| Exhibit 99 1201 S. Second Street Milwaukee, WI 53204 USA Fax: 414.382.5560 | |
| News Release |
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| Contact | John Bernaden Media Relations Rockwell Automation 414-382-2555 | Kirk Larsen Investor Relations Rockwell Automation 414-382-2298 |
Rockwell Automation Reports Third Quarter Results |
| o | Diluted EPS from continuing operations of $1.07 per share |
| o | Revenue growth of 9 percent in the quarter |
| o | International sales growth of 13 percent, excluding currency |
| o | Segment operating earnings growth of 21 percent |
| o | Return on invested capital increased by nearly 3 points to 24 percent |
| o | Company raising full year revenue and EPS guidance |
MILWAUKEE (July 25, 2007) – Rockwell Automation, Inc. (NYSE: ROK) today reported fiscal 2007 third quarter net income of $164.2 million ($1.05 per share) compared to net income of $149.0 million ($0.83 per share) in the third quarter of 2006. Income from continuing operations for the third quarter of 2007 was $167.5 million ($1.07 per share) compared to $123.4 million ($0.69 per share) in the same quarter in 2006. Sales in the quarter were $1,280.6 million, up 9 percent compared to $1,171.7 million in 2006. The effect of currency translation added 2 percentage points to the growth rate. Sales in the U.S. increased 2 percent compared to the third quarter of 2006. International sales increased 13 percent, excluding the effect of currency translation, with continued strength in Europe and Latin America, and improved performance in Asia Pacific and Canada. From an end market perspective, sales growth in consumer industries outpaced the growth in resource-based industries. 1 Segment operating earnings were $262.3 million, up 21 percent compared to $216.1 million in 2006. Segment operating margin of 20.5 percent was 2.1 points higher than the third quarter of 2006. Third quarter 2007 free cash flow from continuing operations, excluding tax payments related to the Power Systems sale, was $183.5 million, versus $138.1 million in the third quarter of 2006. Return on invested capital expanded 2.6 percentage points to 23.7 percent. 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, “This quarter played out very much as we anticipated. Our entire organization executed extremely well this quarter and delivered the results we expect from our powerful business model. Revenue was in line with our expectations across all regions and earnings were better than anticipated. We were pleased to achieve simultaneous growth and productivity.” Outlook Commenting on the outlook, Nosbusch said, “Our current outlook anticipates a gradually expanding global industrial economy across most end markets through the remainder of this year and into fiscal 2008. We remain intensely focused on generating above-market organic revenue growth. We are diversifying our revenue base by driving more growth from consumer industries, emerging economies and the continued adoption of our Integrated Architecture™. I am confident we will close out a very successful 2007 and carry that momentum into 2008.” 2 The company is increasing its full year 2007 guidance to reflect both the performance in the third quarter and the effect of the recent ICS Triplex acquisition. The company is raising its revenue growth guidance to approximately 10 percent, which represents the high end of the prior guidance of 8 to 9 percent and an additional 1 percentage point due to the acquisition. The company now expects full year diluted earnings per share from continuing operations excluding special charges to be between $3.65 and $3.70 per share. Previous guidance was $3.55 to $3.65 per share. Following is a discussion of third quarter results for each of the segments. Architecture & Software The Architecture & Software segment contains all elements of the