FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2009
Commission file number 1-12383
Rockwell Automation, Inc.
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
|
|
25-1797617 |
|
|
|
(State or other jurisdiction
|
|
(I.R.S. Employer |
of incorporation or organization)
|
|
Identification No.) |
|
|
|
1201 South Second Street,
Milwaukee, Wisconsin
|
|
53204 |
|
|
|
(Address of principal executive offices)
|
|
(Zip Code) |
Registrants telephone number, including area code (414) 382-2000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
|
|
|
|
|
|
|
Large accelerated filer þ
|
|
Accelerated filer o
|
|
Non-accelerated filer o
|
|
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
141,828,126 shares of registrants Common Stock, $1.00 par value, were outstanding on March 31,
2009.
ROCKWELL AUTOMATION, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
ROCKWELL AUTOMATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
519.5 |
|
|
$ |
582.2 |
|
Receivables |
|
|
748.1 |
|
|
|
959.9 |
|
Inventories |
|
|
528.3 |
|
|
|
575.5 |
|
Deferred income taxes |
|
|
174.6 |
|
|
|
190.0 |
|
Other current assets |
|
|
167.3 |
|
|
|
129.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
2,137.8 |
|
|
|
2,436.6 |
|
|
|
|
|
|
|
|
|
|
Property, net |
|
|
532.7 |
|
|
|
553.8 |
|
Goodwill |
|
|
881.2 |
|
|
|
915.0 |
|
Other intangible assets, net |
|
|
227.2 |
|
|
|
250.8 |
|
Deferred income taxes |
|
|
116.1 |
|
|
|
120.1 |
|
Prepaid pension |
|
|
139.0 |
|
|
|
138.4 |
|
Other assets |
|
|
141.7 |
|
|
|
178.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
4,175.7 |
|
|
$ |
4,593.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREOWNERS EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Short-term debt |
|
$ |
75.1 |
|
|
$ |
100.1 |
|
Accounts payable |
|
|
299.0 |
|
|
|
437.3 |
|
Compensation and benefits |
|
|
126.7 |
|
|
|
210.0 |
|
Income taxes payable |
|
|
26.1 |
|
|
|
39.4 |
|
Other current liabilities |
|
|
472.9 |
|
|
|
516.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
999.8 |
|
|
|
1,303.1 |
|
Long-term debt |
|
|
904.7 |
|
|
|
904.4 |
|
Retirement benefits |
|
|
379.2 |
|
|
|
386.8 |
|
Other liabilities |
|
|
305.9 |
|
|
|
310.5 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingent liabilities (Note 13) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareowners equity: |
|
|
|
|
|
|
|
|
Common stock (shares issued: 216.4) |
|
|
216.4 |
|
|
|
216.4 |
|
Additional paid-in capital |
|
|
1,288.7 |
|
|
|
1,280.9 |
|
Retained earnings |
|
|
4,551.9 |
|
|
|
4,486.1 |
|
Accumulated other comprehensive loss |
|
|
(463.7 |
) |
|
|
(319.0 |
) |
Common stock in treasury, at cost (shares held: |
|
|
|
|
|
|
|
|
March 31, 2009, 74.6; September 30, 2008, 73.2) |
|
|
(4,007.2 |
) |
|
|
(3,975.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareowners equity |
|
|
1,586.1 |
|
|
|
1,688.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
4,175.7 |
|
|
$ |
4,593.6 |
|
|
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements.
2
ROCKWELL AUTOMATION, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and solutions |
|
$ |
949.8 |
|
|
$ |
1,274.4 |
|
|
$ |
2,019.4 |
|
|
$ |
2,481.6 |
|
Services |
|
|
108.3 |
|
|
|
132.2 |
|
|
|
227.9 |
|
|
|
256.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,058.1 |
|
|
|
1,406.6 |
|
|
|
2,247.3 |
|
|
|
2,738.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and solutions |
|
|
(613.5 |
) |
|
|
(744.9 |
) |
|
|
(1,248.9 |
) |
|
|
(1,416.7 |
) |
Services |
|
|
(81.0 |
) |
|
|
(90.4 |
) |
|
|
(164.4 |
) |
|
|
(175.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(694.5 |
) |
|
|
(835.3 |
) |
|
|
(1,413.3 |
) |
|
|
(1,591.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
363.6 |
|
|
|
571.3 |
|
|
|
834.0 |
|
|
|
1,146.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
(292.8 |
) |
|
|
(358.3 |
) |
|
|
(606.2 |
) |
|
|
(706.9 |
) |
Other (expense) income |
|
|
(0.1 |
) |
|
|
4.2 |
|
|
|
(2.6 |
) |
|
|
14.3 |
|
Interest expense |
|
|
(15.3 |
) |
|
|
(17.5 |
) |
|
|
(30.3 |
) |
|
|
(35.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
55.4 |
|
|
|
199.7 |
|
|
|
194.9 |
|
|
|
418.7 |
|
Income tax provision |
|
|
(14.8 |
) |
|
|
(56.9 |
) |
|
|
(38.7 |
) |
|
|
(119.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
40.6 |
|
|
|
142.8 |
|
|
|
156.2 |
|
|
|
299.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations |
|
|
|
|
|
|
|
|
|
|
2.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
40.6 |
|
|
$ |
142.8 |
|
|
$ |
159.0 |
|
|
$ |
299.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.29 |
|
|
$ |
0.97 |
|
|
$ |
1.10 |
|
|
$ |
2.03 |
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.29 |
|
|
$ |
0.97 |
|
|
$ |
1.12 |
|
|
$ |
2.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.29 |
|
|
$ |
0.96 |
|
|
$ |
1.10 |
|
|
$ |
2.00 |
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.29 |
|
|
$ |
0.96 |
|
|
$ |
1.12 |
|
|
$ |
2.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share |
|
$ |
0.29 |
|
|
$ |
0.29 |
|
|
$ |
0.58 |
|
|
$ |
0.58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average outstanding shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
141.5 |
|
|
|
146.9 |
|
|
|
141.5 |
|
|
|
147.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
142.1 |
|
|
|
148.7 |
|
|
|
142.1 |
|
|
|
149.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements.
3
ROCKWELL AUTOMATION, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Continuing Operations: |
|
|
|
|
|
|
|
|
Operating Activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
159.0 |
|
|
$ |
299.4 |
|
Income from discontinued operations |
|
|
2.8 |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
156.2 |
|
|
|
299.4 |
|
|
|
|
|
|
|
|
Adjustments to arrive at cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
48.1 |
|
|
|
46.3 |
|
Amortization of intangible assets |
|
|
16.3 |
|
|
|
19.3 |
|
Share-based compensation expense |
|
|
12.3 |
|
|
|
15.9 |
|
Retirement benefits expense |
|
|
23.4 |
|
|
|
22.3 |
|
Pension trust contributions |
|
|
(14.2 |
) |
|
|
(17.7 |
) |
Net gain on disposition of securities and property |
|
|
(0.2 |
) |
|
|
(6.1 |
) |
Income tax benefit from the exercise of stock options |
|
|
|
|
|
|
0.2 |
|
Excess income tax benefit from share-based compensation |
|
|
(0.9 |
) |
|
|
(3.5 |
) |
Changes in assets and liabilities, excluding effects of foreign currency adjustments: |
|
|
|
|
|
|
|
|
Receivables |
|
|
166.0 |
|
|
|
(12.2 |
) |
Inventories |
|
|
23.5 |
|
|
|
(75.1 |
) |
Accounts payable |
|
|
(112.0 |
) |
|
|
(34.4 |
) |
Compensation and benefits |
|
|
(73.6 |
) |
|
|
(33.5 |
) |
Income taxes |
|
|
(5.2 |
) |
|
|
(37.8 |
) |
Other assets and liabilities |
|
|
(21.0 |
) |
|
|
(23.0 |
) |
|
|
|
|
|
|
|
Cash Provided by Operating Activities |
|
|
218.7 |
|
|
|
160.1 |
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(45.7 |
) |
|
|
(59.8 |
) |
Acquisition of businesses, net of cash acquired |
|
|
(29.5 |
) |
|
|
(61.6 |
) |
Proceeds from sales of available for sale securities |
|
|
|
|
|
|
36.3 |
|
Proceeds from sale of property |
|
|
2.9 |
|
|
|
6.5 |
|
Other investing activities |
|
|
(4.1 |
) |
|
|
(2.9 |
) |
|
|
|
|
|
|
|
Cash Used for Investing Activities |
|
|
(76.4 |
) |
|
|
(81.5 |
) |
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
Net (repayments) issuance of short-term debt |
|
|
(25.0 |
) |
|
|
147.0 |
|
Issuance of long-term debt |
|
|
|
|
|
|
493.7 |
|
Repayments of long-term debt |
|
|
|
|
|
|
(351.3 |
) |
Cash dividends |
|
|
(82.2 |
) |
|
|
(85.9 |
) |
Purchases of treasury stock |
|
|
(53.5 |
) |
|
|
(201.8 |
) |
Proceeds from the exercise of stock options |
|
|
4.8 |
|
|
|
10.7 |
|
Excess income tax benefit from share-based compensation |
|
|
0.9 |
|
|
|
3.5 |
|
Other financing activities |
|
|
(2.9 |
) |
|
|
(0.2 |
) |
|
|
|
|
|
|
|
Cash (Used for) Provided by Financing Activities |
|
|
(157.9 |
) |
|
|
15.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
(46.8 |
) |
|
|
47.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (Used for) Provided by Continuing Operations |
|
|
(62.4 |
) |
|
|
142.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations: |
|
|
|
|
|
|
|
|
Cash Used for Discontinued Operating Activities |
|
|
(0.3 |
) |
|
|
(5.7 |
) |
|
|
|
|
|
|
|
Cash Used for Discontinued Operations |
|
|
(0.3 |
) |
|
|
(5.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) Increase in Cash and Cash Equivalents |
|
|
(62.7 |
) |
|
|
136.5 |
|
Cash and Cash Equivalents at Beginning of Period |
|
|
582.2 |
|
|
|
624.2 |
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Period |
|
$ |
519.5 |
|
|
$ |
760.7 |
|
|
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements.
4
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. |
|
Basis of Presentation and Accounting Policies |
|
|
|
In the opinion of management of Rockwell Automation, Inc. (the Company or Rockwell
Automation), the unaudited Condensed Consolidated Financial Statements contain all
adjustments, consisting solely of adjustments of a normal recurring nature, necessary to
present fairly the financial position, results of operations, and cash flows for the periods
presented. These statements should be read in conjunction with our Annual Report on Form 10-K
for the fiscal year ended September 30, 2008. The results of operations for the three- and
six-month periods ended March 31, 2009 are not necessarily indicative of the results for the
full year. All date references to years and quarters herein refer to our fiscal year and
fiscal quarter unless otherwise stated. |
|
|
|
Revenue |
|
|
|
Product and solution revenues consist of industrial automation power, control, information and
custom-engineered hardware and software products and systems. Service revenues include
multi-vendor customer technical support and repair, asset management and optimization
consulting and training. |
|
|
|
Cash and Cash Equivalents |
|
|
|
Cash and cash equivalents include time deposits and certificates of deposit with original
maturities of three months or less at the time of purchase. |
|
|
|
Receivables |
|
|
|
Receivables are stated net of allowances for doubtful accounts of $18.4 million at March 31,
2009 and $17.4 million at September 30, 2008. In addition, receivables are stated net of an
allowance for certain customer returns, rebates and incentives of $14.6 million at March 31,
2009 and $13.2 million at September 30, 2008. |
|
|
|
Income Taxes |
|
|
|
At the end of each interim period, we estimate a base effective tax rate that we expect for
the full fiscal year based on our most recent forecast of pretax income, permanent book and
tax differences and global tax planning strategies. We use this base rate to provide for
income taxes on a year-to-date basis, excluding the effect of significant unusual or
extraordinary items and items that are reported net of their related tax effects. We
recognize the tax effect of significant unusual or extraordinary items and items that are
reported net of their tax effects in the period in which they are realizable. See Note 14 for
further details regarding income taxes. |
|
|
|
We account for uncertain tax positions in accordance with Financial Accounting Standards Board
(FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). We
determine whether it is more likely than not that a tax position will be sustained upon
examination based on the technical merits of the position. For tax positions that meet the
more-likely-than-not recognition threshold, we determine the amount of benefit to recognize in
the financial statements. |
5
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. |
|
Basis of Presentation and Accounting Policies (Continued) |
|
|
|
Earnings Per Share |
|
|
|
We present basic and diluted earnings per share (EPS) amounts. Basic EPS is calculated by
dividing net income by the weighted average number of common shares outstanding during the
applicable period. Diluted EPS amounts are based upon the weighted average number of common
and common equivalent shares outstanding during the applicable period. The difference between
basic and diluted EPS is attributable to share-based compensation awards. We use the treasury
stock method to calculate the effect of outstanding share-based compensation awards, which
requires us to compute total employee proceeds as the sum of (a) the amount the employee must
pay upon exercise of the award, (b) the amount of unearned share-based compensation costs
attributed to future services and (c) the amount of tax benefits, if any, that would be
credited to additional paid-in capital assuming exercise of the award. Share-based
compensation awards for which the total employee proceeds exceed the average market price over
the applicable period have an antidilutive effect on EPS, and accordingly, we exclude them
from the calculation of diluted EPS. For the three and six months ended March 31, 2009,
share-based compensation awards of 9.2 million and 8.6 million shares, respectively, were
excluded from the diluted EPS calculation because they were antidilutive. For the three and
six months ended March 31, 2008, share-based compensation awards of 2.5 million and 2.4
million shares, respectively, were excluded from the diluted EPS calculation because they were
antidilutive. |
|
|
|
The following table reconciles basic weighted average outstanding shares to diluted weighted
average outstanding shares (in millions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Weighted average outstanding shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average outstanding shares |
|
|
141.5 |
|
|
|
146.9 |
|
|
|
141.5 |
|
|
|
147.8 |
|
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
0.5 |
|
|
|
1.7 |
|
|
|
0.5 |
|
|
|
2.0 |
|
Restricted stock |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average outstanding shares |
|
|
142.1 |
|
|
|
148.7 |
|
|
|
142.1 |
|
|
|
149.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recent Accounting Pronouncements
In April 2009, the FASB issued FASB Staff Position (FSP) No. FAS 107-1 and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1). FSP FAS 107-1 requires
disclosures about the fair value of financial instruments in interim reporting periods, which
had only been required to be disclosed annually in the past. FSP FAS 107-1 will become
effective for us in the third quarter of 2009. We do not believe FSP FAS 107-1 will have a
material effect on our financial statements; we will expand our relevant disclosures upon
adoption.
