaluation of the uncertainty that the Carryforward amount will be realized. Our income would increase if we determine we will be able to utilize more Carryforwards than currently expected.

          At the end of each interim reporting period, we estimate a base effective tax rate, which is the 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 or items that are reported net of their related tax effects. We recognize the tax effect of significant unusual or extraordinary items in the period in which they are realizable.

          Additional information regarding income taxes is contained in Note 16 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 interest rates and foreign currency exchange rates. We manage exposure to these risks through a combination of normal operating and financing activities and derivative financial instruments in the form of interest rate swap contracts and foreign currency forward exchange contracts.

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 finance 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. At September 30, 2006, we had outstanding commercial paper borrowings of $219.0 million at a weighted average interest rate of 5.4 percent; we had no commercial paper or significant bank borrowings outstanding at September 30, 2005 or during 2005. The weighted average interest rate on the 2006 commercial paper borrowings was 4.8 percent. Changes in market interest rates on commercial paper borrowings affect our results of operations. In 2006 and 2005, a 10 percent increase in average market interest rates would not have had a significant effect on our results of operations.

          At September 30, 2006 we had $219.0 million of unsecured commercial paper obligations outstanding with maturities of three days. As these obligations mature, we issued, and anticipate continuing to issue, additional short-term commercial paper obligations to refinance all or part of these borrowings.

          We had outstanding fixed rate long-term debt obligations with carrying values of $748.2 million at September 30, 2006 and $748.2 million at September 30, 2005. The fair value of this debt was $804.2 million at September 30, 2006 and $826.2 million at September 30, 2005. The potential reduction in fair value on such fixed-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 fixed-rate instruments and, therefore, fluctuations in market interest rates would not have an effect on our results of operations or shareowners’ equity.

          In September 2002, we entered into an interest rate swap contract that effectively converted our $350.0 million aggregate principal amount of 6.15% notes, payable in 2008, to floating rate debt based on six-month LIBOR. The floating rate was 8.02 percent at September 30, 2006. A hypothetical 10 percent change in market interest rates would not be significant to the overall fair value of the swap or our results of operations.

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, intercompany loans with foreign subsidiaries and transactions denominated in foreign currencies. Our objective is to minimize our exposure to these risks through a combination of normal operating activities and foreign currency forward exchange contracts to manage our exposure on transactions denominated in currencies other than the applicable functional currency. In addition, we enter into contracts to hedge certain forecasted intercompany transactions expected to occur within the next three years. Contracts are executed with creditworthy banks and are denominated in currencies of major industrial countries. We do not enter into derivative financial instruments for speculative purposes. We do not hedge our exposure to the translation of reported results of foreign subsidiaries from local currency to United States dollars. A 10 percent adverse change in the underlying foreign currency exchange rates would not be significant to our financial condition or results of operations.

          We record all derivatives on the balance sheet at fair value regardless of the purpose for holding them. Derivatives that are not designated as hedges for accounting purposes are adjusted to fair value through earnings. For derivatives that are hedges, depending on the nature of the hedge, changes in fair value are either offset by changes in the fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. We recognize the ineffective portion of a derivative’s change in fair value in earnings immediately.

          At September 30, 2006 and 2005, we had outstanding foreign currency forward exchange contracts primarily consisting of contracts relating to the euro, British pound sterling, South Korean won and Swiss franc. The use of these contracts allows us to manage transactional exposure to exchange rate fluctuations 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. A hypothetical 10 percent adverse change in underlying foreign currency exchange rates associated with these contracts would not be significant to our financial condition or results of operations.

          The following table indicates the total U.S. dollar equivalents of net transactional foreign exchange exposure related to (short) long contracts outstanding by currency:

		September 30,
		2006				2005
Euro		$	(399.8	)		$	(482.0	)
British pound			(35.7	)			(42.7	)
South Korean won			(21.5	)			(19.0	)
Swiss franc			12.7				46.0
Other			1.5				10.3
Total		$	(442.8	)		$	(487.4	)

          All of the contracts included in the table above will have offsetting effects from actual transactions that have occurred or will occur in the future. We designated certain of these contracts related to intercompany transactions forecasted to occur through November 2009 as cash flow hedges under SFAS 133, Accounting for Derivative Instruments and Hedging Activities. The remaining foreign exchange contracts offset actual underlying receivables and payables in our Consolidated Balance Sheet.