company’s integrated control and information architecture capable of connecting the customer’s entire manufacturing enterprise. Architecture & Software third quarter sales were $582.5 million, an increase of 11 percent compared to $525.4 million in the third quarter of 2006. Our Logix platform business grew by 15 percent in the quarter, led by strength in process applications and the CompactLogix product offering. Segment operating earnings were $164.7 million compared to $133.6 million in the third quarter of 2006. Profitability benefited from volume, productivity efforts, and price, partially offset by inflation. Architecture & Software segment operating margin was 28.3 percent in the third quarter of 2007 compared to 25.4 percent in 2006. 3 Control Products & Solutions The Control Products & Solutions segment combines a comprehensive portfolio of intelligent motor control and industrial control products, along with the customer support and application knowledge necessary to implement and maintain an automation solution on the plant floor. Control Products & Solutions third quarter sales were $698.1 million, an increase of 8 percent compared to sales of $646.3 million in the 2006 third quarter. Segment operating earnings were $97.6 million compared to $82.5 million in the third quarter of 2006. Profitability benefited from volume, productivity efforts, and price, partially offset by inflation and revenue mix. Control Products & Solutions segment operating margin was 14.0 percent in the third quarter of 2007 compared to 12.8 percent in 2006. General Corporate – Net Third quarter general corporate expenses were $17.6 million compared to $21.2 million in the 2006 third quarter. The decrease is primarily due to interest income on the remaining proceeds from the Power Systems sale. Income Taxes The continuing operations effective tax rate for the third quarter of 2007 was 26.2 percent compared to 30.7 percent in the third quarter of 2006. The tax rate in the third quarter of 2007 was lower due to global earnings mix and the resolution of certain state tax matters. The company still expects the full year effective tax rate for continuing operations to be 28 to 29 percent. 4 Discontinued Operations Income from discontinued operations in the third quarter of 2007 primarily relates to an after-tax charge of $2.6 million for legal matters related to a legacy business. Income from discontinued operations in the third quarter of 2006 represents the results of operations of our former Power Systems business. Share Repurchase During the quarter the company repurchased 6.2 million shares at a cost of $382.7 million. The company had $284.1 million available at June 30, 2007 under its existing $1.0 billion share repurchase authorization. Conference Call A conference call to discuss our financial results will take place at 8:30 A.M. Eastern Time on July 25. 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 “believe”, “estimate”, “expect”, “anticipate”, “will”, “intend” 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, many of which are beyond our control, including but not limited to: |
| o | economic and political changes in global markets where we compete, such as currency exchange rates, inflation rates, interest rates, recession, policies of foreign governments and other external factors we cannot control, and U.S. and local laws affecting our activities abroad and compliance therewith; |
5 |
| o | successful development of advanced technologies and demand for and market acceptance of new and existing products; |
| o | general global and regional economic, business or industry conditions, including levels of capital spending in industrial markets; |
| o | the availability, effectiveness and security of our information technology systems; |
| o | competitive product and pricing pressures; |
