Business News
Rockwell Automation Reports 17 Percent Second Quarter Revenue Growth and Reaffirms EPS Guidance
Wednesday 30. April 2008 - -- Revenue growth of 17 percent -- Diluted EPS from continuing operations of $0.96; up 17 percent excluding special charges in fiscal 2007 -- Return on invested capital increased by 3.6 points to 26.0 percent -- Company reaffirms guidance for fiscal 2008 diluted EPS of $4.25 - $4.45
Rockwell Automation, Inc. (NYSE: ROK) today reported fiscal 2008 second quarter revenue of $1,406.6 million, up 17 percent compared to $1,206.5 million in 2007. Foreign currency translation contributed 6 percentage points and acquisitions contributed 4 percentage points to the growth rate. Fiscal 2008 second quarter income from continuing operations was $142.8 million ($0.96 per share) compared to $107.1 million ($0.65 per share) in 2007. Income from continuing operations in the second quarter of 2007 included special charges of $43.5 million ($27.7 million after tax, or $0.17 per share) related to various restructuring actions. Excluding special charges, earnings per share from continuing operations increased 17 percent. Segment operating earnings were $240.3 million, up 9 percent compared to $220.2 million in 2007. Second quarter 2008 free cash flow from continuing operations was $31.8 million. Return on invested capital expanded 3.6 percentage points to 26.0 percent.
Free cash flow, organic growth, return on invested capital and income from continuing operations excluding special charges 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, “We delivered solid top line results, with strong revenue growth in the United States, Asia and Latin America offsetting lower than expected organic growth in Europe. We continued to benefit from investments in technology leadership, expanded served markets and stronger global presence. EPS grew 17 percent despite operating margins somewhat lower than expected due to revenue mix and currency impacts. We remain intensely focused on sustaining above market revenue growth, diversifying our revenue base and driving productivity.”
Outlook
Commenting on the outlook, Nosbusch added, “Customer capital spending and project activity remain firm at this time. Looking forward, we expect continued strength in emerging economies, steady demand in the United States and improved performance in Europe. While we continue to acknowledge that there is significant uncertainty in the economic environment, particularly in the United States, we have not seen a fundamental change in customer demand for our products, services or solutions. We are optimistic regarding our growth prospects and ability to execute. Assuming business conditions in the industrial sector remain relatively stable, we are reaffirming EPS guidance for 2008 of $4.25 – 4.45.”
Following is a discussion of second quarter results for each of the segments.
Architecture & Software
Architecture & Software second quarter sales were $599.0 million, an increase of 11 percent compared to $540.3 million in the second quarter of 2007. Acquisitions added 1 percentage point and foreign currency translation added 6 percentage points to the growth rate. Segment operating earnings were $139.9 million compared to $130.4 million in the second quarter of 2007. Architecture & Software segment operating margin was 23.4 percent in the second quarter of 2008 compared to 24.1 percent in 2007.
Control Products & Solutions
Control Products & Solutions second quarter sales were $807.6 million, an increase of 21 percent compared to sales of $666.2 million in the second quarter of 2007. Acquisitions and foreign currency translation each added 6 percentage points to the growth rate. Segment operating earnings were $100.4 million compared to $89.8 million in the second quarter of 2007. Control Products & Solutions segment operating margin was 12.4 percent in the second quarter of 2008 compared to 13.5 percent in 2007.
General Corporate – Net
Second quarter general corporate net expense was $16.6 million compared to $14.0 million in the second quarter of 2007. General corporate net expense in the second quarter of 2007 was lower due to higher interest and dividend income, partially offset by environmental charges.
Income Taxes
The effective tax rate for the second quarter of 2008 was 28.5 percent compared to 25.3 percent in 2007. The tax rate in the second quarter of 2007 was reduced by nearly 2 percentage points due to the tax benefit associated with special charges, and was further reduced by the resolution of various prior year federal and state matters. For 2008, the Company expects the full year tax rate to be in a range of 28 to 29 percent, subject to quarterly variability.
Share Repurchase
During the quarter, the Company repurchased 1.7 million shares at a cost of $98.3 million. The Company had $832.1 million available at March 31, 2008 under its existing $1.0 billion share repurchase authorization.