- Organic sales down 3.3 percent year
over year; reported sales down 9.4 percent
- Adjusted EPS of $1.49; diluted EPS of
$1.40
- Company revises fiscal 2016 Adjusted
EPS guidance to $5.70 to $6.20 on lower sales
Rockwell Automation, Inc. (NYSE: ROK) today reported fiscal 2016
first quarter sales of $1,426.6 million, down 9.4 percent from
$1,574.4 million in the first quarter of fiscal 2015. Organic sales
declined 3.3 percent, and currency translation reduced sales by 6.1
percent.
Fiscal 2016 first quarter Adjusted EPS was $1.49, down 9 percent
compared to $1.64 in the first quarter of fiscal 2015. Total
segment operating earnings were $295.9 million in the first quarter
of fiscal 2016, down 15 percent from $346.8 million in the same
period of fiscal 2015. Total segment operating margin was 20.7
percent compared to 22.0 percent a year ago, primarily due to lower
sales and unfavorable currency effects.
On a GAAP basis, fiscal 2016 first quarter net income was $185.5
million or $1.40 per share, compared to $214.2 million or $1.56 per
share in the first quarter of fiscal 2015. Pre-tax margin decreased
to 16.6 percent in the first quarter of fiscal 2016 from 18.3
percent in the same period last year.
Commenting on the results, Keith D. Nosbusch, chairman and chief
executive officer, said, "As expected, we had a weak start to the
fiscal year with organic sales down 3 percent due to challenging
market conditions in the U.S. and Asia Pacific. Heavy industry end
markets continued to soften globally, particularly oil and gas in
the U.S. I am pleased with the continued solid growth we are seeing
in EMEA and Latin America.
"We were able to hold segment operating margin near 21 percent
despite 9 percent lower sales. This demonstrates our ability to
execute well in challenging market conditions.”
Outlook
Commenting on the outlook, Nosbusch added, “Since providing
guidance in November, oil and commodity prices have further
deteriorated, and projections for economic growth including
industrial production have softened. As a result, we are lowering
the mid-point of our organic growth guidance by one point. Taking
into account an additional headwind from currency, we are now
expecting fiscal 2016 sales of approximately $5.9 billion and are
updating our Adjusted EPS guidance range to $5.70 to $6.20.
"We have a proven track record of navigating through challenging
market conditions, balancing short-term financial performance with
our long-term priorities. We will protect our key investments in
innovation, domain expertise and commercial resources, and will
continue to expand our served market and gain share. I am very
optimistic on our long-term growth prospects, and would like to
thank our employees, partners and suppliers for their continued
dedication in serving our customers.”
Following is a discussion of fiscal 2016 first quarter results
for both segments.
Architecture &
Software
Architecture & Software quarterly sales were $642.9
million, a decrease of 9.2 percent compared to $707.8 million in
the same period last year. Organic sales decreased 2.7 percent, and
currency translation reduced sales by 6.5 percent. Segment
operating earnings were $176.2 million compared to $221.4 million
in the same period last year. Segment operating margin decreased to
27.4 percent from 31.3 percent a year ago, primarily due to lower
sales and unfavorable currency effects.
Control Products &
Solutions
Control Products & Solutions quarterly sales were
$783.7 million, a decrease of 9.6 percent compared to $866.6
million in the same period last year. Organic sales decreased 3.8
percent, and currency translation reduced sales by 5.8 percent.
Segment operating earnings were $119.7 million compared to $125.4
million in the same period last year. Segment operating margin
increased to 15.3 percent from 14.5 percent a year ago despite
lower sales, primarily due to productivity.
Other Information
In the first quarter of fiscal 2016 free cash flow was $145.3
million and cash flow provided by operating activities was $184.8
million. Return on invested capital was 32.6 percent.
Fiscal 2016 first quarter general corporate-net expense was
$18.0 million compared to $22.8 million in the first quarter of
fiscal 2015.
The Adjusted Effective Tax Rate for the first quarter of fiscal
2016 was 22.8 percent compared to 26.0 percent in the first quarter
of fiscal 2015. On a GAAP basis, the effective tax rate in the
first quarter of fiscal 2016 was 21.7 percent compared to 25.5
percent a year ago. The Company now expects a full-year Adjusted
Effective Tax Rate for fiscal 2016 of approximately 25 percent.
Both the quarter and full year rates reflect the benefit of recent
tax legislation related to the U.S. research and development
credit.
During the first quarter of fiscal 2016, the Company repurchased
1.2 million shares of its common stock at a cost of $121.8 million.
