- Organic sales up 2.2 percent year over
year; reported sales down 4.5 percent
- Adjusted EPS of $1.59 — up 7 percent
year over year; diluted EPS of $1.52
- Company narrows fiscal 2015 Adjusted
EPS guidance range to $6.55 - $6.70
Rockwell Automation, Inc. (NYSE: ROK) today reported fiscal 2015
third quarter sales of $1,575.2 million, down 4.5 percent from
$1,649.5 million in the third quarter of fiscal 2014. Organic sales
grew 2.2 percent, and currency translation reduced sales by 6.8
percent.
Fiscal 2015 third quarter Adjusted EPS was $1.59, up 7 percent
compared to $1.49 in the third quarter of fiscal 2014. Total
segment operating earnings were $343.7 million in the third quarter
of fiscal 2015, up 5 percent from $326.1 million in the same period
of fiscal 2014. Total segment operating margin expanded to 21.8
percent from 19.8 percent a year ago, primarily due to higher
organic sales and strong productivity, partially offset by
increased spending.
On a GAAP basis, fiscal 2015 third quarter net income was $206.1
million or $1.52 per share, compared to $199.7 million or $1.43 per
share in the third quarter of fiscal 2014. Pre-tax margin increased
to 18.1 percent in the third quarter of fiscal 2015 from 16.6
percent in the same period last year.
Commenting on the results, Keith D. Nosbusch, chairman and chief
executive officer, said, “I am pleased with our performance in the
quarter. We delivered another quarter of solid earnings growth,
significant margin expansion, and strong free cash flow despite
continued headwinds from currency and a low growth environment.
Through three quarters, Adjusted EPS was up 12 percent on lower
reported sales. Our results demonstrate excellent execution in
these market conditions."
Outlook
Commenting on the outlook, Nosbusch added, “Given decelerating
industrial production growth, we are lowering the midpoint of our
full-year organic growth guidance by 1 point. We expect fiscal 2015
reported sales of approximately $6.4 billion, and are narrowing our
fiscal 2015 Adjusted EPS guidance range to $6.55 to $6.70.
"We remain focused on innovation, and I am confident in our
ability to deliver attractive shareowner returns while we continue
to invest in profitable growth opportunities.”
Following is a discussion of fiscal 2015 third quarter results
for both segments.
Architecture &
Software
Architecture & Software quarterly sales were $683.5
million, a decrease of 4.4 percent compared to $715.2 million in
the same period last year. Organic sales increased 3.1 percent, and
currency translation reduced sales by 7.5 percent. Segment
operating earnings were $199.9 million compared to $204.8 million
in the same period last year. Segment operating margin increased to
29.2 percent from 28.6 percent a year ago.
Control Products &
Solutions
Control Products & Solutions quarterly sales were
$891.7 million, a decrease of 4.6 percent compared to $934.3
million in the same period last year. Organic sales increased 1.6
percent, and currency translation reduced sales by 6.3 percent.
Segment operating earnings were $143.8 million compared to $121.3
million in the same period last year. Segment operating margin
increased to 16.1 percent from 13.0 percent a year ago.
Other Information
In the third quarter of fiscal 2015 free cash flow was $266.7
million and cash flow provided by operating activities was $286.3
million. Return on invested capital was 33.1 percent.
Fiscal 2015 third quarter general corporate-net expense was
$21.9 million compared to $18.1 million in the third quarter of
fiscal 2014.
The Adjusted Effective Tax Rate for the third quarter of fiscal
2015 was 27.9 percent compared to 27.6 percent in the third quarter
of fiscal 2014. The Company now expects a full-year Adjusted
Effective Tax Rate for fiscal 2015 of approximately 27 percent. On
a GAAP basis, the effective tax rate in the third quarter of fiscal
2015 was 27.6 percent compared to 27.1 percent a year ago.