In December 2008, the FASB issued FSP No. FAS 132(R)-1, Employers Disclosures about
Postretirement Benefit Plan Assets (FSP FAS 132(R)-1). FSP FAS 132(R)-1 expands disclosures
about plan assets of a defined benefit pension or other postretirement plan. The expanded
disclosures include how investment allocation decisions are made, major categories of plan
assets, inputs and valuation techniques used to measure the fair value of plan assets, the
effect of fair value measurements using significant unobservable inputs on changes in plan
assets, and significant concentrations of risk within plan assets. FSP FAS 132(R)-1 will
become effective for us at the end of fiscal 2010. We do not believe FSP FAS 132(R)-1 will
have a material effect on our financial statements; we will expand our relevant disclosures
upon adoption.
6
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. |
|
Basis of Presentation and Accounting Policies (Continued) |
In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of Intangible
Assets (FSP FAS 142-3). FSP FAS 142-3 is intended to improve the consistency between the
useful life of a recognized intangible asset under Statement of Financial Accounting Standards
(SFAS) 142, Goodwill and Other Intangible Assets, and the period of expected cash flows used
to measure the fair value of the asset under SFAS 141 (Revised 2007), Business Combinations
(SFAS 141(R)), and other accounting principles generally accepted in the United States. FSP
FAS 142-3 will become effective for us in fiscal 2010. We do not believe FSP FAS 142-3 will
have a material effect on our financial statements and related disclosures.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133 (SFAS 161), which we adopted on
January 1, 2009. SFAS 161 amends and expands the disclosures required by SFAS 133 so that they
provide an enhanced understanding of how and why a company uses derivative instruments, how
derivative instruments and related hedged items are accounted for under SFAS 133 and its
related interpretations, and how derivative instruments affect an entitys financial position,
financial performance and cash flows; see Note 10 for the expanded disclosures presented in
accordance with the requirements of SFAS 161.
In March 2008, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 08-3, Accounting
by Lessees for Maintenance Deposits Under Lease Arrangements (EITF 08-3). EITF 08-3 requires
that all nonrefundable maintenance deposits be accounted for as a deposit, and expensed or
capitalized when underlying maintenance is performed. If it is determined that an amount on
deposit is not probable of being used to fund future maintenance, it is to be recognized as
expense at the time such determination is made. EITF 08-3 will become effective for us in
fiscal 2010. We do not believe EITF 08-3 will have a material effect on our financial
statements and related disclosures.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements-an amendment of ARB No. 51 (SFAS 160). SFAS 160 amends ARB 51 to
establish accounting and reporting standards for the noncontrolling (minority) interest in a
subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements and establishes a single method of
accounting for changes in a parents ownership interest in a subsidiary that does not result
in deconsolidation. SFAS 160 will become effective for us in fiscal 2010. We do not believe
SFAS 160 will have a material effect on our financial statements and related disclosures.
In June 2007, the FASB ratified EITF Issue No. 06-11, Accounting for Income Tax Benefits of
Dividends on Share-Based Payment Awards (EITF 06-11). EITF 06-11 specifies how companies
should recognize the income tax benefit received on dividends that are (a) paid to employees
holding equity-classified nonvested shares, equity-classified nonvested share units, or
equity-classified outstanding share options and (b) charged to retained earnings under SFAS
123(R), Share-Based Payment. We adopted EITF 06-11 effective October 1, 2008. EITF 06-11 did
not have a material effect on our financial statements or related disclosures.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (SFAS 159). SFAS 159 permits companies to choose to measure many
financial instruments and certain other items at fair value. We adopted SFAS 159 effective
October 1, 2008. In doing so, we did not elect to measure any items under the fair value
option allowed by SFAS 159 that were not already required to be measured at fair value. As
such, the implementation of this standard did not have any impact on our financial statements
and related disclosures.
7
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. |
|
Basis of Presentation and Accounting Policies (Continued) |
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157
defines fair value, establishes a framework for measuring fair value and expands disclosures
about fair value measurements. It also establishes a fair value hierarchy that prioritizes
information used in developing assumptions when pricing an asset or liability. We adopted SFAS
157 for financial assets and liabilities effective October 1, 2008. SFAS 157 will become
effective for our non-financial assets and liabilities in fiscal 2010. The adoption of SFAS
157 did not have a material effect on our financial statements for financial assets and
liabilities; see Note 10 for the expanded disclosures presented in accordance with the
requirements of SFAS 157. We do not believe the adoption of SFAS 157 for non-financial assets
and liabilities will have a material effect on our financial statements.
SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement
Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R) (SFAS 158), became effective
for us as of September 30, 2007. SFAS 158 requires us to recognize an asset or liability in
our consolidated balance sheet reflecting the funded status of our pension and other
postretirement benefit plans, with current-year changes in the funded status recognized in
shareowners equity. SFAS 158 did not change the existing criteria for measurement of
periodic benefit costs, plan assets or benefit obligations. Additionally, SFAS 158 will
require us to measure the funded status on the date of our annual audited Consolidated Balance
Sheet as of September 30, 2009. In doing so, we will record a reduction in retained earnings
of approximately $12.4 million related to the change in our measurement date.
2. |
|
Share-Based Compensation |
We recognized $7.7 million and $12.3 million in share-based compensation expense in income
from continuing operations before income taxes during the three- and six-months ended March
31, 2009, respectively. We recognized $9.1 million and $15.9 million in share-based
compensation expense in income from continuing operations before income taxes during the
three- and six- months ended March 31, 2008, respectively.
Our annual grant of share-based compensation takes place during the first quarter of each
fiscal year. The number of shares granted to all employees and non-employee directors and the
weighted average fair value per share during the periods presented was (in thousands except
per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
Wtd. Avg. |
|
|
|
|
|
|
Wtd. Avg. |
|
|
|
|
|
|
|
Share |
|
|
|
|
|
|
Share |
|
|
|
Grants |
|
|
Fair Value |
|
|
Grants |
|
|
Fair Value |
|
Stock options |
|
|
2,788 |
|
|
$ |
7.75 |
|
|
|
1,554 |
|
|
$ |
17.63 |
|
Performance shares |
|
|
192 |
|
|
|
31.82 |
|
|
|
121 |
|
|
|
70.32 |
|
Restricted stock and restricted stock units |
|
|
86 |
|
|
|
29.29 |
|
|
|
70 |
|
|
|
66.78 |
|
8
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In January 2009, we acquired the assets and assumed certain liabilities of Xian Hengsheng
Science & Technology Company Limited (Hengsheng). Hengsheng delivers automation solutions to
the electrical power and other heavy process industries in central and western China. In
March 2009, we acquired a majority of the assets and assumed certain liabilities of the
automation business of Rutter Hinz Inc. (Hinz). Hinz offers industrial control systems
engineering and related support, with domain expertise in industrial automation, process
control and power distribution, specifically for the oil and gas industry, as well as other
resource-based industries, in Canada. We recorded goodwill of $14.9 million, customer
relationships of $2.8 million and other intangible assets of $2.9 million resulting from the
preliminary purchase price allocations of Hengsheng and Hinz. We expect $11.3 million of the
goodwill to be deductible for tax purposes.
In November 2007, our Architecture & Software segment acquired Pavilion Technologies, Inc.
(Pavilion), a privately held company that engages in advanced process control, production
optimization and environmental compliance solutions for process and hybrid industries. In May
2008, our Architecture & Software segment acquired CEDES Safety & Automation AG (CEDES) and
Incuity Software, Inc. (Incuity). Swiss-based CEDES is a supplier of safety and measuring
light curtains, as well as other safety and non-safety optoelectronics, control units and
related accessories for industrial applications. Incuity is a supplier of Enterprise
Manufacturing Intelligence (EMI) software, which provides real-time intelligence for business
decision support to improve operations and reduce production waste by providing valuable
management insight into a companys operations.
We recorded intangible assets of $43.1 million and goodwill of $69.0 million resulting from
the final purchase price allocation of the Pavilion acquisition and from the preliminary
purchase price allocations of the CEDES and Incuity acquisitions, which are pending the
completion of certain matters. Intangible assets assigned include $34.0 million to technology
(15-year weighted average useful life), $6.6 million to customer relationships (9-year
weighted average useful life) and $2.5 million to other intangible assets (4-year weighted
average useful life). None of the goodwill recorded is expected to be deductible for tax
purposes.
We assigned the full amount of goodwill for Hengsheng and Hinz to our Control Products &
Solutions segment and the full amount of goodwill for Pavilion, CEDES and Incuity to our
Architecture & Software segment. The results of operations of the acquired businesses have
been included in our Condensed Consolidated Statement of Operations since the dates of
acquisition. Pro forma financial information and allocation of the purchase price are not
presented as the individual effects of these acquisitions are not material to our results of
operations and financial position.
4. |
|
Inventories |
|
|
|
Inventories consist of (in millions): |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Finished goods |
|
$ |
207.3 |
|
|
$ |
237.0 |
|
Work in process |
|
|
134.6 |
|
|
|
125.9 |
|
Raw materials, parts, and supplies |
|
|
186.4 |
|
|
|
212.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
$ |
528.3 |
|
|
$ |
575.5 |
|
|
|
|
|
|
|
|
We report inventories net of the allowance for excess and obsolete inventory of $45.0 million
at March 31, 2009 and $39.7 million at September 30, 2008.
9
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. |
|
Property |
|
|
|
Property consists of (in millions): |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
Land |
|
$ |
4.7 |
|
|
$ |
5.2 |
|
Buildings and improvements |
|
|
274.9 |
|
|
|
273.6 |
|
Machinery and equipment |
|
|
1,079.5 |
|
|
|
1,089.8 |
|
Internal use software |
|
|
313.0 |
|
|
|
300.0 |
|
Construction in progress |
|
|
35.9 |
|
|
|
46.8 |
|
|
|
|
|
|
|
|
Total |
|
|
1,708.0 |
|
|
|
1,715.4 |
|
Less accumulated depreciation |
|
|
(1,175.3 |
) |
|
|
(1,161.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, net |
|
$ |
532.7 |
|
|
$ |
553.8 |
|
|
|
|
|
|
|
|
6. |
|
Goodwill and Other Intangible Assets |
|
|
|
Changes in the carrying amount of goodwill for the six months ended March 31, 2009 are (in millions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Control |
|
|
|
|
|
|
Architecture & |
|
|
Products & |
|
|
|
|
|
|
Software |
|
|
Solutions |
|
|
Total |
|
Balance as of September 30, 2008 |
|
$ |
396.6 |
|
|
$ |
518.4 |
|
|
$ |
915.0 |
|
Acquisition of businesses |
|
|
|
|
|
|
14.9 |
|
|
|
14.9 |
|
Translation and other |
|
|
(18.5 |
) |
|
|
(30.2 |
) |
|
|
(48.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2009 |
|
$ |
378.1 |
|
|
$ |
503.1 |
|
|
$ |
881.2 |
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets consist of (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2009 |
|
|
|
Carrying |
|
|
Accumulated |
|
|
|
|
|
|
Amount |
|
|
Amortization |
|
|
Net |
|
Amortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Computer software products |
|
$ |
132.7 |
|
|
$ |
85.9 |
|
|
$ |
46.8 |
|
Customer relationships |
|
|
52.4 |
|
|
|
7.5 |
|
|
|
44.9 |
|
Technology |
|
|
80.7 |
|
|
|
28.2 |
|
|
|
52.5 |
|
Other |
|
|
38.4 |
|
|
|
20.6 |
|
|
|
17.8 |
|
|
|
|
|
|
|
|
|
|
|
Total amortized intangible assets |
|
|
304.2 |
|
|
|
142.2 |
|
|
|
162.0 |
|
Intangible assets not subject to amortization |
|
|
65.2 |
|
|
|
|
|
|
|
65.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
369.4 |
|
|
$ |
142.2 |
|
|
$ |
227.2 |
|
|
|
|
|
|
|
|
|
|
|
10
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. |
|
Goodwill and Other Intangible Assets (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008 |
|
|
|
Carrying |
|
|
Accumulated |
|
|
|
|
|
|
Amount |
|
|
Amortization |
|
|
Net |
|
Amortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Computer software products |
|
$ |
126.6 |
|
|
$ |
77.9 |
|
|
$ |
48.7 |
|
Customer relationships |
|
|
52.7 |
|
|
|
5.6 |
|
|
|
47.1 |
|
Technology |
|
|
84.9 |
|
|
|
25.4 |
|
|
|
59.5 |
|
Other |
|
|
50.8 |
|
|
|
26.0 |
|
|
|
24.8 |
|
|
|
|
|
|
|
|
|
|
|
Total amortized intangible assets |
|
|
315.0 |
|
|
|
134.9 |
|
|
|
180.1 |
|
Intangible assets not subject to amortization |
|
|
70.7 |
|
|
|
|
|
|
|
70.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
385.7 |
|
|
$ |
134.9 |
|
|
$ |
250.8 |
|
|
|
|
|
|
|
|
|
|
|
The Allen-Bradley® and ICS TriplexTM trademarks have been determined to have an
indefinite life, and therefore are not subject to amortization.
