Rockwell Posts 17% Gain for 2nd Quarter

After restructuring its operations and exiting unprofitable businesses, electronics and automation giant Rockwell International Corp. said Monday its earnings for the quarter rose 17% as revenue moved up slightly.

Rockwell said it has trimmed 1,800 jobs as part of its previously announced restructuring effort that eventually will eliminate 3,500 positions either through layoffs or by selling off businesses.

Officials also said that 40 to 45 employees have decided to continue with the company when it moves its headquarters from Costa Mesa to Milwaukee, while about 85 to 90 have chosen to leave the company.

“We’re on track with our move, and we plan to be there by the first week in September,” Chief Executive Don Davis said.

The company said it earned $143 million, or 74 cents a share, in the fiscal second quarter, up from $122 million, or 60 cents a share, for the same period a year ago. Revenue for the three months ended March 31 rose to $1.7 billion from $1.67 billion. The per-share income in the recent quarter surpassed the 70 cents projected by analysts in a survey by First Call Corp.

The strong quarter gives the company confidence that it will hit its earnings goal of $2.90 to $3 a share for the fiscal year, Davis said. “In fact, we now expect to be near the high end of that range,” he added.

The rosy remarks and quarterly financial report boosted Rockwell’s stock to a 52-week high of $53.50 a share Monday during heavy trading on the New York Stock Exchange. The shares edged back to close at $52.81, up $3.88, or 7.9%. Volume totaled 2.66 million shares, more than four times the daily average over the last three months.

“Rockwell really hit the cover off the ball with its automation unit operating margins,” said Mark Koznarek, an analyst with Midwest Research Inc. “Their cost-reduction efforts are coming through loud and clear.”

The automation unit, the larger of the company’s two divisions, saw its sales slip 4.5% to $1.1 billion, but cost reductions boosted the earnings nearly 11% to $163 million, the company said.

Revenue for the company’s avionics and communications division, which includes the fast-growing in-flight entertainment systems business, grew 14.3% to $622 million, while earnings rose 57.7% to $123 million.

The savings in the automation business came from factory consolidation and divesting business that the company deemed unprofitable.

With the margins in the company’s automation business running in the low double digits during a relative down cycle, Rockwell officials said any upswing should lead to significant gains.

“This business is serving the metals business, the aggregates business for road building and that sort of thing, and at the moment, those sectors are relatively weak,” Chief Financial Officer W. Michael Barnes said. “A little bit of volume here is going to translate into good margins, with 16% or more possible.”

The automation business also was hit by a slumping Brazilian economy, Barnes said. Latin America makes up about 3% of the automation unit’s revenue, and Brazil constitutes about a third of that, Barnes said.

The earnings included a one-time charge of $22 million for the costs of relocating the corporate headquarters. The company had announced its move earlier this year to be closer to its core businesses.

The company also said it received $16 million from the settlement of an intellectual property lawsuit against the federal government. While details of the lawsuit were not available, the company said it was related to the company’s aircraft electronic systems operations.

Davis said the company plans to grow in part by acquiring small and mid-sized companies with revenues of $50 million to $400 million.

The former major military contractor sold its defense and aerospace divisions to Seattle-based Boeing Co., and earlier this year spun off its semiconductor group, now known as Conexant Systems Inc.

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Rockwell Return

Rockwell International Corp.’s stock hit a 52-week high of $53.50 Monday before settling back at bit to close at $52.81 a share, nearly double its price early last October. Weekly closing stock prices:

Monday’s close: $52.81

Source: Bloomberg News