At December 31, 2015, $323.4 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, January 27,
2016. 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;
- our ability to manage and mitigate the
risk related to security vulnerabilities and breaches of our
products, solutions and services;
- 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
22,000 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
December 31, 2015 2014 Sales
Architecture & Software (a) $ 642.9 $ 707.8 Control Products
& Solutions (b) 783.7 866.6 Total sales (c) $
1,426.6 $ 1,574.4 Segment operating earnings
Architecture & Software (d) $ 176.2 $ 221.4 Control Products
& Solutions (e) 119.7 125.4 Total segment
operating earnings1 (f) 295.9 346.8 Purchase accounting
depreciation and amortization (4.7 ) (5.4 ) General corporate—net
(18.0 ) (22.8 ) Non-operating pension costs (18.9 ) (16.2 )
Interest expense (17.4 ) (14.9 ) Income before income taxes (g)
236.9 287.5 Income tax provision (51.4 ) (73.3 ) Net income $ 185.5
$ 214.2 Diluted EPS $ 1.40 $ 1.56
Adjusted EPS2 $ 1.49 $ 1.64
Average diluted shares 132.6 136.9 Segment
operating margin Architecture & Software (d/a) 27.4 % 31.3 %
Control Products & Solutions (e/b) 15.3 % 14.5 % Total segment
operating margin1 (f/c) 20.7 % 22.0 % Pre-tax margin (g/c)
16.6 % 18.3 %
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 December 31, 2015
2014 Sales $ 1,426.6 $ 1,574.4 Cost of sales
(813.9 ) (886.9 ) Gross profit 612.7 687.5 Selling, general
and administrative expenses (359.9 ) (386.9 ) Other income 1.5 1.8
Interest expense (17.4 ) (14.9 ) Income before income taxes 236.9
287.5 Income tax provision (51.4 ) (73.3 )
Net income
$ 185.5 $ 214.2
ROCKWELL AUTOMATION,
INC. CONDENSED BALANCE SHEET INFORMATION (in
millions) December 31,
September 30, 2015 2015 Assets
Cash and cash equivalents $ 1,449.2 $ 1,427.3 Short-term
investments 770.6 721.9 Receivables 1,015.8 1,041.0 Inventories
562.2 535.6 Property, net 586.3 605.6 Goodwill and intangibles
1,240.9 1,258.3 Other assets 794.7 815.0 Total $ 6,419.7
$ 6,404.7
Liabilities and Shareowners’ Equity
Short-term debt $ 161.0 $ — Accounts payable 469.6 521.7 Long-term
debt 1,492.9 1,500.9 Other liabilities 2,059.7 2,125.3 Shareowners’
equity 2,236.5 2,256.8 Total $ 6,419.7 $ 6,404.7
ROCKWELL AUTOMATION, INC. CONDENSED CASH FLOW
INFORMATION (in millions) Three
Months Ended December 31, 2015
2014 Operating activities: Income from continuing
operations $ 185.5 $ 214.2 Depreciation and amortization 41.3 40.6
Retirement benefits expense 39.2 36.1 Pension contributions (10.6 )
(8.6 ) Receivables/inventories/payables (36.6 ) 38.5 Advanced
payments from customers and deferred revenue 18.1 7.5 Compensation
and benefits (80.6 ) (99.2 ) Income taxes 11.3 46.9 Other 17.2
(7.8 ) Cash provided by operating activities 184.8
268.2
Investing activities: Capital expenditures
(40.2 ) (40.0 ) Acquisition of business, net of cash acquired —
(21.2 ) Purchases of short-term investments (312.4 ) (171.6 )
Proceeds from maturities of short-term investments 261.1 175.7
Proceeds from sale of property 0.2 0.1 Cash used for
investing activities (91.3 ) (57.0 )
Financing activities:
Net issuance of short-term debt 161.0 183.0 Cash dividends (95.6 )
(88.1 ) Purchases of treasury stock (127.4 ) (168.4 ) Proceeds from
the exercise of stock options 4.0 4.7 Excess income tax benefit
from share-based compensation 0.7 4.4 Cash used for
financing activities (57.3 ) (64.4 ) Effect of exchange rate
changes on cash (14.3 ) (46.2 )
Increase in cash and cash
equivalents $ 21.9 $ 100.6
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 months ended December 31, 2015 compared to
sales for the three months ended December 31, 2014:
