- Organic sales up 2.7 percent year over
year; reported sales down 3.1 percent
- Adjusted EPS of $1.59 — up 18 percent
year over year; diluted EPS of $1.51
- Company maintains 2015 Adjusted EPS
guidance of $6.50 - $6.80 on lower sales
Rockwell Automation, Inc. (NYSE: ROK) today reported fiscal 2015
second quarter sales of $1,550.8 million, down 3.1 percent from
$1,600.5 million in the second quarter of fiscal 2014. Organic
sales grew 2.7 percent, and currency translation reduced sales by
6.0 percent.
Fiscal 2015 second quarter Adjusted EPS was $1.59, up 18 percent
compared to $1.35 in the second quarter of fiscal 2014. Total
segment operating earnings were $334.2 million in the second
quarter of fiscal 2015, up 11 percent from $302.1 million in the
same period of fiscal 2014. Total segment operating margin expanded
to 21.6 percent from 18.9 percent a year ago, primarily due to
higher organic sales, strong productivity and favorable mix,
partially offset by increased spending.
On a GAAP basis, fiscal 2015 second quarter net income was
$206.0 million or $1.51 per share, compared to $180.3 million or
$1.28 per share in the second quarter of fiscal 2014. Pre-tax
margin increased to 17.8 percent in the second quarter of fiscal
2015 from 15.5 percent in the same period last year.
Commenting on the results, Keith D. Nosbusch, chairman and chief
executive officer, said, "Earnings growth in the quarter was robust
in spite of lower sales, as solid organic sales growth was more
than offset by a large currency headwind. Margin expansion was very
healthy and free cash flow was also strong in the quarter. I am
extremely pleased with 15 percent first half growth in Adjusted
EPS, an excellent result in this market environment. We have
demonstrated that even in a lower growth environment, we can still
grow earnings and deliver great value to shareowners."
Outlook
Commenting on the outlook, Nosbusch added, "Based on a softer
forecast for industrial production growth, a reduced outlook for
oil and gas, and our solutions and services backlog entering the
second half, we are lowering our full-year organic growth by 1
point. We are also including a larger currency headwind and now
expect fiscal 2015 reported sales of about $6.4 billion. In spite
of the top line reduction, our expectation for a higher full-year
margin enables us to maintain the Adjusted EPS guidance range of
$6.50 to $6.80.
"Revenue diversification and agility are helping us to pursue
the best growth opportunities. Our strong productivity culture will
enable us to invest in innovation and organic growth."
Following is a discussion of fiscal 2015 second quarter results
for both segments.
Architecture &
Software
Architecture & Software quarterly sales were $674.3
million, a decrease of 1.8 percent from $686.8 million in the same
period last year. Organic sales increased 4.8 percent, and currency
translation reduced sales by 6.7 percent. Segment operating
earnings were $200.8 million compared to $190.2 million in the same
period last year. Segment operating margin increased to 29.8
percent from 27.7 percent a year ago.
Control Products &
Solutions
Control Products & Solutions quarterly sales were
$876.5 million, a decrease of 4.1 percent compared to $913.7
million in the same period last year. Organic sales increased 1.2
percent, and currency translation reduced sales by 5.5 percent.
Segment operating earnings were $133.4 million compared to $111.9
million in the same period last year. Segment operating margin
increased to 15.2 percent from 12.2 percent a year ago.
Other Information
In the second quarter of fiscal 2015 free cash flow was $269.4
million and cash flow provided by operating activities was $285.2
million. Return on invested capital was 32.0 percent.
Fiscal 2015 second quarter general corporate-net expense was
$21.4 million compared to $18.9 million in the second quarter of
fiscal 2014.
The Adjusted Effective Tax Rate for the second quarter of fiscal
2015 was 26.0 percent compared to 27.9 percent in the second
quarter of fiscal 2014. The Company continues to expect a full-year
Adjusted Effective Tax Rate for fiscal 2015 of approximately 26.5
percent. The full-year rates reflect the retroactive extension of
the U.S. research and development credit for 2014. On a GAAP basis,
the effective tax rate in the second quarter of fiscal 2015 was
25.5 percent compared to 27.4 percent a year ago.
