Rockwell Automation UK Regulatory
Announcement: Interim Results
MILWAUKEE--
Rockwell Automation Reports Second Quarter Earnings of 41 Cents Per Share;
Raises Full Year EPS Expectation to $1.55 to $1.60 Per Share
Rockwell Automation, Inc. , a leading global provider of industrial
automation power, control and information solutions, today reported fiscal 2004
second quarter net income of $78.3 million compared to fiscal 2003 net income of
$49.0 million. Diluted earnings per share for the second quarter were 41 cents,
up 58 percent compared to 26 cents in the second quarter of 2003.
Sales for the second quarter were $1,112.9 million, up 8 percent compared to
$1,029.4 million in the second quarter of 2003. Revenue growth excluding the
effect of currency translation was 4 percent.
Keith D. Nosbusch, president and chief executive officer, commented, "The second
quarter results clearly demonstrate the earnings power of this business and the
operating leverage produced by our focus on operational efficiencies. This
quarter's results reflect a favorable mix of Logix integrated architecture
products, control platform products, industrial control components, and
software."
Nosbusch added, "In the quarter, we saw further evidence of a sustained, gradual
recovery in the pace of activity in the industrial automation market. In
addition to increased maintenance and repair outlays by customers, we are
encouraged by indications that customers are advancing capital project
activities."
Nosbusch concluded, "Our revenue growth expectations for fiscal 2004 remain at 4
percent to 6 percent, excluding the effect of currency. The level of
profitability on second quarter revenues was exceptional, and we expect profit
margins to continue at about second quarter levels until the anticipated
increase in customer project spending materializes. Accordingly, we now expect
full-year diluted EPS from continuing operations in the range of $1.55 to $1.60,
excluding the tax benefit recorded in the first quarter."
Following is a discussion of second quarter results for each business.
Control Systems
Control Systems second quarter sales increased 8 percent to $897.0 million from
$830.4 million in the second quarter of 2003. Five percentage points of the
growth was due to the effect of currency translation. The increase in sales was
driven primarily by the Logix platform business which grew by approximately 25
percent. Segment operating earnings were $132.0 million, an increase of 41
percent compared to $93.4 million in 2003's second quarter. The increase in
segment operating earnings was due to favorable product mix, productivity
improvements, and higher volume. Control Systems return on sales was 14.7
percent in 2004's second quarter compared to 11.2 percent in 2003.
Power Systems
Power Systems second quarter sales increased 5 percent to $182.6 million from
$174.6 million in last year's second quarter. Second quarter segment operating
earnings were $13.8 million compared to $15.5 million in the second quarter of
2003. Segment operating earnings in 2004 include $3.7 million of charges related
to employee costs and asset impairments associated with a plant closure and the
discontinuation of product lines. Power Systems return on sales was 7.6 percent
versus 8.9 percent in the second quarter of 2003.
Rockwell FirstPoint Contact
Rockwell FirstPoint Contact sales in the second quarter were $33.3 million
compared to $24.4 million in 2003's second quarter. The increase in sales is
primarily the result of the shipment of two large projects in the quarter.
Segment operating earnings were $5.7 million for the quarter compared to
breakeven in the second quarter of 2003. The higher segment operating earnings
in 2004 are primarily due to higher volume. Results for the balance of the year
are expected to return to first quarter levels.
Other Items
Second quarter 2004 general corporate expenses were $22.5 million compared to
$13.9 million in the second quarter of 2003. The increase is in part the result
of charges due to higher estimated future costs for environmental remediation at
three legacy sites, a contribution to the company's charitable corporation, and
costs associated with corporate staff changes.
Interest expense in the second quarter of 2004 was $10.2 million compared to
$14.7 million in the second quarter of 2003. The decrease was primarily the
result of the retirement at maturity of the company's $150 million principal
amount of 6.80% notes in April 2003.
Cash Flow
In the second quarter of 2004, the company made a voluntary contribution of $50
million to its U.S. qualified pension plan trust. Including the effect of this
contribution, free cash flow for the first six months of 2004 was $243.1
million, compared to $159.0 million for the first six months of 2003. Free cash
flow for the second quarter was $115.0 million compared to $70.0 million in the
second quarter of 2003. The strong cash flow performance is the result of
continued focus on cash generation, in particular capital spending discipline.
In addition, through the first six months of 2004, the company received net
refunds from various taxing authorities of approximately $30 million. The
company defines free cash flow as cash provided by operating activities reduced
by capital expenditures.
On April 23, 2004 the company made an additional voluntary contribution of $75
million to the company's U.S. qualified pension plan trust.
Business Developments
Rockwell Automation continued to expand in its served markets through the
greater adoption of the Logix integrated architecture. A series of contract wins
across a breadth of industries and control disciplines demonstrates this
continued expansion. Key sales included a major food industry OEM, a major ship
building OEM, a major semiconductor company, and Stora Enso for equipment and
software as part of the company's No. 26 paper machine upgrade.
