Rockwell Automation Reports Third Quarter Results
MILWAUKEE--July 23, 2002--Rockwell Automation , a leading global provider of industrial automation power, control and information solutions, today reported fiscal 2002 third quarter net income of $90 million (47 cents per share). This result includes:| -- | A benefit of $30 million (16 cents per share) from the resolution of certain tax matters for the period 1995-1999; |
| -- | A benefit of $4 million (2 cents per share) from a reduction in the fiscal 2002 effective tax rate from 27 percent to 24 percent; and |
| -- | Income of $5 million ($4 million after-tax, or 2 cents per share) from the favorable settlement of intellectual property matters. |
Excluding the effect of these items, net income was $52 million (27 cents per share).
Last year's third quarter results were a net loss from continuing operations of $27 million (15 cents per share), including a charge of $69 million ($45 million after-tax, or 25 cents per share) for costs associated with the consolidation and closure of facilities and workforce reductions and a benefit of $9 million (5 cents per share) from a reduction in the effective tax rate. Excluding the amortization 3rd Quarter Earnings of goodwill and certain other intangible assets ($12 million after-tax, or 6 cents per share) as well as the $69 million charge and the benefit from the effective tax rate change, income from continuing operations in 2001's third quarter would have been $21 million (11 cents per share).
Sales in the third quarter were $995 million. This result compares to $1,027 million in the third quarter of 2001, which included $22 million related to the former Rockwell Science Center business. Third quarter sales increased 4 percent from the second quarter.
Don H. Davis, chairman and chief executive officer, said, "The increase in sequential sales was in line with our expectations as we experienced some improvement in business conditions. We again achieved strong sequential earnings growth as segment operating earnings were 14 percent higher than in the second quarter. In addition, our business continued to generate very strong free cash flow."
Davis added, "We are anticipating a continuation of the current uncertain business environment in the near term and are thus assuming flat to modest sequential sales growth in the fourth quarter. Accordingly, we are estimating fourth quarter earnings per share to be in the range of 27 cents to 29 cents."
Following is a discussion of sales and operating earnings for each Rockwell Automation business for the third quarter.
Control Systems
Control Systems sales in the third quarter were $788 million compared to $784 million in the third quarter of 2001. Global Manufacturing Solutions' sales were relatively strong, driven by substantial growth in Process Solutions. In addition, Logix(TM) sales increased by more than 30 percent compared to 2001's third quarter. On a sequential basis, sales increased 5 percent compared to the second quarter, primarily due to increased sales in the United States and Asia-Pacific. Segment operating earnings were $91 million compared to $66 million in 2001's third quarter and $81 million in the second quarter of 2002. Control Systems' return on sales was 11.5 percent versus 8.4 percent in the third quarter of 2001. This performance represents an improvement over the 10.8 percent return in the second quarter of 2002.
Power Systems
Power Systems sales in the third quarter were $178 million compared to $187 million in last year's third quarter. Third quarter segment operating earnings were $15 million compared to $12 million in the third quarter of 2001. On a sequential basis, sales were up 1 percent, with an increase in mechanical sales offsetting a decrease in motors sales. Segment operating earnings improved by $3 million from the second quarter of 2002. Power Systems' return on sales was 8.4 percent versus 6.4 percent in the third quarter of 2001 and 6.8 percent in the second quarter of 2002.
Rockwell FirstPoint Contact
Rockwell FirstPoint Contact sales in the third quarter were $29 million compared to $34 million in 2001's third quarter. Operating earnings for the quarter were $1 million compared to a loss of $1 million in the third quarter of 2001.
General Corporate - Net
General corporate expenses were $9 million compared to $22 million in 2001's third quarter, driven in part by lower corporate spending. Also included in this quarter's result is $5 million of income related to the settlement of intellectual property matters. Included in general corporate expenses in the 2001 third quarter were $3 million of costs incurred in connection with the spinoff of Rockwell Collins.
Cash Flow
Through nine months, free cash flow from continuing operations was $224 million. The company defines free cash flow as cash flows from operating activities reduced by capital expenditures.