Estimated amortization expense is $34.7 million in 2009, $29.0 million in 2010, $25.9 million
in 2011, $22.4 million in 2012 and $15.6 million in 2013.
We performed the annual evaluation of our goodwill and indefinite life intangible assets for
impairment as required by SFAS No. 142, Goodwill and Other Intangible Assets, during the
second quarter of 2009 and concluded that no impairments exist.
7. |
|
Other Current Liabilities |
|
|
|
Other current liabilities consist of (in millions): |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Advance payments from customers and deferred revenue |
|
$ |
175.6 |
|
|
$ |
161.6 |
|
Customer returns, rebates and incentives |
|
|
106.7 |
|
|
|
124.6 |
|
Unrealized losses on foreign exchange contracts |
|
|
10.9 |
|
|
|
16.2 |
|
Product warranty obligations |
|
|
31.1 |
|
|
|
33.5 |
|
Taxes other than income taxes |
|
|
21.6 |
|
|
|
39.1 |
|
Accrued interest |
|
|
15.6 |
|
|
|
15.6 |
|
Restructuring and special items |
|
|
48.1 |
|
|
|
66.5 |
|
Other |
|
|
63.3 |
|
|
|
59.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
472.9 |
|
|
$ |
516.3 |
|
|
|
|
|
|
|
|
8. |
|
Product Warranty Obligations |
|
|
|
We record a liability for product warranty obligations at the time of sale to a customer based upon historical warranty experience. Most of our
products are covered under a warranty period that runs for twelve months from either the date of sale or from installation to an end-user or OEM
customer. We also record a liability for specific warranty matters when they become probable and reasonably estimable. Our product warranty
obligations are included in other current liabilities in the Condensed Consolidated Balance Sheet. |
11
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. |
|
Product Warranty Obligations (Continued) |
|
|
|
Changes in the product warranty obligations for the six months ended March
31, 2009 and 2008 are (in millions): |
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
33.5 |
|
|
$ |
34.9 |
|
Warranties recorded at time of sale |
|
|
16.6 |
|
|
|
21.3 |
|
Adjustments to pre-existing warranties |
|
|
(0.9 |
) |
|
|
(0.4 |
) |
Settlements of warranty claims |
|
|
(18.1 |
) |
|
|
(21.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
31.1 |
|
|
$ |
34.2 |
|
|
|
|
|
|
|
|
9. |
|
Long-term and Short-term Debt |
|
|
|
Long-term debt consists of (in millions): |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
5.65% notes, payable in 2017 |
|
$ |
250.0 |
|
|
$ |
250.0 |
|
6.70% debentures, payable in 2028 |
|
|
250.0 |
|
|
|
250.0 |
|
6.25% debentures, payable in 2037 |
|
|
250.0 |
|
|
|
250.0 |
|
5.20% debentures, payable in 2098 |
|
|
200.0 |
|
|
|
200.0 |
|
Unamortized discount and other |
|
|
(45.3 |
) |
|
|
(45.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
$ |
904.7 |
|
|
$ |
904.4 |
|
|
|
|
|
|
|
|
In December 2007, we issued an aggregate of $500 million principal amount of our 5.65% notes
due 2017 and 6.25% debentures due 2037. The debt offering yielded approximately $493.5
million of proceeds, which were used to repay at maturity our 6.15% notes due January 15, 2008
and for general corporate purposes.
We issued an aggregate of $800 million principal amount of our 6.15% notes, 6.70% debentures
and 5.20% debentures in January 1998. The debt offering yielded approximately $750.0 million
of proceeds. We issued the 5.20% debentures at a discount, and the 6.15% notes and 6.70%
debentures at par.
On March 16, 2009, we replaced our former five-year $600.0 million unsecured revolving credit
facility with two new unsecured revolving credit facilities totaling $535.0 million. The new
facilities have borrowing limits of $267.5 million each. One facility has a three-year term
and the other facility has a 364-day term. Our 364-day credit facility includes a term-out
option that allows us to borrow, on March 15, 2010, up to $267.5 million as a term loan for
one year. We have not drawn down under any of our credit facilities at March 31, 2009 or
September 30, 2008. Borrowings under these credit facilities bear interest based on short-term
money market rates in effect during the period the borrowings are outstanding. The terms of
these credit facilities contain covenants under which we would be in default if our
debt-to-total-capital ratio was to exceed 60 percent. We were in compliance with all covenants
under these credit facilities at March 31, 2009 and September 30, 2008. In addition to our
two $267.5 million credit facilities, short-term unsecured credit facilities of approximately
$159.5 million at March 31, 2009 were available to foreign subsidiaries. There were no
significant commitment fees or compensating balance requirements under any of our credit
facilities. Borrowings under our credit facilities during the three- and six-months ended
March 31, 2009 and 2008 were not significant.
Our short-term debt obligations consist primarily of commercial paper borrowings.
Commercial paper borrowings outstanding were $75.0 million at March 31, 2009 and $100.0
million at September 30, 2008. At March 31, 2009, the weighted average interest rate and
maturity period of the commercial paper outstanding were 0.41 percent and 18 days,
respectively. At September 30, 2008, the weighted average interest rate and maturity
period of the commercial paper outstanding were 2.25 percent and six days, respectively.
12
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
10. |
|
Derivative Instruments and Fair Value Measurement |
We use foreign currency forward exchange contracts to manage certain foreign currency risks.
We enter into these contracts to offset changes in the amount of future cash flows associated
with certain third-party and intercompany transactions denominated in foreign currencies
expected to occur within the next two years (cash flow hedges). Certain of our locations have
assets and liabilities denominated in currencies other than their functional currencies
resulting from intercompany loans and other transactions with third parties denominated in
foreign currencies. We also enter into foreign currency forward exchange contracts, which we
do not designate as hedging instruments, to offset the transaction gains or losses associated
with some of these assets and liabilities.
Our accounting method for derivative financial instruments is based upon accounting principles
generally accepted in the United States. We recognize all derivative financial instruments as
either assets or liabilities at fair value in the Condensed Consolidated Balance Sheet. We
report in other comprehensive loss the effective portion of the gain or loss on derivative
financial instruments that we designate and that qualify as cash flow hedges. We reclassify
these gains or losses into earnings in the same periods during which the hedged transactions
affect earnings. Gains and losses on derivative financial instruments for which we do not
elect hedge accounting are recognized in the Condensed Consolidated Statement of Operations in
each period, based upon the change in the fair value of the derivative financial instruments.
It is our policy to execute such instruments with global financial institutions that we
believe to be creditworthy and not to enter into derivative financial instruments for
speculative purposes. We diversify our forward exchange contracts among counterparties to
minimize exposure to any one of these entities. All forward exchange contracts are
denominated in currencies of major industrial countries. The notional values of our forward
exchange contracts outstanding at March 31, 2009 were $832.7 million, of which $392.8 million
were designated as cash flow hedges under SFAS 133. Contracts with the most significant
notional values relate to transactions denominated in the British pound sterling, United
States dollar, Euro and Canadian dollar.
We adopted SFAS 157 for our financial assets and liabilities effective October 1, 2008. SFAS
157 will become effective for our non-financial assets and liabilities in fiscal 2010. SFAS
157 defines fair value as the price that would be received for an asset or paid to transfer a
liability (exit price) in an orderly transaction between market participants in the principal
or most advantageous market for the asset or liability. SFAS 157 classifies the inputs used
to measure fair value into the following hierarchy:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices in active markets for similar assets or liabilities, quoted
prices for identical or similar assets or liabilities in markets that are not active, or
inputs other than quoted prices that are observable for the asset or liability.
Level 3: Unobservable inputs for the asset or liability.
We value our forward exchange contracts using a market approach, as described by SFAS 157. We
use an internally developed valuation model based on inputs including forward and spot prices
for currency and interest rate curves. We have not changed our valuation techniques during the
six months ended March 31, 2009.
Assets and liabilities measured at fair value on a recurring basis and their location in our
Condensed Consolidated Balance Sheet are (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value (Level 2) |
|
Derivatives Designated as Hedging |
|
|
|
March 31, |
|
|
September 30, |
|
Instruments under SFAS 133 |
|
Balance Sheet Location |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts |
|
Other current assets |
|
$ |
8.3 |
|
|
$ |
1.0 |
|
Forward exchange contracts |
|
Other assets |
|
|
0.2 |
|
|
|
0.2 |
|
Forward exchange contracts |
|
Other current liabilities |
|
|
(4.3 |
) |
|
|
(15.3 |
) |
Forward exchange contracts |
|
Other liabilities |
|
|
(0.1 |
) |
|
|
(6.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
$ |
4.1 |
|
|
$ |
(20.3 |
) |
|
|
|
|
|
|
|
|
|
13
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
10. |
|
Derivative Instruments and Fair Value Measurement (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value (Level 2) |
|
Derivatives Not Designated as Hedging |
|
|
|
March 31, |
|
|
September 30, |
|
Instruments under SFAS 133 |
|
Balance Sheet Location |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts |
|
Other current assets |
|
$ |
26.3 |
|
|
$ |
5.1 |
|
Forward exchange contracts |
|
Other assets |
|
|
16.5 |
|
|
|
4.9 |
|
Forward exchange contracts |
|
Other current liabilities |
|
|
(6.6 |
) |
|
|
(0.9 |
) |
Forward exchange contracts |
|
Other liabilities |
|
|
(12.3 |
) |
|
|
(2.2 |
) |
|
|
|
|
|
|
|
|
|
Total |
|
|
|
$ |
23.9 |
|
|
$ |
6.9 |
|
|
|
|
|
|
|
|
|
|
The pre-tax amount of gain (loss) recorded in accumulated other comprehensive loss related to
forward exchange contracts designated as cash flow hedges under SFAS 133 that would have been
recorded in the Condensed Consolidated Statement of Operations had they not been so designated
as cash flow hedges was (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts |
|
$ |
1.6 |
|
|
$ |
(27.0 |
) |
|
$ |
25.7 |
|
|
$ |
(32.1 |
) |
Approximately $2.6 million ($1.6 million net of tax) of the net unrealized gains on cash flow
hedges as of March 31, 2009 will be reclassified into earnings during the next 12 months. We
expect that these net unrealized gains will be offset when the hedged items are recognized in
earnings.
The pre-tax amount of gains (losses) reclassified from accumulated other comprehensive loss
into the Condensed Consolidated Statement of Operations related to derivative forward exchange
contracts designated as cash flow hedges under SFAS 133, which offset the related gains and
losses on the hedged items during the periods presented was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
2.3 |
|
|
$ |
|
|
|
$ |
3.7 |
|
|
$ |
|
|
Cost of sales |
|
|
(0.7 |
) |
|
|
(4.8 |
) |
|
|
0.2 |
|
|
|
(9.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1.6 |
|
|
$ |
(4.8 |
) |
|
$ |
3.9 |
|
|
$ |
(9.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The amount recognized in earnings as a result of ineffective cash flow hedges was not
significant.
The pre-tax amount of gain (loss) from forward exchange contracts not designated as hedging
instruments recognized in the Condensed Consolidated Statement of Operations during the
periods presented was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income |
|
$ |
(9.2 |
) |
|
$ |
5.2 |
|
|
$ |
17.4 |
|
|
$ |
8.7 |
|
Cost of sales |
|
|
(0.1 |
) |
|
|
|
|
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(9.3 |
) |
|
$ |
5.2 |
|
|
$ |
17.3 |
|
|
$ |
8.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
11. |
|
Retirement Benefits |
|
|
|
The components of net periodic benefit cost in income from continuing operations are (in millions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
13.7 |
|
|
$ |
14.4 |
|
|
$ |
27.6 |
|
|
$ |
28.9 |
|
Interest cost |
|
|
38.2 |
|
|
|
37.4 |
|
|
|
76.6 |
|
|
|
74.8 |
|
Expected return on plan assets |
|
|
(47.4 |
) |
|
|
(48.4 |
) |
|
|
(94.9 |
) |
|
|
(96.7 |
) |
Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost |
|
|
(1.2 |
) |
|
|
(1.2 |
) |
|
|
(2.3 |
) |
|
|
(2.3 |
) |
Net transition obligation |
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.2 |
|
Net actuarial loss |
|
|
4.1 |
|
|
|
4.8 |
|
|
|
8.3 |
|
|
|
9.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
7.6 |
|
|
$ |
7.2 |
|
|
$ |
15.5 |
|
|
$ |
14.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Postretirement Benefits |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
0.9 |
|
|
$ |
0.9 |
|
|
$ |
1.8 |
|
|
$ |
1.9 |
|
Interest cost |
|
|
3.3 |
|
|
|
3.5 |
|
|
|
6.6 |
|
|
|
6.9 |
|
Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost |
|
|
(2.5 |
) |
|
|
(3.7 |
) |
|
|
(5.2 |
) |
|
|
(7.3 |
) |
Net actuarial loss |
|
|
2.3 |
|
|
|
3.1 |
|
|
|
4.7 |
|
|
|
6.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
4.0 |
|
|
$ |
3.8 |
|
|
$ |
7.9 |
|
|
$ |
7.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12. |
|
Comprehensive Income |
|
|
|
Comprehensive (loss) income consists of (in millions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
40.6 |
|
|
$ |
142.8 |
|
|
$ |
159.0 |
|
|
$ |
299.4 |
|
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized pension and postretirement benefit
plan liabilities |
|
|
1.4 |
|
|
|
1.6 |
|
|
|
2.8 |
|
|
|
3.2 |
|
Currency translation adjustments |
|
|
(40.1 |
) |
|
|
96.7 |
|
|
|
(161.1 |
) |
|
|
108.2 |
|
Unrealized gains (losses) on cash flow hedges,
net of tax |
|
|
0.1 |
|
|
|
(13.7 |
) |
|
|
13.5 |
|
|
|
(14.0 |
) |
Realized gains on investment securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.6 |
) |
Other |
|
|
0.3 |
|
|
|
(0.6 |
) |
|
|
0.1 |
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income |
|
|
(38.3 |
) |
|
|
84.0 |
|
|
|
(144.7 |
) |
|
|
95.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
2.3 |
|
|
$ |
226.8 |
|
|
$ |
14.3 |
|
|
$ |
394.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
13. |
|
Commitments and Contingent Liabilities |
Various lawsuits, claims and proceedings have been or may be instituted or asserted against us
relating to the conduct of our business, including those pertaining to product liability,
environmental, safety and health, intellectual property, employment and contract matters.