During the third quarter of fiscal 2015, the Company repurchased
956 thousand shares of its common stock at a cost of $115.3
million. At June 30, 2015, $641.7 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 Wednesday, July 29, 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 Nine
Months Ended June 30, June 30, 2015
2014 2015 2014 Sales Architecture &
Software (a) $ 683.5 $ 715.2 $ 2,065.6 $ 2,097.9 Control Products
& Solutions (b) 891.7 934.3 2,634.8
2,743.8 Total sales (c) $ 1,575.2 $ 1,649.5 $
4,700.4 $ 4,841.7 Segment operating earnings
Architecture & Software (d) $ 199.9 $ 204.8 $ 622.1 $ 606.9
Control Products & Solutions (e) 143.8 121.3
402.6 349.3 Total segment operating earnings1 (f)
343.7 326.1 1,024.7 956.2 Purchase accounting depreciation
and amortization (5.2 ) (5.5 ) (15.8 ) (15.9 ) General
corporate—net (21.9 ) (18.1 ) (66.1 ) (58.7 ) Non-operating pension
costs (15.6 ) (14.1 ) (47.2 ) (42.1 ) Interest expense (16.4 )
(14.4 ) (47.0 ) (44.3 ) Income before income taxes (g) 284.6 274.0
848.6 795.2 Income tax provision (78.5 ) (74.3 ) (222.3 ) (217.1 )
Net income $ 206.1 $ 199.7 $ 626.3 $ 578.1
Diluted EPS $ 1.52 $ 1.43 $ 4.60
$ 4.12 Adjusted EPS2 $ 1.59 $ 1.49 $
4.82 $ 4.32 Average diluted shares 135.5
139.6 136.1 140.0 Segment
operating margin Architecture & Software (d/a) 29.2 % 28.6 %
30.1 % 28.9 % Control Products & Solutions (e/b) 16.1 % 13.0 %
15.3 % 12.7 % Total segment operating margin1 (f/c) 21.8 % 19.8 %
21.8 % 19.7 % Pre-tax margin (g/c) 18.1 % 16.6 % 18.1 % 16.4
%
1Total segment operating earnings and total segment operating
margin are non-GAAP financial measures. We exclude purchase
accounting depreciation and amortization, general corporate – net,
non-operating pension costs, interest expense and income tax
provision because we do not consider these costs to be directly
related to the operating performance of our segments. 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 Nine Months Ended June
30, June 30, 2015 2014 2015
2014 Sales $ 1,575.2 $ 1,649.5 $ 4,700.4 $ 4,841.7
Cost of sales (897.0 ) (968.0 ) (2,661.5 ) (2,840.7 ) Gross profit
678.2 681.5 2,038.9 2,001.0 Selling, general and
administrative expenses (376.4 ) (394.4 ) (1,145.7 ) (1,172.3 )
Other (expense) income (0.8 ) 1.3 2.4 10.8 Interest expense (16.4 )
(14.4 ) (47.0 ) (44.3 ) Income before income taxes 284.6 274.0
848.6 795.2 Income tax provision (78.5 ) (74.3 ) (222.3 ) (217.1 )
Net income $ 206.1 $ 199.7 $ 626.3
$ 578.1
ROCKWELL AUTOMATION,
INC. CONDENSED BALANCE SHEET INFORMATION (in
millions) June 30, September 30,
2015 2014 Assets Cash and cash equivalents $
1,567.2 $ 1,191.3 Short-term investments 590.6 628.5 Receivables
1,084.3 1,215.8 Inventories 599.4 588.4 Property, net 590.7 632.9
Goodwill and intangibles 1,284.5 1,296.8 Other assets 689.8
675.8 Total $ 6,406.5 $ 6,229.5
Liabilities and
Shareowners’ Equity Short-term debt $ — $ 325.0 Accounts
payable 547.1 520.6 Long-term debt 1,492.2 905.6 Other liabilities
1,811.2 1,820.2 Shareowners’ equity 2,556.0 2,658.1 Total $
6,406.5 $ 6,229.5
ROCKWELL AUTOMATION, INC.
