Rockwell Automation Reports Second Quarter Results | Automation.com

Rockwell Automation Reports Second Quarter Results

April 232003
MILWAUKEE, April 22, 2003 – Rockwell Automation, Inc. (NYSE: ROK), a leading global provider of industrial automation power, control and information solutions, today reported fiscal 2003 second-quarter net income of $49 million (26 cents per share). This result includes a charge of $3 million after-tax (1 cent per share) related to the sale of a majority of the company’s ownership interest in Reliance Electric Limited Japan. Last year’s second quarter net income of $61 million (33 cents per share) included a tax benefit of $18 million (10 cents per share). Also included in 2002 results was a net benefit of $3 million (2 cents per share) related to discontinued operations. Sales for the second quarter were $1,029 million compared to $958 million in the second quarter of 2002.

Don H. Davis, chairman and chief executive officer, commented, “Our businesses continue to produce very solid results in a prolonged soft market environment. Steady and meaningful improvements in our market position validate the strength of our product and service offerings. Our strong cash flow and financial profile allow us to invest in our businesses while providing attractive current returns to our shareowners.”

Davis added, “We remain focused on executing our strategy in order to deliver on our commitment of profitable growth. We are continuing to invest in key growth areas such as our Logix™, Process Solutions and Global Manufacturing Solutions™ businesses. At the same time we remain diligent in maintaining a lean cost structure.”

Davis concluded, “The timing and pace of improvement in the global economy remain difficult to predict. Our markets have remained generally stable for the past two quarters and we anticipate that this trend will continue for the balance of our fiscal year. Accordingly, we remain confident in our ability to deliver full-year diluted earnings per share of
approximately $1.10.”

Following is a discussion of results for each Rockwell Automation business for the
second quarter.

Control Systems
Control Systems second-quarter sales were $830 million, an increase of 11 percent compared to sales of $749 million in the second quarter of 2002. Approximately 4 percent of the sales growth was due to the favorable impact of currency translation. From a regional perspective, sales outside of the U.S. increased 22 percent (12 percent excluding currency translation) and U.S. sales were up 4 percent.

Our Logix and Process Solutions businesses each increased approximately 40 percent from last year’s second quarter, and the Global Manufacturing Solutions business grew 12 percent compared to 2002.

Segment operating earnings were $93 million compared to $81 million in 2002’s second quarter. The increase in operating earnings is due to increased volume, particularly in the Logix business. The return on sales for Control Systems was 11.2 percent, compared to 10.8 percent in 2002’s second quarter.

Power Systems
Power Systems second quarter sales were $175 million, compared to $176 million in the second quarter of 2002. An increase of 6 percent in mechanical sales was offset by a similar decrease in electrical sales.

Segment operating earnings were $16 million, compared to $12 million in last year’s second quarter. The increase in operating earnings was the result of continued cost-reduction efforts and favorable product mix. Power Systems return on sales was 9.1 percent compared to 6.8 percent in last year’s second quarter.

Rockwell FirstPoint Contact
Rockwell FirstPoint Contact sales in the second quarter were $24 million, compared to $33 million in 2002’s second quarter. Operating earnings were break-even for the quarter, compared to $1 million in the second quarter of 2002. Reduced spending and savings from cost-reduction actions substantially offset the effect of the lower sales volume.

General Corporate – Net
Second-quarter 2003 general corporate expenses were $14 million, compared to
$16 million in the second quarter of 2002, driven primarily by lower corporate staff costs.

The effective tax rate for the quarter was 25 percent. The full-year effective tax rate is estimated to be 30 percent, excluding the impact of the REJ transaction. Last year’s second quarter tax rate includes a tax benefit of $18 million from the resolution of certain tax matters.

Cash Flow
Free cash flow from continuing operations for the first six months of 2003 was
$159 million, compared to $102 million in the first half of 2002. Free cash flow for the second quarter was $70 million, compared to $34 million in the second quarter of 2002. The company defines free cash flow as cash flows provided by operating activities reduced by capital expenditures.

On April 15, 2003, the company retired its $150 million 6.80% debt obligation using a combination of cash on hand and commercial paper borrowings.

Following are additional business developments:
● Rockwell Automation opened a manufacturing operation in Shanghai, China. The new facility will focus on the manufacture of electro-mechanical products including push buttons, rotary switches and panels for the global and indigenous Chinese markets. The facility will initially manufacture the next generation IEC pushbutton product line, and plans are in place to migrate production of other products. Rockwell Automation expects the facility to grow to several hundred people over the next two to four years as the manufacture of additional products is moved to Shanghai.
● Rockwell Automation acquired Interwave Technology, Inc., expanding its Manufacturing Information Solutions (MIS) capability and accelerating its ability to integrate real-time information between customers’ manufacturing plant floor and business systems. Interwave is one of the country's leading independent consulting integrators.
● Rockwell Automation formed a strategic alliance with Weidmüller Holding AG that will enhance Rockwell Automation’s position as a leader in providing IEC connection products. The multi-dimensional alliance consists of a master brand label agreement, a technology/design exchange, joint product development and the acquisition of Weidmüller’s North American sales assets.
● Rockwell Automation Global Manufacturing Solutions signed a $4.5 million five-year contract with Air Liquide America LP to provide condition-based monitoring equipment and services that will help reduce maintenance costs and improve uptime at its gas production facilities in the United States. In addition, the company signed multi-year asset management service agreements with six major manufacturers to manage the maintenance, repair and operations assets for these global customers.
● Rockwell Automation was one of only 13 companies to earn Intel’s prestigious 2002 Supplier Continuous Quality Improvement award, which recognizes “outstanding commitment to quality and performance by suppliers that provide products and services deemed essential to Intel’s success.” Rockwell Automation was awarded for its efforts in supplying Intel with programmable logic controllers, industrial networks, and software and system integration services while meeting stringent assessment criteria.

A conference call to discuss Rockwell Automation’s financial results will take place at 10 A.M. Eastern Time on April 22. The call will be Webcast and accessible via the Rockwell Automation website (www.rockwellautomation.com).

This news release contains statements (including certain projections and business trends) accompanied by such phrases as “believes,” “estimates,” “expect(s),” “anticipates,” “will,” “intends” 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, including but not limited to economic and political changes in international markets where the company competes, such as currency exchange rates, inflation rates, recession, foreign ownership restrictions and other external factors over which the company has no control; demand for and market acceptance of new and existing products, including levels of capital spending in industrial markets; successful development of advanced technologies; competitive product and pricing pressures; future terrorist attacks; epidemics; and the uncertainties of litigation, as well as other risks and uncertainties, including but not limited to those detailed from time to time in the company’s Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Rockwell Automation (NYSE: ROK) is a world-leading provider of industrial automation power, control and information solutions that help customers meet their manufacturing productivity objectives. The company brings together leading brands in industrial automation for Complete Automation® solutions, including Allen-Bradleyâ controls
and engineered services and Rockwell Softwareâ factory management software, Dodgeâ mechanical power transmission products, and Reliance Electric® motors and drives. The company also is a leading provider of contact management technologies and applications that help companies more efficiently manage interaction with their own customers. Headquartered in Milwaukee, Wis., USA, the company employs about 22,000 people serving customers in more than 80 countries.
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