Although the outcome of litigation cannot be predicted with certainty and some lawsuits,
claims or proceedings may be disposed of unfavorably to us, we believe the disposition of
matters that are pending or have been asserted will not have a material adverse effect on our
business or financial condition.
We (including our subsidiaries) have been named as a defendant in lawsuits alleging personal
injury as a result of exposure to asbestos that was used in certain components of our products
many years ago. Currently there are thousands of claimants in lawsuits that name us as
defendants, together with hundreds of other companies. In some cases, the claims involve
products from divested businesses, and we are indemnified for most of the costs. However, we
have agreed to defend and indemnify asbestos claims associated with products manufactured or
sold by our former Dodge mechanical and Reliance Electric motors and motor repair services
businesses prior to their divestiture by us, which occurred on January 31, 2007. We are also
responsible for half of the costs and liabilities associated with asbestos cases against the
former Rockwell International Corporations (RICs) divested measurement and flow control
business. But in all cases, for those claimants who do show that they worked with our products
or products of divested businesses for which we are responsible, we nevertheless believe we
have meritorious defenses, in substantial part due to the integrity of the products, the
encapsulated nature of any asbestos-containing components, and the lack of any impairing
medical condition on the part of many claimants. We defend those cases vigorously.
Historically, we have been dismissed from the vast majority of these claims with no payment to
claimants.
We have maintained insurance coverage that we believe covers indemnity and defense costs, over
and above self-insured retentions, for claims arising from our former Allen-Bradley
subsidiary. Following litigation against Nationwide Indemnity Company and Kemper Insurance,
the insurance carriers that provided liability insurance coverage to Allen-Bradley, we entered
into separate agreements on April 1, 2008 with both insurance carriers to further resolve
responsibility for ongoing and future coverage of Allen-Bradley asbestos claims. In exchange
for a lump sum payment, Kemper bought out its remaining liability and has been released from
further insurance obligations to Allen-Bradley. Nationwide administers the Kemper buyout
funds and has entered into a cost share agreement to pay the substantial majority of future
defense and indemnity costs for Allen-Bradley asbestos claims once the Kemper buy-out funds
are depleted. We believe that these arrangements will continue to provide coverage for
Allen-Bradley asbestos claims throughout the remaining life of the asbestos liability.
The uncertainties of asbestos claim litigation make it difficult to predict accurately the
ultimate outcome of asbestos claims. That uncertainty is increased by the possibility of
adverse rulings or new legislation affecting asbestos claim litigation or the settlement
process. Subject to these uncertainties and based on our experience defending asbestos
claims, we do not believe these lawsuits will have a material adverse effect on our financial
condition.
We have, from time to time, divested certain of our businesses. In connection with these
divestitures, certain lawsuits, claims and proceedings may be instituted or asserted against
us related to the period that we owned the businesses, either because we agreed to retain
certain liabilities related to these periods or because such liabilities fall upon us by
operation of law. In some instances, the divested business has assumed the liabilities;
however, it is possible that we might be responsible to satisfy those liabilities if the
divested business is unable to do so.
In connection with the divestiture of our former aerospace and defense businesses (the A&D
Business) to The Boeing Company (Boeing), we agreed to indemnify Boeing for certain matters
related to operations of the A&D Business for periods prior to the divestiture. In connection
with the spin-offs of our former automotive component systems business, semiconductor systems
business and Rockwell Collins avionics and communications business, the spun-off companies
have agreed to indemnify us for substantially all contingent liabilities related to the
respective businesses, including environmental and intellectual property matters.
16
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
13. |
|
Commitments and Contingent Liabilities (Continued) |
In connection with the sale of our Dodge mechanical and Reliance Electric motors and motor
repair services businesses, we agreed to indemnify the purchaser, Baldor Electric Company
(Baldor), for costs and damages related to certain legal, legacy environmental and asbestos
matters of these businesses, including certain damages pertaining to the Foreign Corrupt
Practices Act, arising before January 31, 2007, for which the maximum exposure would be capped
at the amount received for the sale.
In many countries we provide a limited intellectual property indemnity as part of our terms
and conditions of sale. We also at times provide limited intellectual property indemnities in
other contracts with third parties, such as contracts concerning the development and
manufacture of our products, the divestiture of businesses and the licensing of intellectual
property. Due to the number of agreements containing such provisions, we are unable to
estimate the maximum potential future payments.
The effective tax rate for the six months ended March 31, 2009 was 19.9 percent. During the
first six months of 2009, we recognized benefits totaling $11.1 million related to the
resolution of a contractual tax obligation and the retroactive extension of the U.S. federal
research tax credit.
The amount of unrecognized tax benefits was $122.3 million ($75.8 million net of $46.5 million
of indirect tax benefits) at March 31, 2009 and $125.8 million ($76.6 million net of $49.2
million of indirect tax benefits) at September 30, 2008. The amount of unrecognized tax
benefits that would reduce our effective tax rate if recognized was $80.6 million ($42.4
million net of $38.2 million of indirect tax benefits) at March 31, 2009 and $84.1 million
($43.2 million net of $40.9 million of indirect tax benefits) at September 30, 2008. The
balance of $41.7 million ($33.4 million net of $8.3 million of indirect tax benefits) at March
31, 2009 and September 30, 2008 was attributable to discontinued operations and would not
impact the effective tax rate for continuing operations if recognized.
We believe it is reasonably possible that the amount of unrecognized tax benefits could be
reduced by up to $41.5 million and the amount of indirect tax benefits could be increased by
up to $3.0 million during the next 12 months as a result of the resolution of worldwide tax
matters and the lapses of statutes of limitations. There was no material change of the amount
of unrecognized tax benefits in the first six months of 2009.
We recognize interest and penalties related to unrecognized tax benefits in tax expense.
Accrued interest and penalties were $25.4 million and $2.1 million at March 31, 2009 and $24.0
million and $2.0 million at September 30, 2008, respectively.
We conduct business globally and are routinely audited by the various tax jurisdictions in
which we operate. Our U.S. federal tax returns for 2007 and 2008, Wisconsin tax returns for
2003 through 2008, and tax returns for other major states and countries for 1998 through 2008
remain subject to examinations by taxing authorities.
17
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
15. |
|
Restructuring Charges and Special Items |
In the second quarter of 2009, we recorded restructuring charges of $20.2 million related to
actions designed to better align our cost structure with current economic conditions. The
majority of the charges relate to severance benefits recognized pursuant to SFAS No. 112,
Employers Accounting for Postemployment Benefits An Amendment of FASB Statements No. 5 and
43. In the Condensed Consolidated Statement of Operations for the three and six months ended
March 31, 2009, we recorded $4.1 million of the restructuring charge in cost of sales, and we
recorded $16.1 million in selling, general and administrative expenses. We expect total cash
expenditures associated with these actions to be approximately $19.4 million. We paid $0.9
million related to these actions during the three months ended March 31, 2009.
In the fourth quarter of 2008, we recorded special items of $50.7 million related to
restructuring actions designed to better align resources with growth opportunities and to
reduce costs as a result of current and anticipated market conditions. During 2007, we
recorded special items of $43.5 million related to various restructuring actions designed to
execute on our cost productivity initiatives and to advance our globalization strategy. We
paid $29.6 million related to the 2008 and 2007 restructuring actions during the six months
ended March 31, 2009 and $8.6 million during the six months ended March 31, 2008. Accruals
remaining under these restructuring actions after currency translation and other items are
$29.6 million at March 31, 2009.
16. |
|
Segment Information |
|
|
|
The following tables reflect the sales and operating results of our reportable segments (in millions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Architecture & Software |
|
$ |
393.5 |
|
|
$ |
599.0 |
|
|
$ |
899.9 |
|
|
$ |
1,176.9 |
|
Control Products & Solutions |
|
|
664.6 |
|
|
|
807.6 |
|
|
|
1,347.4 |
|
|
|
1,561.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,058.1 |
|
|
$ |
1,406.6 |
|
|
$ |
2,247.3 |
|
|
$ |
2,738.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Architecture & Software |
|
$ |
33.2 |
|
|
$ |
139.9 |
|
|
$ |
142.8 |
|
|
$ |
288.4 |
|
Control Products & Solutions |
|
|
53.0 |
|
|
|
100.4 |
|
|
|
121.0 |
|
|
|
209.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
86.2 |
|
|
|
240.3 |
|
|
|
263.8 |
|
|
|
497.8 |
|
Purchase accounting depreciation and amortization |
|
|
(4.8 |
) |
|
|
(6.5 |
) |
|
|
(9.8 |
) |
|
|
(12.8 |
) |
General corporate net |
|
|
(14.7 |
) |
|
|
(16.6 |
) |
|
|
(32.8 |
) |
|
|
(30.8 |
) |
Interest expense |
|
|
(15.3 |
) |
|
|
(17.5 |
) |
|
|
(30.3 |
) |
|
|
(35.5 |
) |
Special items |
|
|
4.0 |
|
|
|
|
|
|
|
4.0 |
|
|
|
|
|
Income tax provision |
|
|
(14.8 |
) |
|
|
(56.9 |
) |
|
|
(38.7 |
) |
|
|
(119.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
40.6 |
|
|
$ |
142.8 |
|
|
$ |
156.2 |
|
|
$ |
299.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
ROCKWELL AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
16. |
|
Segment Information (Continued) |
Among other considerations, we evaluate performance and allocate resources based upon segment
operating earnings before income taxes, interest expense, costs related to corporate offices,
certain nonrecurring corporate initiatives, gains and losses from the disposition of
businesses and incremental acquisition related expenses resulting from purchase accounting
adjustments such as intangible asset amortization, depreciation, inventory and purchased
research and development charges. Depending on the product, intersegment sales that are
within a single legal entity are recorded either at cost or cost plus a mark-up, which does
not necessarily represent a market price. Sales between legal entities are at an appropriate
transfer price. Costs incurred related to shared segment operating activities are allocated
to the segments using a methodology consistent with the expected benefit.
In the United States and Canada, we sell our products primarily through independent
distributors. We sell large systems and service offerings principally through a direct sales
force, though opportunities are sometimes identified through distributors. Outside the United
States and Canada, we sell products through a combination of direct sales and sales through
distributors. Sales to our largest distributor in the first three and six months of 2009 were
approximately 9 percent of our total sales, compared to approximately 10 percent in the first
three and six months of 2008.
17. |
|
Discontinued Operations |
In the six months ended March 31, 2009, we recorded a benefit of $4.5 million ($2.8 million
net of tax) related to a change in estimate for legal contingencies associated with RICs
operation of the Rocky Flats facility for the U.S. Department of Energy.
19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareowners of
Rockwell Automation, Inc.
Milwaukee, Wisconsin:
We have reviewed the accompanying condensed consolidated balance sheet of Rockwell Automation, Inc.
and subsidiaries (the Company) as of March 31, 2009, and the related condensed consolidated
statements of operations for the three-month and six-month periods ended March 31, 2009 and 2008,
and cash flows for the six-month periods ended March 31, 2009 and 2008. These condensed
consolidated interim financial statements are the responsibility of the Companys management.
We conducted our reviews in accordance with the standards of the Public Company Accounting
Oversight Board (United States). A review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in accordance with
the standards of the Public Company Accounting Oversight Board (United States), the objective of
which is the expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to such
condensed consolidated interim financial statements for them to be in conformity with accounting
principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheet of Rockwell Automation, Inc. and
subsidiaries as of September 30, 2008, and the related consolidated statements of operations, cash
flows, shareowners equity and comprehensive income for the year then ended (not presented herein);
and in our report dated November 17, 2008, we expressed an unqualified opinion on those
consolidated financial statements and included an explanatory paragraph relating to the adoption of
Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, on October 1, 2008 and Financial Accounting Standard No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans An Amendment of FASB Statements No. 87,
88, 106, and 132R, on September 30, 2007. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of September 30, 2008 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
May 4, 2009
20
ROCKWELL AUTOMATION, INC.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations
Forward-Looking Statement
This Quarterly Report contains statements (including certain projections and business trends)
that are forward-looking statements as defined in the Private Securities Litigation Reform Act of
1995. Words such as believe, estimate, project, plan, expect, anticipate, will,
intend and other similar expressions may identify forward-looking statements. 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:
|
|
|
economic changes in global markets where we compete, such as currency exchange rates,
inflation rates, recession, interest rates and the volatility and disruption of the capital
and credit markets for us, our customers and our suppliers; |
|
|
|
|
laws, regulations and governmental policies affecting our activities in the countries
where we do business; |
|
|
|
|
successful development of advanced technologies and demand for and market acceptance of
new and existing products; |
|
|
|
|
general global and regional economic, business or industry conditions, including levels
of capital spending in industrial markets; |
|
|
|
|
the availability, effectiveness and security of our information technology systems; |
|
|
|
|
competitive product and pricing pressures; |
|
|
|
|
disruption of our operations due to natural disasters, acts of war, strikes, terrorism
or other causes; |
|
|
|
|
intellectual property infringement claims by others and the ability to protect our
intellectual property; |
|
|
|
|
our ability to successfully address claims by taxing authorities in the various
jurisdictions where we do business; |
|
|
|
|
our ability to attract and retain qualified personnel; |
|
|
|
|
the uncertainties of litigation; |
|
|
|
|
disruption of our distribution channels; |
|
|
|
|
the availability and price of components and materials; |
|
|
|
|
the ability of our divested businesses to satisfy certain obligations that they have
assumed; |
|
|
|
|
successful execution of our cost productivity, restructuring and globalization
initiatives; |
|
|
|
|
our ability to execute strategic actions, including acquisitions and integration of
acquired businesses; and |
|
|
|
|
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 report. We
undertake no obligation to update or revise any forward-looking statement, whether as a result of
new information, future events or otherwise. See Item 1A, Risk Factors of our Annual Report on Form
10-K for the fiscal year ended September 30, 2008 for more information.
