Business News

Rockwell Automation Reports Fourth Quarter 2009 Results

Monday 09. November 2009 - Revenue down 28 percent compared to the fourth quarter of fiscal 2008, up 6 percent sequentially

Diluted EPS of $0.20; $0.37 excluding restructuring charges
Company provides guidance for fiscal 2010 diluted EPS of $1.25 – $1.75
Rockwell Automation, Inc. (NYSE: ROK) today reported fiscal 2009 fourth quarter revenue of $1,074.4 million, down 28 percent compared to $1,484.3 million in the fourth quarter of fiscal 2008. Currency translation contributed 3 percentage points to the decline. Fiscal 2009 fourth quarter revenue was up 6 percent sequentially compared to the third quarter of this fiscal year. Fiscal 2009 fourth quarter net income was $28.9 million or $0.20 per share, compared to $125.6 million or $0.87 per share in the fourth quarter of fiscal 2008. Excluding restructuring charges from 2009 and special items from 2008, fiscal 2009 fourth quarter net income was $53.1 million or $0.37 per share, compared to $156.0 million or $1.08 per share in the fourth quarter of fiscal 2008.

Segment operating earnings were $79.6 million in the fourth quarter of fiscal 2009, down from $269.1 million in the same period of 2008. Earnings decreased primarily due to the significant revenue decline and the inclusion of restructuring charges in segment operating earnings in 2009, partially offset by cost reductions. Segment operating earnings, excluding restructuring charges of $33.1 million, were $112.7 million in the fourth quarter of fiscal 2009. Segment operating margin in the fourth quarter of fiscal 2009 was 7.4 percent compared to 18.1 percent in the fourth quarter of fiscal 2008. Excluding restructuring charges, segment operating margin in the fourth quarter of fiscal 2009 was 10.5 percent.

Full Fiscal Year 2009

Sales for the full fiscal year were $4,332.5 million, down 24 percent compared to $5,697.8 million in fiscal 2008. Foreign currency translation contributed 5 percentage points to the decline. Income from continuing operations was $217.9 million or $1.53 per share, compared to $3.90 per share in fiscal 2008. Segment operating earnings were $429.7 million, down 58 percent compared to $1,025.2 million in 2008. Full fiscal year 2009 free cash flow from continuing operations was $430.8 million. Return on invested capital was 10.7 percent.

Diluted EPS and net income, both excluding restructuring charges and special items; segment operating earnings and segment operating margin, both excluding restructuring charges; 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, “2009 was clearly a difficult year with significant year-over-year revenue declines for the full year and the fourth quarter. However, sequential revenue growth for the quarter supports our view that macroeconomic conditions and demand trends are stabilizing.

“I am pleased with our accomplishments during this challenging year. We took decisive actions throughout the year to right-size the cost structure to current business conditions, including cost actions in the fourth quarter that will create additional tailwinds for fiscal 2010. Excluding the charges associated with these actions, segment margin improved sequentially for the quarter, reflecting the benefit of our cost reduction efforts and the earnings leverage we expect as sales improve.

“We also quickly aligned inventory levels to lower demand, effectively managed receivables in a difficult credit environment, and appropriately constrained capital spending, enabling us to generate strong free cash flow of over $430 million for the year.

“These accomplishments, made possible by the continued commitment of our employees, have allowed us to navigate this economic storm while continuing to invest in our core technologies and our most attractive growth opportunities.”

Outlook

Commenting on the outlook for fiscal 2010, Nosbusch said, “Based on improving macroeconomic indicators and stabilization in our own demand trends, it appears we have reached the bottom of the cycle. In this uncertain economic environment, I cannot predict the shape of the recovery, but I do not expect a sharp upturn. Accordingly, we will continue our operating discipline, with a focus on cost control and cash management. Given the timing of the revenue declines in fiscal 2009, we expect year-over-year revenue to be lower in the first half of fiscal 2010 with growth turning positive in the second half of the year. Based on a revenue outlook of $4.1 to $4.4 billion, we are providing fiscal 2010 earnings per share guidance of $1.25 to $1.75.”

Nosbusch added, “I am encouraged by how we strengthened our competitive advantage during the downturn. We expect that this, along with our dedicated employees and partners, strong balance sheet and improved cost position, will enable us to outperform the eventual market recovery. We believe we are positioned to deliver a solid 2010 and to grow faster than the underlying markets with accelerating benefits in 2011 and beyond. Our ongoing commitment to innovation, technology differentiation, domain expertise and thought leadership will enable us to continue to meet our customers’ global productivity and sustainability needs.”

Following is a discussion of fourth quarter results for both segments.

Architecture & Software

Architecture & Software fiscal 2009 fourth quarter sales were $424.1 million, a decrease of 31 percent from $617.1 million in the fourth quarter of fiscal 2008. Currency translation contributed 2 percentage points to the decline. Fiscal 2009 fourth quarter sales were up 6 percent sequentially compared to $399.5 million in the third quarter of this fiscal year. Segment operating earnings were $36.9 million in the fourth quarter of fiscal 2009 compared to $141.6 million in the fourth quarter of fiscal 2008. Architecture & Software segment operating margin was 8.7 percent in the fourth quarter of fiscal 2009 compared to 22.9 percent in the same period of 2008. Excluding restructuring charges, segment operating earnings in the fourth quarter of fiscal 2009 was $58.4 million and segment operating margin was 13.8 percent.

Control Products & Solutions

Control Products & Solutions fiscal 2009 fourth quarter sales were $650.3 million, a decrease of 25 percent from $867.2 million in the fourth quarter of fiscal 2008. Currency translation contributed 3 percentage points to the decline. Fiscal 2009 fourth quarter sales were up 6 percent sequentially compared to $611.3 million in the third quarter of this fiscal year. Segment operating earnings were $42.7 million in the fourth quarter of fiscal 2009 compared to $127.5 million in the fourth quarter of fiscal 2008. Control Products & Solutions segment operating margin was 6.6 percent in the fourth quarter of fiscal 2009 compared to 14.7 percent in the same period of 2008. Excluding restructuring charges, segment operating earnings in the fourth quarter of fiscal 2009 was $54.3 million and segment operating margin was 8.3 percent.

General Corporate – Net

Fiscal 2009 fourth quarter general corporate net expense was $31.2 million, $6.7 million higher than the fourth quarter of fiscal 2008, primarily due to funding of the Company’s charitable corporation. General corporate net expense for the full year was $80.3 million compared to $77.2 million in 2008.

Income Taxes

The effective tax rate for the fourth quarter of fiscal 2009 was negative 0.3 percent, compared to 28.9 percent for the fourth quarter of fiscal 2008. The tax rate for the quarter primarily benefited from the resolution of various tax matters related to prior years. The effective tax rate for the full year was 20.4 percent compared to 28.6 percent in 2008. In 2010, the Company expects the full year tax rate to be in the range of 21 to 25 percent, subject to quarterly variability.