Strategies. Demonstrated performance of continuing Rockwell businesses to meet and exceed stated goals Actuals (CAGR)

Transcription

1 Strategies

2 Strategies Demonstrated performance of continuing Rockwell businesses to meet and exceed stated goals Actuals (CAGR) 21% Sales * Goals (CAGR) 14% 23% 8% 15% Operating Earnings Sales Earnings Per Share *Excluding Reliance Electric Acquisition. Global Market Leadership _ We are leaders in all of our served markets, providing customers and suppliers global reach and responsive service and support. Over one-third of Rockwell s sales are to international markets. Global sales will be an even more important aspect of business in the future. Aggressive investments around the world in our manufacturing infrastructure, sales and distribution networks, and aftermarket support continue to be our focus. Advanced Technology _ Leadership in innovation and technology, including Rockwell s world-class Science Center in California and other locations around the world, remain key to all our activities. Outstanding Employees _ A continuing hallmark of Rockwell has been our ability to attract and retain the highest-caliber employees all with an intense focus on customer satisfaction. Financial Strength _ We are essentially a debt-free company. We are using our financial capacity to invest in products and technologies that provide our customers with a competitive edge. Additionally, we continue to repurchase Rockwell stock to strengthen the equity base of our shareowners. Demonstrated Performance _ Our continuing businesses have realized sales growth of 21 percent and operating earnings growth of 23 percent over the past five years. We are excited about the opportunities ahead. 36

3 Strategic Restructuring, Reshaped Company Commercial and international sales have both increased dramatically. U.S. government sales have decreased to 7%. Over 50 strategic acquisitions and 30 divestitures since Exceptional financial capacity. Sharpened focus on customers and growth U.S. Government 64% U.S. Commercial 23% International 36% U.S. Government 7% U.S. Commercial 57% International 13% 37

4 Rockwell Today Rockwell today is a global electronic controls and communications company. Leadership positions in all our markets. World class technology including Rockwell Science Center. Strong balance sheet. 45,000 employees. 1996* 1997 Aerospace & Defense 22% Graphics 5% Automation 29% Semiconductor Systems 20% Automation 58% Automotive 23% Semiconductor Systems 11% Avionics & Communications 10% Avionics & Communications 22% Total Sales $14.3 Billion* Total Sales $7.8 Billion * Includes sales of discontinued businesses. 38

5 Strong Balance Sheet Rockwell s strong balance sheet produces the financial capacity to implement an aggressive investment strategy. Debt to total capital: 4.4% Net debt: $ (61) million Target debt to total capital: 30-35% Rockwell s Investment Priorities 1. Invest in businesses _ Capital spending _ Research and development _ Acquisitions 2. Dividends 3. Share repurchases Investing in Rockwell s business is our first priority for the use of our financial capacity and cash generated from operations. We will continue to emphasize value-enhancing capital expenditures and research and development expenditures for new product offerings. Recent acquisitions, such as Intecolor, ICOM, Brooktree, and Hi-Media, have strengthened our core businesses and we continue to evaluate additional opportunities, such as our recently announced plans to enter the in-flight entertainment market by acquiring Hughes-Avicom. We have always placed a high priority on dividends and have a 20 year history of increasing dividends. This record continued in 1997 with our shareowners receiving dividends on the Boeing shares received in connection with the sale of our Aerospace and Defense business. Also, after the Meritor spin-off, our shareowners are receiving a higher dividend return on their Rockwell shares since Rockwell retained a disproportionately higher share of the pre-spin-off dividend. Our intention for the future is to pay out approximately percent of our earnings in current dividends. After investing in the businesses and paying a good dividend, we repurchase stock when excess cash flow is available. Since 1984, we have spent $3.5 billion in repurchasing Rockwell shares at an average price of $27.55 per share. 39

6 Global Expansion Rockwell s global expansion will continue to contribute significantly to growth in the next decade. International sales comprise 36% of 1997 total sales (versus 13% in the mid-1980s). We realize that to achieve our full potential as a global company we can t fully understand our customers from a distance. It s necessary to be there, working with them to help them achieve and maintain a competitive edge. We are making significant investments in marketing and in manufacturing facilities in faster growing geographic markets like Asia Pacific and Latin America. And our design centers in China, France, India, Israel, Japan, and Russia make it possible for us to tailor products to meet the specific, unique needs of our customers, wherever they may be. Latin America 5% Europe 17% Asia Pacific 21% Sales Growth Middle East/ Africa 2% United States 51% The use of a local workforce is critical to the success of our global operations. It s the people who live in the region who truly understand the nuances of conducting business in their part of the world. We have placed a high priority on growing our global workforce, and investing in schools and universities in the cities and countries where we do business. These talented people are a valuable source of management and technical expertise for our businesses around the world. Nearly 50 percent of Rockwell s sales growth over the next five years will come from markets outside the United States. Canada 4% 40