Non-GAAP Measures
The following discussion includes organic sales and free cash flow, which are non-GAAP
measures. See Supplemental Sales Information for a reconciliation of reported sales to organic
sales and a discussion of why we believe this non-GAAP measure is useful to investors. See
Financial Condition for a reconciliation of cash flows from operating activities to free cash flow
and a discussion of why we believe this non-GAAP measure is useful to investors.
21
ROCKWELL AUTOMATION, INC.
Overview
We are a leading global provider of industrial automation power, control and information
solutions that help manufacturers achieve a competitive advantage for their businesses. Overall
demand for our products and services is driven by:
|
|
|
investments in manufacturing capacity, including upgrades, modifications and expansions
of existing manufacturing facilities, and the creation of new manufacturing facilities; |
|
|
|
|
our customers needs for greater productivity, sustainable production (cleaner, safer
and more energy efficient), cost reduction, quality assurance and improvement and overall
global competitiveness; |
|
|
|
|
industry factors that include our customers new product introductions, trends in the
actual and forecasted demand for our customers products or services, and the regulatory
and competitive environments in which our customers operate; |
|
|
|
|
levels of global industrial production and capacity utilization; |
|
|
|
|
regional factors that include local political, social, regulatory and economic
circumstances; and |
|
|
|
|
the seasonal spending patterns of our customers due to their annual budgeting processes
and their working schedules. |
Long-term Strategy
Our long-term growth and performance strategy is characterized by the careful balance of
sustained organic growth and profitability. This strategy seeks to:
|
|
|
deploy human and financial resources in order to strengthen our technology leadership
and allow us to capture a larger share of our customers spending and continue to transform
our business model into one that is based less on tangible assets and more on intellectual
capital; |
|
|
|
|
enhance our market access by increasing our solutions and service capabilities,
advancing our global presence and delivering our products and solutions to a wider range of
industries; |
|
|
|
|
expand our served market by increasing our ability to meet our customers needs in the
areas of process control, safety and information software; |
|
|
|
|
look for potential acquisitions that serve as catalysts to organic growth and add
complementary technology, expand our served market, increase our domain expertise and/or
continue our geographic diversification; and |
|
|
|
|
foster a robust productivity culture. |
As we execute our long-term growth and performance strategy, we expect to provide value for
our shareowners through revenue and earnings growth, free cash flow generation and superior returns
over the long term.
Technological Advancement and Domain Expertise
We seek a technology leadership position in all facets of plant-wide control. We believe our
core technologies are the foundation for long-term sustainable growth at a multiple of global Gross
Domestic Product (GDP) growth.
Our customers face increasingly complex and volatile customer demand patterns, which are
driving the need for flexible manufacturing. Our investments in new technology and domain
expertise have expanded our served market beyond discrete control into process, safety and
information. Our value proposition is to help our customers gain the benefits of faster time to
market, lower total cost of ownership, better asset utilization and reduced business risks.
We believe that process automation is the largest growth opportunity for our company. Our
Logix architecture enables us to compete effectively with traditional Distributed Control Systems
(DCS) control solutions for many process applications. Our Logix architecture can integrate
information across the plant floor to the enterprise systems and the external supply chain. Our
Logix architecture continues to be an important differentiator and the anchor of our comprehensive
automation offerings.
22
ROCKWELL AUTOMATION, INC.
We have one of the most comprehensive safety offerings in the industry, as our portfolio
contains both machine and process safety products. We see significant potential in the growing
safety market. We successfully integrated safety into the Logix platform with our launch of
GuardLogix® safety controllers. Our safety products are designed to bring a dual benefit
to our customers: a safe environment for their employees and productivity in their operations.
Through internal investment and acquisitions, we have expanded our capability in the area of
plant-wide information. This opportunity involves optimizing processes and assets while
integrating between the plant floor, enterprise business system and the supply chain.
Our broad power and motor control offering is one of our core competencies. Many of our motor
control products are intelligent, configurable and manageable. These products enhance the
availability, efficiency and safe operation of our customers critical plant assets.
We augment our product portfolio with solutions and service offerings. We have grown our
repeatable solutions, which enables us to gain efficiency, drive innovation and improve the global
deployment of our solutions to our customers. The combination of our leading technologies, such as
integrated architecture, with the industry-specific domain expertise of our people enables us to
solve our customers manufacturing challenges.
Global Expansion and Enhanced Market Access
As the manufacturing world continues to globalize, we must be able to meet our customers
needs in emerging markets. We expect to continue to add delivery resources and expand our sales
force in emerging markets over the long term. We currently have more than half of our employees
outside the U.S., and achieved our goal of about 50 percent of our revenues outside of the U.S.
during 2008.
As we expand in markets with considerable growth potential and shift our global footprint, we
expect to continue to broaden the portfolio of products, services and solutions that we provide to
our customers in these regions. We have made significant investments to globalize our
manufacturing and customer facing resources in order to be closer to our customers throughout the
world. The emerging markets of Asia Pacific, including China and India, Latin America and eastern
Europe have the potential to exceed global GDP rates, due to higher levels of infrastructure
investment and the growing role of consumer spending in these markets. We believe that increased
demand for consumer products in these markets will drive manufacturing investment and provide us
with additional growth opportunities in the future.
Original Equipment Manufacturers (OEMs) represent another growth opportunity for us. The OEM
market is large and we have an opportunity to increase market share with OEMs, particularly outside
of North America. To remain competitive, OEMs need to continually improve their costs and machine
performance and reduce their time to market. Our modular and scaleable Logix offering combined
with motion and safety can assist OEMs in addressing these business needs.
Industry Views
We apply our knowledge of manufacturing applications to help customers solve their business
challenges. We serve customers in a wide range of industries, including consumer, resource-based
and transportation.
Our consumer industry customers are engaged in the food and beverage, home and personal care
and life sciences industries. These customers needs include global expansion, incremental capacity
from existing facilities, an increasingly flexible manufacturing environment and regulatory
compliance. In addition, these customers operate in an environment where product innovation and
time to market are critical factors.
We serve customers in resource-based industries, including oil and gas, mining, aggregates,
cement, metals, water/wastewater and forest products. Companies in these industries typically
invest in capacity and productivity when commodity prices are high and global demand for basic
materials is increasing.
In the transportation industry, factors such as geographic expansion, investment in new model
introductions and more flexible manufacturing technologies influence customers purchasing
decisions regarding our products, services and solutions.
23
ROCKWELL AUTOMATION, INC.
Demand for our products, services and solutions across all industries benefits from
outsourcing and sustainability needs of our customers. Customers increasingly desire to outsource
engineering services to achieve a more flexible cost base. Our manufacturing application knowledge
enables us to serve these customers globally. The sustainability needs of our customers include
energy efficiency and better environmental and safety results. Higher energy prices have
historically caused customers across all industries to invest in more energy-efficient
manufacturing processes and technologies, such as intelligent motor controls and energy-efficient
solutions and services. In addition, environmental and safety objectives often spur customers to
make investments to ensure compliance and implement sustainable business practices.
Productivity
Productivity and continuous improvement are important components of our culture. We have
programs in place that drive ongoing process improvement, functional streamlining, material cost
savings and manufacturing productivity. We are in the process of developing and implementing common
global process standards and an enterprise-wide information system. These are designed to result in
improved profitability that can be used to fund investment in growth and technology and to offset
inflation and dilution from acquisitions. Our ongoing productivity initiatives target both cost and
improved asset utilization. Charges for workforce reductions and facility rationalization may be
required in order to execute our productivity programs.
Acquisitions
In March 2009, we acquired a majority of the assets and assumed certain liabilities of the
automation business of Rutter Hinz Inc., which is expected to accelerate our business growth in
Canada, in the oil and gas and other resource-based industries.
In January 2009, we purchased the assets and assumed certain liabilities of XiAn Hengsheng
Science & Technology Limited. This acquisition also advances our globalization strategy and
strengthens our ability to deliver project management and engineering solutions primarily to our
customers in China.
During 2008 we acquired CEDES Safety & Automation AG (CEDES), Incuity Software, Inc. (Incuity)
and Pavilion Technologies, Inc. (Pavilion).
With our acquisition of CEDES, we have expanded our comprehensive machine safety component
portfolio for our customers worldwide. CEDES is a supplier of safety and measuring light curtains,
a leading product offering in the machine safety market.
Our acquisition of Incuity positions us for continued growth in the information solutions
market. Incuitys enterprise manufacturing intelligence offerings, which we have named
FactoryTalk® VantagePoint, enable us to accelerate specific aspects of our plant-wide information
strategy and extend the capabilities of our integrated architecture.
We believe that Pavilions expertise in advanced process control, production optimization and
environmental compliance solutions, paired with our Logix architecture, positions us to help our
customers create a more agile, efficient and productive environment. It also benefits, in
particular, our process growth initiative.
We believe the acquired companies will help us expand our market share and deliver value to our
customers.
24
ROCKWELL AUTOMATION, INC.
U.S. Industrial Economic Trends
In the second quarter of 2009, sales to U.S. customers accounted for 51 percent of our total
sales. The various indicators we use to gauge the direction and momentum of our U.S. served
markets include:
|
|
|
Industrial Equipment Spending, which is an economic statistic compiled by the Bureau of
Economic Analysis (BEA). This statistic provides insight into spending trends in the broad
U.S. industrial economy. This measure over the longer term has proven to demonstrate a
reasonable correlation with our domestic growth. |
|
|
|
Capacity Utilization (Total Industry), which is an indication of plant operating
activity published by the Federal Reserve. Historically there has been a meaningful
correlation between Capacity Utilization and the level of capital investment made by our
U.S. customers in their manufacturing base. |
|
|
|
The Manufacturing Purchasing Managers Index (PMI), published by the Institute for
Supply Management (ISM), which is an indication of the current and near-term state of
manufacturing activity in the U.S. According to the ISM, a PMI measure above 50 indicates
that the U.S. manufacturing economy is generally expanding while a measure below 50
indicates that it is generally contracting. |
|
|
|
The Industrial Production Index (Total Index), published by the Federal Reserve, which
measures the real output of manufacturing, mining, and electric and gas utilities. The
Industrial Production Index is expressed as a percentage of real output in a base year,
currently 2002. |
As
key economic indicators and projections weakened, we saw a significant deceleration in
customer demand. While there are some signs that economic and market
conditions may have stabilized, key economic indicators have been at historically low levels. The table below
depicts the trends in these indicators since September 2007. U.S. Industrial Equipment Spending
declined slightly in fiscal 2008 and declined sharply in the first two quarters of fiscal 2009.
Capacity Utilization steadily declined since September 2007, with a more significant decrease in
the most recent quarter, due to a pronounced reduction in overall demand for manufactured goods.
The PMI remained near 50 during the first three quarters of fiscal 2008. Since September 2008, the
PMI has been significantly below 50, which indicates future expected weakness in the U.S.
manufacturing sector. However, the increase in the PMI in March 2009 compared to December 2008
showed signs of possible stabilization. The Industrial Production Index gradually increased from
September 2007 through March of 2008, followed by significant declines over the last four quarters.
We continue to operate in a period of unprecedented volatility and uncertainty with respect to the
U.S. economy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment |
|
|
Capacity |
|
|
|
|
|
|
Industrial |
|
|
|
Spending |
|
|
Utilization |
|
|
|
|
|
|
Production |
|
|
|
(in billions) |
|
|
(percent) |
|
|
PMI |
|
|
Index |
|
Fiscal 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 2009 |
|
$ |
149.5 |
|
|
|
70.3 |
|
|
|
36.3 |
|
|
|
98.8 |
|
December 2008 |
|
|
175.1 |
|
|
|
74.3 |
|
|
|
32.9 |
|
|
|
104.5 |
|
Fiscal 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 2008 |
|
|
182.2 |
|
|
|
76.9 |
|
|
|
43.4 |
|
|
|
108.1 |
|
June 2008 |
|
|
183.2 |
|
|
|
78.9 |
|
|
|
49.5 |
|
|
|
110.7 |
|
March 2008 |
|
|
182.0 |
|
|
|
80.1 |
|
|
|
49.0 |
|
|
|
112.0 |
|
December 2007 |
|
|
179.9 |
|
|
|
80.4 |
|
|
|
49.1 |
|
|
|
112.0 |
|
Fiscal 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 2007 |
|
|
185.2 |
|
|
|
80.7 |
|
|
|
50.5 |
|
|
|
111.7 |
|
Note: Economic indicators are subject to revisions by the issuing organizations.
25
ROCKWELL AUTOMATION, INC.