Following are additional business developments:
| -- | Rockwell Automation Global Manufacturing Solutions was awarded major contracts including: |
| - | A leading life sciences company selected our process solution for its new biotech manufacturing plant being built in Puerto Rico. |
| - | Ford Motor Co. awarded a press control, robot integration and service installation project to rework two tandem lines at its Walton Hills stamping plant. |
| - | Global Manufacturing Solutions signed multi-year asset management service agreements with nine manufacturers including Briggs & Stratton and The Goodyear Tire & Rubber Co. Rockwell Automation will manage maintenance, repair and operations (MRO) assets. |
| -- | Customers globally continue to adopt Rockwell Automation's Integrated Logix(TM) Architecture products to achieve faster start-up and lower cost integration benefits as evidenced by increased sales in this quarter to machinery builders, airport providers and waste water companies. |
| -- | Rockwell Automation won several new programs in Asia Pacific including: |
| - | A contract for Datang Power Corp., an energy company that owns multiple power plants in China, to supply 12 Powerflex(TM)medium-voltage drives. |
| - | A contract with Nestle to use ControlLogix for automating the first phase of its milk processing plant in India. |
| - | A drive systems order from Chugai Ro, a Japan-based OEM, which is building a system for Kentucky-based North American Stainless. |
| -- | Rockwell Automation acquired the Controller Division of Samsung's Mechatronics business in Korea in May, 2002. This acquisition will expand Rockwell Automation's existing operations in Korea, further our design and product development capabilities and will support future commercial and operational expansion in the Asia Pacific region. |
A conference call to discuss Rockwell Automation's financial results will take place at 10 a.m. Eastern Time on July 23. 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 the 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; 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, Inc. , is a leading global 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-Bradley(R) controls and services, Dodge(R) mechanical power transmission products, Reliance Electric(TM) motors and drives, and Rockwell Software(R) factory management software. 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, Wisconsin, the company employs about 23,000 people serving customers in more than 80 countries.
ROCKWELL AUTOMATION, INC.
SALES AND EARNINGS INFORMATION
(in millions, except per share amounts)
Quarter Ended Quarter Ended Nine Months Ended
June 30, March 31, June 30,
------------- ------------- ----------------
2002 2001 2002 2002 2001
---- ---- ---- ---- ----
Sales (see Note 4)
Control Systems $ 788 $ 784 $ 749 $ 2,260 $ 2,560
Power Systems 178 187 176 532 581
FirstPoint Contact 29 34 33 100 108
Science Center
(see Note 1) - 22 - - 60
---- ---- ---- ---- ----
Total Sales $ 995 $ 1,027 $ 958 $ 2,892 $ 3,309
====== ======= ====== ======== ========
Segment Operating Earnings
(see Note 4)
Control Systems $ 91 $ 66 $ 81 $ 239 $ 352
Power Systems 15 12 12 38 40
FirstPoint Contact 1 (1) 1 4 2
Science Center
(see Note 1) - (1) - - 3
------ ---- ---- ---- ----
Total Segment Operating
Earnings 107 76 94 281 397
Goodwill & Purchase
Accounting Items
(see Note 3) (6) (21) (7) (19) (61)
General Corporate - Net
(see Note 1) (9) (22) (16) (43) (53)
Special Charges - (69) - - (69)
Interest Expense (17) (20) (17) (50) (66)
Income Tax Benefit
(Provision) 15 29 4 8 (35)
------ ----- ----- ----- -----
Income (Loss) from
Continuing Operations
before Accounting
Change 90 (27) 58 177 113
Income from Discontinued
Operations - 61 3 3 180
Cumulative Effect of
Accounting Change
(see Note 2) - - - (108) -
------ ----- ----- ----- -----
Net Income $ 90 $ 34 $ 61 $ 72 $ 293
====== ====== ====== ====== ========
Diluted Earnings (Loss) Per Share:
Continuing Operations
Before Accounting
Change 0.47 (0.15) 0.31 0.94 0.61
Discontinued
Operations - 0.33 0.02 0.02 0.97
Cumulative Effect of
Accounting Change - - - (0.58) -
------ ----- ----- ----- -----
Net Income $ 0.47 $ 0.18 $ 0.33 $ 0.38 $ 1.58
====== ====== ====== ====== ========
Average Diluted Shares
(see Note 5) 190.4 183.1 188.9 188.6 185.1
====== ====== ====== ====== ========
ROCKWELL AUTOMATION, INC.