CONDENSED CASH FLOW INFORMATION (in millions)
Nine Months Ended June 30, 2015
2014 Operating activities: Income from continuing
operations $ 626.3 $ 578.1 Depreciation and amortization 120.9
114.4 Retirement benefits expense 106.4 100.0 Pension contributions
(30.9 ) (32.7 ) Receivables/inventories/payables 69.1 4.2 Advanced
payments from customers and deferred revenue 26.2 25.5 Compensation
and benefits (58.1 ) (21.3 ) Income taxes (12.7 ) (29.1 ) Other
(7.5 ) (31.7 ) Cash provided by operating activities 839.7
707.4
Investing activities: Capital expenditures
(83.2 ) (96.4 ) Acquisition of businesses, net of cash acquired
(21.2 ) (81.5 ) Purchases of short-term investments (470.8 ) (487.0
) Proceeds from maturities of short-term investments 501.8 285.3
Proceeds from sale of property 2.0 0.3 Other investing activities —
(3.4 ) Cash used for investing activities (71.4 ) (382.7 )
Financing activities: Net (repayment) issuance of short-term
debt (325.0 ) 100.9 Issuance of long-term debt, net of discount and
issuance costs 594.3 — Cash dividends (263.3 ) (240.9 ) Purchases
of treasury stock (404.8 ) (345.2 ) Proceeds from the exercise of
stock options 55.5 104.7 Excess income tax benefit from share-based
compensation 12.2 29.1 Other financing activities (1.6 ) —
Cash used for financing activities (332.7 ) (351.4 ) Effect of
exchange rate changes on cash (59.7 ) 0.9 Increase
(decrease) in cash and cash equivalents $ 375.9 $ (25.8 )
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
nine months ended June 30, 2015 compared to sales for the three and
nine months ended June 30, 2014: Three Months Ended
June 30, 2015 2014 Sales
Excluding Effect of Effect of Changes in Changes in Effect of
Organic Sales Currency Currency Acquisitions Sales Sales United
States $ 872.4 $ 1.0 $ 873.4 $ (1.4 ) $ 872.0 $ 845.9 Canada 93.1
11.7 104.8 — 104.8 113.3 Europe, Middle East, Africa 285.4 65.7
351.1 — 351.1 336.7 Asia Pacific 215.0 8.8 223.8 — 223.8 220.5
Latin America 109.3 25.2 134.5 — 134.5
133.1 Total $ 1,575.2 $ 112.4 $ 1,687.6
$ (1.4 ) $ 1,686.2 $ 1,649.5 Nine Months Ended June
30, 2015 2014 Sales Excluding Effect of Effect of Changes in
Changes in Effect of Organic Sales Currency Currency Acquisitions
Sales Sales United States $ 2,572.4 $ 2.7 $ 2,575.1 $ (4.4 ) $
2,570.7 $ 2,515.2 Canada 278.9 30.1 309.0 — 309.0 321.0 Europe,
Middle East, Africa 868.2 150.6 1,018.8 (2.7 ) 1,016.1 1,001.1 Asia
Pacific 621.6 21.9 643.5 — 643.5 627.8 Latin America 359.3
56.5 415.8 — 415.8 376.6 Total $
4,700.4 $ 261.8 $ 4,962.2 $ (7.1 ) $ 4,955.1
$ 4,841.7 The following is a reconciliation of
reported sales to organic sales for our operating segments for the
three and nine months ended June 30, 2015 compared to sales for the
three and nine months ended June 30, 2014: Three
Months Ended June 30, 2015 2014 Sales
Excluding Effect of Effect of Changes in Changes in Effect
of Organic Sales Currency Currency Acquisitions Sales Sales
Architecture & Software $ 683.5 $ 53.8 $ 737.3 $ — $ 737.3 $
715.2 Control Products & Solutions 891.7 58.6
950.3 (1.4 ) 948.9 934.3 Total $ 1,575.2 $
112.4 $ 1,687.6 $ (1.4 ) $ 1,686.2 $ 1,649.5
Nine Months Ended June 30, 2015 2014 Sales Excluding Effect
of Effect of Changes in Changes in Effect of Organic Sales Currency