Item 8.		Financial Statements and Supplementary Data

CONSOLIDATED BALANCE SHEET
(in millions)

		September 30,
		2006				2005
Assets
Current Assets
Cash and cash equivalents		$	414.7			$	463.6
Receivables			879.3				799.6
Inventories			599.5				569.9
Deferred income taxes			177.7				169.4
Other current assets			116.8				184.0
Total current assets			2,188.0				2,186.5
Property, net			671.6				774.5
Goodwill			841.0				811.9
Other intangible assets, net			325.1				307.0
Deferred income taxes			—				66.3
Prepaid pension			597.2				200.5
Other assets			112.5				178.4
Total		$	4,735.4			$	4,525.1
Liabilities and Shareowners’ Equity
Current Liabilities
Short-term debt		$	219.8			$	1.2
Accounts payable			470.5				388.5
Compensation and benefits			175.6				214.4
Income taxes payable			51.0				5.4
Other current liabilities			376.4				331.3
Total current liabilities			1,293.3				940.8
Long-term debt			748.2				748.2
Retirement benefits			349.1				977.5
Deferred income taxes			155.3				—
Other liabilities			271.3				209.5
Commitments and contingent liabilities (Note 17)
Shareowners’ Equity
Common stock (shares issued: 216.4)			216.4				216.4
Additional paid-in capital			1,193.6				1,122.7
Retained earnings			2,856.2				2,493.5
Accumulated other comprehensive loss			(75.3	)			(501.5	)
Unearned restricted stock compensation			—				(1.7	)
Common stock in treasury, at cost (shares held: 2006, 45.6; 2005, 36.7)			(2,272.7	)			(1,680.3	)
Total shareowners’ equity			1,918.2				1,649.1
Total		$	4,735.4			$	4,525.1

See Notes to Consolidated Financial Statements.

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

		Year Ended September 30,
		2006				2005				2004
Sales		$	5,561.4			$	5,003.2			$	4,411.1
Cost of sales			(3,367.0	)			(3,109.1	)			(2,848.3	)
Gross profit			2,194.4				1,894.1				1,562.8
Selling, general and administrative expenses			(1,275.3	)			(1,120.8	)			(1,058.6	)
Other income (expense) (Note 15)			30.7				9.5				(24.4	)
Interest expense			(58.4	)			(45.8	)			(41.7	)
Income from continuing operations before income taxes and cumulative effect of accounting change			891.4				737.0				438.1
Income tax provision (Note 16)			(263.3	)			(218.6	)			(84.0	)
Income from continuing operations before cumulative effect of accounting change			628.1				518.4				354.1
(Loss) income from discontinued operations (Note 13)			(3.0	)			21.6				60.8
Cumulative effect of accounting change (Note 17)			(18.1	)			—				—
Net income		$	607.0			$	540.0			$	414.9
Basic earnings per share:
Continuing operations before accounting change		$	3.55			$	2.83			$	1.91
Discontinued operations			(0.01	)			0.12				0.33
Cumulative effect of accounting change			(0.10	)			—				—
Net income		$	3.44			$	2.95			$	2.24
Diluted earnings per share:
Continuing operations before accounting change		$	3.49			$	2.77			$	1.85
Discontinued operations			(0.02	)			0.11				0.32
Cumulative effect of accounting change			(0.10	)			—				—
Net income		$	3.37			$	2.88			$	2.17
Weighted average outstanding shares:
Basic			176.6				183.1				185.5
Diluted			179.9				187.2				191.1

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)