Logix integrated control and information architecture products also contributed
to the new Pepperidge Farm Bloomfield, Conn. plant being named Food
Engineering's Plant of the Year. In profiling the company in its most recent
issue, the magazine writes that the new plant, "leveraged advances in control
technology previously unavailable."
Rockwell Automation's presence in the process market continued to expand during
the quarter. Highlights included:
-- A $12 million contract with a North American major pipeline operator to
control the pipeline transport pumps that move one million barrels of
crude oil per day.
-- A $7.7 million contract with Syncrude Canada Ltd. to help increase
production at the company's Ft. McMurray site in Alberta.
A conference call to discuss Rockwell Automation's financial results will take
place at 10 A.M. Eastern Time on April 27. 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; the availability and effectiveness of our
information technology systems; competitive product and pricing pressures;
future terrorist attacks; epidemics; intellectual property infringement claims
by others and the ability to protect our intellectual property; 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(R) motors and drives, and Rockwell
Software(R) factory management software. The company also is a 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 20,000 people serving customers
in more than 80 countries.
ROCKWELL AUTOMATION, INC.
SALES AND EARNINGS INFORMATION
(in millions, except per share amounts)
Quarter Ended Six Months Ended
March 31, March 31,
------------------- -------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Sales
Control Systems $897.0 $830.4 $1,725.8 $1,617.5
Power Systems 182.6 174.6 344.1 345.4
FirstPoint Contact 33.3 24.4 58.7 50.1
--------- --------- --------- ---------
Total Sales $1,112.9 $1,029.4 $2,128.6 $2,013.0
========= ========= ========= =========
Segment Operating Earnings
(Loss)
Control Systems $132.0 $93.4 $232.5 $179.3
Power Systems 13.8 15.5 22.9 23.6
FirstPoint Contact 5.7 - 6.5 (0.4)
--------- --------- --------- ---------
Total Segment Operating
Earnings 151.5 108.9 261.9 202.5
Purchase Accounting
Amortization (6.9) (6.8) (13.7) (13.3)
General Corporate - Net (22.5) (13.9) (39.4) (26.3)
Loss on Disposition of a
Business - (8.4) - (8.4)
Interest Expense (10.2) (14.7) (20.7) (29.8)
Income Tax Provision
(see Note 1) (33.6) (16.1) (52.2) (34.0)
--------- --------- --------- ---------
Income from Continuing
Operations 78.3 49.0 135.9 90.7
Income from Discontinued
Operations (see Note 2) - - 4.6 -
--------- --------- --------- ---------
Net Income $78.3 $49.0 $140.5 $90.7
========= ========= ========= =========
Diluted Earnings Per Share:
Continuing Operations $0.41 $0.26 $0.71 $0.48
Discontinued Operations - - 0.02 -
--------- --------- --------- ---------
Net Income $0.41 $0.26 $0.73 $0.48
========= ========= ========= =========
Average Diluted Shares 192.1 190.4 192.2 189.9
========= ========= ========= =========
---
(1) Includes a net benefit of $4.3 million in the first quarter of
2004 related to additional state tax benefits associated with a
previously reported U.S. federal research and experimentation tax
credit settlement in 2003.
(2) Includes income of $7.6 million ($4.6 million after-tax, or 2
cents per share) from a final judgment in a legal proceeding
related to the Company's former operation of the Rocky Flats
facility of the Department of Energy.
ROCKWELL AUTOMATION, INC.
CONDENSED BALANCE SHEET
(in millions)
March 31, September 30,
2004 2003
------------- -------------
ASSETS
Cash $353.8 $226.4
Receivables 689.9 683.7
Inventories 557.8 541.6
Deferred income taxes 155.7 164.2
Other current assets 110.7 120.5
------------- -------------
Total current assets 1,867.9 1,736.4
Property 879.9 925.4
Goodwill 808.1 798.2
Other intangible assets 339.1 344.1
Other assets 173.6 182.2
------------- -------------
Total $4,068.6 $3,986.3
============= =============
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term debt $0.3 $8.7
Accounts payable 330.5 327.1
Compensation and benefits 173.4 170.6
Income taxes payable 49.0 15.0
Other current liabilities 302.0 298.6
------------- -------------
Total current liabilities 855.2 820.0
Long-term debt 766.0 764.0
Retirement benefits 635.7 656.7
Deferred income taxes 22.6 37.4
Other liabilities 123.0 121.4
Shareowners' equity 1,666.1 1,586.8
------------- -------------
Total $4,068.6 $3,986.3
============= =============
ROCKWELL AUTOMATION, INC.
