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Don H. Davis, chairman and CEO, commented, "I am pleased with our first quarter results. Our performance reflects the strength of our business as we continued to improve our market position in this challenging environment. We remain balanced in our efforts to accelerate revenue growth while maintaining profit leverage. The company's financial profile is strong and the outstanding cash flow reflects the quality of our businesses."
Davis added, "The pace of the recovery in the global manufacturing sector continues to be uneven. While customer demand showed some improvement in the first quarter, it is not yet clear whether this is a sustainable trend. Barring any economic disruption, we believe that our markets will remain generally stable for the remainder of the fiscal year. In this environment, we will deliver earnings growth of at least 20 percent (diluted EPS of $1.10). If business conditions improve modestly, then full year diluted EPS is expected to approximate $1.20."
Following is a discussion of results for each Rockwell Automation business for the first quarter.
Control Systems' first quarter sales were $787 million compared to $723 million in the first quarter of 2002. Sales were up approximately 6 percent in North America, with relative strength in the automotive, food and beverage, and life sciences industries. The Logixﾙ business continued to exhibit strong growth, with an increase in sales of 37 percent. Global Manufacturing Solutions generated a sales increase of 8 percent, which included revenues from the acquisition of Propack Data. Segment operating earnings, which included expenses for targeted cost reduction actions, were $86 million compared to $67 million in 2002's first quarter. Control Systems' return on sales was 10.9 percent versus 9.3 percent in the first quarter of 2002.
Power Systems' first quarter sales were $171 million compared to $178 million in last year's first quarter. Electrical sales decreased 3 percent versus 2002's first quarter, while mechanical sales were down 5 percent. First quarter segment operating earnings were $8 million compared to $11 million in the first quarter of 2002. The decrease in operating earnings resulted from the lower sales volume. Power Systems' return on sales was 4.7 percent versus 6.2 percent in the first quarter of 2002.
Rockwell FirstPoint Contact
Rockwell FirstPoint Contact sales in the first quarter were $26 million compared to $38 million in 2002's first quarter. Operating earnings were break even for the quarter compared to $2 million in the first quarter of 2002. Reduced spending and savings from cost reduction actions partially offset the effect of the lower sales volume.
General Corporate ﾖ Net
First quarter 2003 general corporate expenses were $12 million compared to $18 million in the first quarter of 2002 as a result of lower corporate staff costs and higher earnings from the company's investment in Rockwell Scientific Company LLC.
The effective tax rate for the quarter was 30 percent compared to 27 percent in last year's first quarter.
First quarter 2003 free cash flow from continuing operations was $89 million compared to $68 million in the first quarter of 2002. The company defines free cash flow as cash flows from operating activities reduced