		Year Ended September 30,
		2006				2005				2004
Continuing Operations:
Operating Activities:
Net income		$	607.0			$	540.0			$	414.9
Cumulative effect of accounting change			18.1				—				—
Loss (income) from discontinued operations			3.0				(21.6	)			(60.8	)
Income from continuing operations before accounting change			628.1				518.4				354.1
Adjustments to arrive at cash provided by operating activities:
Depreciation			129.7				150.8				159.7
Amortization of intangible assets			23.9				20.4				27.0
Share-based compensation expense			29.5				—				—
Retirement benefit expense			119.0				91.1				92.2
Pension trust contributions			(472.2	)			(185.6	)			(157.3	)
Deferred income taxes			(16.1	)			115.8				63.6
Net (gain) loss on dispositions of property, business and investment (Note 15)			(15.8	)			4.7				24.3
Income tax benefit from the exercise of stock options			1.1				72.1				40.2
Excess income tax benefit from the exercise of stock options			(47.4	)			—				—
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency adjustments:
Receivables			(63.9	)			(56.4	)			(48.2	)
Inventories			(27.5	)			9.0				(28.5	)
Accounts payable			52.9				20.7				37.1
Compensation and benefits			(40.7	)			12.3				35.2
Income taxes			132.4				(66.1	)			(39.1	)
Other assets and liabilities			(6.8	)			(68.3	)			36.6
Cash Provided by Operating Activities			426.2				638.9				596.9
Investing Activities:
Capital expenditures			(150.1	)			(124.1	)			(98.0	)
Acquisition of businesses, net of cash acquired			(39.5	)			(5.4	)			—
Proceeds from sales of property, business and investment			254.4				7.4				32.4
Proceeds from return on investment			24.1				—				—
Other investing activities			(6.4	)			(0.7	)			0.4
Cash Provided by (Used for) Investing Activities			82.5				(122.8	)			(65.2	)
Financing Activities:
Net issuance (repayments) of short-term debt			218.6				1.0				(8.4	)
Cash dividends			(159.3	)			(142.7	)			(122.5	)
Purchases of treasury stock (See Note 10 for non-cash financing activities)			(722.5	)			(499.2	)			(258.4	)
Proceeds from the exercise of stock options			60.1				91.6				78.5
Excess income tax benefit from the exercise of stock options			47.4				—				—
Other financing activities			(0.7	)			(1.3	)			(1.2	)
Cash Used for Financing Activities			(556.4	)			(550.6	)			(312.0	)
Effect of exchange rate changes on cash			(1.2	)			(3.1	)			1.8
Cash (Used for) Provided by Continuing Operations			(48.9	)			(37.6	)			221.5
Discontinued Operations:
Cash Provided by Discontinued Operating Activities			—				27.4				27.2
Cash Used for Discontinued Investing Activities			—				—				(1.3	)
Cash Provided by Discontinued Operations			—				27.4				25.9
(Decrease) Increase in Cash			(48.9	)			(10.2	)			247.4
Cash and Cash Equivalents at Beginning of Year			463.6				473.8				226.4
Cash and Cash Equivalents at End of Year		$	414.7			$	463.6			$	473.8

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF SHAREOWNERS’ EQUITY
(in millions, except per share amounts)

		Year Ended September 30,
		2006				2005				2004
Common Stock (no shares issued during years)		$	216.4			$	216.4			$	216.4
Additional Paid-In Capital
Beginning balance			1,122.7				1,050.6				1,007.5
Income tax benefits from the exercise of stock options			48.5				72.1				40.2
Share based compensation expense			29.5				—				—
Other			(7.1	)			—				2.9
Ending balance			1,193.6				1,122.7				1,050.6
Retained Earnings
Beginning balance			2,493.5				2,255.7				2,143.0
Net income			607.0				540.0				414.9
Cash dividends (2006, $0.90 per share; 2005, $0.78 per share; 2004, $0.66 per share)			(159.3	)			(142.7	)			(122.5	)
Shares delivered under incentive plans			(85.0	)			(159.5	)			(179.7	)
Ending balance			2,856.2				2,493.5				2,255.7
Accumulated Other Comprehensive Loss
Beginning balance			(501.5	)			(226.8	)			(343.8	)
Other comprehensive income (loss)			426.2				(274.7	)			117.0
Ending balance			(75.3	)			(501.5	)			(226.8	)
Unearned Restricted Stock Compensation
Beginning balance			(1.7	)			(1.1	)			—
Restricted stock compensation expense			—				0.9				0.6
Restricted stock grants			—				(1.5	)			(1.7	)
Transfer to additional paid-in capital			1.7				—				—
Ending balance			—				(1.7	)			(1.1	)
Treasury Stock
Beginning balance			(1,680.3	)			(1,433.8	)			(1,436.3	)
Purchases			(743.1	)			(499.2	)			(258.4	)
Shares delivered under incentive plans			150.7				252.7				260.9
Ending balance			(2,272.7	)			(1,680.3	)			(1,433.8	)
Total Shareowners’ Equity		$	1,918.2			$	1,649.1			$	1,861.0