| o | disruption of our operations due to natural disasters, acts of war, strikes, terrorism, or other causes; |
| o | intellectual property infringement claims by others and the ability to protect our intellectual property; |
| o | our ability to successfully address claims by taxing authorities in the various jurisdictions where we do business; |
| o | our ability to attract and retain qualified personnel; |
| o | the uncertainties of litigation; |
| o | disruption of our North American distribution channel; |
| o | the availability and price of components and materials; |
| o | successful execution of our cost productivity and globalization initiatives; |
| o | our ability to execute strategic actions, including acquisitions and integration of acquired businesses; and |
| o | other risks and uncertainties, including but not limited to those detailed from time to time in our Securities and Exchange Commission filings. |
These forward-looking statements reflect our beliefs as of the date of filing this release. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Rockwell Automation, Inc. (NYSE: ROK), is a leading global provider of industrial automation power, control and information solutions that help manufacturers achieve a competitive advantage for their businesses. The company brings together leading global brands in industrial automation that include Allen-Bradley® controls and services and Rockwell Software® factory management software. Headquartered in Milwaukee, Wisc., the company employs about 19,000 people serving customers in more than 80 countries. 6 |
ROCKWELL AUTOMATION, INC. |
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | |||||||||
| Sales | ||||||||||||
| Architecture & Software | $ | 582.5 | $ | 525.4 | $ | 1,651.8 | $ | 1,532.6 | ||||
| Control Products & Solutions | 698.1 | 646.3 | 1,981.6 | 1,829.8 | ||||||||
| Total sales | $ | 1,280.6 | $ | 1,171.7 | $ | 3,633.4 | $ | 3,362.4 | ||||
| Segment Operating Earnings | ||||||||||||
| Architecture & Software | $ | 164.7 | $ | 133.6 | $ | 442.4 | $ | 407.2 | ||||
| Control Products & Solutions | 97.6 | 82.5 | 267.1 | 238.7 | ||||||||
| Total segment operating earnings | 262.3 | 216.1 | 709.5 | 645.9 | ||||||||
| Purchase accounting depreciation and amortization | (3.8 | ) | (3.0 | ) | (9.5 | ) | (8.8 | ) | ||||
| General corporate - net | (17.6 | ) | (21.2 | ) | (50.6 | ) | (67.5 | ) | ||||
| Special charges | – | – | (43.5 | ) | – | |||||||
| Interest expense | (13.8 | ) | (13.8 | ) | (48.5 | ) | (40.9 | ) | ||||
| Income from continuing operations before income taxes | 227.1 | 178.1 | 557.4 | 528.7 | ||||||||
| Income tax provision | (59.6 | ) | (54.7 | ) | (151.9 | ) | (156.2 | ) | ||||
| Income from continuing operations | 167.5 | 123.4 | 405.5 | 372.5 | ||||||||
| Income from discontinued operations | (3.3 | ) | 25.6 | 917.1 | 68.7 | |||||||
| Net income | $ | 164.2 | $ | 149.0 | $ | 1,322.6 | $ | 441.2 | ||||
| Diluted Earnings Per Share | ||||||||||||
| Continuing operations | $ | 1.07 | $ | 0.69 | $ | 2.47 | $ | 2.06 | ||||
| Discontinued operations | (0.02 | ) | 0.14 | 5.60 | 0.38 | |||||||
| Net Income | $ | 1.05 | $ | 0.83 | $ | 8.07 | $ | 2.44 | ||||
| Average Diluted Shares | 156.5 | 179.8 | 163.9 | 180.9 | ||||||||
Page 7 ROCKWELL AUTOMATION, INC. |
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | |||||||||
| Sales | $ | 1,280.6 | $ | 1,171.7 | $ | 3,633.4 | $ | 3,362.4 | ||||
| Cost of sales (1) | (729.5 | ) | (685.2 | ) | (2,110.2 | ) | (1,950.7 | ) | ||||
| Gross profit | 551.1 | 486.5 | 1,523.2 | 1,411.7 | ||||||||
| Selling, general and administrative expenses (1) | (319.7 | ) | (295.1 | ) | (938.4 | ) | (850.3 | ) | ||||
| Other income | 9.5 | 0.5 | 21.1 | 8.2 | ||||||||
| Interest expense | (13.8 | ) | (13.8 | ) | (48.5 | ) | (40.9 | ) | ||||
| Income from continuing operations before income taxes | 227.1 | 178.1 | 557.4 | 528.7 | ||||||||