Non-U.S. Regional Trends
In the second quarter of 2009, sales to non-U.S. customers accounted for 49 percent of our
total sales. Outside the U.S., demand for our products and services is principally driven by the
strength of the industrial economy in each region and by our customers ability and propensity to
invest in their manufacturing assets. These customers include both multinational companies with
expanding global presence and indigenous companies. Demand has historically been driven, in part,
by investments in infrastructure in developing economies, investments in basic materials production
capacity in response to higher end-product pricing and expanding consumer markets.
We use changes in global GDP as one indication of the growth opportunities in each region
where we do business. GDP slowed considerably in all regions during the second fiscal quarter of
2009, contributing to a significant decline in worldwide customer demand. We have observed the
most significant effects of the GDP deceleration in the developed economies of North America,
Western Europe and Asia Pacific, all of which are experiencing year-over-year GDP declines. Growth
in China, India, and Latin America continues to decelerate, but still exceeds the global average.
Markets remain uncertain and our revenue trends are mixed across each region. We are operating in
a very weak economic environment that will result in very challenging business conditions for the
remainder of 2009.
Revenue by Geographic Region
The table below presents our sales for the quarter ended March 31, 2009 by geographic region
and the change in sales from the quarter ended March 31, 2008 (in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
Organic Sales |
|
|
|
Three |
|
|
Change vs. Three |
|
|
vs. Three |
|
|
|
Months Ended |
|
|
Months Ended |
|
|
Months Ended |
|
|
|
Mar. 31, 2009(1) |
|
|
Mar. 31, 2008 |
|
|
Mar. 31, 2008(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
538.3 |
|
|
|
(25 |
%) |
|
|
(24 |
%) |
Canada |
|
|
62.2 |
|
|
|
(36 |
%) |
|
|
(21 |
%) |
Europe, Middle East and Africa |
|
|
244.4 |
|
|
|
(28 |
%) |
|
|
(16 |
%) |
Asia-Pacific |
|
|
133.3 |
|
|
|
(19 |
%) |
|
|
(9 |
%) |
Latin America |
|
|
79.9 |
|
|
|
(11 |
%) |
|
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales |
|
$ |
1,058.1 |
|
|
|
(25 |
%) |
|
|
(18 |
%) |
|
|
|
|
|
|
|
|
|
|
The table below presents our sales for the six months ended March 31, 2009 by geographic
region and the change in sales from the six months ended March 31, 2008 (in millions, except
percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
Organic Sales |
|
|
|
Six |
|
|
Change vs. Six |
|
|
vs. Six |
|
|
|
Months Ended |
|
|
Months Ended |
|
|
Months Ended |
|
|
|
Mar. 31, 2009(1) |
|
|
Mar. 31, 2008 |
|
|
Mar. 31, 2008(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
1,179.5 |
|
|
|
(15 |
%) |
|
|
(14 |
%) |
Canada |
|
|
128.3 |
|
|
|
(33 |
%) |
|
|
(17 |
%) |
Europe, Middle East and Africa |
|
|
493.2 |
|
|
|
(23 |
%) |
|
|
(13 |
%) |
Asia-Pacific |
|
|
275.6 |
|
|
|
(16 |
%) |
|
|
(5 |
%) |
Latin America |
|
|
170.7 |
|
|
|
(9 |
%) |
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales |
|
$ |
2,247.3 |
|
|
|
(18 |
%) |
|
|
(11 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We attribute sales to the geographic regions based upon country of destination. |
|
(2) |
|
Organic sales is a non-GAAP measure. See Supplemental Information for
information on this non-GAAP measure. |
26
ROCKWELL AUTOMATION, INC.
Summary of Results of Operations
Our 2009 second quarter results reflect the severity of the global economic recession. Market
conditions quickly deteriorated across most industries and all regions. As a result of the sharp
revenue decline during the quarter, we continued to aggressively adjust our cost structure. During
the second quarter of 2009, we made significant progress in our cost
reduction actions and we recorded
pre-tax restructuring charges of $20.2 million, which included headcount reductions. We also
instituted unpaid time off to further reduce payroll costs and suspended the 401(k) match for U.S.
employees.
We
generated strong free cash flow during the quarter, primarily due to
reduced working capital. In particular, inventory was appropriately managed down, consistent
with declining sales levels. We also acquired two engineering firms based in China and Canada in
the second quarter of 2009 that enhance our global domain expertise and demonstrate our commitment
to our long-term diversification strategy. We believe our balance
sheet is an important strength, particularly in these uncertain
market conditions.
The following tables reflect the sales and operating results for the three and six months
ended March 31, 2009 and 2008 (in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Architecture & Software |
|
$ |
393.5 |
|
|
$ |
599.0 |
|
|
$ |
899.9 |
|
|
$ |
1,176.9 |
|
Control Products & Solutions |
|
|
664.6 |
|
|
|
807.6 |
|
|
|
1,347.4 |
|
|
|
1,561.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,058.1 |
|
|
$ |
1,406.6 |
|
|
$ |
2,247.3 |
|
|
$ |
2,738.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Architecture & Software |
|
$ |
33.2 |
|
|
$ |
139.9 |
|
|
$ |
142.8 |
|
|
$ |
288.4 |
|
Control Products & Solutions |
|
|
53.0 |
|
|
|
100.4 |
|
|
|
121.0 |
|
|
|
209.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase accounting depreciation and amortization |
|
|
(4.8 |
) |
|
|
(6.5 |
) |
|
|
(9.8 |
) |
|
|
(12.8 |
) |
General corporate net |
|
|
(14.7 |
) |
|
|
(16.6 |
) |
|
|
(32.8 |
) |
|
|
(30.8 |
) |
Interest expense |
|
|
(15.3 |
) |
|
|
(17.5 |
) |
|
|
(30.3 |
) |
|
|
(35.5 |
) |
Special items |
|
|
4.0 |
|
|
|
|
|
|
|
4.0 |
|
|
|
|
|
Income tax provision |
|
|
(14.8 |
) |
|
|
(56.9 |
) |
|
|
(38.7 |
) |
|
|
(119.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
40.6 |
|
|
|
142.8 |
|
|
|
156.2 |
|
|
|
299.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
2.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
40.6 |
|
|
$ |
142.8 |
|
|
$ |
159.0 |
|
|
$ |
299.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.29 |
|
|
$ |
0.96 |
|
|
$ |
1.10 |
|
|
$ |
2.00 |
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.29 |
|
|
$ |
0.96 |
|
|
$ |
1.12 |
|
|
$ |
2.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average outstanding shares |
|
|
142.1 |
|
|
|
148.7 |
|
|
|
142.1 |
|
|
|
149.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Note 16 in the Condensed Consolidated Financial Statements for the definition of segment
operating earnings.
27
ROCKWELL AUTOMATION, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Second Quarter Compared to 2008 Second Quarter |
|
|
|
|
|
|
|
|
|
(in millions, except per share amounts) |
|
2009 |
|
|
2008 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
1,058.1 |
|
|
$ |
1,406.6 |
|
|
$ |
(348.5 |
) |
Income from continuing operations |
|
|
40.6 |
|
|
|
142.8 |
|
|
|
(102.2 |
) |
Diluted earnings per share from continuing operations |
|
|
0.29 |
|
|
|
0.96 |
|
|
|
(0.67 |
) |
Sales
Sales decreased 25 percent in the second quarter of 2009 compared to the second quarter of
2008. The effects of currency translation contributed 7 percentage points to the decrease. We
experienced a significant decline in customer demand during the quarter due to weak economic and credit market conditions in all regions and most industries. Sales to customers in
the United States declined 25 percent compared to the second quarter of 2008. The impact of current
global economic conditions was also felt in Canada, with an organic sales decline of 21 percent as
compared to the second quarter of 2008, resulting from continued weakness in the eastern part of
the country. Europe, Middle East and Africa (EMEA) organic sales declined 16 percent. Organic sales in
Asia-Pacific declined by 9 percent compared to the second quarter of 2008. Organic sales in China
grew modestly, which was more than offset by declines in the developed countries of the
Asia-Pacific region that depend more heavily on exports. We achieved organic growth in Latin
America of 12 percent as compared to the second quarter of 2008,
as the region continued to benefit primarily from demand in resource-based industries.
In the second quarter of 2009, we experienced growth in our process initiative, demonstrating
progress in our revenue base diversification strategy. These increases were more than offset by
sales declines in the transportation, metals and, to a lesser extent, consumer product industries.
Sales to customers in the resources-based industries declined at a
rate lower than our average
rate of decline.
Purchase Accounting Depreciation and Amortization
Purchase accounting depreciation and amortization was $4.8 million in the second quarter of
2009 compared to $6.5 million in the same period in the prior year. The decrease was primarily due
to completed amortization of certain intangible assets as well as currency translation.
General Corporate-Net
General corporate expenses were $14.7 million in the second quarter of 2009 compared to $16.6
million in the second quarter of 2008. The decrease was primarily due to lower compensation
expense.
Interest Expense
Interest expense was $15.3 million in the second quarter of 2009 compared to $17.5 million in
the second quarter of 2008. The decrease was due to lower interest rates on outstanding debt.
Special items
Special items of $4.0 million in the second quarter of 2009 include the reversal of
restructuring accruals established in prior years.
Income Taxes
The effective tax rate for the second quarter of 2009 was 26.7 percent compared to 28.5
percent in the second quarter of 2008. The effective tax rate was lower than the U.S. statutory
tax rate of 35 percent because we benefited from lower non-U.S. tax rates and our use of foreign
tax credits. The 2009 rate was lower than 2008 as we benefited from a lower proportionate share of
income in higher tax rate jurisdictions as compared to 2008.
28
ROCKWELL AUTOMATION, INC.
2009 Second Quarter Compared to 2008 Second Quarter (Continued)
Income from Continuing Operations
Income from continuing operations decreased 72 percent in the second quarter of 2009 to $40.6
million, compared to the second quarter of 2008. The decrease is primarily due to lower volume,
but is also due to restructuring charges and unfavorable mix, all partially offset by cost reductions and a lower
effective tax rate.
Architecture & Software
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except percentages) |
|
2009 |
|
|
2008 |
|
|
Change |
|
Sales |
|
$ |
393.5 |
|
|
$ |
599.0 |
|
|
$ |
(205.5 |
) |
Segment operating earnings |
|
|
33.2 |
|
|
|
139.9 |
|
|
|
(106.7 |
) |
Segment operating margin |
|
|
8.4 |
% |
|
|
23.4 |
% |
|
(15.0 |
)pts |
Sales
Architecture & Software sales decreased 34 percent in the second quarter of 2009 compared to
the second quarter of 2008. The effects of currency translation contributed 6 percentage points to
the decrease. Logix sales declined 18 percent in the second quarter of 2009 compared to the second
quarter of 2008.
Operating Margin
Architecture & Software segment operating margin decreased 15.0 points to 8.4 percent. The
decline was primarily due to a sharp decline in organic sales and restructuring charges, partially
offset by cost reductions.
Control Products & Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except percentages) |
|
2009 |
|
|
2008 |
|
|
Change |
|
Sales |
|
$ |
664.6 |
|
|
$ |
807.6 |
|
|
$ |
(143.0 |
) |
Segment operating earnings |
|
|
53.0 |
|
|
|
100.4 |
|
|
|
(47.4 |
) |
Segment operating margin |
|
|
8.0 |
% |
|
|
12.4 |
% |
|
(4.4 |
)pts |
Sales
Control Products & Solutions sales decreased 18 percent in the second quarter of 2009 compared
to the second quarter of 2008. Currency translation caused 8 percentage points of the decrease.
Our solutions and services businesses grew slightly during the quarter, which was more than offset
by a decline in sales by our products businesses.
Operating Margin
Control Products & Solutions segment operating margin decreased by 4.4 points to 8.0 percent.
The decrease was primarily due to lower volume, restructuring charges and unfavorable mix,
partially offset by cost reductions.
29
ROCKWELL AUTOMATION, INC.
Six Months Ended March 31, 2009 Compared to Six Months Ended March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except per share amounts) |
|
2009 |
|
|
2008 |
|
|
Change |
|
Sales |
|
$ |
2,247.3 |
|
|
$ |
2,738.5 |
|
|
$ |
(491.2 |
) |
Income from continuing operations |
|
|
156.2 |
|
|
|
299.4 |
|
|
|
(143.2 |
) |
Diluted earnings per share from continuing operations |
|
|
1.10 |
|
|
|
2.00 |
|
|
|
(0.9 |
) |
Sales
Sales decreased 18 percent in the first six months of 2009 compared to the first six months of
2008. The effects of currency translation contributed 7 percentage points to the decrease. We
experienced a significant decline in customer demand during the first six months of 2009 due to
deteriorating economic, financial and credit market conditions in most regions and industries.
Sales to customers in the United States declined 15 percent as compared to the first six months of
2008, as plant shutdowns occurred and production slowed across many industries. The Canadian
organic sales decline of 17 percent was driven by weakness in transportation and general
manufacturing in the eastern half of the country. Sales to customers in EMEA declined 13 percent
organically. EMEA weakness occurred in all industries as well as to OEM customers, due to a large
number of plant shutdowns and production slowdowns. Organic sales in Asia-Pacific declined by 5
percent compared to the first six months of 2008. We realized organic growth in China and emerging
countries of Asia-Pacific, which was more than offset by declines in organic sales in the developed
countries of the Asia-Pacific region that depend more heavily on exports. We achieved organic
growth in Latin America of 11 percent as compared to the first six months of 2008, as the region
continued to benefit from demand in resource-based industries.
In the first six months of 2009, we experienced growth in our process initiative,
demonstrating progress in our revenue base diversification strategy, and in resource-based
industries, which continued to benefit from infrastructure spending in emerging markets. These
increases were more than offset by sales declines in the transportation, metals and, to a lesser
extent, consumer product industries.
Purchase Accounting Depreciation and Amortization
Purchase accounting depreciation and amortization was $9.8 million in the first six months of
2009 compared to $12.8 million in the same period in the prior year. The decrease was primarily
due to completed amortization of certain intangible assets as well as currency translation.