During the second quarter of fiscal 2015, the Company
repurchased 1.14 million shares of its common stock at a cost of
$127.1 million. At March 31, 2015, $757.0 million remained
available under the existing share repurchase authorization.
Organic sales, total segment operating earnings, total segment
operating margin, Adjusted Income, Adjusted EPS, Adjusted Effective
Tax Rate, free cash flow and return on invested capital are
non-GAAP measures that are reconciled to GAAP measures in the
attachments to this release.
Conference Call
A conference call to discuss our financial results will take
place at 8:30 a.m. Eastern Time on April 30, 2015. The call
and related financial charts will be webcast and accessible via the
Rockwell Automation website
(http://www.rockwellautomation.com/investors/).
This news release contains statements (including certain
projections and business trends) that are “forward-looking
statements” as defined in the Private Securities Litigation Reform
Act of 1995. Words such as “believe”, “estimate”, “project”,
“plan”, “expect”, “anticipate”, “will”, “intend” and other similar
expressions may identify forward-looking statements. Actual results
may differ materially from those projected as a result of certain
risks and uncertainties, many of which are beyond our control,
including but not limited to:
- macroeconomic factors, including global
and regional business conditions, the availability and cost of
capital, commodity prices, the cyclical nature of our customers’
capital spending, sovereign debt concerns and currency exchange
rates;
- laws, regulations and governmental
policies affecting our activities in the countries where we do
business;
- the successful development of advanced
technologies and demand for and market acceptance of new and
existing products;
- the availability, effectiveness and
security of our information technology systems;
- competitive products, solutions and
services and pricing pressures, and our ability to provide high
quality products, solutions and services;
- a disruption of our business due to
natural disasters, pandemics, acts of war, strikes, terrorism,
social unrest or other causes;
- intellectual property infringement
claims by others and the ability to protect our intellectual
property;
- the uncertainty of claims by taxing
authorities in the various jurisdictions where we do business;
- our ability to attract and retain
qualified personnel;
- our ability to manage costs related to
employee retirement and health care benefits;
- the uncertainties of litigation,
including liabilities related to the safety and security of the
products, solutions and services we sell;
- our ability to manage and mitigate the
risks associated with our solutions and services businesses;
- a disruption of our distribution
channels;
- the availability and price of
components and materials;
- the successful integration and
management of acquired businesses;
- the successful execution of our cost
productivity and globalization initiatives; and
- other risks and uncertainties,
including but not limited to those detailed from time to time in
our Securities and Exchange Commission (SEC) filings.
These forward-looking statements reflect our beliefs as of the
date of filing this release. We undertake no obligation to update
or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
Rockwell Automation, Inc. (NYSE: ROK), the world’s largest
company dedicated to industrial automation and information, makes
its customers more productive and the world more sustainable.
Headquartered in Milwaukee, Wis., Rockwell Automation employs over
22,500 people serving customers in more than 80 countries.
