Rockwell Automation Reports Fourth Quarter and Full Year Results
MILWAUKEE--Nov. 7, 2002--Rockwell Automation, Inc. , a leading global provider of industrial automation power, control and information solutions, today reported fiscal 2002 fourth quarter income from continuing operations and net income of $49 million (26 cents per share). This result includes:
- Income of $4 million ($3 million after-tax, or 2 cents per share)
from the favorable settlement of intellectual property matters;
and
- A charge of $4 million ($3 million after-tax, or 2 cents per
share) related to a workforce reduction and an asset impairment at
Rockwell FirstPoint Contact.
Fiscal 2001 fourth quarter income from continuing operations and net income was $12 million (7 cents per share). Excluding the effect of the amortization of goodwill and certain other intangible assets, special charges and a favorable intellectual property settlement, income from continuing operations in 2001's fourth quarter would have been $27 million (15 cents per share).
Sales for the fourth quarter were $1,017 million compared to $976 million in the fourth quarter of 2001. Full year 2002 income from continuing operations before accounting change was $226 million ($1.20 per share). This result includes:
- A benefit of $48 million (26 cents per share) from the settlement
of tax matters for the period 1995-1999;
- Income of $9 million ($7 million after-tax, or 4 cents per share)
from the favorable settlement of intellectual property matters;
- A charge of $4 million ($3 million after-tax, or 2 cents per
share) related to a workforce reduction and an asset impairment at
Rockwell FirstPoint Contact.
Excluding the effect of these items, income from continuing operations before accounting change was $174 million (92 cents per share).
Full year 2002 net income was $121 million (64 cents per share). Net income includes a trademark and goodwill impairment charge of $129 million ($108 million after-tax, or 58 cents per share) related to Rockwell Automation's adoption of SFAS 142 and income of $3 million before- and after-tax (2 cents per share) from the resolution of certain obligations related to two discontinued businesses.
Fiscal 2001 income from continuing operations was $125 million (68 cents per share). Excluding the effect of the amortization of goodwill and certain other intangible assets, special charges, resolution of tax matters and a favorable intellectual property settlement, income from continuing operations was $198 million ($1.07 per share). Net income, which includes the results of Rockwell Automation's discontinued Rockwell Collins business, was $305 million ($1.65 per share).
Sales for the full year were $3,909 million. This result compares to $4,285 million in fiscal 2001, which includes $60 million related to the former Rockwell Science Center business.
Don H. Davis, chairman and chief executive officer, said, "We are pleased with the performance turned in by this management team in these difficult market conditions. Excellent execution on our various productivity initiatives under the Rockwell Lean Enterprise program had a significant impact on our operating results and also resulted in strong free cash flow for the full year. Our cash generation capability remains outstanding and provides the ability to continue to make important investments in the future of our business."
Davis added, "Indicators of the future direction of the global manufacturing economy are mixed, though our end markets have generally stabilized. While we do not expect further deterioration in the markets we serve, we are managing our cost structure tightly, and our first quarter results will include expenses for targeted cost reduction actions. These actions, combined with normal quarterly revenue trends, are expected to result in first quarter earnings per share in the range of 16 to 18 cents. For the full year, we will deliver earnings growth of at least 15 percent (to $1.05 per share), even if the current soft business conditions persist. If business conditions improve modestly, we expect to achieve earnings growth of 25 percent (to $1.15 per share)."
Following is a discussion of results for each Rockwell Automation business for the fourth quarter.
Control Systems
Control Systems fourth quarter sales were $800 million compared to $767 million in the fourth quarter of 2001. Logix(TM) sales were up 34 percent and Global Manufacturing Solutions sales were up 6 percent compared to 2001's fourth quarter. Shipment increases in North America, Latin America and Asia Pacific were partially offset by a decrease in Europe. Segment operating earnings were $85 million compared to $73 million in 2001's fourth quarter. Control Systems' return on sales was 10.6 percent versus 9.5 percent in the fourth quarter of 2001.
Power Systems
Power Systems fourth quarter sales were $184 million compared to $167 million in last year's fourth quarter. Motor sales were up 3 percent, while mechanical sales increased approximately 20 percent. Fourth quarter segment operating earnings were $15 million compared to a loss of $1 million in the fourth quarter of 2001. The increase is attributable to increased volume and the benefits of cost reduction initiatives. Power Systems' return on sales was 8.2 percent versus last year's loss.