| Income tax provision | (59.6 | ) | (54.7 | ) | (151.9 | ) | (156.2 | ) | ||||
| Income from continuing operations | 167.5 | 123.4 | 405.5 | 372.5 | ||||||||
| Income from discontinued operations | ||||||||||||
| Income from discontinued operating activities of Power Systems | – | 25.6 | 42.3 | 73.4 | ||||||||
| Gain on sale of Power Systems | (0.7 | ) | – | 866.5 | – | |||||||
| Other | (2.6 | ) | – | 8.3 | (4.7 | ) | ||||||
| Income from discontinued operations | (3.3 | ) | 25.6 | 917.1 | 68.7 | |||||||
| Net income | $ | 164.2 | $ | 149.0 | $ | 1,322.6 | $ | 441.2 | ||||
(1) Nine months ended June 30, 2007 includes special charges of $21.8 million in Cost of sales and $21.7 million in Selling, general, and administrative expenses. Page 8 ROCKWELL AUTOMATION, INC. |
| June 30, 2007 | September 30, 2006 | |||||
|---|---|---|---|---|---|---|
| Assets | ||||||
| Cash and cash equivalents | $ | 794.3 | $ | 408.1 | ||
| Receivables | 882.9 | 743.6 | ||||
| Inventories | 472.3 | 411.5 | ||||
| Property, net | 480.7 | 468.5 | ||||
| Goodwill and intangibles | 867.9 | 819.9 | ||||
| Other assets | 1,088.8 | 980.2 | ||||
| Assets available for sale | – | 903.6 | ||||
| Total | $ | 4,586.9 | $ | 4,735.4 | ||
| Liabilities and Shareowners' Equity | ||||||
| Short-term debt | $ | 396.2 | $ | 219.0 | ||
| Accounts payable | 386.3 | 395.7 | ||||
| Long-term debt | 409.0 | 748.2 | ||||
| Other liabilities | 1,430.0 | 1,201.3 | ||||
| Liabilities associated with assets available for sale | – | 253.0 | ||||
| Shareowners' equity | 1,965.4 | 1,918.2 | ||||
| Total | $ | 4,586.9 | $ | 4,735.4 | ||
Page 9 ROCKWELL AUTOMATION, INC. |
| Nine Months Ended June 30, | ||||||
|---|---|---|---|---|---|---|
| 2007 | 2006 | |||||
| Continuing Operations: | ||||||
| Operating Activities: | ||||||
| Income from continuing operations | $ | 405.5 | $ | 372.5 | ||
| Depreciation and amortization | 86.1 | 88.9 | ||||
| Retirement benefits expense | 44.7 | 66.6 | ||||
| Pension trust contributions | (26.0 | ) | (466.5 | ) | ||
| Receivables/inventories/payables | (133.1 | ) | (75.0 | ) | ||
| Other | (113.0 | ) | 78.4 | |||
| Cash provided by operating activities | 264.2 | 64.9 | ||||
| Investing Activities: | ||||||
| Capital expenditures | (82.1 | ) | (77.9 | ) | ||
| Acquisition of businesses | (44.6 | ) | (39.5 | ) | ||
| Proceeds from sale of property and business | 1,744.6 | 113.4 | ||||
| Other investing activities | (3.2 | ) | (6.4 | ) | ||
| Cash provided by (used for) investing activities | 1,614.7 | (10.4 | ) | |||
| Financing Activities: | ||||||
| Net (repayment) issuance of short-term debt | (170.0 | ) | 152.1 | |||
| Cash dividends | (140.8 | ) | (120.1 | ) | ||
| Purchases of treasury stock | (1,263.8 | ) | (424.4 | ) | ||
| Proceeds from the exercise of stock options | 51.8 | 56.7 | ||||
| Excess income tax benefit from the exercise of stock options | 21.4 | 45.9 | ||||
| Other financing activities | (0.4 | ) | (0.5 | ) | ||
| Cash used for financing activities | (1,501.8 | ) | (290.3 | ) | ||
| Effect of exchange rate changes on cash | 18.3 | (3.2 | ) | |||
| Cash provided by (used for) continuing operations | 395.4 | (239.0 | ) | |||
Discontinued Operations: | ||||||
| Cash (used for) provided by discontinued operations | (9.2 | ) | 115.4 | |||
| Increase (decrease) in cash and cash equivalents | $ | 386.2 | $ | (123.6 | ) | |
