Rockwell Automation Reports Second Quarter 2009 Results


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MILWAUKEE--Rockwell Automation, Inc. :

  • Organic sales down 18 percent; total sales down 25 percent
  • Diluted EPS of $0.29
  • Company revises fiscal 2009 EPS guidance to $1.40 - $1.70

Rockwell Automation, Inc. today reported fiscal 2009 second quarter revenue of $1,058.1 million, down 25 percent compared to $1,406.6 million in the second quarter of fiscal 2008. Organic sales declined 18 percent, and currency translation contributed an additional 7 percentage points to the total decline. Fiscal 2009 second quarter net income was $40.6 million or $0.29 per share, compared to $0.96 per share in the second quarter of fiscal 2008.

Segment operating earnings were $86.2 million in the second quarter of fiscal 2009, down from $240.3 million in the same period of 2008. Earnings decreased primarily due to the significant revenue decline. Earnings were also lower due to pre-tax restructuring charges of approximately $20 million and unfavorable mix, partially offset by cost reductions. Segment operating margin in the second quarter of fiscal 2009 was 8.1 percent, 9.0 percentage points lower than the second quarter of fiscal 2008.

Second quarter of fiscal 2009 free cash flow from continuing operations was $152.1 million versus $31.8 million in the second quarter of fiscal 2008. Free cash flow in the quarter benefited primarily from working capital reductions, as well as lower capital expenditures and a refund related to a contractual tax matter. Return on invested capital was 18.7 percent.

Organic sales, free cash flow and return on invested capital are non-GAAP measures that are defined in the attachments to this release under “Other Supplemental Information”.

Commenting on the results, Keith D. Nosbusch, chairman and chief executive officer said, “Our second quarter results reflect the severity of the global economic recession. Market conditions quickly deteriorated across most industries and all regions. With a sharper revenue decline in the quarter than we expected, we continued to aggressively adjust our cost structure. We made significant progress on our cost reduction actions in the quarter and expect to deliver savings for fiscal year 2009 above the original $240 million target. We also generated strong free cash flow in the quarter, primarily through our intense focus on working capital management. I am proud of how well our employees have responded in this challenging environment. Despite making personal sacrifices, they have not wavered in their commitment to our business priorities and dedication to our customers.”

Outlook

Commenting on the outlook, Nosbusch added, “While there are signs that economic and market conditions may be stabilizing, it is still too early to call a bottom. We believe that the steepest sequential declines are behind us, but markets remain uncertain and our revenue trends are mixed across the regions. We are managing our business assuming that sales volume in the second half of the fiscal year will be somewhat below the second quarter run rate. We continue to evolve our cost structure and expect to implement additional cost actions in the remainder of the fiscal year. Given this outlook, we now expect revenue to decline between 16 and 18 percent in fiscal 2009, excluding the effects of currency. Accordingly, we are revising our fiscal 2009 earnings guidance downward to a range of $1.40 to $1.70 per share, excluding any restructuring charges related to actions that we may take in the remainder of the fiscal year.”

Nosbusch added, “In spite of the difficult business environment, we will balance near-term financial performance with protecting our intellectual capital and core technology investments. Our strong balance sheet and liquidity position provide the financial flexibility needed to manage through this economic cycle without compromising our long-term strategy. We are confident that we will execute through the downturn and emerge even more competitive when markets recover.”

Following is a discussion of second quarter results for each of the segments.

Architecture & Software

Architecture & Software fiscal 2009 second quarter sales were $393.5 million, a decrease of 34 percent from $599.0 million in the second quarter of fiscal 2008. Currency translation contributed 6 percentage points to the decline. Segment operating earnings were $33.2 million in the second quarter of fiscal 2009 compared to $139.9 million in the second quarter of fiscal 2008. Architecture & Software segment operating margin was 8.4 percent in the second quarter of fiscal 2009 compared to 23.4 percent in the same period of 2008.

Control Products & Solutions

Control Products & Solutions fiscal 2009 second quarter sales were $664.6 million, a decrease of 18 percent from $807.6 million in the second quarter of fiscal 2008. Currency translation contributed 8 percentage points to the decline. Segment operating earnings were $53.0 million in the second quarter of fiscal 2009 compared to $100.4 million in the second quarter of fiscal 2008. Control Products & Solutions segment operating margin was 8.0 percent in the second quarter of fiscal 2009 compared to 12.4 percent in the same period of 2008. In the second quarter of fiscal 2009, we closed two acquisitions based in China and Canada that enhance our global domain expertise in process solutions.

General Corporate – Net

Fiscal 2009 second quarter general corporate net expense was $14.7 million compared to $16.6 million in the second quarter of fiscal 2008.

Income Taxes

The effective tax rate for the second quarter of fiscal 2009 was 26.7 percent, compared to 28.5 percent for the second quarter of fiscal 2008. For fiscal 2009, the Company now expects the full year tax rate to be in the range of 21 to 24 percent, subject to quarterly variability.

Liquidity

The Company secured two new credit facilities in the second quarter of fiscal 2009 aggregating to $535 million, split equally between a 364-day facility and a 3-year facility. No shares were purchased in the quarter under the existing repurchase authorization.

Conference Call

A conference call to discuss our financial results will take place at 8:30 A.M. Eastern Time on April 29. The call and related financial charts will be webcast and accessible via the Rockwell Automation website (www.rockwellautomation.com).

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