Currency Acquisitions Sales Sales Architecture & Software $
2,065.6 $ 125.0 $ 2,190.6 $ (2.2 ) $ 2,188.4 $ 2,097.9 Control
Products & Solutions 2,634.8 136.8 2,771.6
(4.9 ) 2,766.7 2,743.8 Total $ 4,700.4 $ 261.8
$ 4,962.2 $ (7.1 ) $ 4,955.1 $ 4,841.7
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 nine
months ended June 30, 2015 and 2014:
Three Months
Ended Nine Months Ended June 30, June
30, 2015 2014 2015
2014 Service cost $ 21.3 $ 19.7 $ 64.5 $ 59.0 Amortization
of prior service credit (0.7 ) (0.7 ) (2.0 ) (2.1 ) Operating
pension costs 20.6 19.0 62.5 56.9
Interest cost 41.7 43.6 125.6 130.8 Expected return on plan
assets (55.7 ) (54.5 ) (167.6 ) (163.5 ) Amortization of net
actuarial loss 29.6 25.0 89.2 74.8
Non-operating pension costs 15.6 14.1 47.2
42.1 Net periodic pension cost $
36.2 $ 33.1 $ 109.7 $ 99.0 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 Nine Months
Ended June 30, June 30, 2015
2014 2015 2014 Income from continuing
operations $ 206.1 $ 199.7 $ 626.3 $ 578.1 Non-operating pension
costs 15.6 14.1 47.2 42.1 Tax effect of non-operating pension costs
(5.4 ) (5.1 ) (16.4 ) (15.1 ) Adjusted Income $ 216.3 $
208.7 $ 657.1 $ 605.1 Diluted EPS from
continuing operations $ 1.52 $ 1.43 $ 4.60 $ 4.12 Non-operating
pension costs per diluted share 0.11 0.10 0.34 0.30 Tax effect of
non-operating pension costs per diluted share (0.04 ) (0.04 ) (0.12
) (0.10 ) Adjusted EPS $ 1.59 $ 1.49 $ 4.82 $
4.32 Effective tax rate 27.6 % 27.1 % 26.2 % 27.3 %
Tax effect of non-operating pension costs 0.3 % 0.5 % 0.4 % 0.4 %
Adjusted Effective Tax Rate 27.9 % 27.6 % 26.6 % 27.7 %
Year Ended Fiscal 2015 September 30,
Guidance 2014 Diluted EPS from continuing
operations $6.25 - $6.40 $ 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 $6.55 - $6.70 $ 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, Jun. 30, 2013 2014 2014
2014 2014 2015 2015 Cash provided by continuing operating
activities $ 203.5 $ 202.8 $ 301.1 $ 325.9 $ 268.2 $ 285.2 $ 286.3
Capital expenditures (35.6 ) (22.7 ) (38.1 ) (44.6 ) (40.0 ) (18.0
) (25.2 ) Excess income tax benefit from share-based compensation
10.7 7.9 10.5 0.8 4.4 2.2
5.6 Free cash flow $ 178.6 $ 188.0 $ 273.5
$ 282.1 $ 232.6 $ 269.4 $ 266.7
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 June 30,
2015 2014 (a) Return Income from
continuing operations $ 875.0 $ 793.4 Interest expense 62.0 59.2
Income tax provision 312.6 281.0 Purchase accounting depreciation
and amortization 21.5 20.4 Return 1,271.1
1,154.0
(b) Average invested capital Short-term debt
222.6 254.5 Long-term debt 1,142.8 905.2 Shareowners’ equity
2,614.3 2,550.6 Accumulated amortization of goodwill and
intangibles 788.6 773.7 Cash and cash equivalents (1,325.7 )
(1,177.3 ) Short-term investments (609.8 ) (434.0 ) Average
invested capital 2,832.8 2,872.7
(c) Effective tax
rate Income tax provision 312.6 281.0 Income from continuing
operations before income taxes $ 1,187.6 $ 1,074.4
Effective tax rate 26.3 % 26.2 %
(a) / (b) * (1-c) Return On
Invested Capital 33.1 % 29.6 %
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Rockwell AutomationDarice BrownMedia
Relations414.382.4852orRockwell AutomationPatrick GorisInvestor
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