Page 10 ROCKWELL AUTOMATION, INC. Free Cash Flow Our definition of free cash flow, which is a non-GAAP financial measure, takes into consideration capital investments required to maintain the operations of our businesses and execute our strategy. In the first quarter of 2006 we adopted SFAS 123(R), which requires that we report the excess income tax benefit from the exercise of stock options as a financing cash flow rather than as an operating cash flow. We have added this benefit back to our calculation of free cash flow in order to generally classify cash flows arising from income taxes as operating cash flows. In our opinion, free cash flow provides useful information to investors regarding our ability to generate cash from business operations that is available for acquisitions and other investments, service of debt principal, dividends and share repurchases. We use free cash flow as one measure to monitor and evaluate performance. Our definition of free cash flow may be different from definitions used by other companies. Our definition of free cash flow excludes the operating cash flows and capital expenditures related to our discontinued operations. Operating, investing and financing cash flows of our discontinued operations are presented separately in our statement of cash flows. Cash flows from the operating activities of our discontinued operations are reported in our statement of cash flows net of their separately calculated income tax effects. U.S. Federal and state taxes paid in the third quarter of 2007 that are directly attributable to the gain on sale of the principal businesses of our former Power Systems operating segment have been excluded from free cash flow to present free cash flow that is representative of the performance of our continuing businesses. The following table summarizes free cash flow by quarter: |
| Quarter Ended | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec. 31, 2005 | March 31, 2006 | June 30, 2006 | Sept. 30, 2006 | Dec. 31, 2006 | March 31, 2007 | June 30, 2007 | |||||||||||||||
| Cash (used for) provided by continuing | |||||||||||||||||||||
| operating activities | (221.8 | ) | 127.6 | 159.1 | 248.4 | 98.2 | 108.2 | 57.8 | |||||||||||||
| Capital expenditures of continuing operations | (22.7 | ) | (26.6 | ) | (28.6 | ) | (44.4 | ) | (29.2 | ) | (24.0 | ) | (28.9 | ) | |||||||
| Tax payments related to the gain on divestiture | |||||||||||||||||||||
| of Power Systems | – | – | – | – | – | – | 142.2 | ||||||||||||||
| Excess income tax benefit from the exercise | |||||||||||||||||||||
| of stock options | 11.3 | 27.0 | 7.6 | 1.5 | 4.7 | 4.3 | 12.4 | ||||||||||||||
| Free cash flow | $ | (233.2 | ) | $ | 128.0 | $ | 138.1 | $ | 205.5 | $ | 73.7 | $ | 88.5 | $ | 183.5 | ||||||
Effect of Changes in Currency Exchange Rates on Sales Our press release contains information regarding the effect of changes in currency exchange rates on sales, which is a non-GAAP measure. Management believes this provides useful information to investors because it reflects regional performance from our activities without the effect of changes in currency rates. Management uses sales excluding the effect of changes in currency exchange rates as one measure to monitor and evaluate our regional performance. Sales are attributed to the geographic regions based on the country of destination. The following is a reconciliation of reported sales to sales excluding the effect of changes in currency exchange rates for the three and nine months ended June 30, 2007 compared to sales for the three and nine months ended June 30, 2006: |
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||||
| Sales | Effect of Changes in Currency | Sales Excluding Effect of Changes in Currency | Sales | Sales | Effect of Changes in Currency | Sales Excluding Effect of Changes in Currency | Sales | |||||||||||||||||
| United States | $ | 691.5 | $ | (0.8 | ) | $ | 690.7 | $ | 676.1 | $ | 1,977.1 | $ | (1.1 | ) | $ | 1,976.0 | $ | 1,946.1 | ||||||
| Canada | 87.9 | (1.9 | ) | 86.0 | 80.3 | 244.7 | (3.5 | ) | 241.2 | 244.4 | ||||||||||||||
| Europe, Middle East, Africa | 264.7 | (15.3 | ) | 249.4 | 217.2 | 762.0 | (48.9 | ) | 713.1 | 601.9 | ||||||||||||||
| Asia-Pacific | 151.3 | (7.9 | ) | 143.4 | 131.8 | 420.7 | (17.1 | ) | 403.6 | 381.7 | ||||||||||||||