ROCKWELL AUTOMATION, INC. SALES AND
EARNINGS INFORMATION (in millions, except per share amounts
and percentages) Three Months Ended Six Months
Ended March 31, March 31, 2015
2014 2015 2014 Sales Architecture &
Software (a) $ 674.3 $ 686.8 $ 1,382.1 $ 1,382.7 Control Products
& Solutions (b) 876.5 913.7 1,743.1
1,809.5 Total sales (c) $ 1,550.8 $ 1,600.5 $
3,125.2 $ 3,192.2 Segment operating earnings
Architecture & Software (d) $ 200.8 $ 190.2 $ 422.2 $ 402.1
Control Products & Solutions (e) 133.4 111.9
258.8 228.0 Total segment operating earnings1 (f)
334.2 302.1 681.0 630.1 Purchase accounting depreciation and
amortization (5.2 ) (5.8 ) (10.6 ) (10.4 ) General corporate—net
(21.4 ) (18.9 ) (44.2 ) (40.6 ) Non-operating pension costs (15.4 )
(14.0 ) (31.6 ) (28.0 ) Interest expense (15.7 ) (15.0 ) (30.6 )
(29.9 ) Income before income taxes (g) 276.5 248.4 564.0 521.2
Income tax provision (70.5 ) (68.1 ) (143.8 ) (142.8 ) Net income $
206.0 $ 180.3 $ 420.2 $ 378.4
Diluted EPS $ 1.51 $ 1.28 $ 3.08 $ 2.70
Adjusted EPS2 $ 1.59 $ 1.35 $ 3.23 $
2.82 Average diluted shares 136.0 140.2
136.5 140.2 Segment operating margin
Architecture & Software (d/a) 29.8 % 27.7 % 30.5 % 29.1 %
Control Products & Solutions (e/b) 15.2 % 12.2 % 14.8 % 12.6 %
Total segment operating margin1 (f/c) 21.6 % 18.9 % 21.8 % 19.7 %
Pre-tax margin (g/c) 17.8 % 15.5 % 18.0 % 16.3 %
1Total segment operating earnings and total segment operating
margin are non-GAAP financial measures. We believe that these
measures are useful to investors as measures of operating
performance. We use these measures to monitor and evaluate the
profitability of our Company. Our measures of total segment
operating earnings and total segment operating margin may be
different from those used by other companies.
2Adjusted EPS is a non-GAAP earnings measure that excludes the
non-operating pension costs and their related income tax effects.
See "Other Supplemental Information - Adjusted Income, Adjusted EPS
and Adjusted Effective Tax Rate" section for more information
regarding non-operating pension costs and a reconciliation to GAAP
measures.
ROCKWELL AUTOMATION, INC. CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS (in millions)
Three Months Ended Six Months Ended March
31, March 31, 2015 2014 2015
2014 Sales $ 1,550.8 $ 1,600.5 $ 3,125.2 $ 3,192.2
Cost of sales (877.6 ) (944.7 ) (1,764.5 ) (1,872.7 ) Gross profit
673.2 655.8 1,360.7 1,319.5 Selling, general and
administrative expenses (382.4 ) (392.5 ) (769.3 ) (777.9 ) Other
income 1.4 0.1 3.2 9.5 Interest expense (15.7 ) (15.0 ) (30.6 )
(29.9 ) Income before income taxes 276.5 248.4 564.0 521.2 Income
tax provision (70.5 ) (68.1 ) (143.8 ) (142.8 )
Net
income $ 206.0 $ 180.3 $ 420.2 $ 378.4
ROCKWELL AUTOMATION, INC. CONDENSED
BALANCE SHEET INFORMATION (in millions) March
31, September 30, 2015 2014 Assets
Cash and cash equivalents $ 1,402.9 $ 1,191.3 Short-term
investments 634.7 628.5 Receivables 1,060.3 1,215.8 Inventories
595.6 588.4 Property, net 598.0 632.9 Goodwill and intangibles
1,275.5 1,296.8 Other assets 713.2 675.8 Total $ 6,280.2
$ 6,229.5
Liabilities and Shareowners’ Equity
Short-term debt $ — $ 325.0 Accounts payable 515.4 520.6 Long-term
debt 1,505.4 905.6 Other liabilities 1,692.9 1,820.2 Shareowners’
equity 2,566.5 2,658.1 Total $ 6,280.2 $ 6,229.5
ROCKWELL AUTOMATION, INC. CONDENSED CASH FLOW
INFORMATION (in millions) Six Months Ended
March 31, 2015 2014 Operating
activities: Income from continuing operations $ 420.2 $ 378.4
Depreciation and amortization 79.7 74.3 Retirement benefits expense
71.3 66.5 Pension contributions (21.3 ) (25.1 )
Receivables/inventories/payables 73.3 (55.9 ) Advanced payments
from customers and deferred revenue 24.6 39.5 Compensation and
benefits (70.3 ) (32.9 ) Income taxes (14.0 ) (37.3 ) Other (10.1 )
(1.2 ) Cash provided by operating activities 553.4 406.3
Investing activities: Capital expenditures (58.0 )
(58.3 ) Acquisition of business, net of cash acquired (21.2 ) (81.5
) Purchases of short-term investments (338.0 ) (310.8 ) Proceeds
from maturities of short-term investments 323.8 197.8 Proceeds from
sale of property 0.2 0.2 Other investing activities — (3.4 )
Cash used for investing activities (93.2 ) (256.0 )
Financing
activities: Net (repayment) issuance of short-term debt (325.0
) 163.5 Issuance of long-term debt, net of discount and issuance
costs 594.3 — Cash dividends (175.9 ) (160.9 ) Purchases of
treasury stock (293.0 ) (217.8 ) Proceeds from the exercise of
stock options 22.7 83.9 Excess income tax benefit from share-based
compensation 6.6 18.6 Other financing activities (1.6 ) —
Cash used for financing activities (171.9 ) (112.7 ) Effect of
exchange rate changes on cash (76.7 ) 1.3 Increase in cash
and cash equivalents $ 211.6 $ 38.9
ROCKWELL AUTOMATION, INC.
