Rockwell Automation, Inc. (ROK)

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Rockwell Automation, Inc. (ROK)

F4Q2010 Earnings Call Transcript

November 9, 2010 8:30 pm ET

Executives

Rondi Rohr-Dralle – IR

Keith Nosbusch – Chairman and CEO

Ted Crandall – SVP and CFO

Analysts

Mark Douglass – Longbow Research

Julian Mitchell – Credit Suisse

John Inch – Merrill Lynch

Mark Koznarek – Cleveland Research

Darren Yep – Barclays Capital

Presentation

Operator

Thank you for holding, and welcome to Rockwell Automation’s quarterly conference call. I need to remind everyone that today’s conference call is being recorded. Later in the call, we will open up the lines for questions.

At this time, I would like to turn the call over to Rondi Rohr-Dralle, Vice President of Investor Relations. Ms. Rohr-Dralle, please go ahead.

Rondi Rohr-Dralle

Thanks, Katie. Good morning, everyone. Thanks for joining us for Rockwell Automation’s fourth quarter fiscal 2010 earnings release conference call. Our results were released this morning, and the press release and charts have been posted to our Web site at www.rockwellautomation.com.

Please note that both the press release and charts include reconciliations to non-GAAP measures. Additionally, a webcast of this call is accessible at that Web site and will be available for replay for the next 30 days.

With me today are Keith Nosbusch, our Chairman and CEO; and Ted Crandall, our Chief Financial Officer. Our agenda includes opening remarks by Keith that will include his reflections on the company’s performance in the fourth quarter and the full fiscal year, some context around our outlook for fiscal 2011, and a preview of our investor conference on December 8. And then Ted will provide more details around the fourth quarter results and our guidance for fiscal 2010. As Katie said, we’ll take questions at the end of Ted’s remarks. And we want to get to as many of you as possible, so please limit yourself to one question and a follow-up.

We expect the call today to take about an hour. As is always the case on these calls, I need to remind you that our comments will include statements related to the expected future results of the company and are therefore forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Our actual results may differ materially from our forecasted projections due to a wide range of risks and uncertainties that are described in our earnings release and detailed in all of our SEC filings.

So, with that, I’ll turn the call over to Keith.

Keith Nosbusch

Thanks, Rondi. Good morning, everyone, and thank you for joining us on the call today. I appreciate your time and interest in Rockwell Automation. Our results in the fourth quarter are a clear indication that the global industrial recovery has continued. We capped the year with another quarter of strong revenue growth in all regions.

I was particularly pleased to see very strong year-over-year growth again this quarter in China and India, and strong sequential growth in Latin America and Europe. Logix grew 36% in the quarter, and earnings grew dramatically from a year ago.

For the full year, we grew revenue 12% and doubled earnings per share compared to fiscal 2009. Operating margin improved by 5 points, a great result in the light of the compensation cost headwinds and growth investments we made in the second half of the year.

Again, this year we generated strong free cash flow. We used that to fund organic growth, increase the dividend by 21%, resume share repurchase, and make a significant discretionary U.S. pension contribution. The performance this year is evidence that we are executing well as the recovery progresses and I want to thank our employees, customers, and partners for their support throughout the year.

I am very proud of the people of Rockwell Automation, and our culture of integrity corporate responsibility and inclusion. This year, Rockwell Automation was added to the Dow Jones Sustainability Index and again recognized by Ethisphere as one of the world’s most ethical companies.

I’ve spent a good deal of my time traveling outside the United States this year, particularly in emerging markets, and what I saw further solidified my confidence that our growth and performance strategy is working. The investments that we made in the last cycle are paying off and we are gaining traction in our expanded growth opportunities.

Let me share with you a few examples. A global nutraceutical manufacturer standardized on Rockwell for its highly sophisticated Greenfield site in China. They are using our products and solutions, not just for process control, but also for regulatory compliance and to improve energy efficiency and reduce wastes.

We won our first order in India for primary pharmaceutical manufacturing, historically a stronghold of traditional DCS providers. Demonstrating the power of our best-in-class integrated automation and information solutions.

China grew over 30% this year, and in total emerging markets now represent over 20% of total Rockwell sales. Sales in Germany and Italy grew over 15%, an indication of the success of our OEM strategy.

We also continue to make demonstrable progress in technology differentiation. We introduced new functionality in Logix in the areas of processing speed, memory, safety, and communications. All of which expand the capabilities and scalability of this platform to serve the demands of our traditional discrete, OEM and process customers.

We released our next-generation of PlantPAx which adds new features such as high availability, device integration, and asset management to an already robust process automation system.

We introduced the Micro800, a component controller line with an innovative software toolset that complements our current portfolio of component offerings for simpler, standalone machine applications. This product line is tangible evidence that we are seeing a return on the investments we have made in expanding our Asian design presence.

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