Basis of Presentation and Accounting Policies

In the opinion of management of Rockwell Automation, Inc. ("Rockwell Automation" or "the Company"), the unaudited Condensed Consolidated Financial Statements contain all adjustments necessary to present fairly the financial position, results of operations and cash flows for the periods presented and, except as otherwise indicated, such adjustments consist only of those of a normal, recurring nature. These statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended September 30, 2015. The results of operations for the three-month period ended December 31, 2015 are not necessarily indicative of the results for the full year. All date references to years and quarters herein refer to our fiscal year and fiscal quarter unless otherwise stated.

Receivables

Receivables are stated net of an allowance for doubtful accounts of $22.3 million at December 31, 2015 and $22.0 million at September 30, 2015. In addition, receivables are stated net of an allowance for certain customer returns, rebates and incentives of $11.4 million at December 31, 2015 and $9.2 million at September 30, 2015.

Earnings Per Share

The following table reconciles basic and diluted earnings per share (EPS) amounts (in millions, except per share amounts):



	Three Months Ended December 31,
	2015			2014
Net income	$	185.5		$	214.2
Less: Allocation to participating securities	(0.2		)	(0.3		)
Net income available to common shareowners	$	185.3		$	213.9
Basic weighted average outstanding shares	131.8			135.6
Effect of dilutive securities
Stock options	0.8			1.2
Performance shares	—			0.1
Diluted weighted average outstanding shares	132.6			136.9
Earnings per share:
Basic	$	1.41		$	1.58
Diluted	$	1.40		$	1.56

For the three months ended December 31, 2015, share-based compensation awards for 2.9 million shares were excluded from the diluted EPS calculation because they were antidilutive. For the three months ended December 31, 2014, share-based compensation awards for 1.7 million shares were excluded from the diluted EPS calculation because they were antidilutive.

Non-Cash Investing and Financing Activities

Capital expenditures of $3.4 million and $5.8 million were accrued within accounts payable and other current liabilities at December 31, 2015 and 2014, respectively. At December 31, 2015 and 2014, there were $6.9 million and $3.4 million, respectively, of outstanding common stock share repurchases recorded in accounts payable that did not settle until the next fiscal quarter. These non-cash investing and financing activities have been excluded from cash used for capital expenditures and treasury stock purchases in the Condensed Consolidated Statement of Cash Flows.

Recent Accounting Pronouncements

In November 2015, the FASB issued new guidance that requires all deferred income taxes to be classified on the balance sheet as noncurrent assets or liabilities rather than separating current and noncurrent deferred income taxes based on the classification of the related assets and liabilities. This requirement is effective for us no later than October 1, 2017; however, we elected to adopt earlier as of December 31, 2015. Upon adoption of this guidance we retrospectively reclassified $151.2 million of deferred income taxes from current assets to noncurrent assets at September 30, 2015.

In May 2014, the FASB issued a new standard on revenue recognition related to contracts with customers. This standard supersedes nearly all existing revenue recognition guidance and involves a five-step approach to recognizing revenue based on individual performance obligations in a contract. The new standard will also require additional qualitative and quantitative disclosures about contracts with customers, significant judgments made in applying the revenue guidance, and assets recognized from the costs to obtain or fulfill a contract. This guidance is effective for us for reporting periods beginning October 1, 2018. We are currently evaluating the impact the adoption of this guidance will have on our consolidated financial statements and related disclosures.