OTHER SUPPLEMENTAL INFORMATION
(in millions)
Organic Sales
Our press release contains information regarding organic sales,
which we define as sales excluding the effect of changes in
currency exchange rates and acquisitions. We believe this non-GAAP
measure provides useful information to investors because it
reflects regional and operating segment performance from our
activities without the effect of changes in currency exchange rates
and/or acquisitions. We use organic sales as one measure to monitor
and evaluate our regional and operating segment performance. We
determine the effect of changes in currency exchange rates by
translating the respective period’s sales using the currency
exchange rates that were in effect during the prior year. When we
acquire businesses, we exclude sales in the current year for which
there are no comparable sales in the prior period. Organic sales
growth is calculated by comparing organic sales to reported sales
in the prior year. Sales are attributed to the geographic regions
based on the country of destination.
The following is a reconciliation of reported sales to organic
sales for the three and six months ended March 31, 2015
compared to sales for the three and six months ended March 31,
2014:
Three Months Ended March 31, 2015 2014
Sales Excluding Effect of Effect of Changes in
Changes in Effect of Organic Sales Currency Currency Acquisitions
Sales Sales United States $ 863.2 $ 1.1 $ 864.3 $ (2.0 ) $ 862.3 $
832.9 Canada 85.8 10.6 96.4 — 96.4 108.1 Europe, Middle East,
Africa 285.9 58.4 344.3 (0.2 ) 344.1 340.0 Asia Pacific 199.4 7.6
207.0 — 207.0 200.5 Latin America 116.5 17.7 134.2
— 134.2 119.0 Total $ 1,550.8 $ 95.4
$ 1,646.2 $ (2.2 ) $ 1,644.0 $ 1,600.5
Six Months Ended March 31, 2015 2014 Sales Excluding Effect of
Effect of Changes in Changes in Effect of Organic Sales Currency
Currency Acquisitions Sales Sales United States $ 1,700.0 $ 1.7 $
1,701.7 $ (3.0 ) $ 1,698.7 $ 1,669.3 Canada 185.8 18.4 204.2 —
204.2 207.7 Europe, Middle East, Africa 582.8 84.9 667.7 (2.7 )
665.0 664.4 Asia Pacific 406.6 13.1 419.7 — 419.7 407.3 Latin
America 250.0 31.3 281.3 — 281.3
243.5 Total $ 3,125.2 $ 149.4 $ 3,274.6 $ (5.7
) $ 3,268.9 $ 3,192.2
The following is a reconciliation of reported sales to organic
sales for our operating segments for the three and six months ended
March 31, 2015 compared to sales for the three and six months
ended March 31, 2014:
Three Months Ended March 31, 2015 2014
Sales Excluding Effect of Effect of Changes in
Changes in Effect of Organic Sales Currency Currency Acquisitions
Sales Sales Architecture & Software $ 674.3 $ 45.8 $ 720.1 $
(0.6 ) $ 719.5 $ 686.8 Control Products & Solutions 876.5
49.6 926.1 (1.6 ) 924.5 913.7 Total $
1,550.8 $ 95.4 $ 1,646.2 $ (2.2 ) $ 1,644.0
$ 1,600.5
Six Months Ended March 31,
2015 2014 Sales Excluding Effect of Effect of Changes in Changes in
Effect of Organic Sales Currency Currency Acquisitions Sales Sales
Architecture & Software $ 1,382.1 $ 71.2 $ 1,453.3 $ (2.2 ) $
1,451.1 $ 1,382.7 Control Products & Solutions 1,743.1
78.2 1,821.3 (3.5 ) 1,817.8 1,809.5 Total $
3,125.2 $ 149.4 $ 3,274.6 $ (5.7 ) $ 3,268.9
$ 3,192.2
ROCKWELL AUTOMATION, INC.