Three Months Ended December 31, 2015
2014 Sales
Excluding Effect of Effect of Changes in Changes in Effect of
Organic Sales Currency Currency Acquisitions Sales Sales United
States $ 787.3 $ 0.8 $ 788.1 $ (0.3 ) $ 787.8 $ 836.8 Canada 78.7
13.4 92.1 — 92.1 100.0 Europe, Middle East, Africa 274.2 39.9 314.1
— 314.1 296.9 Asia Pacific 173.0 11.8 184.8 — 184.8 207.2 Latin
America 113.4 30.2 143.6 — 143.6
133.5 Total $ 1,426.6 $ 96.1 $ 1,522.7 $ (0.3
) $ 1,522.4 $ 1,574.4
The following is a reconciliation of reported sales to organic
sales for our operating segments for the three months ended
December 31, 2015 compared to sales for the three months ended
December 31, 2014:
Three Months Ended
December 31, 2015 2014
Sales Excluding Effect of Effect of
Changes in Changes in Effect of Organic Sales Currency Currency
Acquisitions Sales Sales Architecture & Software $ 642.9 $ 45.9
$ 688.8 $ — $ 688.8 $ 707.8 Control Products & Solutions 783.7
50.2 833.9 (0.3 ) 833.6 866.6 Total $
1,426.6 $ 96.1 $ 1,522.7 $ (0.3 ) $ 1,522.4
$ 1,574.4
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 months ended December 31, 2015 and
2014:
Three Months Ended December
31, 2015 2014 Service cost $ 22.1 $
21.7 Amortization of prior service credit (0.7 ) (0.7 ) Operating
pension costs 21.4 21.0 Interest cost 42.5
42.3 Expected return on plan assets (54.7 ) (56.1 ) Amortization of
net actuarial loss 31.1 30.0 Non-operating pension
costs 18.9 16.2 Net periodic pension
cost $ 40.3 $ 37.2
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
December 31, 2015 2014 Income
from continuing operations $ 185.5 $ 214.2 Non-operating pension
costs 18.9 16.2 Tax effect of non-operating pension costs (6.8 )
(5.6 ) Adjusted Income $ 197.6 $ 224.8 Diluted
EPS from continuing operations $ 1.40 $ 1.56 Non-operating pension
costs per diluted share 0.14 0.12 Tax effect of non-operating
pension costs per diluted share (0.05 ) (0.04 ) Adjusted EPS $ 1.49
$ 1.64 Effective tax rate 21.7 % 25.5 % Tax
effect of non-operating pension costs 1.1 % 0.5 % Adjusted
Effective Tax Rate 22.8 % 26.0 %
Fiscal 2016 Guidance
Year Ended September 30,
2015
Diluted EPS from continuing operations $5.33 - $5.83 $ 6.09
Non-operating pension costs per diluted share 0.58 0.46 Tax effect
of non-operating pension costs per diluted share (0.21) (0.15 )
Adjusted EPS $5.70 - $6.20 $ 6.40
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, 2014 2015
2015 2015 2015 Cash provided by continuing
operating activities $ 268.2 $ 285.2 $ 286.3 $ 348.0 $ 184.8
Capital expenditures (40.0 ) (18.0 ) (25.2 ) (39.7 ) (40.2 ) Excess
income tax benefit from share-based compensation 4.4 2.2
5.6 0.2 0.7 Free cash flow $ 232.6
$ 269.4 $ 266.7 $ 308.5 $ 145.3
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 December 31,
2015 2014 (a) Return Income from
continuing operations $ 798.9 $ 842.9 Interest expense 66.2 59.3
Income tax provision 278.0 306.0 Purchase accounting depreciation
and amortization 20.3 22.4 Return 1,163.4
1,230.6
(b) Average invested capital Short-term debt
133.8 341.3 Long-term debt 1,379.4 905.4 Shareowners’ equity
2,437.0 2,677.4 Accumulated amortization of goodwill and
intangibles 797.1 778.6 Cash and cash equivalents (1,427.7 )
(1,228.8 ) Short-term investments (667.7 ) (534.8 ) Average
invested capital 2,651.9 2,939.1
(c) Effective tax
rate Income tax provision 278.0 306.0 Income from continuing
operations before income taxes $ 1,076.9 $ 1,148.9
Effective tax rate 25.8 % 26.6 %
(a) / (b) * (1-c) Return On
Invested Capital 32.6 % 30.7 %
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Rockwell AutomationDarice BrownMedia
Relations414.382.4852orRockwell AutomationPatrick GorisInvestor
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