General Corporate Net
General corporate expenses were $32.8 million in the first six months of 2009 compared to
$30.8 million in the first six months of 2008. The increase was primarily due to a gain recognized
in the first six months of 2008 in connection with the divestiture of Power Systems, partially
offset by lower compensation expense.
Interest Expense
Interest expense was $30.3 million in the first six months of 2009 compared to $35.5 million
in the first six months of 2008. The decrease was due to lower interest rates on outstanding debt.
Special items
Special items of $4.0 million in the first six months of 2009 include the reversal of
restructuring accruals established in prior years.
30
ROCKWELL AUTOMATION, INC.
Six Months Ended March 31, 2009 Compared to Six Months Ended March 31, 2008 (Continued)
Income Taxes
The effective tax rate for the first six months of 2009 was 19.9 percent compared to 28.5
percent in the first six months of 2008. The effective tax rate was lower than the U.S. statutory
tax rate of 35 percent because we benefited from lower non-U.S. tax rates and our use of foreign
tax credits. The 2009 rate was lower than 2008 as we benefited from a lower proportionate share of
income in higher tax rate jurisdictions as compared to 2008. We also recognized benefits totaling
$11.1 million related to the resolution of a contractual tax obligation and the retroactive
extension of the U.S. federal research tax credit in the first six months of 2009.
Income from Continuing Operations
Income from continuing operations decreased 48 percent in the first six months of 2009 to
$156.2 million, compared to the first six months of 2008. The decrease is primarily due to lower
volume, but is also due to inflation, unfavorable mix, restructuring charges and the unfavorable impact of currency
exchange rates, all partially offset by cost reductions and a lower effective tax rate.
Architecture & Software
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except percentages) |
|
2009 |
|
|
2008 |
|
|
Change |
|
Sales |
|
$ |
899.9 |
|
|
$ |
1,176.9 |
|
|
$ |
(277.0 |
) |
Segment operating earnings |
|
|
142.8 |
|
|
|
288.4 |
|
|
|
(145.6 |
) |
Segment operating margin |
|
|
15.9 |
% |
|
|
24.5 |
% |
|
(8.6 |
)pts |
Sales
Architecture & Software sales decreased 24 percent in the first six months of 2009 compared to
the first six months of 2008. Organic sales decreased 18 percent, as the effects of currency
translation contributed approximately 7 percentage points to the decrease offset by growth from
acquisitions of approximately 1 percentage point. Logix sales declined 8 percent in the first six
months of 2009 compared to the first six months of 2008.
Operating Margin
Architecture & Software segment operating margin decreased 8.6 points to 15.9 percent. The
decline was primarily due to a sharp decline in organic sales and restructuring charges, partially
offset by cost reductions.
Control Products & Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except percentages) |
|
2009 |
|
|
2008 |
|
|
Change |
|
Sales |
|
$ |
1,347.4 |
|
|
$ |
1,561.6 |
|
|
$ |
(214.2 |
) |
Segment operating earnings |
|
|
121.0 |
|
|
|
209.4 |
|
|
|
(88.4 |
) |
Segment operating margin |
|
|
9.0 |
% |
|
|
13.4 |
% |
|
(4.4 |
)pts |
Sales
Control Products & Solutions sales decreased 14 percent in the first six months of 2009
compared to the first six months of 2008. Currency translation caused 7 percentage points of the
decrease. Our solutions and services businesses grew slightly during the first six months of 2009
compared to the same period of 2008, which was more than offset by a decline in sales by our
products businesses.
Operating Margin
Control Products & Solutions segment operating margin decreased by 4.4 points to 9.0 percent.
The decrease resulted primarily from lower volume, unfavorable mix, inflation and restructuring
charges, partially offset by cost reductions.
31
ROCKWELL AUTOMATION, INC.
Financial Condition
The following is a summary of our cash flows from operating, investing and financing
activities, as reflected in the Condensed Consolidated Statement of Cash Flows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
Cash provided by (used for): |
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
218.7 |
|
|
$ |
160.1 |
|
Investing activities |
|
|
(76.4 |
) |
|
|
(81.5 |
) |
Financing activities |
|
|
(157.9 |
) |
|
|
15.7 |
|
Effect of exchange rate changes on cash |
|
|
(46.8 |
) |
|
|
47.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used for) provided by continuing operations |
|
$ |
(62.4 |
) |
|
$ |
142.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes free cash flow (in millions):
|
|
|
|
|
|
|
|
|
Cash provided by continuing operating activities |
|
$ |
218.7 |
|
|
$ |
160.1 |
|
Capital expenditures of continuing operations |
|
|
(45.7 |
) |
|
|
(59.8 |
) |
Tax payments related to gain on divestiture of Power Systems |
|
|
|
|
|
|
6.1 |
|
Excess income tax benefit from share-based compensation |
|
|
0.9 |
|
|
|
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow |
|
$ |
173.9 |
|
|
$ |
109.9 |
|
|
|
|
|
|
|
|
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. We account for share-based compensation under SFAS 123(R), Share-Based Payment,
which requires us to report the excess income tax benefit from share-based compensation 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 income taxes paid as
a result of the gain on sale of the principal businesses of our former Power Systems operating
segment have been classified within continuing operations consistent with the cash proceeds. These
taxes paid in the six months ended March 31, 2008 have been excluded from free cash flow to present
free cash flow that is representative of the performance of our continuing businesses.
Free cash flow was a source of $173.9 million for the six months ended March 31, 2009 compared
to a source of $109.9 million for the six months ended March 31, 2008. This increase in free cash
flow is primarily due to improvements in working capital, a refund related to a contractual tax
matter and lower capital expenditures, partially offset by a decrease in current year earnings and
payments related to special items accrued in the fourth quarter of 2008.
In December 2007, we issued an aggregate of $500 million principal amount of our 5.65% notes
due 2017 and 6.25% debentures due 2037. The debt offering yielded approximately $493.5 million of
proceeds, which were used to repay at maturity our 6.15% notes due January 15, 2008 and for general
corporate purposes.
Commercial paper is our principal source of short-term financing. Commercial paper borrowings
outstanding at March 31, 2009 were $75.0 million, with a weighted average interest rate of 0.41
percent. At September 30, 2008, commercial paper borrowings outstanding were $100.0 million, with
a weighted average interest rate of 2.25 percent.
32
ROCKWELL AUTOMATION, INC.
Financial Condition (Continued)
We repurchased approximately 1.7 million shares of our common stock in the first six months of
2009, all of which occurred in October 2008. The total cost of these shares was $50.0 million.
This is compared to purchases of approximately 3.1 million shares at a cost of $194.3 million in
the first six months of 2008. We also paid $3.5 million in the first six months of 2009 and $7.5
million in the first six months of 2008 for unsettled share purchases outstanding at September 30,
2008 and 2007, respectively. We may repurchase additional stock in 2009, which will depend
ultimately on business conditions, stock price, free cash flow generation and other cash
requirements. At March 31, 2009, we had approximately $621.2 million remaining for stock
repurchases under our existing board authorization. See Part II, Item 2, Unregistered Sales of
Equity Securities and Use of Proceeds, for additional information regarding share repurchases.
We expect future uses of cash to include repayments of short-term borrowings, dividends to
shareowners, capital expenditures, acquisitions of businesses, repurchases of common stock and
additional contributions to our pension plans. Recent declines in the value of our pension plan
assets may impact the amount and timing of future contributions to our pension plans. We currently
expect to contribute approximately $31.2 million to our worldwide pension plans and $20.3 million
to our postretirement benefit plans in 2009. Contributions to our pension plans beyond 2009 will
depend on future investment performance of our pension plan assets, changes in discount rate
assumptions and governmental regulations in effect at the time. We expect capital expenditures in
2009 to be about $120 million. We expect to fund these future uses of cash with a combination of
existing cash balances, cash generated by operating activities, commercial paper borrowings, or a
new issuance of debt or other securities.
In addition to cash generated by operating activities, we have access to existing financing
sources, including the public debt markets and unsecured credit facilities with various banks. Our
debt-to-total-capital ratio was 38.2 percent at March 31, 2009 and 37.3 percent at September 30,
2008.
On March 16, 2009 we replaced our former five-year $600.0 million unsecured revolving credit
facility with two new unsecured revolving credit facilities totaling $535.0 million. Both new
facilities have borrowing limits of $267.5 million each. One facility has a three-year term and the
other facility has a 364-day term. Our 364-day credit facility includes a term-out option that
allows us to borrow, on March 15, 2010, up to $267.5 million as a term loan for one year. We have
not drawn down under any of our credit facilities at March 31, 2009 or September 30, 2008.
Borrowings under these credit facilities bear interest based on short-term money market rates in
effect during the period the borrowings are outstanding. The terms of these credit facilities
contain covenants under which we would be in default if our debt-to-total-capital ratio was to
exceed 60 percent. We were in compliance with all covenants under these credit facilities at March
31, 2009 and September 30, 2008. In addition to our two $267.5 million credit facilities,
short-term unsecured credit facilities of approximately $159.5 million at March 31, 2009 were
available to foreign subsidiaries.
The following is a summary of our credit ratings as of March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short Term |
|
|
Long Term |
|
|
|
|
Credit Rating Agency |
|
Rating |
|
|
Rating |
|
|
Outlook |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standard & Poors |
|
|
A-1 |
|
|
|
A |
|
|
Negative |
Moodys |
|
|
P-1 |
|
|
|
A2 |
|
|
Negative Watch |
Fitch Ratings |
|
|
F1 |
|
|
|
A |
|
|
Negative |
Among other uses, we can draw on our credit facilities as standby liquidity facilities to
repay our outstanding commercial paper as it matures. This access to funds to repay maturing
commercial paper is an important factor in maintaining the commercial paper ratings set forth in
the table above. Under our current policy with respect to these ratings, we expect to limit our
other borrowings under our credit facilities, if any, to amounts that would leave enough credit
available under the facilities so that we could borrow, if needed, to repay all of our then
outstanding commercial paper as it matures.
Our ability to access the commercial paper market, and the related costs of these borrowings,
is affected by the strength of our credit rating and market conditions. We have not experienced
any difficulty in accessing the commercial paper market to date. If our access to the commercial
paper market is adversely affected due to a change in market conditions or otherwise, we would
expect to rely on a combination of available cash and our unsecured committed credit facility to
provide short-term funding. In such event, the cost of borrowings under our unsecured committed
credit facility could be higher than the cost of commercial paper borrowings.
33
ROCKWELL AUTOMATION, INC.
Financial Condition (Continued)
We have cash and cash equivalents of $519.5 million at March 31, 2009. We regularly monitor
the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is
primarily on safety and liquidity of principal and secondarily on maximizing yield on those funds.
We diversify our cash and cash equivalents among counterparties to minimize exposure to any one of
these entities.
We enter into contracts to hedge certain third-party sales and intercompany transactions
denominated in foreign currencies forecasted to occur within the next two years and to offset
transaction gains or losses associated with some of our assets and liabilities that are denominated
in currencies other than their functional currencies resulting from intercompany loans and other
transactions with third parties denominated in foreign currencies. The fair value of our foreign
currency forward exchange contracts is a net asset of $28.0 million at March 31, 2009. Contracts
are denominated in currencies of major industrial countries. We diversify our foreign currency
forward exchange contracts among counterparties to minimize exposure to any one of these entities.
We have, from time to time, divested certain of our businesses. In connection with these
divestitures, certain lawsuits, claims and proceedings may be instituted or asserted against us
related to the period that we owned the businesses, either because we agreed to retain certain
liabilities related to these periods or because such liabilities fall upon us by operation of law.
In some instances, the divested business has assumed the liabilities; however, it is possible that
we might be responsible to satisfy those liabilities if the divested business is unable to do so.
We also have funds on deposit related to certain of these divested businesses, and our recovery of
these funds may depend upon such divested businesses ability to return these deposits when due.
Information with respect to our contractual cash obligations is contained in Item 7,
Managements Discussion and Analysis of Financial Condition and Results of Operations, of our
Annual Report on Form 10-K for the fiscal year ended September 30, 2008. We believe that at March
31, 2009, there has been no material change to this information.
Environmental
Information with respect to the effect on us and our manufacturing operations of compliance
with environmental protection requirements and resolution of environmental claims is contained in
Note 17 of the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary
Data, of our Annual Report on Form 10-K for the fiscal year ended September 30, 2008. We believe
that at March 31, 2009, there has been no material change to this information.
Supplemental Sales Information
We translate sales of subsidiaries operating outside of the United States using exchange rates
effective during the respective period. Therefore, changes in currency exchange rates affect our
reported sales. Sales by businesses we acquired also affect our reported sales. We believe that
organic sales, defined as sales excluding the effects of changes in currency exchange rates and
acquisitions, which is a non-GAAP financial measure, provides useful information to investors
because it reflects regional performance from the activities of our businesses without the effect
of changes in currency exchange rates and acquisitions. We use organic sales as one measure to
monitor and evaluate our regional performance. We determine the effect of changes in currency
exchange rates by translating the respective periods sales using the same currency exchange rates
that were in effect during the prior year. We determine the effect of acquisitions by excluding
sales in the current period for which there are no sales in the comparable prior period. Organic
sales growth is calculated by comparing organic sales to reported sales in the prior year. We
attribute sales to the geographic regions based on the country of destination.
34
ROCKWELL AUTOMATION, INC.