OTHER SUPPLEMENTAL INFORMATION
(in millions, except per share amounts
and percentages)
Adjusted Income, Adjusted EPS and
Adjusted Effective Tax Rate
Our press release contains financial information and earnings
guidance regarding Adjusted Income, Adjusted EPS and Adjusted
Effective Tax Rate, which are non-GAAP earnings measures that
exclude non-operating pension costs and their related income tax
effects. We define non-operating pension costs as defined benefit
plan interest cost, expected return on plan assets, amortization of
actuarial gains and losses and the impact of any plan curtailments
or settlements. These components of net periodic benefit cost
primarily relate to changes in pension assets and liabilities that
are a result of market performance; we consider these costs to be
unrelated to the operating performance of our business. We believe
that Adjusted Income, Adjusted EPS and Adjusted Effective Tax Rate
provide useful information to our investors about our operating
performance and allow management and investors to compare our
operating performance period over period. Our measures of Adjusted
Income, Adjusted EPS and Adjusted Effective Tax Rate may be
different from measures used by other companies. These non-GAAP
measures should not be considered a substitute for income from
continuing operations, diluted EPS and effective tax rate.
The following are the components of operating and non-operating
pension costs for the three and six months ended March 31,
2015 and 2014:
Three Months Ended Six Months Ended
March 31, March 31, 2015 2014
2015 2014 Service cost $ 21.5 $ 19.6 $ 43.2 $
39.3 Amortization of prior service credit (0.6 ) (0.7 ) (1.3 ) (1.4
) Operating pension costs 20.9 18.9 41.9 37.9
Interest cost 41.6 43.6 83.9 87.2 Expected return on
plan assets (55.8 ) (54.5 ) (111.9 ) (109.0 ) Amortization of net
actuarial loss 29.6 24.9 59.6 49.8
Non-operating pension costs 15.4 14.0 31.6
28.0 Net periodic pension cost $
36.3 $ 32.9 $ 73.5 $ 65.9
The following are reconciliations of income from continuing
operations, diluted EPS from continuing operations, and effective
tax rate to Adjusted Income, Adjusted EPS and Adjusted Effective
Tax Rate:
Three Months Ended Six Months Ended
March 31, March 31, 2015 2014
2015 2014 Income from continuing operations $
206.0 $ 180.3 $ 420.2 $ 378.4 Non-operating pension costs 15.4 14.0
31.6 28.0 Tax effect of non-operating pension costs (5.4 ) (5.0 )
(11.0 ) (10.0 ) Adjusted Income $ 216.0 $ 189.3 $
440.8 $ 396.4 Diluted EPS from continuing
operations $ 1.51 $ 1.28 $ 3.08 $ 2.70 Non-operating pension costs
per diluted share 0.12 0.10 0.23 0.19 Tax effect of non-operating
pension costs per diluted share (0.04 ) (0.03 ) (0.08 ) (0.07 )
Adjusted EPS $ 1.59 $ 1.35 $ 3.23 $ 2.82
Effective tax rate 25.5 % 27.4 % 25.5 % 27.4 % Tax
effect of non-operating pension costs 0.5 % 0.5 % 0.5 % 0.4 %
Adjusted Effective Tax Rate 26.0 % 27.9 % 26.0 % 27.8 %
Year Ended Fiscal 2015 September 30,
Guidance 2014 Diluted EPS from continuing
operations $6.20 - $6.50 $ 5.91 Non-operating pension costs per
diluted share 0.46 0.40 Tax effect of non-operating pension costs
per diluted share (0.16) (0.14 ) Adjusted EPS $6.50 - $6.80 $ 6.17
ROCKWELL AUTOMATION, INC.