7 Automation Growth Strategy Goal: Number 1 Automation Supplier Worldwide Leverage the combined products and markets of our Allen-Bradley, Reliance Electric, Dodge and Rockwell Software brands. Invest in leading-edge technologies toward the development of new products to achieve more than 20% of sales from products introduced during the current or previous two fiscal years. Continue global expansion, particularly in places like the Asia Pacific and Latin American regions, with their significant need for infrastructure improvements due to large populations, and growing consumer markets. The Persistent Technologies Model directs our investment in leading-edge developments and guides our every move to serve our customers. Pursue well-placed and well-executed acquisitions that couple geographic and product enhancements to our Automation business. HUMAN-MACHINE INTERFACE F S O E R T W A T W A R E NETW ORKS CONTROL LOGIC NET WO RK S F S O SENSORS S O N ET W OR KS F T W A E R POWER & ACTUATION 41

8 Avionics & Communications Growth Strategy Goal: Highest Value Provider of Advanced Integrated Avionics and Mobile Communication Systems Capitalize on the substantial rebound in the production rates for air transport aircraft. Lead the development of advanced satellite communications and navigation technology. Leverage our GPS technology to develop next-generation air traffic management systems around the world. Capture additional integrated systems _ new OEM programs and exploit leadership in liquid crystal display (LCD) technology. Pursue new market opportunities _ new commercial business initiatives and acquisitions and alliances. Exploit market and technology synergies. Taking advantage of the synergies of consolidating commercial and government businesses. Collins Air Transport Division Collins Subsidiary & Service Businesses Collins General Aviation Division GSD STC SLC New Business Initiatives Collins Avionics & Communications Division Communication Systems Division Global Strategy Development (GSD) Strategic Technology Council (STC) Strategic Leadership Council (SLC) 42

9 Semiconductor Systems Growth Strategy Diversifying our product line to capitalize on growing markets. Goal: Leading provider of semiconductor system solutions for personal communications electronics. Continue to expand and strengthen our position as a leading supplier of call center systems and personalized electronic commerce application software. Use the company s leadership in the modem marketplace as a springboard to key related markets in personal computing, personal imaging, digital infotainment, wireless communications and network access. Accelerate this diversification by leveraging and continuing to improve the company s core competencies in digital signal processing, semiconductor design and manufacturing, IC packaging, and communications technology. Increase global penetration and continue building the resources to support a rapidly growing customer base. Pursue external relationships to speed access to critical technologies and markets across our targeted businesses. Mixed Signal Computing Personal Computing Desktops Notebooks PDAs Personal Imaging Facsimiles Printers Multifunction Devices LAN Modem Speech ISDN ATM Audio Processor Cable Firmware Signal Processing Algorems xdsl Communication Protocols Signal Conversion Cellular PCS Processor Hardware Host Interface Software Video Cordless Imaging Paging DBS/ Satcom Graphics Wireless Communications Cellular Phones Cordless Phones Pagers Digital Infotainment Digital Set-Top Box/Games Digital VCR-DVD-HDTV Internet Access Hubs/Routers/ Switches Network Access Systems Analog/Digital Access Multiplexors 43

10 Growth Strategy Summary Our growth strategy is based on expanding our leadership businesses, which will build value for our shareowners. New products and technologies will continue to be introduced to anticipate and meet the needs of our customers. Our businesses will increase by addressing non-traditional markets and expanding globally. Our aggressive business development activity will also expand our businesses through acquisitions, joint ventures, teaming and alliances. All of the above actions are focused on growth for the company. Not growth for growth s sake, but profitable growth which benefits our customers and provides value for our shareowners. Focused on Shareowner Value Financial Goals _ Sales Growth 8% _ EPS Growth 15% _ ROE 20% range Leadership Team Focused on Shareowner Value _ Strategic restructuring for higher growth _ Share repurchase program 44