SALES AND EARNINGS INFORMATION--CONTINUED
Quarter Ended Quarter Ended Nine Months Ended
June 30, March 31, June 30,
------------- -------------- -----------------
2002 2001 2002 2002 2001
---- ---- ---- ---- ----
Additional
Information:
Income (Loss)
from Continuing
Operations
Before Accounting
Change $ 90 $ (27) $ 58 $ 177 $ 113
Amortization of
Goodwill and
Trademarks
(see Note 3) - 12 - - 35
Special Charges - 45 - - 45
Resolution of
Tax Matters (30) - (18) (48) -
Intellectual
Property
Settlements (4) - - (4) -
Change in
Effective
Tax Rate (4) (9) - (4) (9)
------- ------- ------- ------- -------
Adjusted Income
from Continuing
Operations
Before
Accounting
Change $ 52 $ 21 $ 40 $ 121 $ 184
======= ======= ======= ======= =======
Diluted Earnings
Per Share:
Continuing
Operations Before
Accounting Change $ 0.47 $(0.15) $ 0.31 $ 0.94 $ 0.61
Amortization of
Goodwill and
Trademarks
(see Note 3) - 0.06 - - 0.18
Special Charges - 0.25 - - 0.25
Resolution of
Tax Matters (0.16) - (0.10) (0.26) -
Intellectual
Property
Settlements (0.02) - - (0.02) -
Change in Effective
Tax Rate (0.02) (0.05) - (0.02) (0.05)
------- ------- ------- ------- -------
Adjusted
Continuing
Operations
Before Accounting
Change $ 0.27 $ 0.11 $ 0.21 $ 0.64 $ 0.99
======= ======= ======= ======= =======
(1) Beginning in the fourth quarter of 2001, the company's investment
in Rockwell Scientific Company LLC is being accounted for using
the equity method with the company's proportional share of
earnings and losses being included in general corporate-net.
(2) The cumulative effect of accounting change relates to impairment
charges resulting from the adoption of Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets
(SFAS 142).
(3) As a result of adopting SFAS 142, the company no longer amortizes
goodwill and certain other intangible assets that have been deemed
to have an indefinite useful life. The adjusted information
represents income from continuing operations before accounting
change and the related diluted per share amount as if SFAS 142 had
been adopted effective October 1, 2000.
(4) Certain amounts in prior periods have been reclassified as the
result of the required adoption of new accounting rules for
shipping and handling costs and reimbursement of out-of-pocket
expenses and to reflect the transfer of management responsibility
of a business from Control Systems to Power Systems which took
place effective January 1, 2002.
(5) Dilutive per share amounts are anti-dilutive for loss periods.
Therefore, for all periods with a loss from continuing operations
before accounting change, diluted outstanding shares and per share
amounts equal basic shares and per share amounts, respectively.
ROCKWELL AUTOMATION, INC.
CONDENSED BALANCE SHEET
(in millions)
June 30, September 30,
2002 2001
------- ------------
ASSETS
Cash $ 214 $ 121
Receivables 657 709
Inventories 589 600
Deferred income taxes 160 152
Other current assets 159 144
------- -------
Total current assets 1,779 1,726
Property 1,006 1,075
Goodwill and other intangible assets 1,118 1,192
Other assets 110 110
------- -------
Total $ 4,013 $ 4,103
======= =======
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term debt $ 207 $ 10
Accounts payable 370 382
Compensation and benefits 148 189
Income taxes payable 107 74
Other current liabilities 283 243
------- -------
Total current liabilities 1,115 898
Long-term debt 760 909
Retirement benefits 330 338
Deferred income taxes 90 171
Other liabilities 138 187
Shareowners' equity 1,580 1,600
------- -------
Total $ 4,013 $ 4,103
======= =======
ROCKWELL AUTOMATION, INC.
CONDENSED CASH FLOW INFORMATION
(in millions)
Nine Months Ended
June 30, 2002
CONTINUING OPERATIONS: -----------------
OPERATING ACTIVITIES:
Income from continuing operations before accounting change $ 177
Adjustments to arrive at cash provided by
operating activities:
Depreciation 138
Amortization of intangible assets 16
Receivables 66
Inventories 23
Accounts payable (16)
Compensation and benefits (43)
Changes in other assets and liabilities (66)
-----------
Cash provided by operating activities 295
-----------
INVESTING ACTIVITIES:
Property additions (71)
Acquisitions of businesses, net of cash acquired (68)
-----------
Cash used for investing activities (139)
-----------
FINANCING ACTIVITIES:
Net increase in debt 45
Cash dividends (92)
Proceeds from the exercise of stock options 24
-----------
Cash used for financing activities (23)
-----------
Effect of exchange rate changes on cash (4)
-----------
Cash provided by continuing operations 129
Cash used for discontinued operations (36)
-----------
Increase in cash $ 93
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