OTHER SUPPLEMENTAL INFORMATION
(in millions, except
percentages)
Free Cash Flow
Our definition of free cash flow, which is a non-GAAP financial
measure, takes into consideration capital investments required to
maintain the operations of our businesses and execute our strategy.
We account for share-based compensation under U.S. GAAP, which
requires that we report the excess income tax benefit from
share-based compensation as a financing cash flow rather than as an
operating cash flow. We have added this benefit back to our
calculation of free cash flow in order to generally classify cash
flows arising from income taxes as operating cash flows.
In our opinion, free cash flow provides useful information to
investors regarding our ability to generate cash from business
operations that is available for acquisitions and other
investments, service of debt principal, dividends and share
repurchases. We use free cash flow, as defined, as one measure to
monitor and evaluate performance. Our definition of free cash flow
may be different from definitions used by other companies.
The following table summarizes free cash flow by quarter:
Quarter Ended Dec. 31, Mar. 31, Jun. 30,
Sep. 30, Dec. 31, Mar. 31, 2013 2014 2014 2014
2014 2015 Cash provided by continuing operating activities $ 203.5
$ 202.8 $ 301.1 $ 325.9 $ 268.2 $ 285.2 Capital expenditures (35.6
) (22.7 ) (38.1 ) (44.6 ) (40.0 ) (18.0 ) Excess income tax benefit
from share-based compensation 10.7 7.9 10.5
0.8 4.4 2.2 Free cash flow $ 178.6
$ 188.0 $ 273.5 $ 282.1 $ 232.6
$ 269.4
Return On Invested
Capital
Our press release contains information regarding Return On
Invested Capital (ROIC), which is a non-GAAP financial measure. We
believe that ROIC is useful to investors as a measure of
performance and of the effectiveness of the use of capital in our
operations. We use ROIC as one measure to monitor and evaluate
performance. Our measure of ROIC may be different from that used by
other companies. We define ROIC as the percentage resulting from
the following calculation:
(a) Income from continuing operations, before
interest expense, income tax provision, and purchase accounting
depreciation and amortization, for the most recent twelve months;
divided by
(b) average invested capital for the year,
calculated as a five quarter rolling average using the sum of
short-term debt, long-term debt, shareowners’ equity, and
accumulated amortization of goodwill and other intangible assets,
minus cash and cash equivalents and short-term investments;
multiplied by
(c) one minus the effective tax rate for the
twelve-month period.
ROIC is calculated as follows:
Twelve Months Ended March 31, 2015
2014 (a) Return Income from continuing
operations $ 868.6 $ 797.4 Interest expense 60.0 60.1 Income tax
provision 308.4 260.4 Purchase accounting depreciation and
amortization 21.8 19.5 Return 1,258.8 1,137.4
(b) Average invested capital Short-term debt 291.1
245.7 Long-term debt 1,025.5 905.1 Shareowners’ equity 2,654.6
2,410.4 Accumulated amortization of goodwill and intangibles 783.2
773.4 Cash and cash equivalents (1,260.2 ) (1,135.7 ) Short-term
investments (588.8 ) (391.8 ) Average invested capital 2,905.4
2,807.1
(c) Effective tax rate Income tax
provision 308.4 260.4 Income from continuing operations before
income taxes $ 1,177.0 $ 1,057.8 Effective tax rate
26.2 % 24.6 %
(a) / (b) * (1-c) Return On Invested Capital
32.0 % 30.6 %
Rockwell AutomationJohn BernadenMedia
Relations414.382.2555orRockwell AutomationRondi Rohr-DralleInvestor
Relations414.382.8510
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