Rockwell FirstPoint Contact
Rockwell FirstPoint Contact sales in the fourth quarter were $33 million compared to $42 million in 2001's fourth quarter. Operating earnings for the quarter were break even compared to $5 million in the fourth quarter of 2001. Fourth quarter results include a charge of $4 million ($3 million after-tax, or 2 cents per share) related to a workforce reduction and an asset impairment charge.
General Corporate - Net
Fourth quarter general corporate expenses were $14 million. This result includes income from intellectual property settlements of $4 million ($3 million after-tax, or 2 cents per share). In the fourth quarter of 2001, the amount of such settlements was $18 million, which resulted in zero net corporate expense.
Cash Flow
Full year 2002 free cash flow from continuing operations was $372 million. Rockwell Automation defines free cash flow as cash flows from operating activities reduced by capital expenditures.
Following are additional business developments:
- Rockwell Automation won new business for its family of integrated
Logix(TM) architecture products. Commitments were received from
major automotive manufacturers including DaimlerChrysler in
Tuscaloosa, Alabama, and the Renault truck plant in Blainville,
France. Orders were also received from ChevronTexaco for
production platforms in the Gulf of Mexico.
- Leading life sciences companies continue to select Rockwell
Automation Process Solutions to help them achieve greater
production reliability and regulatory compliance. Orders were
received from two major pharmaceutical companies for the Propack
Data manufacturing information system to manage production flow
consistent with regulatory requirements.
- In September, Rockwell Automation acquired SPEL, spol. s.r.o., an
engineering and systems integration services company in the Czech
Republic. This acquisition will expand Rockwell Automation's
existing operations in Central Europe and support Global
Manufacturing Solutions' growth in key industries throughout
Europe.
- Rockwell Automation continues to expand its machine safety
business and entered into collaboration with Asia-based Omron and
Germany-based SICK in the development of an open protocol for
safety communications networks.
- Rockwell Automation won several new programs in key global markets
including:
- A drive systems order with a tire manufacturer in China for
its extruder line.
- A maintenance management order with a Korean semiconductor
company to improve the asset utilization of its fabrication
lines.
- A contract from a Brazilian power company to standardize
globally on Allen-Bradley Motor Control Centers.
- A ControlLogix and integrated motion order received from a
German OEM for the first phase of a paper conversion project.
A conference call to discuss Rockwell Automation's financial results will take place at 10 A.M. Eastern Time on Nov. 7. The call will be webcast and accessible via the Rockwell 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 22,000 people serving customers in more than 80 countries.
ROCKWELL AUTOMATION, INC.
SALES AND EARNINGS INFORMATION
(in millions, except per share amounts)
Quarter Ended Year Ended
September 30, September 30,
------------------- -------------------
2002 2001 2002 2001
-------- --------- --------- --------
Sales (see Note 1)
Control Systems $ 800 $ 767 $ 3,060 $ 3,327
Power Systems 184 167 716 748
FirstPoint Contact 33 42 133 150
Science Center
(see Note 2) - - - 60
-------- --------- --------- ---------
Total Sales $ 1,017 $ 976 $ 3,909 $ 4,285
======== ========= ========= =========
Segment Operating Earnings
(Loss) (see Note 1)
Control Systems $ 85 $ 73 $ 324 $ 425
Power Systems 15 (1) 53 39
FirstPoint Contact - 5 4 7
Science Center
(see Note 2) - - - 3
-------- --------- --------- ---------
Total Segment Operating
Earnings 100 77 381 474
Goodwill & Purchase
Accounting Items
(see Note 3) (6) (18) (25) (79)
General Corporate - Net
(see Note 2) (14) - (57) (53)
Special Charges - (22) - (91)
Interest Expense (16) (17) (66) (83)
Income Tax Provision (15) (8) (7) (43)
-------- --------- --------- ---------
Income from Continuing
Operations before
Accounting Change 49 12 226 125
Income from Discontinued
Operations - - 3 180
Cumulative Effect of
Accounting Change
(see Note 4) - - (108) -
-------- --------- --------- --------
Net Income $ 49 $ 12 $ 121 $ 305
======== ========= ========= ========
Diluted Earnings (Loss)
Per Share:
Continuing Operations
Before Accounting Change 0.26 0.07 1.20 0.68
Discontinued Operations - - 0.02 0.97
Cumulative Effect of
Accounting Change - - (0.58) -
-------- --------- --------- --------
Net Income $ 0.26 $ 0.07 $ 0.64 $ 1.65
======== ========= ========= =======
Average Diluted Shares 189.4 185.9 188.8 185.3
======== ========= ========= =======
ROCKWELL AUTOMATION, INC.