CONDENSED CASH FLOW INFORMATION
(in millions)
Six Months Ended
March 31,
---------------------------
2004 2003
------------- -------------
CONTINUING OPERATIONS:
OPERATING ACTIVITIES:
Income from continuing operations $135.9 $90.7
Adjustments to arrive at cash provided by
operating activities:
Depreciation 82.1 86.0
Amortization of intangible assets 14.6 10.9
Pension trust contributions (50.0) -
Loss on disposition of a business - 8.4
Receivables 12.7 18.7
Inventories (10.4) 0.6
Accounts payable (2.6) (7.4)
Compensation and benefits 0.6 (1.5)
Income taxes 51.0 (22.5)
Changes in other assets and liabilities 46.3 16.8
------------- -------------
Cash provided by operating activities 280.2 200.7
------------- -------------
INVESTING ACTIVITIES:
Capital expenditures (37.1) (41.7)
Acquisitions of businesses, net of cash
acquired - (24.9)
Other investing activities 2.6 (6.9)
------------- -------------
Cash used for investing activities (34.5) (73.5)
------------- -------------
FINANCING ACTIVITIES:
Repayments of debt (8.4) (3.1)
Cash dividends (61.5) (61.3)
Purchases of treasury stock (99.9) (66.2)
Proceeds from the exercise of stock options 46.2 32.6
Other financing activities (0.9) (1.5)
------------- -------------
Cash used for financing activities (124.5) (99.5)
------------- -------------
Effect of exchange rate changes on cash (3.0) (21.4)
------------- -------------
Cash provided by continuing operations 118.2 6.3
Cash provided by discontinued operations 9.2 -
------------- -------------
Increase in cash and cash equivalents $127.4 $6.3
============= =============
FREE CASH FLOW:
Cash provided by operating activities $280.2 $200.7
Capital expenditures (37.1) (41.7)
------------- -------------
Free cash flow (see Note 1) $243.1 $159.0
============= =============
---
(1) The company's definition of free cash flow, which is an internal
performance measurement, may be different from definitions used by
other companies.
ROCKWELL AUTOMATION, INC.
OTHER SUPPLEMENTAL INFORMATION
(in millions)
Income Excluding Income Tax Benefits
------------------------------------
The company's press release contains information regarding income
excluding the income tax benefit in 2004 related to a previously
announced settlement of a U.S. federal research and experimentation
credit refund claim in 2003, which is a non-GAAP financial measure.
Management believes that income excluding such income tax benefits is
useful to investors since the combined benefit related to the
settlement is not indicative of the magnitude of tax benefits the
company may recognize in the future. Management uses income excluding
such income tax benefits to monitor the performance of the company.
Free Cash Flow
--------------
The company's press release contains information regarding free cash
flow, which is a non-GAAP financial measure. The company's definition
of free cash flow takes into consideration capital investment required
to maintain the operations of the company and execute its strategy.
Management believes that free cash flow provides useful information to
investors regarding the company's ability to generate cash from
business operations that is available for acquisitions and other
investments, debt service, dividends and share repurchases. Management
uses free cash flow as one measure to monitor and evaluate the
performance of the company.
The following table summarizes free cash flow by quarter for the
company:
Quarter Ended
--------------------------------------------------------
Dec. 31, March 31, June 30, Sept. 30, Dec. 31, March 31,
2002 2003 2003 2003 2003 2004
-------- --------- -------- --------- -------- ---------
Cash provided
by operating
activities $103.8 $96.9 $77.0 $158.4 $144.3 $135.9
Capital
expenditures (14.8) (26.9) (29.2) (37.9) (16.2) (20.9)
-------- --------- -------- --------- -------- ---------
Free cash flow $89.0 $70.0 $47.8 $120.5 $128.1 $115.0
======== ========= ======== ========= ======== =========
Effect of Currency Translation on Sales
---------------------------------------
The company's press release contains information regarding the effect
of currency translation on sales. Management believes this provides
useful information to investors since it reflects performance of the
company without the effect of changes in currency rates, which is
outside the control of management. Management uses sales excluding
translation to monitor and evaluate the company's regional
performance.
The following is a reconciliation for the Control Systems segment of
reported sales to sales excluding translation for the second quarter
of 2004:
Quarter Ended March 31, 2004
---------------------------------
Sales
Excluding
Currency Currency
Sales Translation Translation
--------- ----------- -----------
United States $499.8 $- $499.8
Canada 72.4 (9.0) 63.4
Europe, Middle East,
Africa 195.6 (26.8) 168.8
Asia-Pacific 93.2 (6.6) 86.6
Latin America 36.0 (2.1) 33.9
--------- ----------- ------------
Total $897.0 $(44.5) $852.5
========= =========== ============
The following is a reconciliation for the company of reported sales to
sales excluding translation for the second quarter of 2004:
Quarter Ended March 31, 2004
---------------------------------
Sales
Excluding
Currency Currency
Sales Translation Translation
--------- ----------- ------------
United States $689.6 $- $689.6
Canada 80.5 (10.0) 70.5
Europe, Middle East,
Africa 207.6 (28.3) 179.3
Asia-Pacific 96.5 (6.8) 89.7
Latin America 38.7 (2.1) 36.6
--------- ----------- ------------
Total $1,112.9 $(47.2) $1,065.7
========= =========== ============
CONTACT: Rockwell Automation
Matthew Gonring, 414-382-5575
