10-QPeriod: Q3 FY2003

ROCKWELL AUTOMATION, INC Quarterly Report for Q3 Ended Jun 30, 2003

Filed August 5, 2003For Securities:ROK

Summary

Rockwell Automation, Inc. reported a solid third quarter for fiscal year 2003, with sales increasing 3.8% to $1,033 million and net income rising significantly to $128 million, or $0.67 per diluted share, up from $90 million, or $0.47 per diluted share, in the prior year. This strong performance was bolstered by a substantial $69 million tax benefit related to a research and experimentation credit refund claim. The Control Systems segment showed particular strength, with sales up 5% driven by international growth and favorable currency translation, alongside improved operating earnings. The company's financial position appears stable, with a decrease in total assets and liabilities. Notably, short-term debt has been significantly reduced, and long-term debt remains manageable. Free cash flow for the first nine months of the year was $207 million, reflecting continued operational efficiency despite a notable voluntary pension contribution. Management anticipates a stable business run rate for the remainder of the fiscal year, projecting full-year diluted earnings per share of approximately $1.10, excluding the one-time tax benefit.

Key Highlights

  • 1Net income for the quarter was $128 million ($0.67 per diluted share), a substantial increase from $90 million ($0.47 per diluted share) in the prior year, boosted by a $69 million tax benefit from a research credit claim.
  • 2Total sales for the quarter increased by 3.8% to $1,033 million, driven primarily by growth in the Control Systems segment.
  • 3The Control Systems segment's sales grew 5% to $824 million, with international sales showing a strong 20% increase (7% excluding currency impact), while U.S. sales declined 5%.
  • 4Segment operating earnings for Control Systems improved to $103 million from $91 million, with a higher return on sales of 12.5% due to cost reduction efforts.
  • 5The company's free cash flow for the nine months ended June 30, 2003, was $207 million, down slightly from $224 million in the prior year, impacted by a significant voluntary pension contribution.
  • 6Short-term debt was reduced to $2 million from $162 million year-over-year, indicating improved liquidity management.
  • 7Management expects full-year diluted earnings per share of approximately $1.10, excluding the significant third-quarter tax benefit.

Frequently Asked Questions

The primary driver of the substantial increase in net income was a $69 million tax benefit recognized from the settlement of a U.S. federal research and experimentation credit refund claim for the years 1997 through 2001.

The Control Systems segment demonstrated strong performance with a 5% sales increase, largely due to international growth and currency translation effects. The Power Systems segment saw relatively stable sales and operating earnings. The FirstPoint Contact segment experienced a decrease in sales and operating earnings compared to the prior year.

Management anticipates the company's business will remain at the current run rate for the remainder of the fiscal year. They project full-year diluted earnings per share to be approximately $1.10, excluding the impact of the significant third-quarter tax benefit.

Rockwell Automation significantly reduced its short-term debt to $2 million from $162 million in the prior year. The company generated $207 million in free cash flow for the first nine months of the fiscal year, and its debt-to-total-capital ratio stood at 31.4% as of June 30, 2003.