SALES AND EARNINGS INFORMATION--CONTINUED
Quarter Ended Year Ended
September 30, September 30,
-------------------- ------------------
2002 2001 2002 2001
-------- --------- -------- --------
Additional Information:
Income from Continuing
Operations Before
Accounting Change $ 49 $ 12 $ 226 $ 125
Amortization of Goodwill
and Trademarks
(see Note 3) - 12 - 47
Special Charges - 15 - 60
Resolution of Tax Matters - - (48) (22)
Intellectual Property
Settlements (3) (12) (7) (12)
FirstPoint Contact Charges
(see Note 5) 3 - 3 -
-------- -------- -------- --------
Adjusted Income from
Continuing Operations
Before Accounting Change $ 49 $ 27 $ 174 $ 198
======== ======== ======== ========
Diluted Earnings Per Share:
Continuing Operations
Before Accounting Change $ 0.26 $ 0.07 $1.20 $ 0.68
Amortization of Goodwill
and Trademarks
(see Note 3) - 0.06 - 0.25
Special Charges - 0.08 - 0.32
Resolution of Tax Matters - - (0.26) (0.12)
Intellectual Property
Settlements (0.02) (0.06) (0.04) (0.06)
FirstPoint Contact Charges
(see Note 5) 0.02 - 0.02 -
-------- ------ ------- -------
Adjusted Continuing
Operations Before
Accounting Change $ 0.26 $ 0.15 $ 0.92 $ 1.07
======== ======== ======== ========
(1) Certain amounts in prior periods have been reclassified as the
result of the required adoption of new accounting rules for
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.
(2) 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.
(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) 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).
(5) Amount represents a charge related to a workforce reduction
and an asset impairment.
ROCKWELL AUTOMATION, INC.
CONDENSED BALANCE SHEET
(in millions)
September 30, September 30,
2002 2001
------------- -------------
ASSETS
Cash $ 289 $ 121
Receivables 645 709
Inventories 557 600
Deferred income taxes 175 152
Other current assets 109 144
---------- ----------
Total current assets 1,775 1,726
Property 988 1,075
Goodwill and other intangible assets 1,124 1,192
Other assets 137 110
---------- ----------
Total $ 4,024 $ 4,103
========== ==========
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term debt $ 162 $ 10
Accounts payable 325 346
Compensation and benefits 161 189
Income taxes payable 44 36
Other current liabilities 274 279
---------- ----------
Total current liabilities 966 860
Long-term debt 767 909
Retirement benefits 381 338
Deferred income taxes 158 209
Other liabilities 143 187
Shareowners' equity 1,609 1,600
---------- ----------
Total $ 4,024 $ 4,103
========== ==========
ROCKWELL AUTOMATION, INC.
CONDENSED CASH FLOW INFORMATION
(in millions)
Year Ended
September 30,
--------------------------
2002 2001
---------- ----------
CONTINUING OPERATIONS:
OPERATING ACTIVITIES:
Income from continuing operations before
accounting change $ 226 $ 125
Adjustments to arrive at cash provided by
operating activities:
Depreciation 184 196
Amortization of intangible assets 22 76
Receivables 75 33
Inventories 53 (3)
Accounts payable (26) (86)
Compensation and benefits (30) (52)
Changes in other assets and liabilities (28) 46
---------- ----------
Cash provided by operating activities 476 335
---------- ----------
INVESTING ACTIVITIES:
Capital expenditures (104) (157)
Acquisitions of businesses, net of
cash acquired (71) (6)
Special payment from Rockwell Collins - 300
Investment in affiliates and other (4) (3)
Proceeds from the dispositions of
property and businesses 4 19
---------- ----------
Cash (used for) provided by investing
activities (175) 153
---------- ----------
FINANCING ACTIVITIES:
Net increase in debt - (8)
Cash dividends (122) (170)
Purchases of treasury stock - (63)
Proceeds from the exercise of stock options 25 44
---------- ----------
Cash used for financing activities (97) (197)
---------- ----------
Effect of exchange rate changes on cash - 9
---------- ----------
Cash provided by continuing operations 204 300
Cash used for discontinued operations (36) (349)
---------- ----------
Increase (decrease) in cash $ 168 $ (49)
========== ==========
FREE CASH FLOW:
Cash provided by operating activities $ 476 $ 335
Capital expenditures (104) (157)
---------- ----------
Free cash flow (see Note 1) $ 372 $ 178
========== ==========
(1) The company's definition of free cash flow, which is an internal
performance measurement, may be different from definitions used
by other companies.