| Latin America | 85.2 | (4.2 | ) | 81.0 | 66.3 | 228.9 | (4.9 | ) | 224.0 | 188.3 | ||||||||||||||
| Total | $ | 1,280.6 | $ | (30.1 | ) | $ | 1,250.5 | $ | 1,171.7 | $ | 3,633.4 | $ | (75.5 | ) | $ | 3,557.9 | $ | 3,362.4 | ||||||
The following table summarizes reported sales to sales excluding the effect of changes in currency exchange rates for our reporting segments for the three and nine months ended June 30, 2007 compared to sales for the three and nine months ended June 30, 2006: |
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||||
| Sales | Effect of Changes in Currency | Sales Excluding Effect of Changes in Currency | Sales | Sales | Effect of Changes in Currency | Sales Excluding Effect of Changes in Currency | Sales | |||||||||||||||||
| Architecture & Software | $ | 582.5 | $ | (15.0 | ) | $ | 567.5 | $ | 525.4 | $ | 1,651.8 | $ | (39.1 | ) | $ | 1,612.7 | $ | 1,532.6 | ||||||
| Control Products & Solutions | 698.1 | (15.1 | ) | 683.0 | 646.3 | 1,981.6 | (36.4 | ) | 1,945.2 | 1,829.8 | ||||||||||||||
| Total | $ | 1,280.6 | $ | (30.1 | ) | $ | 1,250.5 | $ | 1,171.7 | $ | 3,633.4 | $ | (75.5 | ) | $ | 3,557.9 | $ | 3,362.4 | ||||||
Page 11 ROCKWELL AUTOMATION, INC. Return On Invested Capital Our press release contains information regarding Return On Invested Capital (ROIC), which is a non-GAAP financial measure. Management believes that ROIC is useful to investors as a measure of performance and of the effectiveness of the use of capital in its operations. Management uses ROIC as one measure to monitor and evaluate the performance of the company. Our measure of ROIC is likely to differ from that used by other companies. We define ROIC as the percentage resulting from the following calculation: |
| (a) Income from continuing operations before accounting change and income from Power Systems discontinued operating activities, before non-operating gains or loses, special charges, interest expense, income tax provision, and purchase accounting depreciation and amortization, divided by; |
| (b) average invested capital for the year, calculated as a five quarter rolling average using the sum of short-term debt, long-term debt, shareowners’ equity, cumulative impairments of goodwill and intangibles required under SFAS No. 142, and accumulated amortization of goodwill and other intangible assets, minus cash and cash equivalents, multiplied by; |
| (c) one minus the effective tax rate for the period. |
ROIC is calculated as follows: |
| Twelve Months Ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2007 | 2006 | |||||||
| (a) Return | ||||||||
| Income from continuing operations before cumulative effect | ||||||||
| of accounting change | $ | 562.3 | $ | 483.2 | ||||
| Income from Power Systems discontinued operating activities | 68.8 | 87.6 | ||||||
| Interest expense | 65.0 | 54.0 | ||||||
| Income tax provision | 242.0 | 259.1 | ||||||
| Purchase accounting depreciation and amortization | 12.7 | 12.7 | ||||||
| Special charges | 43.5 | – | ||||||
| Gain on sale of investment | (19.9 | ) | – | |||||
| Return | 974.4 | 896.6 | ||||||
| (b) Average Invested Capital | ||||||||
| Short-term debt | 330.1 | 71.7 | ||||||
| Long-term debt | 612.1 | 747.6 | ||||||
| Shareowners' equity | 1,938.6 | 1,686.6 | ||||||
| Impairments of goodwill and intangibles | 64.8 | 108.0 | ||||||
| Accumulated amortization of goodwill and intangibles | 650.5 | 675.8 | ||||||
| Cash and cash equivalents | (621.7 | ) | (364.1 | ) | ||||
| Average invested capital | 2,974.4 | 2,925.6 | ||||||
| (c) Effective Tax Rate | ||||||||
| Income tax provision | 242.0 | 259.1 | ||||||
| ||||||||
| activities before income taxes and cumulative effect | ||||||||
| of accounting change | $ | 873.1 | $ | 829.9 | ||||
| Effective tax rate | 27.7% | 31.2% | ||||||
| (a) / (b) * (1-c) Return On Invested Capital | 23.7% | 21.1% | ||||||
Page 12 |