Rockwell Reports 12 Percent Increase in 2000 Earnings

Company Generates Record Free Cash Flow of $659 Million

Rockwell generated free cash flow of $659 million in fiscal 2000, while continuing substantial investments in product development and new technologies, including $474 million for product research and development and $315 million for capital expenditures.

"We are very pleased that, despite the difficult market conditions we faced in the fourth quarter of 2000, we continue to generate very strong cash flow while investing for future growth," said Don H. Davis, chairman and chief executive officer. "This is a testament to our continued focus on working capital management and Rockwell Lean Enterprise cost reduction initiatives. We enter fiscal 2001 with substantial financial flexibility for growth investments including strategic acquisitions and new product development."

"Rockwell Collins had another record year in fiscal 2000 with sales in excess of $2.5 billion," Davis continued. "Rockwell Collins' sales have increased nearly 30 percent since 1998. Our business and regional systems, passenger systems, government and aviation services businesses all posted sales increases in fiscal 2000. Rockwell Collins also achieved record operating earnings of $447 million, an increase of eight percent over 1999's excellent performance."

"Rockwell Automation also achieved record operating earnings of $667 million in fiscal 2000." Davis continued, "Sales were higher in 2000 despite slower North American order activity in the fourth quarter, particularly automotive related spending projects, and a weaker euro which led to slightly lower fourth quarter sales," Davis continued. "The Rockwell Automation management team has taken a series of actions to address these market conditions. The realignment of our Automation business announced in July is nearly complete. We expect this realignment to further enhance the focus, flexibility and cost effectiveness of our control systems business."

"Looking ahead to 2001," Davis concluded, "we continue to expect earnings in the range of $3.10 to $3.20 per share. We have seen some improvement in automation markets over the last two months and we now expect our first quarter results to be somewhat better than our previous guidance of 65 cents per share."

Following is a discussion of sales and earnings for each of Rockwell's businesses during the fourth quarter:

Automation

Rockwell Automation's fourth quarter sales of $1.1 billion were down $31 million from 1999 primarily due to lower sales in North America in both control and power systems. Sales in Europe were down about seven percent in the fourth quarter from the same period a year ago due to the weaker euro. Operating earnings of $162 million were about the same as last year's fourth quarter with the benefits from manufacturing process improvements and material cost reductions offsetting the impact of lower sales, continuing investments in new product development and material cost increases resulting from certain part shortages. Automation's return on sales in the fourth quarter of 2000 increased to 14.4 percent from 14.3 percent a year ago.

Avionics & Communications

Rockwell Collins' fourth quarter sales of $708 million were up $9 million over 1999's fourth quarter with higher sales at business and regional systems offsetting lower sales at the government systems business. Sales in the fourth quarter include approximately $20 million attributable to our new passenger systems acquisition, Sony Trans Com, which was completed in July. Record quarterly operating earnings of $123 million were primarily due to the increased volume at business and regional systems. Rockwell Collins' return on sales increased to 17.4 percent in the fourth quarter of 2000 compared to 17.0 percent last year.

Other Businesses

Fourth quarter sales at Rockwell Electronic Commerce and Rockwell Science Center of $57 million were down $17 million from last year's fourth quarter due to lower volume at Rockwell Electronic Commerce. The $19 million operating loss in the quarter includes approximately $10 million of charges associated with the previously announced realignment at Electronic Commerce.

In the fourth quarter of fiscal 2000, the company changed the method of determining cost for certain automation inventories to the FIFO method from the LIFO method. Prior period amounts have been restated to conform with this change.

Following are additional business developments during the fourth quarter:

• Rockwell Automation signed an agreement with HIMA Paul Hildebrandt GmbH + Co KG, Europe's market leader for safety-related automation systems, to partner in the development and production of safety-specific controllers and software. The agreement addresses growing customer demand for automation control products for safety-critical machinery. It adds a major element to Rockwell Automation's growing safety systems, products and services and has the potential to generate additional sales of $40 million annually by 2002.

• Rockwell Automation announced that PTplace.com, its business-to-business e-commerce site dedicated to power control products, is now able to serve customers in Canada. Customers in Canada will have access to a catalog featuring 85,000 Dodge^® and Reliance Electric^® products. Customers can also access the same user friendly features, including multi-line entry forms, saved purchasing lists, and address books that have helped the site generate sales in excess of $25 million since its launch six months ago.

• Rockwell Automation was awarded a contract to supply engineering services and automation control software and hardware to Silterra Malaysia Sdn. Bhd., West Malaysia's first semiconductor wafer fabrication facility. The Rockwell Automation-based system will permit plant control and monitoring from anywhere in the world, courtesy of the system's Internet-enabled functionality. It also gives Rockwell Automation a strong foothold in the regional semiconductor marketplace.

• Rockwell Collins completed the acquisition of Sony Trans Com, a producer of In-Flight Entertainment (IFE) systems. Sony Trans Com becomes part of Rockwell Collins Passenger Systems, based in Pomona, California. Rockwell Collins can now tailor IFE systems for airlines' wide-body and narrow-body fleets. The annual sales of the passenger systems business are expected to approximate $500 million.

• Rockwell Collins entered into an agreement to acquire Kaiser Aerospace and Electronics, a leading supplier of cockpit display solutions for tactical aircraft, optical technologies for instrumentation and communication and specialized aircraft products for the defense and aerospace industry. Sales in 1999 were approximately $210 million. The purchase price is about $300 million and significantly strengthens the core capabilities of Rockwell Collins.

• The Rockwell Science Center received a four-year $5 million contract from the U.S. Department of Defense to establish a domestic manufacturing capability to produce thin film coatings for laser protective eyewear. As part of the effort, sample spectacles, goggles, and visors will be delivered to the U.S. Army, Navy, and Air Force for evaluation. The coatings will be manufactured in a new Rockwell Science Center facility in Camarillo, California.

• Rockwell Electronic Commerce received a $5 million commitment from Sabre, a leader in providing IT solutions to the travel industry. The agreement with Sabre includes a complete contact center package for US Airways and represents one of the industry's largest contracts in 2000. Rockwell Electronic Commerce was selected for its overall customer knowledge, superior technology and extensive industry call center experience.

A conference call to discuss these financial results will take place at 3:00 p.m. Eastern Time on November 1. The call will be webcast and accessible via the Rockwell website (www.rockwell.com).

This news release contains statements relating to future results that are "forward-looking" as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to, those detailed from time-to-time in the company's Securities and Exchange Commission filings.

Rockwell is a $7 billion electronic controls and communications company with global leadership positions in industrial automation, avionics and communications, and electronic commerce. The company employs about 40,000 people at more than 450 locations serving customers in more than 80 countries.