10-QPeriod: Q3 FY2008

ROCKWELL AUTOMATION, INC Quarterly Report for Q3 Ended Jun 30, 2008

Filed July 29, 2008For Securities:ROK

Summary

Rockwell Automation, Inc. reported solid financial results for the nine months ended June 30, 2008, with significant sales growth driven by both organic performance and strategic acquisitions. The company saw a notable increase in revenue, particularly in emerging markets like Asia-Pacific and Latin America, reflecting its global expansion strategy. Income from continuing operations also showed improvement, indicating effective cost management and operational efficiency. The company continues to focus on technological advancement and domain expertise, especially in process automation and safety control, positioning itself for future growth. Financially, Rockwell Automation demonstrated a healthy cash flow from operations, though free cash flow saw a decrease compared to the prior year due to increased working capital needs and capital expenditures. The company managed its debt levels effectively and maintained strong credit ratings, providing financial flexibility for future investments and potential strategic acquisitions. Investments in new technologies and integration of recent acquisitions are key priorities, as is managing the impact of global economic conditions on developed markets.

Financial Highlights

30 data points
Beta

Revenue

$1.48B

41.1% Gross Margin

Net Income

$152.60M

10.3% Net Margin

EPS (Diluted)

$1.03

Cash & Equivalents

$805.90M

Free Cash Flow

$249.50M

Financial Statements
Beta
Revenue$1.48B
Cost of Revenue$869.40M
Gross Profit$605.60M
SG&A Expenses$377.60M
Operating Income$452.00M
Interest Expense$16.60M
Net Income$152.60M
EPS (Basic)$1.04
EPS (Diluted)$1.03
Shares Outstanding (Basic)146.30M
Shares Outstanding (Diluted)148.10M

Key Highlights

  • 1Total sales increased by 16% for the first nine months of fiscal 2008 compared to the same period in fiscal 2007, reaching $4.21 billion. Organic sales grew by 7%.
  • 2Income from continuing operations for the first nine months of fiscal 2008 increased by 11% to $452.0 million compared to the prior year.
  • 3The company completed several key acquisitions in fiscal 2008, including CEDES Safety & Automation AG, Incuity Software, Inc., and Pavilion Technologies, Inc., to expand its market share and technological capabilities.
  • 4Sales in emerging markets, particularly Asia-Pacific and Latin America, showed strong double-digit organic growth rates, indicating successful global expansion efforts.
  • 5Free cash flow for the first nine months of fiscal 2008 was $261.1 million, a decrease from $345.7 million in the prior year, attributed to increased working capital needs and higher capital expenditures.
  • 6The company's debt-to-total-capital ratio remained healthy at 39.5% as of June 30, 2008.
  • 7Income from continuing operations for the third quarter of fiscal 2008 decreased by 9% to $152.6 million compared to the prior year, impacted by increased investment spending, higher interest expenses, and a higher tax rate.

Frequently Asked Questions

Sales growth was driven by a combination of strong organic sales (up 7%), the positive impact of currency exchange rates (contributing 5%), and sales from recent acquisitions (contributing 4%). Emerging markets, especially Asia-Pacific and Latin America, showed robust growth, while developed markets like the U.S. and Europe experienced more sluggish growth due to macroeconomic conditions.

Income from continuing operations increased by 11% to $452.0 million. This improvement was driven by special charges taken in the prior year, strong productivity performance, higher sales volume, and pricing, partially offset by increased investment in growth and technology, higher purchase accounting depreciation and amortization, inflation, and a higher effective income tax rate.

The company's financial position remains strong, with a debt-to-total-capital ratio of 39.5% as of June 30, 2008. Cash flow from continuing operations was $187.8 million for the nine months ended June 30, 2008. Free cash flow was $261.1 million, a decrease from the prior year due to higher working capital needs and capital expenditures, but still indicating the company's ability to generate cash from its ongoing businesses.

Recent acquisitions, including CEDES, Incuity, and Pavilion, contributed to sales growth, particularly in the Architecture & Software segment. However, these acquisitions also led to increased purchase accounting depreciation and amortization, and negatively impacted segment operating margins in the short term due to integration costs and the amortization of acquired intangibles.