Supplemental Sales Information (Continued)
The following is a reconciliation of our reported sales to organic sales (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
Three Months Ended March 31, 2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of |
|
|
Excluding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in |
|
|
Changes in |
|
|
Effect of |
|
|
Organic |
|
|
|
|
|
|
Sales |
|
|
Currency |
|
|
Currency |
|
|
Acquisitions |
|
|
Sales |
|
|
Sales |
|
United States |
|
$ |
538.3 |
|
|
$ |
5.2 |
|
|
$ |
543.5 |
|
|
$ |
(0.4 |
) |
|
$ |
543.1 |
|
|
$ |
717.0 |
|
Canada |
|
|
62.2 |
|
|
|
14.7 |
|
|
|
76.9 |
|
|
|
|
|
|
|
76.9 |
|
|
|
96.9 |
|
Europe, Middle East
and Africa |
|
|
244.4 |
|
|
|
40.8 |
|
|
|
285.2 |
|
|
|
(1.4 |
) |
|
|
283.8 |
|
|
|
337.7 |
|
Asia-Pacific |
|
|
133.3 |
|
|
|
17.9 |
|
|
|
151.2 |
|
|
|
|
|
|
|
151.2 |
|
|
|
165.5 |
|
Latin America |
|
|
79.9 |
|
|
|
20.3 |
|
|
|
100.2 |
|
|
|
|
|
|
|
100.2 |
|
|
|
89.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company Sales |
|
$ |
1,058.1 |
|
|
$ |
98.9 |
|
|
$ |
1,157.0 |
|
|
$ |
(1.8 |
) |
|
$ |
1,155.2 |
|
|
$ |
1,406.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
Six Months Ended March 31, 2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of |
|
|
Excluding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in |
|
|
Changes in |
|
|
Effect of |
|
|
Organic |
|
|
|
|
|
|
Sales |
|
|
Currency |
|
|
Currency |
|
|
Acquisitions |
|
|
Sales |
|
|
Sales |
|
United States |
|
$ |
1,179.5 |
|
|
$ |
10.5 |
|
|
$ |
1,190.0 |
|
|
$ |
(2.8 |
) |
|
$ |
1,187.2 |
|
|
$ |
1,388.4 |
|
Canada |
|
|
128.3 |
|
|
|
30.8 |
|
|
|
159.1 |
|
|
|
|
|
|
|
159.1 |
|
|
|
192.1 |
|
Europe, Middle East
and Africa |
|
|
493.2 |
|
|
|
70.1 |
|
|
|
563.3 |
|
|
|
(3.4 |
) |
|
|
559.9 |
|
|
|
642.4 |
|
Asia-Pacific |
|
|
275.6 |
|
|
|
36.3 |
|
|
|
311.9 |
|
|
|
(0.1 |
) |
|
|
311.8 |
|
|
|
328.9 |
|
Latin America |
|
|
170.7 |
|
|
|
36.4 |
|
|
|
207.1 |
|
|
|
|
|
|
|
207.1 |
|
|
|
186.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company Sales |
|
$ |
2,247.3 |
|
|
$ |
184.1 |
|
|
$ |
2,431.4 |
|
|
$ |
(6.3 |
) |
|
$ |
2,425.1 |
|
|
$ |
2,738.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
ROCKWELL AUTOMATION, INC.
Supplemental Sales Information (Continued)
The following is a reconciliation of our reported sales by operating segment to organic sales
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
Three Months Ended March 31, 2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of |
|
|
Excluding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in |
|
|
Changes in |
|
|
Effect of |
|
|
Organic |
|
|
|
|
|
|
Sales |
|
|
Currency |
|
|
Currency |
|
|
Acquisitions |
|
|
Sales |
|
|
Sales |
|
Architecture
& Software |
|
$ |
393.5 |
|
|
$ |
36.4 |
|
|
$ |
429.9 |
|
|
$ |
(1.8 |
) |
|
$ |
428.1 |
|
|
$ |
599.0 |
|
Control Products
& Solutions |
|
|
664.6 |
|
|
|
62.5 |
|
|
|
727.1 |
|
|
|
|
|
|
|
727.1 |
|
|
|
807.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company Sales |
|
$ |
1,058.1 |
|
|
$ |
98.9 |
|
|
$ |
1,157.0 |
|
|
$ |
(1.8 |
) |
|
$ |
1,155.2 |
|
|
$ |
1,406.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
Six Months Ended March 31, 2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of |
|
|
Excluding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in |
|
|
Changes in |
|
|
Effect of |
|
|
Organic |
|
|
|
|
|
|
Sales |
|
|
Currency |
|
|
Currency |
|
|
Acquisitions |
|
|
Sales |
|
|
Sales |
|
Architecture
& Software |
|
$ |
899.9 |
|
|
$ |
72.2 |
|
|
$ |
972.1 |
|
|
$ |
(6.3 |
) |
|
$ |
965.8 |
|
|
$ |
1,176.9 |
|
Control Products
& Solutions |
|
|
1,347.4 |
|
|
|
111.9 |
|
|
|
1,459.3 |
|
|
|
|
|
|
|
1,459.3 |
|
|
|
1,561.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company Sales |
|
$ |
2,247.3 |
|
|
$ |
184.1 |
|
|
$ |
2,431.4 |
|
|
$ |
(6.3 |
) |
|
$ |
2,425.1 |
|
|
$ |
2,738.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
ROCKWELL AUTOMATION, INC.
Critical Accounting Policies and Estimates
We have prepared the Condensed Consolidated Financial Statements in accordance with accounting
principles generally accepted in the United States, which require us to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the Condensed
Consolidated Financial Statements and revenues and expenses during the periods reported. Actual
results could differ from those estimates. Information with respect to our critical accounting
policies that we believe could have the most significant effect on our reported results or require
subjective or complex judgments by management is contained in Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for
the fiscal year ended September 30, 2008. We believe that at March 31, 2009, there has been no
material change to this information.
Recent Accounting Pronouncements
See Note 1 in the Condensed Consolidated Financial Statements regarding recent accounting
pronouncements.
37
ROCKWELL AUTOMATION, INC.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information with respect to our exposure to interest rate risk and foreign currency risk
is contained in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of
our Annual Report on Form 10-K for the fiscal year ended September 30, 2008. We believe
that at March 31, 2009, there has been no material change to this information.
Item 4. Controls and Procedures
Disclosure Controls and Procedures: We, with the participation of our Chief Executive
Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (Exchange Act)) as of the end of the
fiscal quarter covered by this report. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that, as of the end of the fiscal
quarter covered by this report, our disclosure controls and procedures were effective.
Internal Control Over Financial Reporting: As previously disclosed, we are in the
process of developing and implementing common global process standards and an
enterprise-wide information technology system. In the second quarter of 2009, we
deployed the distributor order management functionality of the system to additional
distributors in the United States. In doing so, we modified and enhanced our internal
controls over financial reporting (as such term is defined in Exchange Act Rule
13a-15(f)) as a result of and in connection with the implementation of the new processes
and functionality. Additional implementations will occur at most locations of our
company over a multi-year period, with additional phases scheduled throughout fiscal
2009-2012.
There has been no other change in our internal control over financial reporting during
the quarter ended March 31, 2009 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
38
ROCKWELL AUTOMATION, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information about our legal proceedings is contained in Item 3, Legal Proceedings, of
our Annual Report on Form 10-K for the fiscal year ended September 30, 2008 and has been
updated by the information contained in Item 1, Legal Proceedings, of our Quarterly
Report on Form 10-Q for the quarter ended December 31, 2008. We believe that at March
31, 2009, there has been no material change to this information, except that the
following replaces the penultimate paragraph under the section entitled Rocky Flats
Plant:
On November 13, 1990, RIC was served with another civil action brought against it in the
same court by James Stone, claiming to act in the name of the United States, alleging
violations of the U.S. False Claims Act in connection with its operation of the Plant.
On April 1, 1999 a jury awarded approximately $1.4 million in damages. On May 18, 1999,
the court entered judgment against RIC for approximately $4.2 million, trebling the
jurys award as required by the False Claims Act, and imposing a civil penalty of
$15,000. We have paid this judgment to the U.S. government. On March 31, 2009, the
court dismissed the one remaining claim in the Stone action, with each party bearing
their own costs associated with this action. This final agreed order completely
resolves all claims brought by James Stone. We believe that RIC is entitled under
applicable law and its contract with the DOE to be indemnified for all costs associated
with this action. However, as described below, the Civilian Board of Contract Appeals
has denied RICs claim seeking reimbursement of certain of those costs.
Item 1A. Risk Factors
Information about our most significant risk factors is contained in Item 1A of our
Annual Report on Form 10-K for the fiscal year ended September 30, 2008. We believe that
at March 31, 2009 there has been no material change to this information.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Share Repurchases
On November 7, 2007, our Board of Directors approved a $1.0 billion share repurchase
program. Our repurchase program allows management to repurchase shares at its
discretion. However, during quarter-end quiet periods, defined as the period of time
from quarter-end until two days following the filing of our quarterly earnings results
with the SEC on Form 8-K, shares are repurchased at our brokers discretion pursuant to
a share repurchase plan subject to price and volume parameters. We repurchased no
shares under this program during the three months ended March 31, 2009. The dollar
value of shares remaining under the repurchase program as of March 31, 2009 was
$621,188,198.
39
ROCKWELL AUTOMATION, INC.
Item 4. Submission of Matters to a Vote of Security Holders
|
(a) |
|
We held our 2009 annual meeting of shareowners on February 4, 2009. |
|
|
(b) |
|
At the annual meeting, the shareowners: |
|
(i) |
|
voted to elect four directors. Each nominee for director
was elected to a term expiring in the year and by a vote of the shareowners
as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term |
|
|
Affirmative |
|
|
Votes |
|
|
|
Expiring |
|
|
Votes |
|
|
Withheld |
|
Betty C Alewine |
|
|
2012 |
|
|
|
114,397,755 |
|
|
|
3,416,733 |
|
Verne G. Istock |
|
|
2012 |
|
|
|
114,294,734 |
|
|
|
3,519,754 |
|
Donald R. Parfet |
|
|
2011 |
|
|
|
114,371,073 |
|
|
|
3,443,414 |
|
David B. Speer |
|
|
2012 |
|
|
|
113,748,074 |
|
|
|
4,066,414 |
|
|
(ii) |
|
voted on a proposal to approve the selection by the Audit
Committee of our Board of Directors of the firm of Deloitte & Touche LLP as
our independent registered public accounting firm for fiscal year 2009. The
proposal was approved by a vote of the shareowners as follows: |
|
|
|
|
|
Affirmative votes |
|
|
114,854,040 |
|
Negative votes |
|
|
2,599,789 |
|
Abstentions |
|
|
360,661 |
|
40
ROCKWELL AUTOMATION, INC.
Item 6. Exhibits
(a) Exhibits:
|
|
|
|
|
Exhibit 10.1
|
|
|
|
364-Day Credit Agreement dated as of March 16, 2009 among the
Company, the Banks listed on the signature pages thereof, JPMorgan Chase
Bank, N.A., as Administrative Agent, Bank of America, N.A., as Syndication
Agent, and Citibank, N.A., The Bank of New York Mellon and Wells Fargo
Bank, National Association, as Documentation Agents, filed as Exhibit 99.1
to the Companys Current Report on Form 8-K dated March 16, 2009, is hereby
incorporated by reference. |
|
|
|
|
|
Exhibit 10.2
|
|
|
|
Three-Year Credit Agreement dated as of March 16, 2009 among the
Company, the Banks listed on the signature pages thereof, JPMorgan Chase
Bank, N.A., as Administrative Agent, Bank of America, N.A., as Syndication
Agent, and Citibank, N.A., The Bank of New York Mellon, and Wells Fargo
Bank, National Association, as Documentation Agents, filed as Exhibit 99.2
to the Companys Current Report on Form 8-K dated March 16, 2009, is hereby
incorporated by reference. |
|
|
|
|
|
Exhibit 12
|
|
|
|
Computation of Ratio of Earnings to Fixed Charges
for the Six Months Ended March 31, 2009. |
|
|
|
|
|
Exhibit 15
|
|
|
|
Letter of Deloitte & Touche LLP regarding Unaudited
Financial Information. |
|
|
|
|
|
Exhibit 31.1
|
|
|
|
Certification of Periodic Report by the Chief
Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934. |
|
|
|
|
|
Exhibit 31.2
|
|
|
|
Certification of Periodic Report by the Chief
Financial Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934. |
|
|
|
|
|
Exhibit 32.1
|
|
|
|
Certification of Periodic Report by the Chief
Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
Exhibit 32.2
|
|
|
|
Certification of Periodic Report by the Chief
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
41
ROCKWELL AUTOMATION, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
ROCKWELL AUTOMATION, INC.
|
|
|
(Registrant)
|
|
Date: May 7, 2009 |
By |
/s/ Theodore D. Crandall
|
|
|
|
Theodore D. Crandall |
|
|
|
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer) |
|
|
|
|
Date: May 7, 2009 |
By |
/s/ David M. Dorgan
|
|
|
|
David M. Dorgan |
|
|
|
Vice President and Controller
(Principal Accounting Officer) |
|
42
INDEX TO EXHIBITS
|
|
|
|
|
Exhibit No. |
|
Exhibit |
|
|
|
|
|
|
12 |
|
|
Computation of Ratio of Earnings to Fixed Charges for the Six Months Ended March 31, 2009. |
|
|
|
|
|
|
15 |
|
|
Letter of Deloitte & Touche LLP regarding Unaudited Financial Information. |
|
|
|
|
|
|
31.1 |
|
|
Certification of Periodic Report by the Chief Executive Officer pursuant to Rule 13a-14(a) of
the Securities Exchange Act of 1934. |
|
|
|
|
|
|
31.2 |
|
|
Certification of Periodic Report by the Chief Financial Officer pursuant to Rule 13a-14(a) of
the Securities Exchange Act of 1934. |
|
|
|
|
|
|
32.1 |
|
|
Certification of Periodic Report by the Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
32.2 |
|
|
Certification of Periodic Report by the Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. |